Soft Drink Industry Analysis

Mary Kay Proposal

Tiffany Saylor

Sullivan University

MGT 510

Executive Summary

This proposal will attempt to revamp the Mary Kay incentive program. The three problems I am going to address are: the morale of consultants, motivational/stagnation of sales, and poor or weak directors and consultants. In addressing these issues I am going to be referencing other business that have used different motivational techniques in these situations. At the end of my proposal I hope to have at least 3-4 viable options that could be implemented in the Mary Kay Company to fix the problems mentioned above.

Introduction: The Problem

The problem facing Mary Kay Inc. today is that their incentive program is not working. Based on the data used in Mary Kay Cosmetics: Sales Force Incentives, the company introduced the VIP car program to motivate their consultants to sell their cosmetics. The top sellers would be awarded a step program of cars. Initially you would receive a red Grand Am and then a pink Cadillac. However, in doing this program they have ran into problems they had not thought of. This program was initially created to keep up morale as well as give incentive for sales growth. In reality it has caused the company to have poorly trained directors who created a "team" of sales people under them but did not have the experience to be a leader. It has also caused a stagnation of sales once the leaders received the car. The motivation to continue increasing sales was gone.

Background: The History

In 1984, Mary Kay Cosmetics introduced the VIP car program. After several years of incredible growth using this incentive the company began noticing a decline of 14% in sales. Between the years of 1983 and 1989, Mary Kay's car programs increased form a base of 1100 cars on the road to over 5000. Over time however, the cost of each car on the road began to increase. The interest levels of each leased vehicle increased and automobile insurance premiums escalated. All of these contributed to the increased cost of the VIP program.

Source: Mary Kay Cosmetics: Sales Force Incentives

The Current Challenge:

According to top management within Mary Kay Cosmentics, the top objectives for a new plan are :

* Improve profit margins by reducing overall beauty consultant compensation as a percent of sales.

* Enhance the beauty consultants' career path with more distinct milestones and forms of rewards.

o More well trained directors to be prepared for the roll of directors.

o Continuance of sales past director level (delete stagnation)

o Minimize the cost to the firm of maintaining low-performing consultants.

Source: Mary Kay Cosmetics: Sales Force Incentives

Thoughts: What is needed in the program

Per an article from 2006 Buyer's Handbook, the first things that we need to determine when creating or altering an incentive program is what we want this incentive program to accomplish (see above). By taking a poll and/or asking the directors within the corporation that are going to be winning the incentives what would motivate them, as well as explaining the goals in revamping the program, we would have a more appropriate idea of which way to take the revamp. When asking a source, Deborah Hall, who is a "VIP" within the Mary Kay company "what would motivate you besides the use of a car". Her response was first more money and secondly "RECOGNITION". She listed off things that she would like to be recognized for and how most directors of any kind, except for the annual meeting, didn't know the kind of activities and successes one sales team was having at any given point. One company that has given this thought is The Longaberger Corporation out of Dresden, Ohio. They have created a flyer monthly that is passed out to all sales persons, directors, consultants, etc which is the "Brag Book" for all regional directors to list and brag about their team's successes. When another team see's the amazing sales and work that is listed then it gives them a goal to focus on. "If they can do it, so can we". Peer pressure within the company to want to out do one another is very effective.

Source: Longaberger Monthly, 2007

Source: 2006 Buyer's Handbook

Recommendation #1: Incentive Step Program

The first recommendation that I would give would be to base the incentive program on more steps between the large goals. This incentive would decrease the immediate cost of going straight to a VIP car level and increase the amount of time for each individual to become more prepared for the role of a directorship.

* Step 1: Assistant directorship- 6 month period-no car- working with another experienced leader-must increase sales 10%-add 2 more sales persons to team (maintaining previous number of sales force).

* Step 2: Directorship-6 month period-supervised by trainer- no car-must increase sales 15%-add two more sales persons to team(maintaining previous number of sales force).

* Step 3: Directorship- 1 year period-Grand Am car, but still must pay insurance and other expenses incurred in owning the vehicle-must increase sales 15% -must add 2 members to sales team (maintaining previous number of sales force).

* Step 4: Directorship- 1 year period- Grand Am car, insurance paid-must increase sales 10%-must add 2+ members to sales team (maintaining previous number of sales force).

* Step 5: Directorship-1 year period- Grand Am car, insurance paid-Gas card (limit of yearly expense)-Must increase