Client goal

Our client is Beautify. Beautify has approached McKinsey for help with exploring new ways to approach
their customers.

Description of situation
Beautify is a global prestige cosmetics company, who sells its products mainly in the cosmetics area of
high-end department stores (e.g., Harrod’s, Shanghai No. 1) but also has presence online and in specialty
retailers like Sephora. Beautify produces a number of makeup, fragrance and skin care products, which
are sold through several different brands.
In the department stores, the beauty consultant (BC) plays a critical role for the consumers:
 approaching ‘passive’ customers
 demonstrating their knowledge of the products
 actively selling the products
 maintaining a loyal customer base of repeat buyers
The consultants are hired directly by the beauty company or from specialized third-party agencies that find
employees for a fee. Beautify is then responsible for selecting, training, and paying the consultants. Within
Beautify, beauty consultants are managed independently by each brand in each country (i.e., a consultant
would be part of the ‘Chanel’ team in a store). However, consumers are shifting more and more to online
and too many beauty consultants are working empty department stores.

McKinsey study
Beautify’s President and Chief Operating Officer has engaged McKinsey to help evaluate if training most
beauty consultants to rely much more on virtual channels to connect with customers could be profitable
for Beautify.
Helpful hints
 Write down important information.
 Feel free to ask the interviewer for an explanation of any point that is not clear to you.
Question 1:
Beautify is excited about helping their current staff of beauty consultants develop into virtual social
media beauty Advisors. These employees would still be leading direct consumer engagement and would
be expected to maintain and grow a group of clients. They would sell products through their own page
on beautify.com, make appearances in major retail outlets, and be active on all social media platforms.
What possible factors should Beautify consider when shifting this group of employees to a new set of
responsibilities?
Helpful hints
 Take time to organize your thoughts before answering. This will help show your interviewer that
you have a logical approach and can think in an organized way, regardless of the “accuracy” of the
outcome.
 Develop an overall approach before diving into details.

Answer 1
Good answer

Some of the factors you might discuss with your interviewer could include

Retailer response. How will the retailers respond to consumers buying directly from beautify.com? What
kinds of financial arrangements will Beautify have to work out with its retail partners?

Competitor response. Do other beauty companies offer virtual assistants? If yes, how successful are
they? If no, do they have plans to digitize the personal selling experience?

Current capabilities. What is the current skill set of beauty consultants vis a vis social media? How many
already participate (e.g., via more ‘professional accounts on social media platforms, or their own
beauty/skincare blog)? Would it be possible to hire new Advisors with these skills?

Brand image. What are the implications for Beautify’s brand if suddenly hundreds of Advisors are posting
about its products? How could this be leveraged to make Beautify seem more attractive as an employer
in the market?
Question 2
One of the key points that Beautify wants to understand is their current and potential new customers
reaction to the virtual social media Beauty Advisors.
Imagine you are a current Beautify customer, and you mostly shop in your local department store and
enjoy the high-touch service of working with the in-store consultants. What features would make you
consider switching to a mostly virtual sales experience?
Helpful hints
 Consider the issues raised in the question, and group your thoughts around them. This will ensure
that you are giving the most relevant answers.

Answer 2
Some of the features you might discuss with your interviewer could include

Getting real-time feedback on new looks. Beautify could develop a selfie-mirror mobile app, which will
enable you to upload a selfie and receive customized recommendations from your Advisor. It’s also
possible that they can use the image to show you new ideas or colors (e.g., the lipstick is too matte, here
is what a glossier lipstick would look like)

Participating in an online social community. Advisors could start closed groups, or a blog where they
encourage and respond to comments. This is a great way to connect with other people with similar
interests and to learn what makeup and skincare products work well for them

Learning about latest trends from someone you trust. If the Advisor is active on social media, like
Instagram or Douyin, they will probably post several times/day. Some of it will be personal, to build rapport,
but much of it will be related to beauty and skincare. The Advisor may offer tutorials, do product reviews,
discuss common myths, etc

Responding to a particular concern privately. If you’re having skin issues, you could contact the
Advisor. The two of you could connect to make your concerns clear. Again, the Advisor would understand
which products you already use, and could make appropriate adjustments
Question 3
The discussion about virtual Advisors has been energizing, but you’d like to ground the discussion in
some analysis. One framing that you’ve always found helpful is to express the investment in terms of
how long it will take until it turns profitable (when incremental revenues are greater than the cost of the
project). You sit down with your teammates from Beautify Finance and come up with the following
assumptions:
 With Advisors, you expect ten percent incremental revenue overall (the team assumes Beautify
gains new customers who like the experience and higher online sales for those engaged, but also
lose some to other brands still providing more in-store service). The team assumes this happens
in the first year.
 In the first year, Beautify will invest €50 million in IT, €25 million in training, €50 million in
remodeling the department store counters, and €25 million in inventory.
 All-in yearly costs associated with a shift to Advisors are expected to be €10 million, and will start
during the first year.
 Beautify’s revenues are €1,300 million.
How long would it take, expressed in years, until the investment in Advisors turns profitable?
Helpful hints
 Don’t feel rushed into performing calculations. Take your time.
 Remember that calculators are not allowed - you may wish to write out your calculations on paper
during the interviews.
 Talk your interviewer through your steps so that you can demonstrate an organized approach; the
more you talk the easier it will be for your interviewer to help you.

Answer 3
A possible approach to discuss with your interviewer could be

 Incremental revenues = €130 million (€1,300 million * 10%)

 Therefore profits = €120 million (€130 million - €10 million in annual all-in additional cost for new
Beauty Advisors)
 The expected upfront investment = €150 million (50 + 25 + 50 + 25)
 Thus, this investment will be profitable after 1.25 years or 1 year and 3 months (€150 million
investment / €120 million annual profit = 1.25 years)