Mary K Case Analysis
Prepare Case: Mary Kay Cosmetics, Inc. (course pack) a. What motivates Mary Kay consultants? •Personal reinforcement : Independent consultants can choose their own recruits. •Recognition and prizes: increase their sales and recruiting by prizes and recognition for progress. Winners’ names were listed in Applause, Mary Kay’s monthly magazine for consultants. Directors at their own expense and discretion reward unit members for achieving milestones.
•Gifts and prizes handed out by directors to beauty consultants: jewelry and accessories with Mary Kay logo on them.Awarded in front of a group •Level of achievement and status symbols: ladder pins •Incentive compensation and advancement plan: through recruits and product sales •Win the use of a VIP car • b. Calculate the annual income of: •A beauty consultant who sells an average of $150 (at wholesale value) of product per month; 50% markup $150×1. 5×12= $2700 Sales-cost $2700-$1800= $900 •A VIP team leader with 15 recruits who averages monthly personal sales of $650 and team sales of $3,200 (assume she receives a 12% commission on recruits’ sales);Monthly SalesWholesaleIncomeAnnualTotal Team Leader$650. 00$433. 33$216.
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67$2,600. 00 CommissionIncomeAnnual 15 recruits$3,200. 0012%$384. 00$4,608. 00$7,208.
00 •A director with 50 active unit members, who averages monthly personal sales of $500, personal recruits’ sales of $5,000, and total unit sales of $9,500. Assume she recruits three new consultants every third month, which entitles her to a recruiting bonus of $200 per quarter. (Apply a 12% commission to recruits’ sales and a 11% commission to total unit sales.Also add in a monthly production bonus of $700. ) c.
Based on these calculations, what components of the financial incentives program appear to be the primary motivators for the sales force? d. Describe a typical VIP Consultant in terms of: •Demographics •Income •Management responsibilities b. Recommend a set of changes to the VIP car program that will improve overall sales force effectiveness at Mary Kay. Consider the motivational risks and cost effectiveness of your proposals as well as how they could be implemented. Be as specific as possible.