Key Persons:

1. Kate Creevey, CEO and founder of Designs by Kate, Inc. “DBK”.

2. Juanita Thomas, head of Sales at DBK.

About the Company:

Kate Creevey, after completion of MBA in 1999, launched Designs by Kate (DBK) in 2005.
The company sold women’s jewellery via direct sales method with 8400 salesforces to help them with
the distribution along with 24 employees. The company’s salesforce is growing exponentially but with
a low attrition rate in the industry. They are estimated to generate 75million USD by 2010. DBK made
use of the direct sales model, wherein they recruited sales representatives who were mostly stay-at-
home mothers and others who wanted to do a part time job as extra source of income.

Business Model Strategy:

The company followed a business model in which their sales representatives were encouraged
to add and form a team of their friends and relative as representatives. The incentive plan was devised
in such a way that adding a team member from your friends or relatives would help you earn a part of
the revenue they generate. About 90% of DBK sales representatives were recruited by existing ones.
But the growth rate of DBK has gone down recently and this was due to the slowdown in rate at which
new sales representatives were transitioning to leaders and acquisition of new sales representatives.
This was further attributed to the significant amount of overlap in customer base of new and old
representatives.

Case Facts:
 DBK is into sales of women’s jewellery via the direct-sale methods pioneered by Tupperware,
had enjoyed rapid sales growth since its founding five years earlier.
 DBK’s top-line growth trajectory had slowed recently, 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.
 90% of DBK sales representatives had been recruited by existing sales representatives, but
slowly the sales representatives believed that recruiting friends or colleagues to become sales
representatives was likely to lead to a reduction in their own sales volume, given that there was
overlap between their social networks.
 There is no professional hiring process. The only requirement is that an individual who was
interested in becoming a DBK sales representative would purchase a “Launch Kit” from DBK
for $250.
 Sales representatives were generally women aged 25 to 50. Some were stay-at-home mothers;
others worked full-time and used DBK as a part-time income source. The majority were college
educated, but most had no experience in sales.
 Most DBK sales occurred at DBK parties. A DBK sales representative would invite friends and
colleagues to her home for a DBK party. The main emphasis would not be on selling but they
try to make customers aware and then generate leads.
 Incentives would be given for leadership roles and also different levels created under the main
representative i.e. level 1, level 2, level 3 and so on.
 As many representatives had no background in sales, training was an important part of the DBK
sales process, but the bulk of the training responsibilities rested with the Leaders, Managers,
and Directors.
 DBK had generated $5 million in revenues in 2006—its first full year of operations—and was
on- course to generate nearly $75 million in 2010. This is mainly because the net number of
sales representatives had been increasing at a CAGR of approximately 87%.
  Because of the overlap in customer base, an initial decline in her sales volume of 15% for the
first Level 1 representative she recruited, and another 10% decline for each additional Level 1
representative she recruited.

Compensation and Incentives Policy:

 Women of 25-50 age group are the sales executives.
 32% commission for above 1000$.
 System of levels.
 Leader earns 3-8% commission of members.
 Base commission of 25% of sales.
 Higher commission if promoted.

Problems Faced by the Company:

Problem Statement: What should Designs by Kate do to motivate the existing sales representatives to
add new representatives to their chain?
 Sales declined due to overlap in levels.
 15% lost after first recruit and 10% after next recruitment.
 Items are cute and affordable but not unique.
 No formal training in Sales.
 Guests invited to more than one party.
 Depleting individual income.
 Reduction in new sales force being added by current sales representatives.
 Representatives afraid to become team leads.

Possible solutions:
 Generate Sales through other product categories.
i. Takes time.
ii. 24% revenue from direct sales.
 Increase events conducted.
i. Increases sales.
ii. Leverage holidays.
 Increase incentives for leaders and managers.
i. Rewards and Recognition.
ii. Years of Service awards.
 Revamp the current commission schedule to account for any loss of sales by a representative
in adding new ones.
 Increase the leadership dollars for Leaders, Managers and Directors.
 Hire full time trainers to improve the productivity of the new representatives and
 Educate the salesforce about the potential of DBK sales ladder.

Recommendation/Conclusion:
Providing good incentives to the employees working in the organization. We need to
take into the consideration that the incentives need to be provided only to level of leader and
above. One year with the company warrants a gift of their choice, of an exclusive jewellery
piece valued at $50, this piece will then be available for them to sell. This works as both
incentive and free advertising for the company.