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ABSTRACT
The management strategy of Direct Selling is quite different than that of business administration of general
enterprise; it is an industry that is highly mobile and emphasizes on interpersonal relationship; no matter it is Direct
Selling or Marketing, although they can save the company a lot of cost, yet they are accompanied with uncertain risk.
Being affected by the rats club due to the misuse of Direct Selling, government has to put control on Direct Selling;
currently, most people still do not know too much about Direct Selling and they worry that they might become a victim
of pyramid fraud if they are not very careful, which in turn makes the spreading of Direct Selling more difficult.
Therefore, some Direct Selling companies such as Avon, changes its form from single-level Direct Selling into
multi-channel sale so as to adapt to the change in the social form. Therefore, in this study, we are going to aim at the
study of one Direct Selling form, that is, in-depth study and understanding on Avons multi-channel system.
Keywords: Direct Selling , management strategy, 4P, channel marketing.
INTRODUCTION
Master of Management Peter F. Drucker once said: What an enterprise is, is decided by the customers1. For a
successful Direct Seller, in addition to treating himself/herself as part of the business body to accurately reflect
enterprise image and concept, it is more important to clarify and satisfy real customers need through sincere and
objective mind. This is also the most important spirit of Direct Selling and is the reason why an excellent Direct Selling
company stays strongly in the market.
In the past, when the vendor sells the product using traditional selling way, profit will be stripped off by vendors
in the first stage and second stage sales channels, and the cost of the vendor will get increased greatly and accordingly.
No doubt, these costs will be transferred to the customer, which in turn leads to a burden to the consumer. Therefore,
some suppliers, in order to reduce profit stripping in several stages by the intermediate vendors, they start to find their
own personnel for the product sale, or try to use mobile technology to assist product sale, the new generation of selling
ways such as Direct Selling, Marketing and internet shopping are thus generated.
In 1982, with the introduction of Amway, Direct Selling started to enter Taiwan and other Direct Selling
companies started to follow. On November 1997, some companies which have the sales mainly based on interpersonal
network, for example, Direct Selling for example, Amway, SHUANG HOR (HK) COMPANY LTD., Nuskin Taiwan,
Forever, etc., started to launch companys web sites for sales and business promotion so as to enhance the business
operation efficiency of Direct Selling; these companies are seen with great potential. At that time, Direct Selling
Association also reduces its entrance barrier for the membership application, that is, a company will have the
qualification to become a member once it is founded for more than one year; and a commission for promoting
commercial virtues has been founded to implement the restrictions of commercial virtues on the companies in this
industry.
Direct Selling can be divided into single level Direct Selling and multi-level Marketing; however, in recent years,
to cope with the change of industry environment, some of the Direct Selling companies such as Avon started to shift its
RELATED LITERATURE
2.1 Definition of terms
2.1.1 The definition of Direct Selling
World federation of direct selling associations (WFDSA) has defined Direct Selling as: On non-fixed retailing
places and through the use of face-to-face way, the product and service are sold directly to the consumers. Robert A.
Peterson & Thomas R. Wotruba (1996) briefly described the Direct Selling as a face-to-face selling without fixed
retailing sites. However, the Direct selling education foundation of USA in 1992 had a definition on Direct Selling:
Direct Selling is a distribution method for consumptive product or service through personnel contact (Sales personnel
to the purchaser) and at different commercial locations, mainly at home. Here the nature of consumptive
and distribution way are emphasized fro Direct Selling.
Direct Selling can be categorized in two ways in broad sense and in narrow sense. In broad sense, Direct Selling
is a selling way that the manufacturer or the product importer sells the product directly to the final consumer. For
example, the fisherman sells the fishes to the customers directly and the farmers sell the rice directly to the consumers,
etc. However, for further definition, the Direct Selling in broad sense should include the narrow Direct Selling: Product
manufacturer or importer, through Direct Seller and consumer and through a way of face-to-face selling, introduces or
sells the product or service to consumers. Generally speaking, Direct Seller is not employee of the company and the
selling is usually done in non-fixed selling site (Professor Te-Fa Chen, 2006).
Today, both direct Marketing and direct Selling are sometimes all called Direct Selling. However, a direct
effectiveness selling is that the product manufacturer or importer, through the mail of DM, catalogue, broadcasting, TV
channel, internet, etc., transfer the product and service information to the consumer, and the consumer then reply
through mail or answer through telephone (Professor Te-Fa Chen, 2006). Therefore, we can see two keys in Direct
Selling: Face-to-face selling and Sell at non-fixed places. Direct selling is a process of face-to-face communication
between two persons, and the direct effectiveness marketing is way of selling product or service such as mailing of
catalogue, telephone/TV marketing, direct reply to the advertisement or the recent emergence of network marketing.
The lack of face-to-face contact is the major difference between Direct Selling and direct effectiveness marketing.
Direct selling further includes single level marketing and multi-level marketing. In single level Direct Selling,
Direct Seller is also the consumer and Direct Seller sells the product or service of the company to the customer, then the
Direct Seller receives bonus from the company according to his/her sale performance. In single level Direct Selling, the
income of Direct Seller comes directly from the retailing profit he/she sells the product to the final consumer (Professor
Te-Fa Chen, 2006).
Multi-level Direct Selling is also called network marketing, in addition to getting profit through the sale of
product or service, Direct Seller can also become an upstream to absorb or instruct customer to become downstream
Direct Seller, then the Direct Seller is awarded with rank and bonus according to the number of persons in his/her
downstream and the sale performance. Bonus system is the major difference between single level Direct Selling and
multi-level Direct Selling; especially, multi-level Direct Selling is also called Marketing or multi-level Marketing,
which is a business operation model selected by most of the Direct Selling companies.
To summarized the above discussions, it can be seen that strategy is to define the survival niche of an enterprise,
to use the limited resource to maximize opportunity and to minimize the threats; meanwhile, it controls every step to let
it match the plan and it is the solid action taken by the enterprise runner and its business operation team to face with
future development of the enterprise.
From the above descriptions, it can be seen that management strategy is a set of consistent plan made by the
enterprise to cope with environment change and competition situation; to the up-level, it acts intimately with the
exterior environment, to the down-level, it instructs all kinds of functional policies or strategies within the enterprise to
ensure that the basic goal of the enterprise can be achieved through appropriate implementations by the organization.
In the price aspect for Mary Kay, only Direct Seller can shop in the web site, when the amount is over 10,500 and
17,325 respectively, the discount would be 40% and 50% respectively of the original price; Nu Skin has web site
shopping function; in the past, as long as you are member of Nu Skin, you can enjoy 70% of the original price in the
shopping, but today, the web site price is the same as that of a member and Nu Skin ARO member can purchase it at
90% further the web site price.
In the sale channel aspect, Direct Seller is the only sale channel of Mary Kay, hence, when consumer wants to
order Mary Kays product, the consumer has to find cosmetology consultant he/she knows, the sale channel is thus very
narrow; for Nu Skin, in addition to Direct Seller, another easy way of shopping is through the internet, and the
consumer does not have to spend time to find Direct Seller he/she knows; therefore, its sale channel is a little bit
superior. Both products transportation is through logistics transportation.
In the promotion aspect for Mary Kay, in addition to publishing enterprises book and launching the web site, it
also promotes charity business Blossomy rose project and cooperates with Fund for Children and Family to help
poor children to improve their life; moreover, Nu Skin cooperates with Nongnong Magazine to open a Nu Skin special
column to discuss how the business runner of Nu Skin heads toward success. In 1996, Force for good foundation was
founded to promote Nutrition project for children under huger; it designed warm dish for children for domestic and
foreign children under hunger, meanwhile, a donation project of warm dish for children was started to try to help more
children under hunger.
In the personnel aspect, Mary Kay recruits female of over 18 years old to become its cosmetology consultant (that
is, the Direct Seller). Anyone who wants to join but does not know any cosmetology consultant can check into the web
site to leave personal contact information. Before the entrance of Mary Kay, it will take about 1,490 dollars to
purchase Career entrance kit; meanwhile, cosmetology consultant is incubated by supervisor of Mary Kay, in addition
to group meeting held once a week, the company will also hold irregularly a series of education activity; anyone who
wants to join Nu Skin can select to spend 850 dollars to purchase Entrance tips, or purchase companys product for at
least 2,000 dollars; anyone who use ARO repeating and circulation system for placing order every month can waive
from the membership fee. However, there is no limitation on the qualification of becoming a member of Nu Skin, and
In 1886, Avons precursor California Perfume Corporation was founded; in 1939, Mr. McConnell formally used
a river beside Shakespeares old home Avon as the name of the company; in 1972, Taiwans Avon was founded. It is
119 years since its first foundation, Avon continuously devotes itself to the creation of unique beauty for female; at the
same time, it also creates a new career for millions of females worldwide.
product energy
Charming
perfume
Youth Perfume
Lotion 300-1,800 1,000-4,200 250
adjustment Generics
Cream 600-1,500 Cosmetology 700-880 Bath lotion 300-800
Nutrition and
Day protection 400-2,000 700-1,600 Body lotion 350-800
slimming
Whole family Sun screening
Night cream 400-600 900-1,980 120-480
care product
Childrens Slimming
Exfoliation 400 800-990 600-1,500
Skin care
heath series
Moisture Makeup
400-2,500 200-450 Bath lotion 150-350
keeping remover
Body care
Foundation
Refresher 650-2,450 400 Skin lotion 150-350
cream
Special care 600-3,000 Isolation 300-800 Hands cream 100-200
Anti-aging
Colorful cosmetic
Hare care
Cosmetic 190-380
Face care 90 product
accessory and 45-1,500
Styling
others 210
product
Data source: Summarized by the author
4.1.2 Price
With Low unit price and high circulation in mind, Avon has provided the members with diversified
consumption way and discount, for example, VIP member has the favored purchase right of Use it first and pay it
4.1.3 Place
On Feb., 1998, in one way, Avon recruits more newcomers to expand its Direct Selling net, it also steps
aggressively into open shelf cosmetic retailing channel; starting from Feb., it was sold in Watsons and COSMED to try
to raise its sale proportion in retailing channel to as high as 8%. Until now, Avon is the largest female catalogue sale
channel in Taiwan with around 49 exhibition centers in Taiwan and the distribution is as shown in figure 4-2. Currently,
Avon has more than two hundreds thousands members and the annual issuance of its catalogue is over 6 millions.
In Taiwan, In addition to the open shelf special counter in Watsons, Avon is only operated in three different sale
models, that is, headquarter-operated store, Miss Avon and network sale:
1. Exhibition center: Avons exhibition center is run by the headquarter directly and it not only sells cosmetic
product but also provides personal cosmetology service to the customer.
2. Miss Avon: That is, Avon Direct Seller. Miss Avon sells the product through single level Direct Selling model and
there is no difference of up-level or down-level.
3. Network sale: As early as Nov. 1999, Avon had seized the newly emergent e commerce wave and started its
network selling activity. Avon takes full use of the unlimited nature of network space and combines its new web
site launching activity with the real expansion work of special counters (Te-Ling Ni, 2006).
Avon has its own logistic channel in Hsinchuang city. After customer places the order in the internet, the product
can be distributed directly to customers home. Meanwhile, consumer can pay at the convenience store to facilitate the
financial flow.
In the process of changing sale model and performing supply chain change and in order to ensure normal and high
efficiency operation of special counter system, Avon has enhanced its internal management. It has passed the
implementation of standardization and internal target management, the operation efficiency of store and sale channel is
thus greatly enhanced, at the same time, this is also the guarantee for the sustaining development of the company.
4.1.4 Promotion
Avon commitment day is a nationwide virtual network that Avon has built for research, medical care and social
service for the recognition of the complication of breast cancer among the females of different races; starting from 1993,
5 key anti-cancer fields are the focuses: namely, medical research, clinical care, support and service, education and early
detection. More than a decade, Avon Breast Cancer Crusade continuously raise fund and waken people the importance
of the finding of breast cancer prevention channel.
4.1.5 People
Avon has two kinds of member systems, consumer and business runner. Please look at Table 4-3.
In the Direct Seller business operation qualification and encouragement standard aspect, after joining
cosmetology representative, Miss Avon can receives Avon for one year 18 volumes free (Each volume for an average of
three weeks). Miss Avon has to order from member catalogue and monthly magazine for each term for amount of
consumers price of over 500 dollars, if the order amount is more than 500 dollars, 15% off can be applied; if the order
amount is over 2,000 dollars, 25% off can be applied; if the order is over 10,000 dollars, 30% off can be applied. The
business performance of Miss Avon will be calculated every 3 months, within these 3 months, 45 customers should be
introduced to consume in Avon successfully; meanwhile, the revenue within three months should be over 150 thousands
dollars before Miss Avon can be promoted to professional reserve cosmetology supervisor; for the beginning
cosmetology representative, if the consumption amount at consumers favored price within three months does not reach
over 1,000 dollars, the qualification will be lost. If the qualification is reached, then bonus reception condition is
matched, and the bonus can be divided into nine grades:
The promotional ranks of Avon are, for example, cosmetology representative, professional reserve cosmetology
supervisor, formal professional cosmetology supervisor, professional cosmetology vice manager, professional
cosmetology manager, senior professional cosmetology manager; the first three emphasize on sales and the last three
emphasize on incubation. In addition to receiving the bonus according to the sales revenue, Avon also uses KPI index 7
as the encouragement standard.
Since Miss Avon scatters everywhere, Avon company has to hire district manager to play the role of sales
manager; each district manager will be in charge of the recruitment, education and counseling of 100 Miss Avon.
Meanwhile, the company will also hold related educational courses so as to enhance the related cosmetology knowledge
and technique of Miss Avon.
4.1.6 Advertisement
In TV advertisement, Avon always resorts to the emotional aspect of a product and uses sensible topic and story to
attract customers and to be distinguished from other brand names. In the advertisement of magazine and website, its
unique slogan ofUnderstand woman better than a woman. really impresses people on Avons expertise and brand
content. What it is different than Mary Kay and Nu Skin is, Avon devotes to advertisement, no matter it is TV
advertisement or spokesman way, etc., Avon put large amount of money into them, Avon hopes that its resort
of Understand woman better than a woman can really impress women around the world.
Here we will sum up the member rights of the above mentioned three Direct Sellers. Furthermore, we will
perform SWOT analysis on each Direct Seller so as to understand the strength and weakness of each company and
propose our suggestions:
from the Direct Seller. internet or Direct Seller. 2. When the shopping amount exceeds
2. Pay member fee of 1,499 2. Pay a membership fee of 850 1000 dollars.
dollars. dollars; or join ARO system to 3. When the shopping is over 20000
waive the membership fee. dollars in consecutive two months, the
membership will be upgraded to VIP
automatically.
4. Pay 1000 dollars of membership fee.
1. Professional consultation 1. Direct Seller professional 1. All the network services.
from cosmetology counseling and after-sales 2. Can receive catalogue and shopping
Rights of the member
Convenient and simple The price is too high and superstar industries. difficult and the quality is
order placement customers consumption Zero time difference very different.
system and product thus can not continue. international market.
delivery service so as Bonus system is too
to create convenient strict, which might lead
consumption. to over-inventory at
Direct Seller.
Diversified product. The total bonus is lower Multiple sale system to Multi-channels will
Reasonable product than the competitors. increase business increase the cost.
price. Difficult to develop male development chance. It is more complicated in
Customer can have customers. Advertisement the sale channel
Avon
It can be seen from the above table that Mary Kay and Avon all commit to customers long term product
satisfaction warranty, 100% refunding and exchanging services can greatly enhance consumers confidence on their
products. The product prices of three companies are made according to customer and Direct Seller, and Avon gives
member and Direct Seller respectively favored purchase discount; in addition, Avon also provides Direct Seller and
customers diversified product discounts, such strategy can not only encourage purchases but also clear out the inventory.
However, in the order discount of Direct Sellers, Mary Kay give them discount even up to 50% off, which is the highest
discount among the discounts from all the three companies; for Nu Skin, in addition to the additional 10% off for ARO
member, the recommended sale price has been unified to 70% of the original price too, but the product price is still too
high and can not convince customers that real discounts are offered to them. Although Avon also provides product
warranty period of one month, yet the warranty period is even longer in Mary Kay, that is, three months; if the product
5.2 Suggestion
5.2.1 Suggestions to companies in this business
Business operation featuresAvon has includes seven major products which can most of the females need.
Although such strategy has taken care most of the market, yet its own feature is lost and it can not have strong
impression on consumers mind. Therefore, Avon can head toward a more professional company and try to develop
unique and competitive product and use the product as a segmentation of its brand and image with its competitors; in
addition to the product feature, its price can also be segmented in medium and high price so as to seize the need of
consumers of high level groups and enhance corporate and product image.
Green productIn recent year, the global warming issue becomes serious, environmental protection, in addition
to be hot topic in recent years, is also a large business opportunity. Since cosmetics is consumptive product, Avon can
thus focus on green related projects, for example, discount for using old bottle to buy a new product and the
development of green product so as to create new product opportunity.
NOTES
1. Jo-Lan Chi ed., Peter F. Drucker (2004). Management bible of Peter F. Drucker, Yuan-Liou Press.
2. Net price is price that is close the cost. All the net price products can not be accompanied with other discounts.
3. The VIP membership qualification can remain if starting from the second year, the year end accumulated customers
price value has reached 60,000 dollars.
4. For the bonus point accumulation, any consumption of 1 dollar consumers price can have one accumulation point,
when over 30,000 points are acquired, the consumer can receive a gift; when it is over 60,000 points, the consumer
can exchange the accumulation bonus point for a gift.
5. The extra discount of nutrition-assisted food is: When the value of one single purchase order is over a customers
price of 2,000 (included), 15% discount can be applied; when it is over 4,000 (included), a discount of over 25% can
be applied.
6. Career classical combo pack includes: Avons career hand pack, Avons career classic, Avons star product
experiencing set, Avons beauty rights, Avons manual for customers purchase order, visit slip, Avons invitation
card, Avons invitation manual, Avons universal manual and VIPs first visit gift, etc.
7. KPI means key performance index, which uses the most important indexes of the company as bases for the
issuance of the bonus. Avon will adjust KPI index at the end of each year so as to create a fair bonus distribution
system.
REFERENCES