Spencer Bogdanski

Alli Ferlin

Randy Vollrath

Scott Raap

MGT300

Dr. Jensen

Week 4 Discussion Questions Mary Kay Cosmetics: Sales Force Incentives

1 A. What is Mary Kays strategy? How do they add value for the customer,

or in other words what is their value proposition?

According to their mission, they add value in part with their consultants

as consumers. Mary Kay wants to provide women with exceptional

opportunities for professional achievement, economic success, recognition,

personal development, and independence. Mary Kay also prides itself on its

preeminence in the manufacturing, distribution, and marketing of personal

care products by providing personalized service, value, convenience and

innovative solutions to consumer needs through an independent sales force.

Mary Kay operates coming from the basic principle of doing unto

others as you would have them do unto you and prioritizing God first, family

second, and career third. Their entire Mary Kay system is aimed at promoting

a successful career for the beauty consultants because to the customer, the

beauty consultant is Mary Kay.

Mary Kay addresses the needs of the beauty consultants first by

recognizing the needs: Satisfaction with a task well done, teamwork,

opportunity, recognition, and money. They address these needs through

various aspects of their business.

1B: What does Mary Kay need to do well to succeed at this strategy? Is there

evidence that Mark Kay is doing well? How do we know?

In order to succeed in this strategy Mary Kay needs to maintain their

sales force. They need to find ways to support and encourage them, in order

to for them to not succeed but maximize their potential.

Mary Kay produces plenty of written material for its consultants, as

well as videos and audiocassettes, promotional sales aids, and even a

telephone hot line for advice and answers. This support allows the

consultants to be educated, achieve economic success and recognition.

Mary Kay Ash believed that people could be praised to success, this led to

the company fostering a sales culture based on positive reinforcement and

recognition. This was achieved by allowing the independent consultants to

choose their own recruits, which increased the chances of having a positive

director-consultant relationship. They also provided guidelines to assist the

independent sales force in motivating and training its members. One way is

by praising members at unit meetings, which served as a support group and

training class and created an environment that fostered success by

bolstering the self-confidence of the staff.

Mary Kay has been able to keep their consultants motivated to

increase sales and recruiting by awarding them with prizes and recognizing

staff members for incremental progress. The names of the winners are

published in their monthly magazine, Applause.

2. What components of the financial incentives program appear to be the

primary motivators for the sales force? Do these measures align with their

strategy and key performance variables?

 Mary Kays financial incentive program includes compensation,

advancement opportunity, prize incentives, and recognition. This carefully

designed package is what has such high appeal for beauty consultants to

work for them. There are no constraints for the sales force to make as much

money as they can, and essentially, have unlimited earning potential. They

have the potential to get the VIP car for 2 years if they maintain a certain

level of sales and recruitment. This seemed to be one of the most appealing

incentives to the sales force because, in just a matter of a few years after

introducing the VIP car rewards, the cars rewarded increased by five times.

Mary Kays company philosophy stresses the importance of helping their

beauty consultants to succeed by reaching their personal best, which makes

the company succeed as a whole. This is shown through the incentives that

they offer. Their mission is to be successful in manufacturing, distributing,

and marketing of personal care products by providing personalized service,

value, and convenience to the customers needs through our independent

sales force(2). In using these financial incentives, the company is urging

their sales force to be productive in sales and through recruiting new

consultants, which is helping further their mission and strategy as a

company. However, the cost of the program, specifically the car program,

escalated too quickly putting previously unaccounted for financial stress on

the companys bottom line.

3.
-Describe a typical consultant in terms of:
-Demographics
-Income
 -Reasons for being a Mary Kay consultant
The typical consultant for Mary Kay is 24 to 54 years old, has some

college education and has another job. She is married with children and lives

outside a major urban area. Her income is less than $5,000 a year from her

work at Mary Kay. She spends about eight hours a week on Mary Kay work.

The reasons for being a consultant vary: from wanting an additional revenue

stream to supplement that of her career, supplementing family income, or

just wanting the flexibility and incentives Mary Kay offers their sales force.

4A: What problems is Mary Kay currently facing with respect to their car

program?
The cost to Mary Kay of leasing the cars had increased with interest

rates, automobile insurance premiums had escalated faster than both

inflation and prices of Mary Kay products, and General Motors discontinued

the Oldsmobile Firenza, reducing the resale value of the one- and two-year-

old cars. Also, with the VIP car program, there was a decrease in car

tenure: consultants who qualified for the car were unable to maintain the

required sales and recruiting levels for the 24 month period. This meant Mary

Kay often was forced to reclaim cars that were substantially less than two

years old. The newer a car when Mary Kay reclaimed it from a consultant, the

greater the disparity between the cars unamortized book value and the

much lower resale price that Mary Kay received for it. Mary Kay is looking for

a way to motivate sustainable sales from their consultants without losing so

much on the investment, as they did with the car program.

4B: Recommend a set of changes to the VIP car program that will improve

overall sales force effectiveness at Mary Kay. Consider the strategic risks and

cost effectiveness of your proposals as well as how they could be

implemented. Be as specific as possible.

As discovered through different trials, the VIP car program has some

flaws in it. One of the major flaws identified was that consultants were

working extra hard to rush into getting the VIP car but they could not

maintain necessary sales in order to keep the new vehicle. A way to

overcome this problem would be to set up some sort of probation period for

consultants who are in the VIP car program. If a consultant didn't meet their

necessary numbers that month they can go on probation. Since taking the

car right away has proven expensive and demoralizing for the consultant,

instead, implement a 3 or 6 month probation period where they have a

chance to meet their monthly quota and continue to work hard for their car.

If the consultant does not meet their quota after that determined period, the

car will be seized. This type of leniency can motivate a consultant to

continue to work hard and also show that Mary Kay wants their workers to

achieve success without taking away their hard earned incentives.

Another way to battle rising costs in leasing would be to re-gift

confiscated cars. If Mary Kay is taking out a two year lease on a new car and

they have to commandeer the vehicle after 6 months, it only makes sense to

have that car working for them for the next 18 months. Any new consultant

who finds their way into the VIP program now has a slightly used car but at
this point, a free car is a free car. Reusing cars will help save thousands of

dollars by not having to cancel leases or resell used cars that were once

confiscated from consultants. If need be, the opportunity to set a slightly

lower performance standard to receive a used car is an available option to

Mary Kay.
An alternative to a slightly low performance standard would be a

system of checks and balances similar to the claw-back proposals offered

in proposed social security reforms. These clauses are already utilized in

several different industries with great success. These could account for the

discrepancy in the amount of value of a new car and used one. This type of

claw-back proposal would allow to Mary Kay to positively bend the cost curve

in the out years. A claw-back clause in new contracts would be a good

counterweight to allow for unforeseen shifts in business as well as

performance. This not only rewards good employees it in addition provides

motivation for all employees.