Absentee Assignment

Prashant Kumar,
Section-D,
16MKT-109
Understanding of the chapterThere has been a recent paradigm shift in the way products are being
marketed. The attention is more towards fulfilling the satisfaction of the
customer than just profit maximization. The idea is to provide your
customers with an exclusive shopping experience as well as personalizing
communications with them in an effort of saying and doing the right
things at the right time for marketing effectiveness.
The chapter talks about other forms of value offering than just store
retailing that come under the umbrella of personalized communications.
Broadly categorized into 4 major categories, non-store retailing can be
classified as direct marketing, direct selling, automatic vending and
buying service.
Direct marketing can be stated as the marketing technique where direct
channels such as catalogs, direct mail, telemarketing, e-tailing etc. are
used to reach and deliver goods and services to customers without using
marketing middlemen.
Direct selling is another form of non-store retailing. Popularly known as
multilevel selling and network marketing, it is the process in which the
salesman interacts directly with the customers by going door to door in
order to sell the product. A few examples can be Avon, Electrolux, and
Southwestern company of Nashville (Bibles).
Automatic vending includes offering a variety of merchandise including
impulse goods such as soft drinks, coffee, newspapers, magazines,
hosiery, cosmetics, hot food, paperbacks etc. Vending machines generally
offer 24-hour selling, self-service and merchandise.
Buying service is a storeless retailer serving a specific clientele, usually
employees of large organizations, entitled to buy from a list of retailers
who have made some arrangements with the organization in some way.
Of these four, Direct marketing has the widest reach, offering a greater
variety of goods and services from a wider range of websites. The sale of
goods and services through the medium of internet using online portals is
known as e-tailing. The practice has recently grown because of a wider

availability of internet and the convenience that e-tailing provides to the

customers. The impact can be well estimated by the fact that online sales
in USA were estimated to be $225 million in 2012 approaching 6% of total
retail sales. The increased awareness of the companies as well as the
consumers towards online retailing can be attributed to the benefits it
bestows upon both, the organization as well as the consumer. As a
platform it is eliminating the barriers between the business and the
customer, providing information about the product, the producer is
producing as well as making the buying nature of the customer easily
accessible to the producers. Businesses now have the easier ways of
transactions between different forms, be it business to business or
business to customer. Customers now have a wide array of options to
choose from since the offers made are more flexible and so are the paying
and pricing systems, making it beneficial for the businesses to check
competition. Internet has changed the whole perception of a traditional
marketplace. The virtual reality is far more pleasing, convenient as well as
satisfying.

AVON.COM: CASE ANALYSIS

Avon Products Inc. was founded in 1886 and is a manufacturer and
marketer of beauty products. Avon is most popular for their direct selling
technique in which the company sells products directly to distributors or
final consumers rather than to trading companies or other intermediaries
in order to achieve greater control over the marketing function and to
earn higher profits. While this method has proven to be successful for
Avon and has certainly contributed to their longevity in the market, there
are still crucial factors imposing on the companys global presence
throughout the world. The case talks about the expansion plans of Avon, the worlds
largest direct seller of beauty products and fifth-largest beauty company. Avon after
successful years of business is facing an overall increase in the growth internationally, but
there has been little or no increase in the growth in its home country USA for the past few
years. The product line of Avon is not just limited to beauty products but also extends to gift
and decoratives as well as jewelry and accessories. The tables given below depict the
percentage growth and the sale of different product categories as a percentage of the total sale
in the consecutive 5 years(1995-99) for the company-

1995
cosmetcs, frag,
toiletries
gift and
decorative
jewelry and
accessories
apparel

7.41

Growth in %
1996 1997
1998

5.36

1999

4.99

2.65

1.57

1.56 19.59 12.42

0.95

-0.75

1005.14
0.35

-88.87
-2.11

0.24 -8.94
-13.62 10.98

-1.86
1.80

1995
1996
1997
1998
1999
% of
% of
% of
% of
% of
% of
total in total in total in total in total in total in
94
95
96
97
98
99
cosmetics,
frag,
toiletries
gift and
decorative
jewelry and
accessories
apparel

59.64

62.25

61.22

60.91

35.71

60.99

17.61

17.38

19.40

20.67

11.92

19.89

9.46
13.28

9.21
11.15

7.83
11.55

7.28
11.14

45.98
6.39

8.60
10.51

Avon markets itself as a company for women, aimed at strengthening and enhancing its
beauty image around the world. Its workforce consists of women popularly known as the

Avon Lady. The involvement of the workforce at Avon is of two types- part time
representatives and full time representatives. Part time representatives are the women who do
this as a side job to meet their ends or are the women who want the beauty products at a
discounted price, whereas, full time representatives are the women who have been there in
this business comparatively longer and have a bigger client base of upto 200 clients. In 1999,
Andrea Jung, a former Avon lady was named Avons first female CEO. Concerned of the
performance of the company, taking sales as a measure Jung had specified some of her own
goals for the company which were to build a strong beauty image of the company, to leverage
the equity of Avon into new markets and to build new products with new channels to support
them. Given below is a table depicting the sales and its change in the consecutive years from
1997-1999.

net sales
cost of sales
Mktg. distribution and
administratative expenses
special charges
op profit

1997
5079.
4

1998
5212.
7

2051

2053

2490
0
537.8

2570
116.5
473.2

% increse % increse
1999 in 98
in 99
5289.
1
2.62
1.47
2031.
5
0.10
-1.05
2603
105.2
549.4

3.21
0.00
-12.01

Given the insignificant increase in the net sales of the company, the administration considers
of opting to new channels of selling and marketing, i.e. looking at the option of e-tailing. Etailing sure does have the attention of the masses in the industry but also poses some of the
conflicts towards the tradition and the culture Avon has made for itself over the years. The
sources of these conflicts can be traced toSources of Conflict:
1. The representatives might have issues with sharing what they consider their assets,
in the form of the Customer Lists. This could be seen by the them as an attempt by the
company to eliminate or diminish their role in the process.
The launch and expansion of the online activities itself will be seen as a threat.
2. The company, Avon, is identified with Direct Selling through its Avon ladies. The
launch of serious online stores for all products could dilute the recognition or
credibility of the brand. It might lose the uniqueness that it now commands in the
market.
3. Avon being a recognized company in the direct selling format, there is a possibility
for the company to face failure with its online store format. Without returns on the
site, the company might have to face embarrassment.

1.28
-9.70
16.10

Given these sources of conflicts, the recommendations that can be made here are:
It will need more communication from company top management regarding these changes.
The representatives will need to be assured of their continued importance to the direct selling
model of Avon and fears of replacement by the online model also will need to be allayed.
Furthermore, they can be trained accordingly and involved in whatever changes Avon goes
through to win their confidence as well as increase their potential which ultimately will be
beneficial to the company itself.

Avon should continue its focus on direct selling overseas while executing a
viable retail strategy in the United States. Avon cannot abandon its core
competency in direct sales, but this method is clearly failing in the United
States. Thus it should go for a deep and customers buying nature driven
market research. Depending on the results of market research, this retail
expansion should be either a subset of Avons products, a new line, or a
subsidiary with discreet or removed Avon branding.
In overseas markets, Avon should work to expand its sales representative
force and work with them to develop and better serve local competencies.
If, for instance, local representatives are serving customers in a bartering
capacity then selling new items for their profits, Avon should train similar
representatives in this technique and provide tools to make the exchange
as productive as possible. Incorporating these capabilities into their
ordering system would allow sales representatives to notate their
bartering alongside their product orders, letting them identify and
purchase the most profitable items more easily.