Étude de cas: Kdh (document en anglais)

Table of Contents

Problem/Situation Statement…………………………………………………………………..……….…………..p.

Situation Analysis (SWOT)………………………………………………………….……………….……..p.

Options Generated…………………………………………………………………….……………….p.

Recommendations……………………………………………………………………..………………..….p.

Implementation Plan………………………………………………………………………………………p.

Appendix………………………………………………………………………………………………………………p.

Problem/Situation Statement

Design by Kate (DBK) is an organization that employs a direct sales strategy, based on the method pioneered by Tupperware, to sell women’s jewelry. Despite the retail industry’s slow growth, and generally unfavorable economic conditions, DBK experienced rapid growth since its establishment five years earlier. Recently, the firm’s top-line growth trajectories have slowed due to the fact its sales representatives where taking longer to attain the status of “leader”, and subsequently assemble their own sales teams. The willingness of DBK’s sales reps to build their own teams is integral to the company’s business model, and essential for the firm’s success. More than ninety percent of DBK’s sales reps had been recruited by the firm’s existing sales force. Moreover, as sales representatives climbed the corporate ladder, they tended to remain with the firm longer and be more productive.

DBK implemented an elaborate commission structure to encourage its employees to seek promotion. This structure was developed after extensive research and deliberation, on the part of the company’s CEO Kate Creevey, pertaining to direct sales models, and their implementation. The resulting model included both commission increases, and bonuses for moving up the corporate ladder. In consulting its sales force, the firm discovered two main flaws with their new system. The sales reps made it clear that they did not believe the financial incentives for attaining the status of “leader” were worth the inputs required. Additionally, most of the firm’s sales reps considered the opportunity to work independently to be a key component of their jobs’. The forming of sales teams was regarded as an unnecessary hassle. Secondly, most sales reps believed that the recruitment of other sales personnel would result in a substantial decrease in their earnings, despite the already generous commission they received. The question of overlap among each sales representative’s social network was also a concern for the firm’s sales force. At this stage, DBK realized that they might not have an accurate picture of their sales force’s earnings and how climbing the corporate ladder affects them. If this were the case, the company would have to improve their sales structure so it properly portrays the benefits of moving up the corporate ladder. However, if their sales structure, in its current form, proved to be profitable, it will have to re-teach its sales force, so the benefits of moving up the corporate ladder become apparent. This will result in additional costs in terms of overhead capital. The company has no precedent to base their actions on if this is the case. Furthermore, the success of the company’s direct sales strategy is dependent upon its ability to reduce its fixed costs. The incurrence of additional costs through educating its workforce could potentially undermine DBK’s success.

How can DBK restructure or reeducate its sales force with regards to the benefits of moving up the corporate ladder without undermining the success of its direct sales model?

Situation Analysis

Strengths

First just looking at the direct selling industry as a whole we can see that it can claim many strengths beginning with its focus on products and personalized service. Prospective recruits are offered an opportunity to engage in the free enterprise system with minimal financial investment, minimal risk, free training and the opportunity to earn in proportion to time and effort invested. In terms of ease of entry into a business opportunity, no method of business stands taller than that of direct selling.

Kate Creevey Experience and Knowledge

Since childhood, Kate Creevey has been involved in direct sales. Her mother was a Mary Kay sales representative, which always intrigued Kate. When she received her MBA in 1999, she joined a management-training program that permitted her to gain experience within various departments: finishing as a CFO. After six years in this position, she launched her own business: Design By Kate (DBK). The firm’s business model was inspired by a diverse set of established companies using direct sales, such as Avon, and of course Mary Kay.

The Sales Force

The use of targeted marketing strategies to pre-select its sales representatives is integral to DBK’s strategy. Each perspective sales representative would be obliged to purchase a “launch kit” from the company for $250. This will ensure that the DBK attracts the most suitable, and committed candidates.

Moreover, DBK encourages its current representatives to recruit, train, and mentor new sales representatives, resulting in the establishment of multiple sales teams. This permits each sales representative to increase their revenue by receiving “leadership dollars”. Sales representatives were encouraged to seek promotion, and could increase the percentage of “leadership dollars” they receive from their ‘team’s’ sales by getting promoted up the DBK sales ladder.

DBK Parties

Most of the sales generated by DBK’s representatives occur at parties. In 2006, the company’s sales force hosted 3470 sales parties, generating approximately $1,200 per event. In 2010, these figures rose to 50,459 and $1,428 respectively. These parties consist of sales representatives inviting friends and colleagues to their homes where they display DBK’s product and take orders. DBK parties allow the company’s sales representatives and customers an opportunity to interact and purchase

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