Design By Kate: The Power of

Direct Sales
By Group 7
Devesh Chaudhary 2018PGP020
Swapnil Jaiswal 2018PGP058
Amit Kesharwani 2018PGP064
Kaviwala Tanmay 2018PGP075
Saurabh Pal 2018PGP087
Sourabh A Ugargol 2018PGP091
Sudhanshu Sekhar 2018PGP093
 Case Overview

Business has been vastly Expected reasons was

Kate Creevy is a founder
successful from past 5 that many of the sales
of Designs By Kate (DBK)
years however, now the representatives are
and sells jwellery through
companies top line getting promoted to
direct sales
growth has been slowed leaders position
 Business Model
• Direct Sales
• Women of 25-50 age group, generally stay-at-home mothers or working
women working as part timers are the sales executives
• 97% DBK sales occurred at DBK parties organized by sales executives
• 32% commission for above $1000, Base commission is 25% of sales
• Hierarchy levels of sales executives
Sales
Leader Manager Director
Representative

• Leader earns 3-8% commission of members

• Higher commission if promoted
 Root cause of the Problems
Morale of Sales rep is decreasing as they think that their commission is not up to
the mark when moving up in the ladder

Workload increases when moved up in the ladder

Earnings of sales representative decreases as there is an overlap of customers

Lack of motivation among sales representative to increase their sales

 Analysis: Leadership Dollars
Leader Manager Director Assumptions
Sales 781 1250 1500
Earnings 195.25 312.5 375
Loss in commission due to
68.3375 109.375 131.25
addition of members
Final commission on sales 126.9125 203.125 243.75
Level 1 5% 10% 12%
Commission Level 2 3% 6% 8%
from each level Level 3 2% 4% 6%
Level 4 1% 2% 3%
Level 1 117.15 234.3 281.16 3 members in level 1
Earnings from Level 2 140.58 281.16 374.88 6 members in level 2
each level Level 3 187.44 374.88 562.32 12 members in level 3
Level 4 187.44 374.88 562.32 24 members in level 4
Total commission earned per
384.64 718.59 899.79 Taken till level 2 only
month
Analysis: With increase in Events/Sales Rep, hiring 4
people for training and giving incentive per new hire
2010 E (6.36 events/sales 2010 E (with 8
Formulae Used Value
rep) events/sales rep)
(Average Sales per
Avg Sales = 1428, No. of
Revenue $ 74,283,586.00 $ 93,394,145.00 event*No. of events*No. of
Sales Rep = 7930
Sales rep) /0.97
COGS $ 29,713,434.00 $ 37,357,658.00
Gross Profit $ 44,570,152.00 $ 56,036,487.00
Training Cost = 1 mn,
(0.5*Revenue +
SG&A $ 37,141,793.00 $ 47,731,973.00 Incentive per new hire =
1000000+12.5*2792)
$12.5
Operating Profit $ 7,428,359.00 $ 8,304,515.00

Key Ratios 2010E Assumption: Number of Sales Rep and

COGS as a % of Sales 40% Average sales/event is taken same as given
SG&A as a % of Sales 51.1% for 2010E in Exhibit 2a
Operating Margin 8.89%
Cont. Analysis
2011 E (with 8 events/sales 2012 E (with 8 events/sales rep)
2010 E (with 8 events/sales rep)
rep)
No. of Sales Reps. 8478 12717 19076

Events per Sales Rep. 8 8 8

Revenue $99,848,116 $ 14,97,72,173.20 $ 22,46,58,259.79

COGS $39,939,246 $ 5,99,08,869.28 $ 8,98,63,303.92

Gross Profit $59,908,869 $ 8,98,63,303.92 $ 13,47,94,955.88

SG&A $50,965,808 $ 7,60,39,086.60 $ 11,35,08,617.40

Operating Profit $8,943,062 $ 1,38,24,217.32 $ 2,12,86,338.48

Key Ratios 2010E 2011E 2012E Assumption: Employees hiring rate is 150 %
COGS as a % of Sales 40% 40% 40%
SG&A as a % of Sales 51.04% 50.7% 50.5%
Operating Margin 8.95% 9.3% 9.5%
 Recommendation
• Provide extra 5% commission of amount earned from selling launch
kit to sales rep on adding every new member (i.e. $12.5 each rep)
• To change the perception of Sales Rep regarding decrease in average sales
• Educate Sales rep about commission structure,
• Even after having a fixed cost it will read to
Increase in Revenue
Motivating sales rep Increase in no. of
of company and
to sell more and add Sales Rep and Sales
earning for Sales
new Sales Rep per Rep
Rep

• Increasing the number of average events to 8 per year per sales rep