Feasible or impossible: a look on mary kay direct selling compensation plan
“First impressions last.”
We’ve all heard this cliché probably thousands of times. This is probably the reason googling “skin care”, “anti-aging”, and “cosmetics” yields over 290 million search results. In fact, Singapore, Australia, and Ireland are the top 3 countries that key in “cosmetics” on Google. No wonder companies such as Mary Kay, Avon, and NUSkin continuously answer this demand through wholesale or retail sales.
With all the facts and figures companies present to their recruits, is there really a realistic future for them or are MLMs really nothing more than a scam?
Here, we’ll look at Mary Kay Inc., a 2.6 billion dollar cosmetics and personal care company which started in 1963. Based in Dallas, Texas, it has over 2 million distributors in its 35 markets worldwide.
Reviewing statistics helps you see the trend of a certain subject. In MLM, some of the factors you may want to know are where entrepreneurs sell, where consumers buy, and what items are in demand.
Below are some example of statistics based on Direct Selling Association, a group which aims to promote legal practices in the direct selling business.
-Personal care items come in 3rd in products sold at 21.3%
-Sales are generated from face-to-face selling 78% of the time, and through the internet at over 7%
-Direct sellers are composed of mostly non-personal users or purchasers at almost 31%
-Over 92% spend less than 30 hours a week on direct selling
Mary Kay presents 3 basic distributorship levels. The compensation plan here are based on reviews and feedbacks from current or previous members. I’ve narrowed it down to their simplest compensation in this table.
Mary Kay’s 3 Basic Levels of Distributorship and Compensation Plan
IBC ISD INSD
Investment/ $300 total $4,000 order $20,000 team
Total sales $100 starter kit order on wholesale
Team none 30 IBCs 18 ISDs
Commission 50% on units 9% on team 13% on team
sold orders orders
Because “cosmetics” is keyed in more in Google than “anti-aging”, let’s focus on selling the Mary Kay Compact retailing at $18.
Only 7% use the internet for direct selling, so let’s say you’re only using Facebook and nothing else to sell your Mary Kay products. According to Facebook statistics, you’re most likely to have at least 130 friends. If only 10% of these friends purchased from you, and 2% from each of those friends, you get about 46 customers in a month.
Independent Beauty Consultant (IBC)
Investment = $300
Mary Kay Compact = $18
Profit 50%/every unit sold = $9
You need to sell 33 units in 3 months or just 10 units in a month.
Buyers from Facebook = 46 x $18
Total Sales = $828
Commission = $414
Total Profit (less investment)= $114
Keep in mind that this is your profit from just staying at home, selling online. Almost effortless, if I may say. You simply upload a picture of your Mary Kay product, tag friends, and share. Remember, too, that an average Facebook user is connected to at least 80 community pages. That’s a whole lot of connections, if you ask me.
From your 46 Facebook customers, let’s say you can recruit 30 of them to be your IBCs. You are now eligible to be an Independent Sales Director.
Independent Sales Director (ISD)
Investment = $4,000
No. of IBCs = 30
Order of each IBC= $200
Total sales (IBCxorder)= $6,000
Commission (9%)= $540
Total Sales= $6,540
Total Profit(less investment)= $2,540
Note that Mary Kay offers more ISD commissions and bonuses such as $100 for a new recruit who orders a $600 worth of products, and $500 for any month that a new recruit places at least $600 of wholesale order to name a few.
If from your 30 IBCs you can get 18 of them to be ISDs, you can now be at the top level of Mary Kay. More than just handling sales, your responsibility stretches to mentoring and motivating your team.
Independent National Sales Director (INSD)
Investment = $20,000
No. of ISDs = 18
Order of each ISD= $4,000
Total sales (ISDxorder)= $72,000
Commission (13%)= $540
Total Sales= $9,360
Total Profit(less investment)= $61,360
While over $60,000 total profit looks too good to be true, remember that as you go along, you also incur recruitment expenses. Meaning, you still somehow spend on your transportation, food, materials, etc. for meetings or other team activities.
As a Mary Kay INSD, you get additional percentage shares such as 13% sales director commission for your own orders, and 2-7% commission from your first to third line units on top of travels and car bonuses.
Are MLM companies, a scam? While there may be groups who operate illegally, fortunately, Mary Kay is not a scam. Clearly, “success” in direct selling depends on how much you want to earn. Companies such as Mary Kay may offer the best compensation plan in the industry, but only your commitment can tell how soon you can be at the top.