Sales Strategies in a Real Business

A reader offers this discussion of how companies analyze a market (and the territories) to decide where to place distributors/retailers. Of course, Mary Kay does no such thing, telling consultants to ignore the concept of saturation and that countless reps in an area are no problem. 

I’m mid 40s and a lifelong sales professional (no MLM). I worked over a decade in furniture/mattress retail as a salesperson, manager, and small business owner with my own small store. I also spent more than another decade as a territory sales rep, half for a mattress manufacturer and the other half for a giftware manufacturer.

All of these positions (minus when I owned my own store) are full-time, salary-plus-commission positions with full benefits, mileage/fuel reimbursement, free training, etc. All of my wholesale customers were/are small, independently owned local businesses. My manufacturing employers did also sell to big box/chain stores, but they had a separate sales force to focus on the independents in the territories.

Based on this extensive experience, I’m finding that how the MK world defines and treats “sales”, “market”, “inventory”, business ownership”, and so on, to be ridiculously out of touch to the point of creating their own “business” language that has little to no resemblance to real life.

I’ll describe, for example, my territory as a mattress manufacturer’s rep and how we built business and increased sales. I had a physical territory that was guaranteed to be mine and protected as such. Almost all manufacturers who produce consumer products sold through retail outlets do this, and it’s pretty easy to set up. For me, I had physical counties that were mine. So another ABC Mattress rep from a different territory couldn’t just drive into my area and set up a wholesale account with any of those retail stores and the company. Same thing with my giftware position…protected territories where we wouldn’t sabotage one another.

One of the biggest things we practiced that absolutely flies in the face of the MK way is our deep understanding of market opportunity/saturation. Our corporate office compiled significant, recent data that was provided to us (for free of course, though it cost them money to get it) for every inch of our territory.

Here’s a summary: the data broke down the territory by county and thus provided numbers by county. They used the estimated annual overall US numbers of money spent by consumers on all mattresses, then broke that down by population to get a fair estimate of what each county’s potential mattress purchasing power is, and the company pulled up how much of its product was sold in that county. Then, the company itself used its knowledge of our own overall market share (ie, ABC Mattress, doing xxx million a year, and knowing that the overall mattress industry does xxxx million per year, currently has xx% overall market share on average).

Let’s say our average market share of the entire mattress industry is 21%. We then looked at the data for each county and could easily determine the areas in which we were pretty strong, and the areas where our market share was low. Then we look at those lower areas and figure out if there is potential for more business and create a plan to get it. What we did with the giftware manufacturer was similar. In both positions, we were frequently given updated lists of exactly how many dollars the accounts in our territory spent with us and by which accounts. Because this makes so much sense from a business perspective, it BOGGLES MY MIND that MK not only doesn’t even consider this, but strives to keep this way of thinking and use of data (that they absolutely have) hidden and even discouraged.

So MK tells you to trust that the product sells itself and that the number of other MK sellers in your area is irrelevant to your success. THAT MAKES NO SENSE. Seriously, it doesn’t. I’m guessing that they try to use the lack of physical territories as a plus (you can sell to/recruit anyone, anywhere). But then they focus on how you have to do it in person to be successful. Those two things are contradictory.

Any person being recruited to sell MK should carefully consider the “opportunity” by expecting to be given proper data to gauge the potential for success. This includes knowing how many active consultants are in their area, how much total they are ordering from MK (and thus extrapolate estimated retail sales), and how that amount compares to national estimated numbers. This is the only way to know if the market is saturated or not. To just blow that off flies in the face of all we know about successful retail sales (sales to the end consumer). Even if you managed to get those figures (hahaha, and if you do, are they real) and conclude that your area is not saturated, there is no guarantee that it won’t be next month or next year (since you have no protection of territory).

I know this is a lot in one post, but another thought: when I opened my own business (retail mattress store), I used the county data I had, and knowledge of the market, very carefully to determine where to place the store and whether to even do it. I actually chose the next county over from where I lived to avoid the market saturation in my own county. It seems that the focus that MK presents as what should be the main determining factor you should consider when thinking about a MK opportunity is your potential earnings. Well, potential earnings are infinitely tied to the sales potential in the market. It is not, nor will it ever be, unlimited. That’s ridiculous. Frankly, the MK use of the phrase “own your own business” is laughable to me, as it is to many of you. It’s a joke.

17 Comments

    1. HollyHop

      MK tracks the wholesale amount of products sold to their consultants. But they couldn’t tell you if Pinky Sue sold that wholesale to anyone and for what price (if) she actually sold it at.

      They may assume she did…but we all know what they say about assumptions, right?

  1. Char

    Excellent post, and thank you for pointing out the apples to oranges. Mary Kay is a direct selling company. They sell to customers dubbed consultants with fancy titles, so their customer will buy more.

    I’m sure Mary Kay Company has plenty of analytics on what consultomers are ordering. And, I’m sure they’ve evaluated whether to open or close a distribution center – that ships directly to their consumers.

    The article clearly exposes the fake and purposely confusing conversation from MK: that consultants are anything more than direct buying customers receiving kickbacks after buying overpriced products, and recruiting others to do the same.

    I think companies like “Purple” mattress also sell direct? If I buy one and pay extra, I wonder if I get money back, and a title of “Sleeper Force”? And, if I resell my Purple at a garage sale, am I now an entrepreneur? Do you think Purple keeps track of all the people who resell their mattresses? Why would they care?

    MK also doesn’t track re-sales, and of course they don’t. That would be silly for a direct selling company to do that. ‘Me thinks’ the term “direct selling” has been hijacked and misused like many other terms in MLM in order to confuse their consumer.

    1. Data Junkie

      “‘Me thinks’ the term “direct selling” has been hijacked and misused like many other terms in MLM in order to confuse their consumer.”

      MLMs are notorious for using business terms incorrectly to fool their minions (“Business Owner”, “Income”, “Production”, “Retail”, “Wholesale” etc). And then they make up new terms for things that don’t exist in the business world (Upline, Downline, Overrides, and the myriad of silly titles and meaningless levels).

      To make matters worse, they deliberately conflate terms to compound the confusion. Promoting “gross commissions” as “net income” is the most common, and the most dangerous. But look at a word they use in its opposite meaning: “Wholesale”. In the business world, this refers to the cost of producing the product and includes a modest pre-distribution markup for the wholesaler’s profit. Retailers must mark-up the wholesale cost to cover their distribution/retailing costs along with their own profit. This “retail” price is what is offered to end customers. My intuition tells me that not a single Mary Kay product has a true wholesale cost above $1.00.

      Meanwhile, in Mary Kay, what they call the “wholesale” price already includes an outrageous mark-up to cover the excessive distribution cost of MLM, along with an over-the-top profit for the wholesaler. This kind of price (with the distribution cost built in) is more accurately referred to as “retail” in the business world. And since the Mary Kay rep is, after all, the target customer, what Mary Kay calls the “wholesale” price is quite literally the actual “retail” price of the product. And thanks to the layer upon layer of commissions paid to uninvolved third parties (who bring absolutely no value to the end-consumer of the product), this “wholesale” price ends up higher than competitive “retail” for products of similar quality.

      Modern retailers have eliminated as many unnecessary layers in the distribution as possible to lower the “retail” price to their customers. In MLM, with the reps starting out with an “above-retail” cost, It is understandable why they can’t further “mark-up” an already “retail” price. It is akin to buying something from Walmart and trying to resell it with a 50-100% markup. Most consumers will steer clear. The only way to reconcile all of this is to look at the MLM rep as the target customer. Only then does this model make any sense, and makes their use of the term “wholesale” even more insidious.

      Now if Mary Kay were to sell to their consultants at true wholesale (eliminating up-line commissions) for less than $1 per item, the consultant might have a chance to sell these products at a competitive “retail” price after marking it up. This would then give them a realistic chance to make money as a retailer. Alas, MLM products already have the retail mark-up built in, leaving only one realistic option to move product: recruit.

  2. NayMKWay

    The MLM world is saturated all right: with illogic dressed up as level-headed analysis. I came across this gem while looking for a different quote:

    “Worrying about the market saturating is akin to worrying about getting hit by a meteorite. There’s an outside chance with an infinitely low probability that it could happen. But while you’re immobilized with doubt and worry, life goes on all around you.”

    Yeah, that’s right: all that money companies spend analyzing a market prior to entering it is wasted. Just go for it before someone else beats you to it! (Reality check: market saturation is the norm, not the exception. Is it difficult to find cosmetics, vitamins, weight-loss shakes? Of course not; those are saturated markets.)

    After a few paragraphs of waffle about the outrageous dropout rate in MLM being perfectly reasonable, the article concludes thus (please forgive the long quote; I just can’t resist):

    “The only way you will succeed in network marketing is if you establish your own momentum. When you do that, the momentum of others won’t matter so much. You have to present, present, present, present, present, present your network marketing opportunity. You must be consistently in high gear.

    “If you do that, and you show your network marketing opportunity to a few hundred thousand people and you still haven’t managed to make any money, then maybe you can begin to think about saturation. Until then, you’re just wasting your time.”

    You see, the time to weigh the opportunity is after you’ve wasted huge amounts of time, energy, and money trying to succeed. What you’re supposed to live on in the meantime is not addressed.

    The original quote I was looking for was about saturation being impossible because more people are born every day, and how GE still sells refrigerators even though everyone already owns one. It almost sounds reasonable so long as you ignore the false comparison between two wildly different growth rates.

    Thought-stopping clichés and glib double-speak are the stock in trade in MLM. Candidates can be overwhelmed by all the ready answers to their concerns, unaware they are hearing pre-scripted lines. It’s easy to be misled into thinking a quick reply is a truthful one.

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    1. Char

      ““The only way you will succeed in network marketing is if you establish your own momentum. When you do that, the momentum of others won’t matter so much. You have to present, present, present, present, present, present your network marketing opportunity. You must be consistently in high gear.””

      Funny how there is no mention of retailing products to non-affiliates. (Tap, tap, tap. Paging the FTC. Hello?)

      1. NayMKWay

        Excellent point, Char. “Present” clearly means to present the “opportunity”; i.e., recruit. That tidbit flew right by me. I guess I was distracted by the overall ridiculousness of the article.

  3. Autumn

    I made a Silpada upline unhappy when I stated that I wouldn’t sign up with her and compete with my friend (hostess). So of course she said there were no territories. So I asked why anyone would sign up without a protected territory, the jewelry was expensive after all. I explained that there was only one boat dealer selling Hunter Sailboats on the lake, only one selling Fairwinds Powerboats, or Bayliners. That’s how real companies operate.

    I wasn’t well liked!

  4. Mountaineer95

    There’s some Cadillac director lurking around my town. I so want to get invited to one of her “meetings” to troll her with questions about this topic, and hopefully watch her try to stutter her way to an answer.

    1. NayMKWay

      I can tell you what others have gotten thrown at them when they ask the tough qiestions (gleaned from stories on Reddit):

      “You obviously are not cut out for this business.”

      “Your negative attitude is why you fail in life.”

      “You have just disqualified yourself from this opportunity” (this from an Amway guy)

      If they bite back at you like that, just smile benignly. I mean, what else you gonna do, stoop to their level?

      Or you could just forget the whole thing, stay home, and sort out your junk drawer. If you’re anything like me, and I know I am, it needs it.

    2. Coralrose

      I asked “Why would you recruit someone to be your competition at the recruiting event I went to. Of course, I didn’t know at the time it was a recruiting event . (This was before I found Pink Truth) As much as I wish it made the director squirm, The SD’s answer was smooth & polished. “We’re not in competition with other Beauty consultants. We’re in competition with Wal-Mart and Target.” And they shared the completely made up statistic that the market can support 1 Cadillac Unit for every bank in town. Then they told me the number of banks & Cadillac Units in town, and “See. The market isn’t saturated”. They were very convincing and I believed them.

        1. Heather

          Best – I remember hearing early on that there should be a director for every bank in town. I thought it was the strangest thing, even as a SD. That would have meant the little town we lived in when I first started should have had something like 12-14 directors. There were two, and only one drove a Cadillac off/on.

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