Motivation in Direct Sales

Motivation in Direct Sales

Mary Kay Cosmetics is not a traditional cosmetics company, as it sells its products directly to consumers through a sales force rather than in retail stores (Case). Each member of the Mary Kay sales force is an independent contractor with the company and works for herself (Case). Mary Kay compensates its beauty consultants in a variety of ways, ranging from commissions, to recognition, to incentive programs such as its VIP car program (Case). As it has expanded, Mary Kay's VIP car program has become a burden, ballooning to 8.5% of sales in 1988 (Case).

In sales, motivation plays an important role in maintaining happy employees and workers. Happy workers "produce more product and better service" (Hahn, 2007). Mary Kay's philosophy is that every person associated with the company lives by the Golden Rule (Case). By treating customers, business associates, and all others with such respect, Mary Kay improves not only the morale of its consultants, but also its public image. When sales people are not treated with respect, they "are more likely to treat customers with disregard and seek unemployment, costing the company great expense" (Hahn, 2007). According to Mary Kay's Sales Group Executive Vice President Barbara Beasley, approximately 70% of its consultants drop out each year, which is the lowest turnover rate in the direct-selling industry (Case). Mary Kay's business depends on its consultants to not only purchase and sell its products, but also recruit new consultants (Case). In retaining its consultants, Mary Kay must recognize their accomplishments. Mary Kay provides prizes to consultants based on the increase in their sales, as well as recognizes its consultants for their progress in recruiting new consultants (Case). Sales people have common needs: the feeling that they control their destinies, flexibility to balance professional and personal lives, and recognition and praise (Hahn, 2007).

According to a recent study at the National Conference on People Performance Management at The 2006 Motivation Show, non-cash incentives were compared with monetary incentives. The study found that sales people are motivated by non-cash incentives, but cash incentives cannot be ignored (Jakobsen, 2006). Central Kitchen and Bath recently implemented a non-cash incentive program for its employees in which it would reward all of its employees and one guest each to a Caribbean cruise if sales goals were met. The motivation of the cruise encouraged employees to work together to reach the company's sales goal. Teamwork was enhanced, and Central Kitchen and Bath met its sales goal within nine months (Caccavello, 2006). In its recognition program, Mary Kay rewards its consultants with financial incentives like commissions, as well as positive reinforcement from public acclaim (Case). As Mary Kay consultants recruit other consultants, they receive a percentage (4% to 12%) of their recruits' wholesale orders. This monetary compensation helps to motivate consultants to recruit and assist their teams in selling products. After a consultant has five recruits, she becomes a Team Leader and may be eligible for the next stage of recognition: the use of a Mary Kay VIP car (Case). The VIP car program provides leased cars to consultants at the expense of Mary Kay. To motivate consultants to maintain their levels of performance, retaining use of a VIP car requires consistent meeting of several benchmarks: team monthly production volume, personal monthly wholesale production, and number of active recruits (Case). Mary Kay leases the VIP cars for deserving consultants, and has recently experienced a rise in costs for the program due in part to reclaiming cars from consultants unable to maintain their performance benchmarks (Case). The next level is sales director, in which a consultant receives a percentage (8% to 12%) of her personal recruits' wholesale orders as well as 9% to 13% of the unit she directs (Case).

With its army of independent contractors, Mary Kay's business structure helps it avoid many of the expenses of a typical retail operation. Mary Kay saves money on payroll taxes, reduces its costs of benefits, and avoids Department of Labor regulation (Curtis, 2003). In determining if a worker is an independent contractor or an employee, the more control the company has, the more likely the worker is an employee (Curtis, 2003). Mary Kay must constantly defend its business model against lawsuits from consultants. One such lawsuit came from Claudine Woolf, who worked for Mary Kay for two years and had advanced to the level of a director with fifty consultants underneath her (Curtis, 2003). Woolf drove one of Mary Kay's VIP cars and was very happy, but she soon found out that she was pregnant and had cancer (Curtis, 2003). While undergoing treatment for the cancer, Woolf did not meet the requirements to maintain use of her VIP car, and consequently lost the use of the car and Mary Kay demoted her from director to a beauty consultant (Curtis, 2003). Woolf resigned from Mary Kay and sued for wrongful discharge and discrimination, and won $11.25 Million in a Dallas court (Curtis, 2003).