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Workshop 3
Shawne Slaughter
Calculate the annual income of: a) A beauty consultant who sells $150 (at wholesale
value) of products per month; b) A VIP team leader who averages monthly personal
sales of $650, with 15 recruits and team sales of $3,200 (Assume she receives a 12%
monthly personal sales of $500, personal recruits’ sales of $5,000, and total unit sales
of $9,500. Assume she recruits three new consultants every third month, which
entitles her to a recruiting bonus of $200 per quarter. (Apply 12% commission to
recruits sales and an 11% commission to total until sales. Also, add a monthly
According to the Case book “a consultant’s income [is] determined by a very clear and
objective method, [which is] based on her selling activities” (83). A beauty consultant who sales
$150 worth of product at wholesale value would have annual retail sales of $3600. The beauty
consultant’s annual income based on $3600 in retail sales would be $1800. A VIP team leader
with monthly sales (retail) of $650 would have an annual sales income of $3900 based on total
annual retail sales of $7800. Her sales team of 15 recruits would have total annual sales of
$38,400. The VIP team leader would receive 12% of the wholesale total of the recruits. This
would add an additional $2304 dollars to her annual income based on total team wholesale sales
of $19,200. The total annual income for a VIP tam leader would be $6204 as well as the use of a
Grand Am. Finally, a director meeting the criteria indicated in the question about would have
total personal retail sales based on her own efforts of $6000 per year. This would provide her
with $3000 in annual income. She would be entitled to 12% commission based on wholesale of
recruit sales of $60,000. This creates additional annual revenue in the amount of $3600.
Workshop 3 Case Study 3
Additionally she would be entitled to 11% on the wholesale value of total unit sales of $114,000.
This represents additional income in the amount of $6270. The monthly production bonus and
the recruiting bonus would add an additional $8,400 and $800 respectively. The director would
Based on these calculations, what component of the financial incentive program appears to
The determination as to which financial incentive program serves are the primary motivator
for the sales force is heavily dependent on the title of the consultant. The primary motivator at
the active beauty consultant level is personal selling activities due to the 50% markup associated
with the products. One a consultant moves to the level of team leader or director the primary
motivator moves from individual selling actives and towards her ability to recruit new
consultants. This shift becomes even more dramatic at the director level. Individuals at the
director level are not only rewarded with 50% of their direct sales but are line to receive 12% of
their recruit sales as well as 11% of total unit sales. Additional revenue streams include
production and recruiting bonuses as well as the use of a vehicle. The director in case study
question 1 only earned $3000 based on her personal selling activities. The additional revenue
steams associated with her recruiting activities increased her personal yearly income 7 fold.
• Demographics
• Income
• Management responsibility
According to the Case book a typical VIP Consultant shares many of characteristics
6. Spends approximately 8 hours per week on Mar Kay work. (p. 88)
7. Holds $2500 to $3,000 worth of inventory (at suggested retail value) in her home.
(p.88)
Typical VIP Consultants generate an average annual income of $9200 based on their Mary
One of the main drivers in Mary Kay’s decision to modify the VIP Car Program is directly
related to the management related actions employed by VIP Consultants. As indicated in Case
book, the VIP Program drove the number of cars associated with the car programs from 1,100 to
5,000 between 1983 and 1989 (p. 84). It was noted that one of the major costs associated with
program related to “car tenure: an increasing proportion of the consultants who had qualified for
VIP cars were unable to maintain the required sales and recruiting levels for the 24month
period…Mary Kay was forced to reclaim cars that were substantially less than two years old
“ (85). This situation created substantial losses for the company. It also indicates that VIP
Consultants were so interested in obtaining the level of VIP and therefore earning the use of a
vehicle that they became focused on quantity and forgot about quality. As a result many of the
individuals they recruited into Mary Kay were unable to maintain their numbers. This meant that
the VIP Consultant could not maintain the two management requirements associated with the
Workshop 3 Case Study 5
position; maintaining team production of $36,000 per year and personal production of $7,200 per
year.
Recommend a set of changes to the VIP car program that will improve overall sales force
effectiveness at Mary Kay. Consider the motivational risks and cost effectiveness of your
The current VIP program utilized by Mary Kay has the potential of increasing overall
company operating costs due to the short-sale situations which arise when a VIP Consultant is
unable to maintain her numbers and therefore forfeits the use of a company supplied vehicle.
Attempts to design a more effective program would be more specific if the case study provided
details associated with the cost of the vehicles along with the amortization scheduled utilized by
Mary Kay. The following recommendations are made in the absence of this critical information.
VIP Consultants currently earn the use of a Pontiac Grand Am if they are able to maintain
team production of $3000 per month and personal production of $600 per month. It is also
required that the production team consists of at least 12 recruits and further that 10 of these
recruits be in an active status “by the end of the four-month qualification period” (94)”. As
indicated in the Case book, VIP consultants “feel no motivation to increase their sales and
recruiting efforts above the level necessary to maintain the use of their cars… [Mary Kay] is not
tapping their full potential because [the company is] not rewarding them for achieving it” (p. 7).
It would appear that the VIP Consultant is treading water or just maintaining the threshold
Any attempt to modify the VIP car program should be implemented with a ‘grandfather’
clause. Consultants who are able to maintain the current requirements associated with the VIP
car program should be exempt from any new requirements. The new guidelines should apply to
Workshop 3 Case Study 6
those consultants who forfeit the use of a Grand Am because they are unable to maintain the
minimum requirements of the program as well as consultants who hit the milestone after the new
must be in an active status. The reward level associated with a company provided
Grand Am will not be triggered until this status is maintained for at least six
months. This will motivate the consultant striving to achieve VIP status into
months after she places wholesale orders totaling $225 or more. This represents an
increase of 12.5% over the existing definition. This guideline should be applied to
stream to offset some of the costs associated with the VIP car program.
• All consultants at the team leader level will receive a longevity bonus of an
additional 1.5% of the wholesale sales of any of the recruits on her team who are
able to maintain an active status for more than 3 quarters. This will provide team
leaders with an additional financial incentive for facilitating the selling and
References
Case book, Prentice Hall
Robbins, Stephen P. (2005). Essentials of organizational behavior (8th ed.). Upper Saddle