Emerald Emerging Markets Case Studies

I can do better: Mexican direct sellers of beauty products

Lucía Fernández Reyes, Rajagopal,
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 I can do better: Mexican direct sellers
of beauty products
Lucı́a Fernández Reyes and Rajagopal

Lucı́a Fernández Reyes is A group of marketing managers had to decide what changes to implement in order to
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based at the Department of improve the flow of sales of beauty products in Mexico at the direct selling level. For this
Studies in Management purpose they had arranged a meeting to talk about the strengths and areas of opportunity for
Sciences, EGADE Business direct sellers and to introduce Patricia with an overall picture of direct marketing for beauty
School, Tecnológico de products in the country. Patricia was an independent marketing consultant and social worker
Monterrey, Mexico City, and had been working with small companies in Mexico evaluating their performance. The
México. managers had hired Patricia to explore the difficulties direct vendors of beauty products
Rajagopal is a Professor of faced while working.
Marketing at EGADE
Business School, Throughout their business experience they had observed that direct marketing in Mexico
Tecnológico de Monterrey, had leveraged on the openness of locals to receiving acquaintances at home so they could
Mexico City, México. display their product offerings and their customers could become familiar with the products
and brands by means of catalogues and product trials. They also had realized that direct
marketing offered customers the possibility to start saving after placing their orders and to
pay later increasing their willingness to buy through this marketing modality. Besides, they
were pleased that Mexico offered the possibility of leveraging on a gregarious culture that
exposed people to being looked up more often and to meeting people more frequently than
other cultures. The country also offered flexible working schedules of participants, low
entrance costs, attractive compensation schemes, and high sensitivity to word of mouth as
well as openness to trying foreign brands.
It was time for them to make an update of the advantages and the areas of opportunity in this
business. Some managers suggested that one salient advantage of implementing a direct
marketing strategy had been cost reductions in marketing, advertisement, transportation
and inventories. However, some managers started out in the conversation with comments
about salient disadvantages of direct marketing such as high sensitivity to quality problems,
high brand equity of competitive products, dissociation between the vendor’s interpretation
of the brand and the firm’s vision of the brand, lack of well-established limits to business
expansion and lack of a clear notion of the speed of market penetration.
One of the managers summarized the situation saying that from the vendor’s perspective the
disadvantages in general consisted of creating markets before supporting them with
enough infrastructure, especially outside Mexico City, and pressure to commit to selling
goals. However, depending on the brand, vendors might have faced different challenges
such as subordinating operating procedures to upper vendors. This posed, for example, the
difficulty of subordinating the placement of orders to being able to reach and gain feedback
Disclaimer. This case is written
solely for educational purposes from an upper vendor instead of placing each order directly online.
and is not intended to represent
successful or unsuccessful
managerial decision making.
The author/s may have
Social networking and direct sellers
disguised names; financial and
other recognizable information
Managers explained Patricia that social networking represented a source of social capital for
to protect confidentiality. ventures. Adding that these networks were intertwined within a specific social context that

DOI 10.1108/EEMCS-10-2013-0197 VOL. 3 NO. 5 2013, pp. 1-12, Q Emerald Group Publishing Limited, ISSN 2045-0621 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 1
 constituted a fertile field for people’s incorporation into groups that nurture their sense of
belonging. In this particular case, consisting of direct selling of cosmetic products, the
context was described by the social openness to welcoming potential customers at home or
joining vendors at a predetermined meeting point. At this point of the conversation, Patricia
had a pretty good idea of how to picture a direct seller. She thought that direct sellers could
be described as entrepreneurs, in the sense that they created their own intermediary market
at their own pace and as a result of a subjective cost-benefit analysis.

Direct sellers could also be described as vendors who were instructed to facilitate
transactions, who had developed a sort of sensitivity to avoid the negative impact of forced
sales and who often preferred to keep looking for a new customer than to insist after refusals.
From Patricia’s perspective, direct sellers of beauty products were in favor of a little
voracious business or at least less risky than others, against the common belief that
entrepreneurs were prototypical of a risk seeking attitude. Patricia also realized that
entrepreneurs had great social skills that had been contributing to their success such as
social perception, impression management, persuasion and social influence and
adaptability. However, she noticed that the increasing number of competing businesses
was being detrimental to entrepreneur success. Still, some direct sellers were incorporating
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competing brands in their portfolios to counteract the fierce competition.

The real feel

Patricia had been well associated with the entrepreneurial behavior of small entrepreneurs in
Mexico and was a columnist in an online business magazine. Patricia eventually met Bertha,
Mercedes and Alma, direct sellers of beauty products, on her casual way to investigate
about the performance of Mexican women in doing independent business, in order to
provide updated information about the situation of direct sellers to the marketing managers
in charge of improving the sale flow. Patricia’s discussion with Mexican female vendors
brought about the possibility of exploiting these markets, especially outside Mexico City.
Bertha’s comment briefly illustrated the issue:
I like this job because I have my group of loyal customers, a not so high, but certain, income, a
flexible schedule and even entertainment, but I need a broader immersion in the business with
the help of more courses, samples, ways through market, attractive promotions and lower selling
minimums.

Mercedes, a direct seller of beauty products, knocked at the door. She was carrying a bag
that looked more like a piece of luggage than a working tool. Almost immediately, she was
welcomed by their friend and hostess Alma. After she was offered a coffee, she pulled out a
package while saying ‘‘Alma, I brought your things’’. Alma thanked her, turned to Patricia,
and explained that Mercedes sold beauty products.

Mercedes took the liberty to show Patricia the catalogues of the two brands she managed,
encouraging her to pay attention to products on discount and star products. After browsing
the catalogues, she picked up a passion fruit hand cream. None of the products on sale
captured her attention however her eyes caught an antibacterial gel. She realized she had
just run out of hers. She was curious about its scent. The smell was the most important
aspect she looked for in a cream, so she asked Mercedes for a sample of the gel. Although
Mercedes had none handy, she gave her samples of other products. Patricia ordered the gel
given that the potential loss would be less than the risk taken. Besides, her friend Alma had
told her that she had already tried them and that their smell was pretty good, especially the
one of the red fruits. Mercedes apologized for having to leave early. She had to visit some
other customers.

Mercedes did not have many customers but her friendship circle was punctual with the
payments. Her professional goal was to have an extra disposable income for domestic
needs without taking too much risk as an entrepreneur. Patricia congratulated Mercedes for
her commitment to her job ‘‘Mercedes, I am sure you have been well rewarded’’:

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PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 3 NO. 5 2013
 Not really, I am tired of the same useless jars and glasses which do not match my dinner set and I
have started to give away the excess of irons I have been accumulating. I would like to be
awarded with points for buying groceries, for example. On the other hand, it is not easy to reach
the minimum selling amount required by the company, that is, around $1,200[1] Mexican Pesos
each fortnight.

However, whenever I do not reach this amount, I ask one friend with extra orders to place
them as mine so that I can stay in business. But you are right, I am a committed seller. In
general, I track my customers’ consumption. Around three months after they get a product, I
contact them to check if they are ready to reorder. Sometimes I do not even need to call them
because they contact me in case they really need the product even if it is not on sale.
Besides, the majority of my customers are part of my family: sisters in law, mother in law,
nieces and so on; so it is pretty easy to get in touch with them.
Mercedes’ sister, Bertha, who lived in Michoacan, a Mexican state sold another brand of
beauty products. This brand was national while Mercedes’ were both foreign and from
different countries. Suddenly Patricia realized that in smaller cities of the country, information
systems might have lacked the quality they enjoyed in the capital. This, in turn, had added
difficulties to the placement and processing of orders. Besides, Bertha had to be trained
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away from home and had to pay for transportation and accommodation. Her state,
Michoacan, had a lower income than Mexico City however, according to Bertha there were
women who were willing to pay a higher price for a quality proposition. Bertha:
I need to get more training but it is difficult for me to do so and I realize that my knowledge about
the products is limited and not enough to provide advice to current or potential customers.

Mercedes agreed with Bertha about the advantages of a small secure and trusted group of
customers when compared with a wider one. That was the reason why instead of expanding
her customer base, Mercedes had a brand portfolio consisting of two brands. While Bertha
felt comfortable with a single brand, she thought that she should have expanded her
customer base by showing her products at her daughter in law’s beauty parlor.
Alma also sold only one foreign cosmetic brand that had been in the national market for more
than 20 years. And although on this occasion she was not promoting her products, she had
always had the support of Mercedes to facilitate her meetings. Patricia really found it very
interesting that friends’ meetings could also help them to benefit economically. She decided
to look deeper into the problems they faced in their business activities. First they talked
about the problems they faced concerning the way the product was sold or introduced.
Alma:
I need to create my own testing set. The company commands us to show the products so the
customer can confirm their quality. What I decided to do was to ask for some extra products
whenever my orders did not reach the minimum and, little by little, I have integrated my sampler.
Fortunately, many people already know the brand and they order by catalogue. But many
customers go for trying before buying. I have profited more with the application of the facial
treatments or the makeup routines and I have been trained to do so. Although there is lots of
competition, I have been well trained to increase my earnings.

Mercedes:
I get samples, mostly lotions, with the placement of my orders and distribute them among my
customers. Lotions of this brand are sold less frequently than creams. I do not have samples for
all the products but I give them away to the people that might be interested in them. This brand
has gone a long way in the market and its star products keep going. My customers order by
catalogue or based on friends’ recommendations. My biggest problem is that if I want to place
more orders that I am supposedly to do given my selling capacity I need to do it through the
vendor that incorporated me to the company and many times she is not handy.

Bertha:
My customers are not really educated people and they buy in installments or they do not buy.
They have ruined many of my lipsticks because they open them up for testing and then I am not
able to sell them. Besides, testers are slowly updated and I lack testers for products on season or

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VOL. 3 NO. 5 2013 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3
 recent launch. Testers should be updated especially for sellers outside Mexico City and we
should be locally trained.

Patricia’s research helped to elucidate that the culture of consumption in Mexico was
influenced by the value derived from direct experience with the product. As such, training
had helped sellers to appropriately apply facial treatments and make-up. Patricia found that
some beauty sessions reported a lump sum earning above $700. However, the seller’s
friends circle would not demand the product within the following three months, considering
the product cycle. This extra normal once and for all earning motivated sellers to expand
their market share. Furthermore, personalization stimulated self-esteem and enhanced
social values. Patricia arrived to the conclusion that personalization in this market required:
B product use; and
B favorable references.
Patricia also observed that in Mexican markets purchasing intentions depended on
socioeconomic factors, socio-cultural values, store and brand image, promotion sales point,
credit incentives, references and subjective purchase motivations. With this in mind and
based on interviews, there was a potential for market expansion in regions outside Mexico
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City.
Then, Patricia asked them about the issues concerning their brand portfolio. Alma:
My brand portfolio includes only one brand. I met all my current customers while working at a firm.
They pay half the value of their order at placement and half after delivery. If somebody I do not
know wants to order products I ask for the whole payment in advance. I am risk averse you know.
My customers live near home and I use my car for product delivery. Besides, their daughters also
buy my products occasionally. My customers also value the relationship price-quality of the
brand. My clients have not been willing to buy products of other brands. They had national names
and Mexican origin. That is why I only sell this foreign brand.

Mercedes:
I sell two brands. As a single brand seller I felt pressure for reaching the minimum amount of
requested sales, particularly when attractive products were on sale and became scarce. I could
not pay for unavailable products to comply with my dues. However, I have some acquaintances in
this business and whenever I can’t meet with my goal, they partake in orders. I like selling and
while doing business I also have the opportunity to meet my friends and relatives. I do not make
lots of money, though. It is a long time since I last quit my job to take care of my family. I also do
some bakery to get some extra money. I have even prepared some cakes for people I met in the
beauty business.

Bertha:
I only sell a local brand. My customers have already assessed the quality of its products. I face
competition from a foreign brand, which, by the way, has a high market penetration; however, its
quality is inferior. If my customers have wedding plans for the weekend, they call me in advance
to make an appointment for an application of a facial treatment. On these occasions they do not
buy new products and I use mine. In my opinion, this brand needs more local exposure. On the
other hand, I have benefited a lot from my efforts to develop computer skills to process my orders.
Making business directly with the capital is quicker and more efficient than placing orders
through other distribution centers. I do not have many customers, though.

Patricia and the three ladies later referred to problems concerning product quality, customer
reliability and customer loyalty. Alma:
Customers perceive good quality. They also perceive congruity between the vendor image and
the product quality so they won’t buy a cream if you do not have a relatively good cutis according
to your age.

Mercedes:
With respect to one brand, creams continue to be a success however some customers have
found better brands for some other products. In reference to the other brand, I have conflicting
opinions from the ladies. Some time ago I used to sell shoes but a great majority of my customers

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PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 3 NO. 5 2013
 were part of a pretty mobile work force and sometimes they moved before completing their
payments. I prefer not to sell to people I do not know.

Bertha:
I have never had problems with payments. At the office whenever my customers saw me they
recalled they had to pay and promised to bring the money without me bringing about the issue.

Patricia and the three ladies went on discussing about problems concerning incentives for
the sellers. Alma: ‘‘Awards are attractive. Look, this is a fabulous gray purse that I may be
getting this month. A laptop is the best prize you can get’’.
Mercedes: ‘‘I am fed up of getting useless stuff’’.
Bertha: ‘‘I like gifts, if I do not need them I give them to someone else’’.
Then they dealt with sellers’ overall risks perception. Alma: ‘‘I park my car in front of a bank
sometimes. I hope nobody steals my car or my laptop’’.
Mercedes: ‘‘Not being able to get products on sale. Not being able to allocate discount
packages given that sometimes they consist of products nobody is interested in’’.
Bertha: ‘‘I am not in business if I do not sell in installments’’.
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Finally, they ended up talking about the relationship the sellers had cultivated with their
customers. Alma: ‘‘My customers express freely their satisfaction with respect to a product
and eventually it is either locked in or removed from my orders’’.
Mercedes: ‘‘I have not only colleagues but friends’’.
Bertha:
In general, I introduce the brand by means of a lipstick, if the customer says that she does not buy
products from a brand she does not already know, I do not come back to her. If she says she likes
the product but does not have money at the moment, I call her back or visit her later. If the answer
is ambiguous, I always have an opportunity to insist without bothering my potential customers.

Popularity of direct sellers and retailers

At this point of her inquiry, Patricia had determined that in this business it was easy to get in
and easy to get out. It was quick to profit from a business like this given that profits escalated
as a function of the number of sellers incorporated to the system and directly with the
quantity sold. New participants already had their own networks and believed in their
potential to expand them. Patricia recalled that even some sellers had asserted that they had
joined a profitable business as previous experiences had led them to rip on one single day a
comparable amount to the average salary of a college graduate.
Patricia deduced that this business seemed especially attractive for middle age women that
had difficulty to go back to work and suddenly faced the possibility of making a convenience
income. Besides, from Patricia’s perspective, customers in this market seemed quite
sensitive to word of mouth from acquaintances who had already tried the brands. On the
contrary, retailing stores were more known for offering products less personalized whereas
department stores typically offered exclusive and pricy brands. They for example did not
facilitate feedback channels before, during or after the purchase. In such occasions, they
offered the product but the customer was on charge of making the seeking effort, whereas
direct selling showed the whole offer by means of one of more catalogues at the minimal
effort of turning pages.

Convenience buying behavior

Patricia told marketing managers that, according to her findings, in Mexico, there were
consumers of beauty products who liked buying at home. Multiple reasons contributed to
this behavior: personalization of transactions, social interaction, friendly environment,
security, expectation of getting an effective product as a second best option with respect to

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VOL. 3 NO. 5 2013 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5
 a brand with higher equity but higher price; disposable convenience money, credit options
and living together with other family members interested in buying the same brands.
However, brands in these markets kept quality and integrity standards.
Patricia presented her findings at a meeting with the group of managers who financed the
study. The ladies referred in her case worked for different companies but all of direct
marketing. The issues discussed were the problems faced by direct markets such as
inadequate information systems, inappropriate training as well as flaws inherent to the
selling system of certain brands like product scarcity when sales were attractive enough or
when seasonality increased demand. All of which limited potential sales in Mexico City and
outside the capital. In order to improve the direct marketing processes, the seller friendly
marketing policies should be developed by the general managers and implemented by
marketing managers[2].

Notes
Keywords:
Strategic planning, 1. 94 American dollars.
Marketing brands, 2. The names of general managers and marketing managers have been kept in disguised to prevent
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Marketing practices anonymity.

Further reading
Baron, R.A. and Markman, G.D. (2000), ‘‘Beyond social capital: how social skills can enhance
entrepreneurs’ success’’, The Academy of Management Executive, Vol. 14 No. 1, pp. 106-116.
Belliveau, M.A., O’Reilly, C.A. III and Wade, J.B. (1996), ‘‘Social capital at the top: effects of social
similarity and status on CEO compensation’’, Academy of Management Journal, Vol. 39, pp. 1568-1593.

Boissevain, J. (1974), Friends of Friends, Basil Blackwell, Oxford.

Cheng, J.L.C. and Kesner, I.F. (1997), ‘‘Organizational slack and responses to environmental shifts: the
impact of resource allocation patterns’’, Journal of Management, Vol. 23, pp. 1-18.
McCline, R.L. and Bhat, S. (2012), ‘‘An exploratory investigation into the role and importance of
networking partners of South Asian entrepreneurs in the venture creation process’’, International Journal
of Entrepreneurship, Vol. 16, pp. 43-68.
Nahapiet, J. and Ghoshal, S. (1998), ‘‘Social capital, intellectual capital, and the organizational
advantage’’, Academy of Management Review, Vol. 23, pp. 242-266.
Rajagopal (2011), ‘‘Consumer culture and purchase intentions toward fashion apparel in Mexico’’,
Database Marketing & Customer Strategy Management, Vol. 18 No. 4, pp. 286-307.
Teach, R.D., Tarpley, F.A. and Schwartz, R.G. (1986), ‘‘Software venture teams’’, in Ronstadt, R.,
Hornaday, J.A., Peterson, R. and Vesper, K.H. (Eds), Frontiers of Entrepreneurship Research, Babson
College, Wellesley, MA, pp. 546-562.
Van den Berg, P., Arentze, T. and Timmermans, H. (2012), ‘‘Involvement in clubs or voluntary
associations, social networks and activity generation: a path analysis’’, Transportation, Vol. 39 No. 4,
pp. 843-856.

Corresponding author
Lucı́a Fernández Reyes can be contacted at: [email protected]

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