Date post: | 12-Jan-2015 |
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Group 4, Section AAjitesh Jaiswal (08P007)
Anuj Dharnidharka (08P013)Reeti Bhatia (08P039)
Siddharth Singh (08P048)Subhratosh Khan (08P050)
Varun Malik (08P053)
BackgroundFormed by David McConnell in 1886 as the
California Perfume Company.Name changed to Avon in 1939100 products including perfumes, low-cost home
and beauty products and personal care items like toothbrushes
Ventured into new less related business but had disastrous results
World’s largest seller of beauty products5th largest beauty company overall with annual
sales of $5 billion2.8 million sales reps worldwide and .5 million in
US
Promoted reps with other jobs to sell the products at work
By 1988, these at work sales accounted for 25%-30% of all Avon’s sales.
Experimented with direct mail in mid 1990sFailed because the order sizes tended to be
too small to meet Avon’s required profit margins
Challenges for Andrea JungStrengthening and enhancing Avon’s beauty
image around the worldLeveraging the equity of the Avon brand into
new marketsBuilding new products and new channelsAccelerating top-line growthEnhancing the experience of the Avon reps
Avon Products in 1999Designed to appeal to women aged 25-50
with average to below average household incomes
Positioned to deliver high quality and highly innovative products at and outstanding value
Lipsticks, cosmetics, nail care, hair and skin care
Sales force0.5 million sales reps in the USAll Avon reps were independent contractorsExtensive sales management hierarchy to
recruit, train and advise the repsThe reps tend to sell in one-on-one meetings
either at work or at home
Selling ProcessDirect selling by women sales repsThe leadership program allowed a rep to earn
additional money by encouraging other women to become Avon Sales rep
The Beauty Advisor ProgramAvon ran 26 two week selling campaigns Full color brochure featuring the products
available for saleOn an avg. each customer on a representative’s
list ordered $20 worth of products per campaignAvon provided 100% satisfaction guarantee
Marketing Mission of the company was to provide
exciting and lucrative career opportunities for women
Avon Worldwide Fund for Women’s healthAnnual Avon Breast Cancer 3-Day WalkSpent very little on traditional advertisingAccording to a survey, 70% consumers buy
Avon through a rep
Avon.com (1997)LIMITATIONSCommerce only, very little community buildingSite provided direct to consumer sales only i.e.
no role for the representativeSold only beauty products which was only 60% of
the company’s revenues
Avon.com under EdwardsThe major issue was to make a choice
between becoming Eve.com or iVillage.com i.e. to build a commerce only site or an appealing one
Started with data collectionInvited experts in e-commerce for opinionsHired a well known e-commerce consulting
firmHeld a series of focus groups with reps in
order to get their feedback
IssueHow Avon would utilize the Web in its B2C
and B2B relationships?
Avon Avon Rep Customer
B2C
B2CB2B
B2CUse Avon.com as a content or community siteDecide on the following strategiesCommissionsMarketingProductShipping
B2BMake easy for the reps to place their orders
onlineFully functional online ordering would cost in
excess of $60 million over 3 to 5 yearsCost of about $3 million to $5 million to
update the 1997 version of Avon.com to make it a state of the art online store
Analysis of B2B optionProjected CostCost of updating the 1997 version of Avon.com= $5
millionCost of fully functional online ordering system=$60
million over three to five yearsTotal Cost= $65 million for 5 years
Present cost of processing ordersCost of order processing= $1 per for each customer’s orderNo. of Avon sales reps= 0.5 millionEach rep participated in 12 of Avon campaign’s per yearEach rep had 15 customers on her list
Hence, total customer’s orders in an year =0.5*12*15 million
= 90 million
Cost of processing 90 million orders=90 million*$1 = $ 90 yearlyFor the next 5 years, total processing cost = $90*5 million
= $450 million
ConclusionHence, if the company goes ahead with the
plan of making the fully functional ordering system
Cost cutting for the company over 5 years = $450-$65 million = $ 385 million
RecommendationsSince over 70% of the total sales of Avon were
through its sales reps, the company should use the B2B path and ease the ordering style for the representatives by eliminating the filling of the archaic purchase orders
The company should also use the B2C path because a significant 18% target customers would buy independently
The website should be more attractive and there can be a forum so that the reps as well as the customers can discuss about the Avon products
The present Avon.comThere is a provision for customers to shop
online as well as contact an Avon repThere is also a user friendly provision to
become an Avon rep
THANK YOU