Mary Kay Case Final Writeup

Q1. Was embarking on a totally new, unproven strategy the answer, or should the company stick to what had always worked in the past?

It is obvious that Mary Kay has to do something to not only catch up with competitors, but to address its internal challenges. Installing a greater IT structure is the first step which needs to be met before it can improve any part of the business. Embarking in a totally new business strategy of e-commerce wouldn’t align with Mary Kay’s Golden Rule philosophy or direct selling business model. On the other hand, with the demographic changes, the company has to find the best way to offer efficiency and convenience for consultants. Given the fact that consumers of cosmetics are well educated and informed about health/beauty products, active involvement and close interaction with existing and potential customers is crucial for Mary Kay. This is the attribute of Mary Kay’s sales method, network marketing organization (NMO). For Mary Kay, besides the products, its sales force is the main business driver and key component of its success. Mary Kay’s pricing strategy is of great importance. Although switching to internet based sales will enable the company to vertically integrate the value chain, hence maximize efficiency, and increase sales revenue, but doing so will have cannibalization effect on consultants’ businesses.

Although the executives in the company believe it’s not easy to adapt consultants to technology (due to generation gaps) on pg9, at the end of the first paragraph, it says: “sales force was finding the new technology valuable.” We think once the consultants feel the value of technology, they will most likely adopt it. If company sales and revenue increase with complementing the internet and direct contact, consultants due to their gain, as well, will push themselves to adapt to new technology. By saying this, we don’t imply online sales but rather online communication and relationship building. So we think the company should stick to its business model but with a few developments.

Q2. What approach should it pursue?

The demographic change of customers has already been projected as a declining sales figure of Mary Kay. Technological "laggardness" (phone, mail based order, non-relational database) combined with new-generation female salespeople have produced increasing back-orders, unmet sales orders, inaccurate forecast, inefficient inventory control, decreasing retention rate. Mary Kay should develop their operation quality by investing more in IT. In a postmodernist era where people are trying to keep in touch with other people for socialization, it is strength to keep in direct contact with customers. Considering the emerging problems and socialization era, we believe Mary Kay needs to combine their direct sales method with e-commerce.

Management of the company should refer to e-commerce as a leverage point, or a booster for independent consultants. Since maintaining healthy relationship with sales force is so vital for the existence of the whole organization, Mary Kay should direct sales leads generated online to independent consultants. General information of new arrivals, new research results, company history, membership procedures should be put on the main website. Orders will be made, and recorded online. This coupled with relational database management will enable the company to accurately forecast demand, better plan production, precisely control inventory, decrease stock out and back-order, increase transaction efficiency/customer satisfaction, and reinvigorate sales figures.

Direct selling will still be an option for those who choose it but we will also have a blog for customers and consultants to stay connected. The blog in addition to the current consultant’s web-pages will provide a way for consultants to keep in touch and obtain feedback. To better monitor demand, consultants’ websites should be connected to Mary Kay’s mainframe. If consultants receive sales leads from the main website, then the company can charge a miniature percentage off the sales. Above all, there is a way for Mary Kay to overcome its current challenges and at the same time continue to meet its current consultants and customers’ needs. They should keep their business model but can add in e-commerce and adapt themselves to the current changes in society. (since the company’s goal in the very beginning was to increase the quality of the lives so they should stick to this idea)