Mary Kay

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Mary Kay Inc.
Type of Company	Private
Founded	Dallas, Texas
Headquarters	Addison, Texas
Key people	Mary Kay Ash, Founder David Holl, CEO
Industry	Personal care products
Products	Skin care, cosmetics, nail care, sun protection, perfume
Revenue	$2.2 billion in 2005
Employees	Independent sales force of 1.6 million worldwide (2005)
Website	Mary Kay Inc.

Mary Kay is a brand of color cosmetics sold by Mary Kay Inc. Mary Kay World Headquarters is located in the Dallas suburb of Addison, Texas. Mary Kay Ash (d. November 22, 2001) founded Mary Kay Inc. on Friday, September 13, 1963. David Holl is president and CEO.^[1]

In 1968, the company went public, being traded on the OTC market. By 1976 it was large enough to be traded on the New York Stock exchange. In 1985, Ash took the company private through a leveraged buyout.

For this article in general, feminine pronouns are used because the overwhelming majority of consultants are female.

Contents 1 Markets Mary Kay is in 2 The Products 2.1 Sales Volume 3 The Sales Force 3.1 The Career Path for Consultants 3.1.1 Beauty Consultant 3.1.2 Director 3.1.3 Senior Director 3.1.4 National Director 3.1.5 National Director Emeritus 3.2 The Rewards 3.2.1 The Red Jacket 3.2.2 The Car 3.2.3 The Court of Sales 3.2.4 The Court of Sharing 3.2.5 The Trips 3.3 Earnings 3.3.1 Consultant Turnover Rate 3.4 Inventory 4 Legal Cases Involving Mary Kay 4.1 Woolf v Mary Kay Cosmetics 5 Notes

[edit] Markets Mary Kay is in

Mary Kay Entered the market

Year	Market		Year	Market
1963	USA		1996	Finland
1971	Australia		1997	Czech Republic
1978	Canada		1997	Ukraine
1980	Argentina		1998	Brazil
1984	Uruguay		1999	El Salvador
1986	Germany		1999	Hong Kong
1988	Malaysia		2000	Khazakstan
1988	Mexico		2000	Philippines
1991	Malaysia		2006	India
1991	New Zealand
1991	Guatemala
1991	Taiwan
1992	Spain
1992	Sweden
1993	Russia
1993	UK		?	Korea
1993	Norway		?	Moldovia
1995	China		?	Poland
1995	Portugal		?	Slovakia

[edit] The Products

The original nine skin care products were based upon a recipe from a tanner, whose skin was much smoother, and clearer than his age would indicate. The number of products has increased, or decreased, according to sales, or potential demand. There currently are 200 products - including skin care, cosmetics, nail care, spa products and fragrances - available in the United States. The other thirty five countries in which Mary Kay is sold, have fewer products, because they are reformulated to meet local laws or, more commonly, consumer preferences. For example, Oriental makeup is traditionally much whiter than European makeup. African (the continent) makeup has traditionally been more orche than European makeup.

In the early nineteen nineties, recognizing that the majority of both its customers, and consultants were women of color, Mary Kay introduced colors that were more suitable.

PETA celebrated a semi-victory in the cosmetics industry in 1989, when Mary Kay Cosmetics announced a moratorium on animal testing ^[2]. The sought for victory --- fur coats are not prizes --- came in 1996.^[3].

In 1995, to adhere to the laws of The People's Republic of China, Mary Kay opened a plant in Hangzhou to develop, manufacture, and package products. Since then, that plant has expanded to serve the entire Asian market. A European plant was opened in 1997, in La Chaux-de-Fonds, Switzerland, to serve the European market.

In 2005, wholesale sales of Mary Kay products to the consultants exceeded $2.2 billion. ^[4] This $2.2 billion figure does not account for products returned by consultants to the company.^[5]

[edit] Sales Volume

Mary Kay Sales Figures

Year	Wholesale Volume	Consultants	Directors	National Directors	Wholesale volume / Consultants
1963	$198,154 [6]	318 [6]	0	0	$623.13
1973	unknown	21,069 [7]	unknown	unknown	unknown
1983	$300,000,000 [7]	195,000[7]	unknown	unknown	$1,538.46
1989	$400,000,000 [8]	200,000 [8]	unknown	unknown	$2,000.00
1991	$511,000,000 [9]	220,000 [9]	unknown	unknown	$2,322.73
1992	$500,000,000 [10]	250,000 [10]	unknown	unknown	$2,000.00
1993	$735,000,000 [7]	325,000 [7]	unknown	unknown	$2,261.00
1994	$850,000,000 [11]	unknown	unknown	unknown	unknown
1995	$950,000,000 [11]	unknown	unknown	unknown	unknown
1996	$1,000,000,000 [11]	unknown	unknown	unknown	unknown
1997 China	$12,000,000 [12]	15,000	unknown	unknown	$800.00
1998 China	$7,200,000 [12]	unknown	unknown	unknown	unknown
2001	$1,400,000,000	800,000	unknown	unknown	$1,750.00
2001 USA	Unknown	500,000 [13]	unknown	unknown	unknown
2001 Mexico	$20,000,000 [14]	unknown	unknown	unknown	unknown
2002	$1,600,000,000	850,000	19,000 [15]	more than 300 [15]	$1,882.35
2002 USA	unknown	unknown	13,000 [15]	unknown	unknown
2002 China	$120,000,000 [12]	120,000 [16]	unknown	unknown	$100.00
2003	$1,800,000,000	1,100,000	18,500 [17]	More than 100[17]	$1,636.36
2004	$1,800,000,000 [18]	1,300,000 [18]	27,000 [4]	410 [18]	$1,384.62
2004 USA	unknown	unknown	unknown	210 [18]	unknown
2004 Canada	$125,000,000 [19]	29,357 [20]	661 [20]	16 [20]	$4,257.93
2004 United Kingdom	$7,700,000 [21]	3,500 [17]	More than 70 [17]	0 [17]	$2,200.00
2005	$2,200,000,000 [4]	1,600,000 [4]	31,000[4]	just under 500 [4]	$1,375.00
2005 China	$300,000,000 [22]	400,000 [22]	unknown	unknown	$750.00
2005 USA	$1,300,000,000 [22]	715,000 [22]	unknown	unknown	$1,818.18
2005 Canada	unknown	32,820 [23]	673 [23]	17 [23]	unknown
2005 Argentina	unknown	20,000 [24]	500 [24]	8 [24]	unknown
2005 Mexico	unknown	175,000 [25]	unknown	unknown	unknown
2005 United Kingdom	unknown	5,000 [26]	140[26]	2 [26]	unknown

Notes:

• Dollar amounts are in United States Currency;
• Dollar amounts have not been adjusted for inflation

[edit] The Sales Force

The Mary Kay Sales Force consists of Independent Consultants who earn a 50% profit from the retail sale of the product and are paid a commission on the wholesale purchases of the people who they recruit into the organization.

[edit] The Career Path for Consultants

Mary Kay Ash saw her organization as enriching the lives of the Consultants who moved up the ladder. To that end she defined rewards for specific steps and attainments. By achieving each of these goals the Consultant would improve the quality of her life. Nancy Tietjen claimed that her Mary Kay experience was more significant in her life as a self-improvement course than as a way to sell cosmetics

[edit] Beauty Consultant

When a person signs and accepts the Mary Kay Beauty Agreement, she becomes an Independent Mary Kay Beauty Consultant. Upon signing, her recruiter may inform her of several inventory packages that can be purchased from Mary Kay that offer FREE product bonuses at each level. If the consultant decides to purchase at least US$600.00 (wholesale) and as much as US$4,800 (wholesale) in product then this purchase makes the recruit a "qualified recruit" which entitles the upline to certain benefits --- usually a larger commission check and entitles the new beauty consultant to certain rewards and contest prizes.^[27].

To be an Active Consultant, she must make a US$200.00 (wholesale) purchase every three months. After becoming 'active', the consultant can make accumalative orders up to $200 wholesale in a one month time frame and that continues her active status on for an additional period. She is active for the month that the $200 wholesale order is received and the following two months afterwards. To remain a consultant in the United States, she needs to make a minimum purchase of US$200.00 (wholesale) every year.

The next step is Senior Consultant (1 new team member) then Star Recruiter (3 new team members) then Team Leader (5 active recruits), and then Future Director (8 active team members).

The first Beauty Consultant was Dalene White, who joined the organization in September 1963. She became the first Sales Director, and then the first National Director.

[edit] Director

The next step is Independent Sales Director. Roughly 2% of the consultants in Mary Kay reach this position.The Director is responsible for training the newly recruited Beauty Consultant in third party retail sales principles and practices. The first individual to achieve this status was Dalene White.

A Director receives either 9% or 13% commission on the wholesale purchase of everybody in her unit. If her unit purchases US$5,000 (wholesale) or more in a month, she receives an additional volume bonus check of US$500, or more. If five or more qualified recruits are added to her unit in a single month, she gets an additional US$500 bonus check.

[edit] Senior Director

The next step is Senior Director. This occurs when a Consultant in a Director's unit successfully completes Director in Qualification [DIQ], and becomes a Director with her own unit. A Senior Director earns a commission of either 4% or 6% of the total wholesale purchases of this offspring unit. She also receives a US$500 commission check for every offspring unit she produces.

The Senior Director is responsible for training directors and those in DIQ, in how to sell products, recruit and maintain her unit.

There are three more levels after this: Future Executive Director, Executive Director and Elite Executive. Each based on the amount of First line Director offsprings the Director has. The next step is the National Sales Director.

[edit] National Director

The next step is NIQ (National Director In Qualification). This step requires them to recruit at least Twenty qualifying offspring units, each maintaining a monthly production of $20,000 per month during the four month qualification period. A National Director can not be demoted. She can be terminated for violating the National Director Agreement with Mary Kay.

This is the next to last step on the consultant career ladder. The initial qualifying step is to attain one of the following:

• 12 first line Sales Directors, at least six of which are Senior Directors;
• 11 first line Sales Directors, at least seven of which are Senior Directors;
• 10 first line Sales Directors, at least eight of which are Senior Directors;

If that is attained, then Mary Kay (Corporate) reviews the NIQ for the following qualities:

• Ethics;
• Integrity;
• Image;
• Loyalty to the company;
• Professional Image;

Mary Kay (Corporate) has a policy of not discussing the reasons for accepting or rejecting an individual in NIQ as a National Director.

In addition to an increase in commission checks, she also receives:

• A free car;
• Company paid life insurance policy;
• Company paid retirement benefits;

The primary function of the National Directors is to function as roving ambassadors of Mary Kay (Corporate) projecting a positive, ethical image. Their secondary function is to train Beauty Consultants in how to do to retail product sales.

[edit] National Director Emeritus

This status is awarded to a qualifying National Director, upon their 65th birthday. These individuals receive a monthly retirement check from Mary Kay, based upon the average commission of their five highest production years.

Mary Kay (Corporate) has not provided the number of individuals who have been awarded this status. There is a list of roughly 450 currently living individuals with this status, on the Mary Kay InTouch Website. This list is only accessible to Mary Kay Beauty Consultants.

[edit] The Rewards

Mary Kay Ash believed that rewarding people for a job well done, improved their performance, morale, and enthusiasm. To that end, she created a set of rewards to which any Consultant could aspire to.

One of the major criticisms of the rewards, is that they are not based upon independently verified bona fide third party retail sales. Instead they are based upon Wholesale purchases, or number of qualified recruits.

[edit] The Red Jacket

The Red Jacket was originally conceived as a reward for recruiting five consultants. Over time, the number of active recruits one is required to have to earn the Jacket has decreased to three. The jacket is purchased by the consultant for $65 but is commonly presented as a $15 purchase because a consultant will receive a $50 recruiting bonus on the 4th qualified recruit. ^{[citation needed]}

[edit] The Car

In 1968, Mary Kay Ash purchased the first Pink Cadillac, where it was repainted on site, by the dealership owner, to match the Mountain Laurel Blush in the compact.^[28] It was such a good rolling advertisement that Mary Kay Ash decided to reward her top five producers, by providing them with a Pink Cadillac paid for by the company in 1969. Pink was an obvious color choice --- matching the company's eye and lip color palettes. Since 1980, the shade used by the Mary Kay fleet has been exclusive to Mary Kay. Every two years, a Director or National can requalify for a New Cadillac. When the two year lease has expired, the cars are repainted, prior to being auctioned off. The shade of pink has changed over the years, the most recent being the "pearlized pink" in 1998.

Since the program's inception, more than 100,000 Independent sales force members have qualified for the use of a Career Car or elected the cash compensation option. ^[5] It is not known how many Directors select the cash option, in lieu of the car, but GM estimates that it has built 100,000 pink Cadillacs for Mary Kay^[28].

In 1998, in honour of its 35th anniversary, the Mary Kay edition, white GMC Jimmy sport utility vehicle was offered in the United States.

In the United States, the vehicle choice currently (2006) consists of the Pontiac Vibe, Pontiac Grand Prix or a Cadillac. The current (2005)GM (USA) fleet size is 9,870.^[29]

In the United kingdom, Germany, The Netherlands, and Spain, the car is a pink Mercedes-Benz. In Argentina, one receives a pink Ford, while in Taiwan, it is a pink Toyota.^[30]. In Australia, one gets to choose between a Ford Falcon, or Volkswagon Beetle.^[31] In China, the vehicle is a pink Volkswagen Santana ^[32]. In the Nordic countries you receive a pink Volvo V50.^[33]

The specific qualifications for earning the car depend upon the country, and vehicle that is desired. If those qualification are not met, then the Car Driver has to pay for a portion of the lease of the car for that month.^[34]

Career Car insurance is also provided. Price varies between US$0 to approximately US$100 dependent on a variety of conditions. ^[35]

[edit] The Court of Sales

There are two Courts of Sales, The Directors' Court of Personal Sales, and The Consultants' Court of Personal Sales. The Consultant, or Director needs to have a minimum of US$18,000 (wholesale) in purchases, to qualify for the court.

[edit] The Court of Sharing

Prior to 2006, this was known as the Court of Recruiting. All who qualify with at least 24 Seminar qualified recruits are honoured at Seminar, by being presented as The Court of Sharing. The person who has earned the highest amount of personal recruiting commissions on her qualified recruits for the seminar year is presented as Queen of the Court of Sharing.

[edit] The Trips

One of the perks of being a National Director, is a one week retreat with the other National Directors in different parts of the world, at company expense. The cash value of this perk is taxable to the National Director as income.

[edit] Earnings

In an April 2006 press release, Mary Kay (Canada)^[23] claimed the following for Canada:

• There are more than 32,821 independent Mary Kay Beauty Consultants;
• 4,712 of those consultants had been in for more than one year, and earned a commission check from Mary Kay;
• Close to 50% earned a commission of more than $100 Canadian Currency;
• There were 673 Mary Say Sales Directors;
• The top 50% of the Sales Directors earned commissions of more than $17,000 Canadian;
• There are 17 Mary Kay Independent National Sales Directors;
• More than 88% of the National Sales Directors earned more than $100,000 Canadian;

These figures represent commission paid upon the wholesale product purchases of the downline of the Consultant. These figures do not represent income from retail sales.

• By the early 1990s, Sales Directors were making an average of $48,000 a year.^[36].
• More than 200 Independent National Sales Directors in the United States have earned more than $1 million in commissions.^[4]

[edit] Consultant Turnover Rate

Mary Kay does not release information about the number of Consultants who sign up with the organization every year. Neither does it release figures about the number of Consultants who leave the organization every year.

A 68.6% turnover figure has been calculated based upon information supplied by Mary Kay (USA) to the FTC. ^[37]

[edit] Inventory

One of the criticisms of Mary Kay is that it is a product based pyramid scheme.

Several levels of inventory packages have been established for the new Beauty Consultant:

• Pearl Star : US$4,800 Wholesale;
• Emerald Star : US$3,600 Wholesale;
• Diamond star : US$3,000 Wholesale;
• Ruby Star : US$2,400 Wholesale;
• Sapphire Star : US$1,800 Wholesale;
• US $1,200 Wholesale;
• US $600 Wholesale;

In accordance with DSA guidelines Mary Kay offers a 90% refund of the value of product purchased within the previous 12 months. The product value is calculated on the basis of the lowest wholesale price at which they were sold.

[edit] Legal Cases Involving Mary Kay

[edit] Woolf v Mary Kay Cosmetics

Woolf v. Mary Kay Cosmetics, No. 00-5612-J (Dallas Co., Texas, Dist. Ct.) was originally decided in favor of the plaintiff. In doing so it marked the first time ^[38] that workplace rights could be applied to independent contractors who worked from their home. This case was reversed on appeal.^[39]. The Supreme Court USA ruled Certiorari Denied 31 May 2005.^[40]

In this case, Ms Woolf was terminated from her position as director, because her unit failed to make production for three consecutive months. Ms Woolf contended that her firing was illegal, because of her medical condition --- she was suffering from Cancer.

[edit] Notes