September 13, 1963, 49-year-old Mary Kay Ash
and her son, Richard, started what was to become
a large and successful cosmetics business named
Mary Kay Cosmetics. The company specialized
in the manufacture and sale of a specialized
line of skin cream and related products. What
made the company somewhat unusual was the use
of a direct sales force that numbered about
197,000 at the end of 1982. Most of these individuals
were women working part-time. All made their
sales through demonstrations held in private
homes. Within the direct sales market segment,
Mary Kay, the company, was widely regarded as
having the most product sales force. And Mary
Kay, the woman, was widely regarded as an outstanding
example of entrepreneurship at its best. This
is that story.
Youth and First Marriage
Mary Kay Wagner was born
in Hot Wells, Texas, 25 miles from Houston,
in 1915. Her parents ran a hotel and restaurant,
which drew customers from Houston, 25 miles
away. When she was seven her father became ill
with tuberculosis and had to enter a sanatorium.
Her mother sold the hotel and moved to Houston
where she ran a small café. Mary Kay did the
housework and cooking, developing confidence
in her abilities to take care of herself and
Religion was an important part of the young
girl's life. Later, as an adult, she began tithing
once her income reached eleven dollars a week.
Her tithing and attendance went to the Baptist
Church. But she was truly ecumenical in her
love for others. Her three husbands were, respectively,
Catholic, Protestant and Jew.
In school Mary Kay developed into a fierce competitor.
She attributed that trait to a friendly rivalry
with a neighbor girl who, "Had everything I
wanted to have and did everything I wanted to
do". So motivated, Mary Kay won a junior high
school typing contest and took second place
in the state extemporaneous speaking contest.
She earned straight "A's" in high school.
After graduating from Houston's Reagan High
School she wanted to enter Rice Institute. But
she had no money and was unable to get a scholarship.
Reluctantly, she gave up the idea of going to
Instead, she married Ben Rogers, a guitarist
whose radio program made him something of a
local celebrity. The marriage lasted eleven
years and produced three children. But Rogers
was drafted during World War II and while away
on military duty asked for a divorce. Mary Kay
later commented, "It was the lowest point in
my life. I felt like a complete failure as a
Learning to Sell
Before the divorce Mary
Kay had first taken a few premed courses at
the University of Houston and then obtained
not one but two jobs. One was as a secretary
at the Tabernacle Baptist Church. That paid
$125 a month.
The other job was selling for Stanley Home Products.
That company marketed by direct selling. Its
representatives put on "home shows" at the residences
of selected customers. A number of ladies would
be invited to each show where salespersons like
Mary Kay would demonstrate Stanley home products
and try to sell them on the spot. The salespersons
were actually independent contractors who bought
the merchandise from Stanley and sold it at
In Mary Kay's case the profit came slowly. After
three weeks on the job her "shows" were averaging
$2.01 in net income, hardly enough to support
her family. Many persons in that situation would
have quit and looked for other work. But Mary
Kay was convinced that money could be made selling
Stanley products. That led her to believe that
her sales methods weren't right and she dedicated
herself to finding out what she was doing wrong.
In search of the answers she went to a regional
sales convention in Dallas. She asked many questions,
made notes of ideas that sounded helpful and
left the convention a much wiser salesperson.
A highlight of the convention was the crowning
of the "sales queen." That ceremony had a galvanizing
effect on Mary Kay. She set a goal to be the
company's sales queen at the next convention.
She even got up the courage to approach the
company president, F. Stanley Beveridge, to
tell him of her goal. As she later recalled
that moment, "He took my hand in both of his,
looked me square in the eye and after a moment
said, 'Somehow I think you will.' Those five
words changed my life." A year later she was
named the sales queen.
Having mastered the art of selling, Mary Kay
next had to learn how to recruit and manage
other people. The direct selling business she
was in was primarily an occupation for part-time
workers. A person wishing to make it a lucrative
full-time business had to recruit other salespersons.
Stanley's policy was to pay the person doing
the recruiting a small percentage of the sales
revenue of each person who was recruited.
Mary Kay was a good communicator. Not only was
she able to recruit other women as independent
contractors for Stanley Products, but she was
also able to teach them her secrets for successful
selling. Eventually she had a group of 150 women
whom she had recruited and who were succeeding
in the business. Her income was supplemented
by a small percentage of the sales of each of
At that point in her career Stanley insisted
that she move to Dallas to develop that territory.
In addition, the company refused to let her
continue to receive "commissions" on the sales
of the women she had recruited in the Houston
area. She made the move and successfully recruited
a new group of women. But she deeply resented
not being allowed to share in the earnings of
her Houston recruits. Years later when she started
her own company she remembered that injustice
and adopted a policy of letting her saleswomen
keep commissions without regard to geographical
In 1953 May Kay left Stanley Products to embark
on a business venture in St. Louis. The venture
aborted and she returned to Houston where she
became a salesperson for the World Gift Company.
World Gift was another direct sales organization
and her past experience made it easy for her
to boost her earnings to $1000 a month by the
end of the first year. Impressed by her performance,
World Gift eventually made her its national
training director. Traveling three weeks every
month she developed 43 states for the company.
She also developed a strong power base among
the field personnel.
Mary Kay's success was also her undoing at World
Gift. In 1963, "an efficiency expert told the
company Mary Kay's power was too great and the
pot began to boil." The company offered her
a change of assignment. It was, in effect, a
demotion. Mary Kay refused to accept it and
resigned, waiting for the company to reconsider.
But World Gift had no intention of doing so.
After 25 years in direct sales Mary Kay found
herself suddenly and unexpectedly retired.
Founding A Business
Retirement was not
healthy for Mary Kay. As she later explained:
The boredom of retirement
caused a deepening sense of discontent. I had
achieved success, but I felt that my hard work
and abilities had never been justly rewarded.
I knew that I had been denied opportunities
to fulfill my optimum potentials simply because
I was a woman. These feelings were not mere
indulgences of self-pity, because I had personally
known so many other women who had suffered similar
She attempted to put herself
in a positive frame of mind by, "making a list
of only those good things that had happened to
me during the previous twenty-five years." In
the process of making that list her thinking once
again turned positive.
Once the first list was made, Mary Kay realized
that she might have the beginnings of a book.
But for such a book to be truly helpful to others,
it would also have to warn the reader of problems
encountered in direct selling and offer advice
on how to solve them. And so a second list was
As she reviewed the lists in the following weeks
she began to develop a new dream. In her words,
I had been introduced to the
skin care products by a local cosmetologist
when I had called on her during my direct-selling
days. Her father had been a hide tanner who
noticed that the skin of his hands was like
that of a young man. Realizing that the tanning
solutions he worked with every day were possibly
responsible, he began to experiment and eventually
developed a modified version to use on his face.
His daughter became a cosmetologist and using
his formulas, she developed creams and lotions
for customers of her small, home-operated beauty
shop. In addition to myself, many of her relatives
and friends had been using these wonderful products
for several years, so when the cosmetologist
died, I bought the original formulas from her
family. From my own use and the results I had
personally received, I knew that these skin-care
products were tremendous, and with some modifications
and high-quality packaging I was sure they would
be big sellers!"
With the product identified
and a marketing plan in place, Mary Kay and her
second husband prepared to go into business. Their
life savings of $5,000 was used to make arrangements
for a small office with two desks and the manufacture
of an initial inventory of products. Ten saleswomen
were recruited as independent agents who would
pay for their supplies in advance. And Mary Kay
gave the new recruits a thorough introduction
to the techniques of successful direct selling
under the so-called "party plan."
A month before the company was to open for business,
Mary Kay's husband died of a heart attack. Realizing
that the best way to overcome her grief was to
be busy, she went ahead with the scheduled opening.
Her twenty-year-old son, Richard, accepted a $250
a month job to run the financial and administrative
ends of the business and on September 13, 1963
(a Friday) Beauty by Mary Kay began its
first official day of business.
Nature of the New Company
1. Basic structure of
the Sales Organization
Beauty by Mary Kay
followed the basic party plan model. The company
manufactured proprietary products, which it
then sold through a network of saleswomen. They
were, in fact, independent contractors. Mary
Kay called them "Beauty Consultants". To become
one, the woman had to sign an agreement and
pay for her initial product inventory called
a "beauty showcase." The new recruit would immediately
be taught how to schedule and conduct the sales
session at parties to be held in private homes.
Then it was up to the consultant to book the
parties or "skin care classes."
The beauty consultant's income was to come from
two sources. One was the sale of Mary Kay products
to the consultant's customers. The consultant
bought the merchandise from the company at a
fifty percent discount from retail list price.
The other source of income was the bonus paid
for recruiting new beauty consultants. In 1985
the bonus system paid a consultant 4 percent
of the GROSS product orders of recruits if one
to four persons had been recruited and 8 percent
for 5 or more recruits.
A beauty consultant was expected to work part-time
(leaving time for another full-time job or taking
care of the family). Consequently, a consultant's
income was expected to be low. In the period
1981-1983, for example, the average sales per
consultant was $1,705 with 50% going to the
For salespersons intent on making a larger income,
Mary Kay created the position of Sales Director.
A person in this position remained an independent
consultant. But she was given the additional
responsibility of organizing the weekly sales
meeting for the beauty consultants in her unit.
In 1982, the 4,100 Sales Directors had an average
annual income of just over $25,000.
2. Issue of Pyramiding
The structure of the sales organization at Mary
Kay raises the question of exploitation of the
bottom level salesperson. Reporter Kim Wiley
offers this example of the company's response:
The firm is sensitive to the
fact that this manner of operation may be interpreted
as pyramiding and it sends out full legal documents
explaining why it isn't. In a pyramid scheme,
the recruiter gets a piece of each recruit's
commission (or forces the recruit to buy products
from her at a marked-up price), thus making
it necessary for the recruit to bring in recruits
of her own just to stay afloat. In Mary Kay,
everyone receives the same 50% discount on the
cost of cosmetics; the recruiting bonus does
not come out of the recruit's earnings, but
is paid directly from the home office.
3. Unique Features
With the exception of the care taken to
avoid pyramiding, the organization was similar
to most other direct selling organizations. But
Mary Kay expected her organization to outperform
the others because of the structure and procedures,
which she had formulated.
The structure was designed to help the
independent contractor make the most of the market
opportunities. Key elements of the structure were:
(1) Limiting the product
line so that the salesperson could be thoroughly
knowledgeable about each item and so that on-the-spot
deliveries could be made at the time of the
(2) Putting the emphasis
at the sales parties on teaching rather than
selling. Mary Kay believed that not only would
the teaching make the claims for the products
more credible, but it would make the experience
more enjoyable for both customer and salesperson.
(3) Restricting the
number of people at a party. Mary Kay had learned
through experience that women who actually participated
in a demonstration were more likely to buy.
But since a beauty consultant could not give
personalized attention to more than six women
at a given party, that was the maximum number
(4) Insisting on delivery
on the spot. By having the beauty consultant
deliver the orders at the time they were placed,
the company took full advantage of impulse buying.
Furthermore, by having the beauty consultant
collect payment on the post, the hostess was
relieved of the burden of trying to later collect
from the guests.
(5) Not allowing the
beauty consultant to buy on credit. This policy
eliminated the cost of policing a credit system
and protected the consultant from getting herself
too deeply in debt. Mary Kay felt that other
firms unnecessarily created bad feelings between
the company and sales force because of credit
(6) Not limiting sales
territories. Mary Kay believed that more beauty
consultants would be recruited if any consultant
could recruit anywhere in the country (or outside
of it). As she explained the system in 1978,
"We have what we call the adoptive system. It
works like this: say you recruit a consultant
while you're on vacation in Hawaii. You leave
her with a director of consultants in Hawaii
who trains her. Meanwhile, you draw a small
percentage of your recruit's sales. But the
company pays that commission, not the recruit.
The Hawaiian direct does not get any percentage
except to count on the recruit's sales as a
part of her unit, but the Hawaiian director
will have a recruit somewhere else, under some
other director and it balances out. Most of
our 900 directors have adoptees. Now this system
is almost unexplainable to men, I've found.
But it works. Everyone helps everyone else".
(7) Offering superior
compensation. "Gross profit margins for salespeople
were typically 35% to 40% when Mary Kay launched
her company. She set that level at 50% to help
attract career-oriented women".
(8) Sweetening compensation
with an array of performance bonuses. Sustained
high levels of performance were, of course,
rewarded by promotions to positions of sales
director or national sales director. But short
run effort was further encouraged by a generous
array of cash bonuses and such in-kind awards
as the use of a pink Cadillac for a year. "In
1982, 358 sales directors earned between $30,000
and $50,000 in commissions and prizes (in addition
to their regular sales income). Another 166
earned between $50,000 and $100,000 and 45 earned
more than $100,000".
Those were the key elements
of the structure within which the Mary Kay Cosmetics
sales force would operate for the next two decades.
3.2 Corporate Culture
Mary Kay was fully aware of the fact that
structure or formulas work only if they function
in a manner that brings out the best in the people
involved. And so she sought to create a corporate
culture, which encouraged people to make that
kind of effort. The culture contained a set of
(1) Pride in the organization
(2) A belief that one
could not be satisfied with past accomplishments
but should seek to constantly improve
(3) A willingness to
(4) A belief in the
dignity of selling as a profession
(5) A view that work
was the third most important element of a person's
life. God was first and family second.
(6) A belief that one
could and should have fun at work
(7) A belief that the
Golden Rule was a practical guide to conducting
one's business affairs.
The culture also contained
a set of guidelines for anyone with a supervisory
function. Those guidelines summarized the way
Mary Kay herself tried to deal with her employees.
They included the following admonitions:
(1) Make each individual
(2) Praise them frequently
and in public
(3) Whenever necessary,
criticize them but do so constructively and
sandwich the criticism between two layers of
(4) Be available to
listen to them and hear what they are trying
(5) Make an effort to
eliminate the factors that put stress on them
(6) Don't hide behind
policy in dealing with their problems
(7) When developing
a plan or project get the people who will implement
it involved in planning it so that it becomes
Those were the principles
learned by Mary Kay during her decades of apprenticeship
working for others. Her challenge was to make
them a way of life in her new company.
Two Decades of Rapid Growth
With her plan in place,
Mary Kay lost no time in implementing it. Given
her decades of experience in recruiting and
training direct sales forces for Stanley and
World Gift, she skipped the trial and error
period which many new business founders must
In 1964, the company's first year of operation,
sales totaled $198,514. The number of consultants
stood at 318 at the end of the year. That pace
was rapid enough to cause Mary Kay to think
of ways of covering the nation. She considered
franchising, but decided against it because
she thought women would have to get a man to
put up the capital and that would make the man
the boss. Instead she decided to offer stock
to the public and use the proceeds to fund a
company-directed expansion. The offering was
made in 1967.
For the next 14 years the company's sales grew
at an average annual rate of 28%. There was
a sharp slowdown beginning in 1975 and lasting
through 1978. But the company reacted by increasing
compensation for consultants and growth rates
returned to a range of 29% to 82% for the next
Growth required some capital investment. In
1969 the company built a 275,000 square feet
manufacturing and packaging plant in Dallas.
In the early 1970s four regional distribution
centers were built. And in 1977 an eight story
home office building was opened in Dallas. By
1981 that facility would house 400 of the company's
1,000 payroll employees.
From the beginning Mary Kay Cosmetics held an
annual convention to recognize the top performers
in the company. By the end of the 1970s this
had become a stunning emotional event for the
participants and a highly effective public image
builder for the company. Mary Kay once described
this motivational tool as follows:
Every August we have what
we call Seminar. It's a grand party, three days
of spectacle - part beauty pageant and part
Academy Awards night. It's the climax to a whole
year of Mary Kay enthusiasm.
But there's more than spectacle.
There is a chance to share ideas and techniques
with people from all over the country. There
are classes in selling, goal-setting, leadership,
charm and poise and even bookkeeping. We also
have a workshop for husbands on how to be a
helpful Mary Kay spouse.
On Awards Night we get 8,000
people, all of whom come to Dallas at their
own expense. Thousands of prizes are awarded,
ranging form the keys to a (pink) Cadillac to
diamond bumble bee pins (the company's symbolic
way of saying that the recipient did more than
anyone thought she could). We crown the queens
of sales and recruitment and present them with
prizes and flowers and scepters, accompanied
by standing ovations and musical fanfares. And
there are also inspirational speakers and top-notch
Seminar was the centerpiece
of a well-orchestrated program of motivating the
sales force. As one observer put it, "Mary Kay
Ash urges managers to 'praise people to success'
and she does not take the maxim lightly. Her consultants,
from the most lowly to the most exalted, receive
tremendous recognition. Monthly prizes are mailed
to their homes. Each consultant gets a card on
her birthday. And top performers are listed in
Mary Kay's monthly magazine, aptly called Applause.
The company's expansion was directed by two persons.
Mary Kay herself set the direction, created the
culture and served as a highly visible cheerleader.
Richard Rogers, her son, handled the management
functions. From the beginning Mary Kay needed
her son to handle that aspect of the business
because all of her experience had been in selling.
Rogers gradually built a management team that
by 1985 consisted of the following full-time executives
in addition to the chairman of the board (his
mother) and president (himself):
1. Vice president of
2. Vice president of
3. Vice president, secretary
and general counsel
4. Vice president for
5. Group vice president
6. Vice president for
research and development
7. Vice president for
quality assurance and engineering
8. Vice president for
10. Director of personnel
11. Director of public
12. Director of public
13. Director of product
14. National director
15. Four directors of
the regional distribution centers
By the mid-1980s the company
was no longer a small entrepreneurial venture
but a mid-size corporation which depended for
its success on a team of more than a dozen professional
Tough Times in the 1980s
The heady success of
the 1970s was not to last. Changes in the American
labor force caused direct selling in general
to run into difficulties and Mary Kay Cosmetics
experienced a decline in sales in both 1984
The basic problem was an increase in full-time
job opportunities for women. The number of beauty
consultants working for Mary Kay fell from over
200,000 to 100,000 between 1983 and 1985. As
a result, the company's sales fell from $323
million to $260 million over the same period.
The reason? The cause? In the opinion of reporter
Mei-Mei Chan, "(The industry) simply lost their
vast pool of workers. By 1982 when inflation
fell and the economy improved those who had
wanted 'pin money' during the lean times dropped
out. And job opportunities for women opened
up dramatically in the late '70s and '80s, prompting
more and more women to snap up 9-to-5 positions
instead of part-time sales work. Not only weren't
they available to sell the product, but the
USA's 53 million working women weren't home
when firms like Avon, the industry giant, called".
The company responded first by developing an
improved compensation package for the consultants.
Then, as the founder and her son looked at the
costs involved, a decision was made to buy all
of the outstanding stock and make the firm a
privately held corporation once again. In December
1985, the two paid $315 million to buy the company
back. And in 1986 the newly-created Mary Kay
Cosmetics saw sales rebound to $280 million.
One era ended and another
began when Mary Kay Cosmetics experienced its
first sales decline in 1984. The old era was
a case study in entrepreneurship. The new will
be a study in the efforts of an established
corporation to retain its excellence in a changed
business environment. Mary Kay Ash created a
remarkable corporate culture in the old era.
Her son, Richard, who helped her create that
culture faces the challenge of adapting it to
the changed environment.
There is no question that Mary Kay Cosmetics
is a business success story - a story of the
creation of wealth through effective implementation
of a sound business plan. But it is also clear
that the company's founder had an additional
goal in starting the business. As she put it:
You can do it! So often a
woman comes to us who desperately needs to hear
that. Frequently she is a housewife who has
been out of the job market for many years, or
who has never worked outside the home.
When I see a woman like this,
I want to do for her what nobody did for me,
in the way of providing opportunities… We make
sure she learns the necessary skills. We encourage
her to improve her appearance so she looks the
part of a beauty consultant.
And when she does that, she
begins to improve in other ways, too. Her confidence
builds. She becomes more efficient and begins
to set goals. Very often a Mary Kay career is
a self-improvement and a way of life - not just
a way to earn money."
*This article originally published in
of Business Leadership Volume 1, Number 1,
*Copyright 1988. The American National Business
Hall of Fame. All rights reserved. No portion
of ANBHF may be duplicated, redistributed or manipulated
without the expressed permission of the ANBHF.
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The Journal of Selling and Sales Management.
May, 1983 (Reprint).
5. "Mary Kay's Sweet Smell of Success." Reader's
Digest. November, 1978.
6. Rosenfeld, Paul. "The Beautiful Make-Up of
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7. Wiley, Kim Wright. "Cold Cream and Hard Cash."
Savvy, June, 1985. (Reprint).
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