8/24/2012 Portland, Oregon – Pop in your mints…
We recently attended a Mary Kay event for the first time with our better half and were astounded by the simple genius of this amazing organization. For starters, the products are terrific and, by most counts sell themselves. From Satin Hands to the revolutionary TimeWise Repair, there is simply no better way to keep one’s skin soft, smooth, and younger looking.
Yet the true genius of this world class organization lies in what we call its anarchic, open source sales structure. It is a structure that not only appeals to feminine tastes, but ensures an optimum sales force which manages and promotes itself.
How do they achieve this?
First and foremost, when the founder Mary Kay Ash set out to create her dream company, She consulted Accounting firms, Management consultants, Human resource experts, and MBAs of the day with business plan. As legend has it, every one of them told her it would not work. Mary Kay had simply examined what she liked about her direct sales experience with other companies as well as her needs as a woman and mother and created a place where literally anyone has the opportunity to succeed and advance in the sales structure.
It is the sort of thing that is difficult for those with advanced degrees and professional credentials to grasp.
As we now know, Mary Kay Ash didn’t listen to them. As a result, working for the company can be a woman’s dream. It emphasizes, relationships, beauty, goal setting, self improvement, and recognition. It is literally a sisterhood of like minded individuals driving the vehicle (the sales structure) that Mary Kay Ash gave them to achieve their dreams and help encourage others to do so along the way.
Mary Kay offers the chance for all those who are interested to become a retailer of their world class product offering. For a nominal fee, which amounts to the production cost of the products included in the starter kit, anyone who is interested can become a Mary Kay Consultant. Establishing this relationship gives the consultant the right to order products at the wholesale price, which is 50% of the suggested retail price of the products. This is in line with what one would expect a small scale retail markup to be in any line of business.
In order to maintain the right to order products at wholesale pricing, the consultant must maintain a minimum order volume over the course of each three month period.
The next part of the structure which we will explore is the tiered referral commission structure. This is the part of the structure where those consultants who have actively recruited other consultants can naturally move up the ladder and begin collecting a portion of the sales of those whom they have recruited.
The structure is simple and works in the following way. The consultant who is responsible for signing on a new Mary Kay consultant has the right to receive a commission of up to 26% on the new consultant’s sales. This 26% may be shared amongst three tiers of consultants depending upon the receiving consultant’s level.
It is important to note that this commission does not impact the selling consultant’s 50% take on sales, rather, it is paid by the company (technically, the customers via the company). We can imply, then, that the Mary Kay Corporation, who is the manufacturer, must produce their products and cover their overhead for 24% of the suggested retail price in order to break even.
Selling Mary Kay cosmetics is not a get rich quick scheme. It is a real company selling real products where, in sharp contrast to jobs in the government or financial industries, six figure incomes must be earned. According to one statistic, roughly one in 2,000 consultants will attain a six figure income from their annual sales activities.
And therein lies the anarchic genius of the Mary Kay structure, it gives literally everyone a shot at working to attain said six figure income, which cannot be said of many jobs out there. The barriers to entry are practically nil and sales training is freely available in most cities from fellow consultants, who naturally stand to benefit from the overall success of their fellow consultants. The only limitations placed on the consultant are the time, energy, and ingenuity that they are willing to put into the endeavour.
The genius of the Mary Kay structure is furthered in that the commission and the sales leadership structures allow for advancement in almost direct correlation to the of effort and ingenuity of the individual consultant. For the most part, there are no administrative barriers to income advancement, and at any point the consultant can choose to attempt to increase their income by increasing their efforts towards product sales or towards recruiting a team and supporting their team’s efforts at product sales.
It is the entrepreneur’s dream, and it appears to work as the founder, Mary Kay Ash, intended it. The sales structure of Mary Kay allows the manufacturer to harness the anarchy in which we all live to maximize the sales potential of their considerable product offering.
The secret to success in any income earning endeavour is self determination (being one’s own boss) and working one’s tail off. Mary Kay provides the tools and gives the consultant the first part of the equation from the outset. Results and advancement are then determined by the initiative of the consultants themselves.
Starting one’s own business can be a hard, thankless, and sometimes losing proposition, especially during the first few years when the proprietor is learning the ropes and testing what works and what does not. In Mary Kay, as with anything in life, there is no guarantee of success if one gives it a run, but there is a guarantee of failure if one does not try.
Even if one has no need for skin care products, it is impossible not to admire the anarchic genius of Mary Kay’s sales structure, for it is a microcosm of organic economic activity as nature intended it.
Stay tuned and Trust Jesus.
Key Indicators for August 24, 2012
Copper Price per Lb: $3.46
Oil Price per Barrel: $96.07
Corn Price per Bushel: $8.02
10 Yr US Treasury Bond: 1.68%
FED Target Rate: 0.13% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,671 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 8.3%
Inflation Rate (CPI): 0.0%
Dow Jones Industrial Average: 13,173
M1 Monetary Base: $2,262,700,000,000
M2 Monetary Base: $10,058,800,000,000