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    Case Analysis - Avon

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    nk_1234
    This document provides details about Avon, including its target market, purchase order cycle, sales process, and existing retailing system. It examines whether Avon should establish other forms of retailing or sell directly to consumers. If selling directly, it discusses how to include representatives in the new retail strategy. The key points are: 1. Avon's target market is women aged 25-50 and its products are positioned for average to lower income groups. 2. Representatives currently place orders through a lengthy purchase order form process. 3. A new strategy could include both direct online sales to consumers and representatives ordering online, to reduce costs while maintaining the representative system.

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    Case Analysis - Avon

    Uploaded by

    nk_1234
    672 views6 pages
    This document provides details about Avon, including its target market, purchase order cycle, sales process, and existing retailing system. It examines whether Avon should establish other forms of retailing or sell directly to consumers. If selling directly, it discusses how to include representatives in the new retail strategy. The key points are: 1. Avon's target market is women aged 25-50 and its products are positioned for average to lower income groups. 2. Representatives currently place orders through a lengthy purchase order form process. 3. A new strategy could include both direct online sales to consumers and representatives ordering online, to reduce costs while maintaining the representative system.

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    Avon case analysis

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    This document provides details about Avon, including its target market, purchase order cycle, sales process, and existing retailing system. It examines whether Avon should establish other forms of retailing or sell directly to consumers. If selling directly, it discusses how to include representatives in the new retail strategy. The key points are: 1. Avon's target market is women aged 25-50 and its products are positioned for average to lower income groups. 2. Representatives currently place orders through a lengthy purchase order form process. 3. A new strategy could include both direct online sales to consumers and representatives ordering online, to reduce costs while maintaining the representative system.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    672 views6 pages

    Case Analysis - Avon

    Uploaded by

    nk_1234
    This document provides details about Avon, including its target market, purchase order cycle, sales process, and existing retailing system. It examines whether Avon should establish other forms of retailing or sell directly to consumers. If selling directly, it discusses how to include representatives in the new retail strategy. The key points are: 1. Avon's target market is women aged 25-50 and its products are positioned for average to lower income groups. 2. Representatives currently place orders through a lengthy purchase order form process. 3. A new strategy could include both direct online sales to consumers and representatives ordering online, to reduce costs while maintaining the representative system.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 6
    At a glance
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    Avon is a direct selling company that sells beauty products through woman sales representatives. It is considering adopting an online retail strategy to complement its existing model.

    The existing retailing system of Avon included direct selling through door-to-door visits by representatives, direct marketing through mails, buying services where products were sold to representatives at discount, and catalogue marketing.

    The sales representatives play a crucial role in Avon's business. Avon should include them in the new strategy by giving them access to online accounts with discounts and involving them in delivery to direct customers.

    Name: Surabhi Sharma

    Serial Number: 24
    Section: F
    Roll number: 140101181
    Case Analysis
    Avon.com (A)
    Introduction:
    Avon has been the worlds largest direct seller of beauty products and fifth largest beauty
    company overall with annual sales of over $5billion. It wants to leverage its sales
    representatives and is contemplating new channels for reaching out to the customers.
    Analysis:
    Target market of Avon includes 25-50 years of women. Total 25 million U.S. women included
    the target set. It was positioned as a brand for average and less than average income group.
    Not positioned for luxury segment.

    High
    Quali
    ty

    Highly
    innova
    tive
    produc
    ts

    AVO
    N

    Purchase order cycle of Avon:

    Outst
    anding
    value

    Following is the purchase order cycle of Avon:

    Each
    representative gets
    catalogs from Avon

    The catalogs are


    distributed to
    friends, families or
    put at conspicuous
    locations

    Delivery after 5
    days of receiving
    the order

    Representative
    collects orders
    from customers for
    2 weeks

    The order is placed

    All the orders are


    aggregated

    Purchase order
    form is filled up,
    some extra
    products ordered
    for inventory

    The sales process included selling the products through woman sales representatives. The
    leadership program allowed a rep to earn additional money by encouraging other women to
    become Avon Sales rep. The Beauty Advisor Program included 26 two week selling
    campaigns. Full color brochure featured the products available for sale. On an avg. each
    customer on a representatives list ordered $20 worth of products per campaign. Avon
    provided 100% satisfaction guarantee.
    A choice needs to be made between two models that can be adopted:
    Eve.com model
    iVillage.com
    Commerce-only site
    Active online community site for women
    Only well known products sold directly from Only information exchange
    manufacturer
    Fit to Direct Selling Model
    Image of Company for women
    Eve.com model will restrict the content and functions of the site. Hence, iVillage.com model
    should be adopted. In this way, Avon will maintain its sales force and retain its loyalty.
    Advertising cost will be saved as the reps will be carrying on with their roles.
    Since 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

    Q1) Examine the existing retailing system of Avon.


    The existing retailing system of Avon included the following aspects:
    Direct Selling: The representatives used to do door-to-door selling. They included their
    friends, family members and colleagues at work place.
    Direct Marketing: Direct mails were sent to customers. But this system failed as the margins
    were not covered.
    Buying Services: Avon products were sold to the representatives at discounted price.
    Catalogue Marketing: Catalogues with all the products were distributed to the consumers for
    creating brand awareness. The orders were placed to the representatives.

    Building a customer list through


    networking/referrals
    Buying brochure or catalog from reps
    Collecting orders from customers after
    distribution of brochures and counselling
    Submission of orders to Avon by reps
    through a 35 page purchase order
    Processing of orders by Avon
    Shipments received by Sales rep within 5
    days of ordering
    Delivery by Avon reps to customers in
    person at home/workplace
    Delivery by courier to customers living far
    away

    As the representative turnover ratio was quite high, many customers handled by
    representatives were stranded customers.
    U.S. along had 5 million stranded customers.
    Programs like Leadership Program and Beauty Advisory program were started for
    greater involvement of reps and to reduce the rep turnover ratio.

    Q2) Should Avon establish other forms of retailing? Sell directly to consumers? If so,
    provide details.
    Analysis of B2B option
    For updating 1997 version of Avon.com= $5 million
    Fully functional online ordering system=$60 million (5 years cost)
    Total Cost= $65 million (5 years)
    Present cost of processing orders
    Order processing cost= $1 per order (shipping cost is borne by the representative)
    Cost of brochures=$ 0 (the price charged for the brochures just covers all the costs, hence
    neglected here)
    No. of Avon sales reps= 0.5 million
    1 rep participated in 12 Avon campaign (1 year)
    15 customers under each rep
    Total orders for 5 years =0.5*12*15*5 million
    = 450 million
    Cost of processing 450 million orders=450 million*$1

    = $ 450 million (5 years)


    Cost saving by using the online system=$ 450 million - $ 65 million = $ 385 million
    Hence, Avon should go for B2C sales, i.e. it should sell directly to the customers.
    In this way, it will cut down its cost.
    Will save on the commissions to be given to the sales representatives.
    It will account for the 18% of customers who do not want to buy through reps.
    Online communities can help the customers to connect and create brand awareness.

    Q3) How, if at all, should Avon include the representatives in the new retail strategy?
    The sales representatives play a crucial role in the advertising and brand awareness of Avon
    products. Avon cannot and should not completely do away with this asset.
    Even though the costs are at $ 450 million for the whole sales process, it can be
    reduced by including the representatives in the online retailing system.
    The representatives can be given the access to premium accounts with discounts for
    their purchases.
    They can be accounted for every purchase in their coverage area. The reps can place
    order online so that they do not have to fill the hefty form.
    The positioning of the brand is that if a direct selling company. Integrating reps and B2C
    format might create conflicting brand messages. But some steps can help Avon retain its
    image.

    The delivery to direct customers (who order directly online) can be made through
    representatives. This will lead to interactions on reps and customers. It can also help
    in developing the network for the rep.
    The site can be made available for both the reps and direct customers. In this away,
    reps will not have the threat of being sidelined.

    As per the Exhibit 3, the sales reps have helped in growing the cosmetics, fragrance and
    toiletries section. They can continue to do that. As per the exhibit 3, jewellery section has
    been growing through online sales. Hence, it should be continued as such.
    3500
    3000
    2500

    Products

    2000

    Cosmetics ,
    fragnances , toiletries
    Gifts and decorative

    1500

    jewelry and accessories


    Apparel

    1000
    500
    0
    1

    Q4) What would be the gain from such strategy?


    The mixed structure of online retail and direct selling can have various advantages.
    1. The representatives will save their time which they used to spend on ordering by
    filling the form. They will not be loaded by the 2 weeks window and can order
    anytime.
    2. This mixed approach will help cater to the 18% segment that wants to buy from Avon,
    but not through a representative. These will be able to order online.
    3. Out of the 12% people who do not want to buy from Avon, some will be those who
    are not aware of product portfolio of Avon. Online catalogue and buying option can
    cater to this segment.
    4. Advertising cost for Avon is $ 45 million. Out of which $ 38 million is for the U.S. By
    implementing digital marketing, the cost of traditional marketing can be reduced.
    Cost through digital componemt=$65 million
    Cost through the current setup=$450 million
    A cost reduction of approximately 85.5% is possible through B2C model. A mixed approach
    might lower down the cost benefit. But it will be a trade-off between the brand image and the
    cost.

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