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