Designs By Kate: The Power Of Direct Sales
rP os t
4284
APRIL 20, 2011
JOHN A. DEIGHTON
SARAH ABBOTT
op yo Designs by Kate:
The Power of Direct Sales
For every failure, there's an alternative course of action. You just have to find it. When you come to a roadblock, take a detour.1
— Mary Kay Ash, Founder, Mary Kay
In November 2010, Kate Creevey, CEO and founder of Designs by Kate, Inc. (“DBK”), sat down with her management team to review the quarterly sales numbers. DBK, which sold women’s jewelry via the direct-sale methods pioneered by Tupperware, had enjoyed rapid sales growth since its founding five years earlier. This growth was achieved despite unfavorable economic conditions and slow growth for the retail industry overall.
No
tC
However, Creevey was concerned that DBK’s top-line growth trajectory had slowed recently.
Juanita Thomas, head of Sales at DBK, noted that this slowdown seemed to have been driven by a slowdown in the rate at which new sales representatives were transitioning to “leader” status and beginning to build their own sales teams. The willingness of sales representatives to build their own teams was central to DBK’s business model. Sales growth had been driven primarily by growth in the number of sales representatives, and more than 90% of DBK sales representatives had been recruited by existing sales representatives. Additionally, sales representatives who became team leaders tended to stay with the company longer and were more productive sales people. A detailed commission structure had been put in place to encourage sales representatives to build and to actively manage their own sales teams (see Exhibit 1a.)
Do
In response to this trend, Thomas polled sales representatives about their thoughts on becoming team leaders and moving up the DBK sales ladder. This feedback included two clear messages which disturbed Creevey and her team. First, many representatives thought the financial rewards offered for “leading” were not worth the trouble it took to earn them. These women
4284
APRIL 20, 2011
JOHN A. DEIGHTON
SARAH ABBOTT
op yo Designs by Kate:
The Power of Direct Sales
For every failure, there's an alternative course of action. You just have to find it. When you come to a roadblock, take a detour.1
— Mary Kay Ash, Founder, Mary Kay
In November 2010, Kate Creevey, CEO and founder of Designs by Kate, Inc. (“DBK”), sat down with her management team to review the quarterly sales numbers. DBK, which sold women’s jewelry via the direct-sale methods pioneered by Tupperware, had enjoyed rapid sales growth since its founding five years earlier. This growth was achieved despite unfavorable economic conditions and slow growth for the retail industry overall.
No
tC
However, Creevey was concerned that DBK’s top-line growth trajectory had slowed recently.
Juanita Thomas, head of Sales at DBK, noted that this slowdown seemed to have been driven by a slowdown in the rate at which new sales representatives were transitioning to “leader” status and beginning to build their own sales teams. The willingness of sales representatives to build their own teams was central to DBK’s business model. Sales growth had been driven primarily by growth in the number of sales representatives, and more than 90% of DBK sales representatives had been recruited by existing sales representatives. Additionally, sales representatives who became team leaders tended to stay with the company longer and were more productive sales people. A detailed commission structure had been put in place to encourage sales representatives to build and to actively manage their own sales teams (see Exhibit 1a.)
Do
In response to this trend, Thomas polled sales representatives about their thoughts on becoming team leaders and moving up the DBK sales ladder. This feedback included two clear messages which disturbed Creevey and her team. First, many representatives thought the financial rewards offered for “leading” were not worth the trouble it took to earn them. These women