Mary Kay Cosmetics Boosts Sales Despite Comic-Strip Barbs Over Tests on Animals
Mary Kay Cosmetics Inc., target of comic-strip barbs over animal testing and jokes about its pink Cadillacs, is doing nicely, thank you, 3 1/2 years after founders Mary Kay Ash and her son, Richard R. Rogers, took the company private in a $469-million deal.
Sales have increased 63.1% since 1985, the last year the company was publicly traded, reaching $406 million last year--all through the efforts of 185,000 sales “consultants,” most of them women and some of them rich women.
Since Ash founded the company in 1963, 33 consultants have each been paid more than $1 million in commissions. In February alone, 10 national directors earned more than $20,000 each, with the top director getting $40,303.53.
Mary Kay has an estimated 2% of the cosmetic market, but claims as much as 9% of the skin-care products segment and about 3.5% of the so-called glamour segment--primarily makeup.
Leveraged Buyout
The success of Mary Kay’s leveraged buyout prompted the company’s vice chairman, John P. Rochon, to venture in May a takeover of competitor Avon Products Inc., which had $3 billion in mainly door-to-door sales last year. Avon rejected the offer and Rochon has not broached the subject publicly again.
At the time, Rochon said the “cultures” of Mary Kay and Avon would remain distinct, but he said Avon would benefit from a touch of Mary Kay-style motivation.
The Mary Kay approach is slogan-filled.
“God first, family second, career third,” “In business for yourself, but never by yourself,” and “The go-give spirit” are some of the sayings used to motivate the sales force.
A monthly magazine is entitled Applause, and gem-studded jewelry is given to even new recruits.
Every year the company stages four sessions in which thousands of Mary Kay consultants descend on Dallas for a production-number extravaganza. Top sellers are awarded minks, crowned and throned on stage at the Dallas Convention Center, and treated to a reception at Ash’s pink mansion.
But it is the cars that have become the company signature.
Cars as Gifts
Top achievers are given pink Cadillacs to drive for the rest of their lives, getting a new one every two years as long as they maintain their high performance. Lesser efforts are rewarded by smaller cars--Buicks and Pontiacs.
There are about a thousand Mary Kay pink Cadillacs on the road, plus 1,000 Buicks and 3,000 Pontiacs.
Consultants earn money by selling cosmetics at home presentations and recruiting other consultants.
Unlike some direct sale companies, each sales person orders products directly from Mary Kay, and not from another person one step up a sales ladder. Consultants do, however, receive commissions based on the sales by their recruits.
Behind the flamboyance is a detailed program telling consultants everything from how to set up business and do their accounting to how they should dress. It provides a detailed code of ethics and outlines how to win prizes.
Over this kingdom rules Ash, whose age is a closely guarded secret, one she wouldn’t even reveal to the Securities and Exchange Commission.
Ash, who is recovering from eye surgery and is unavailable for interviews, created the company in 1963 after leaving a firm that wanted her to move every six months.
She was angry at her former employer and began cataloguing the problems facing businesswomen.
“Mainly, I was doing it to help other women,” she told one interviewer.
But Mary Kay’s president, Richard Bartlett, said Ash realized she really was creating an outline for a successful company, so she began to implement it herself, even though some of those ideas ran counter to accepted management and direct-sales theory.
“I thought that I knew about party planning when I came here,” said Bartlett, who spent time at Tupperware Home Products before joining Mary Kay in 1973. “Where others were talking fun and games (at the home visits), she was deadly serious.
“I had spent over 15 years learning that you couldn’t do those things, that they wouldn’t work,” he said. “They do and we thrive.”
He cites as examples her decision to limit the size of home presentations to six people and abandoning the “party approach” for a more serious “skin care class.”
Adventurous Approach
The company continues to take an adventurous approach to business.
Although admitting leveraged buyouts can be troublesome and drain company resources to pay off debt, “I think we’re a shining example of leveraged buyouts,” Bartlett said.
Before the leveraged buyout, “we had a tendency to make decisions on what the shareholders would expect next, or what we thought the analysts thought,” Bartlett said.
“Now we can take the long view.”
An example of that view may be the company’s decision earlier this year to stop testing its products on animals.
The decision followed a long series of “Bloom County” comic strips criticizing Mary Kay’s testing, including one that compared Ash to Ayatollah Khomeini.
It was not ridicule that led to the moratorium, Bartlett said, but “the confusion and concern” shown by Mary Kay’s sales force, which he described as “a microcosm of American women, middle-class and up demographically.”
Bartlett said the moratorium may cost Mary Kay sales, even though most products planned through next year already have been cleared.
The company is also trying to correct mistakes it made in the early 1980s.
“We got complacent with our product line. We laid back and said we had the world’s finest product,” Bartlett said.
The company lost much of its sales force as an improving economy opened more jobs to women.
Since then, the Mary Kay pitch has been restructured to appeal to working women, Bartlett said.
Part of that plan is to have women in Mary Kay’s top management, and even Bartlett, the male president, says a woman should be president of the company.
Other than Ash, whose official title is chairman emeritus, most top-level management is male, although there are many female vice presidents.
