Mary Kay Case Write-up

Q: Should it embark on new strategy or stick on to the original plan? What approach should it pursue?

Health/beauty products are experience goods, yet most of the time, they are bought on impulse. It is said that cosmetics makers sell “the hope of becoming beautiful” not the beauty itself. Compared to the era of Mary Kay and its competitors Avon, Oriflame’s rise, average consumers of cosmetics are well educated and well informed of which ones are better choices. Excluding the last fact and considering that the product itself is not a need-based commodity, but rather want-driven product, Mary Kay’s sales require active involvement and close interaction with existing and potential customers. This very attribute of the sales method created the so called network marketing organization (NMO), which is highly dependent on real time, viral sales carried out by consumers themselves. For Mary Kay, besides the products, its sales force is the main business driver and key component of its success. 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. The speed and the reach of internet will arm those neglected consultants with deadly weapon called – WOM over the internet.

Although the rationale of sticking on to its original plan seems to be the obvious plan, but the demographic change of customers has already been projected as declining sales figure of Mary Kay. Technological laggardness (phone, mail based order, non-relational database) combined with new-generation female salespeople have produced increasing backorders, unmet sales orders, inaccurate forecast, inefficient inventory control, decreasing retention rate. Considering the emerging problems of the old way of conducting business, I believe that Mary Kay will still have to switch on to e-commerce mode.

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. The company’s main website should serve as a navy aircraft carrier. Main products are rocket missiles. The fighter jets are independent consultants. The carrier ship attracts millions of villains to itself (the customers), yet missiles are carried and dropped by independent jets. General information of new arrivals, new research results, company history, membership procedures etc will 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 backorder, increase transaction efficiency/customer satisfaction, and reinvigorate sales figures. Owing to the online democracy, consultants should be allowed to run their businesses online. 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.