(Case Study is compulsory)

A DREAM GONE AWRY

In the late 1990s, the global direct selling giant Amway had to contend with increasing

doubts regarding its survival in India.The company that had become synonymous with

network marketing or multi-level marketing (MLM) the world over was beset with

problems. Media reports were quick to point out Amway's failure to sell the basic concept

of direct selling to the Indians.Though the company managed to rope in a substantial

number of distributors, the attrition rate was at an alarming high of 60-65%. Most of the

products that the distributors bought, they consumed themselves. Estimates put the

percentage of self consumption

at almost 50-60% of the total volume. (There were rumors that some distributors enrolled

just to take advantage of the distributor's margin of 18-30%). In the initial stages, when

trials were the only criterion, this worked well. However, this self consumption did not

translate into repeat purchases.

This was because the percentage of 'active' distributors at any given point of time

remained at a low level of 35-40%. Many people who joined in the initial frenzy returned

the product kits within the first month. Company sources claimed that the returns

constituted just 1% of the total strength, but rivals and ex-employees put the figure at

over 5%. Of the total distributors, only about 10% showed reasonably high levels of

activity. To top it all, Amway was burdened with an image that had little basis in fact. Its

products began to be perceived as being very expensive and meant only for the

premium segment. This was identified as the single biggest reason for the high attrition

rate. What was overlooked was the fact that almost all Amway products were

concentrates. When used in the proper diluted form, the cost per use of each product

worked out to be at par with (and in some cases, even lower than) the nearest

competitor’s products. For instance, the product named LOC (priced above Rs 320 for a

1-liter pack), when diluted gave around 165 bottles. The cost per usage was thus very

low. Either the distributors were themselves not aware of this fact, or they were unable to

communicate this to the customers. Since the distributors themselves were unsure

about the price-value equation of the products they were selling, they could not

effectively convince the consumers either. Amway also had to contend with customers

complaining of poor customer service on the part of the company. Analysts commented

that as long as the volume of products that moved through the network was high,

network market such as Amway were satisfied. Even though customers complained of

the lack of services, the company deemed it more beneficial to go for higher sales force

motivation programs rather than undertake customer service initiatives. This was largely

due to the fact that the company was almost never involved directly with the end-

consumers and the sales volumes were the end of all discussions.

Questions

1. Enumerate the reasons for brand AMWAY to be not so successful in India.

2. Compare advantages and disadvantages of MLM marketing to conventional system.

MAKEOVER OF BRITANNIA

THE ROAD AHEAD

BIL's makeover plan seemed to have worked well. The sales increased from Rs 752.3

crore in 1996-97 to Rs. 1169 crore in 1999-00 and net profits increased almost 4 times

since 1996-97. Although BIL's biscuit business seemed to have done well, its

diversification into dairy segments did not seem to be an unqualified success. Analysts

observed that the value-added dairy market which BIL had targeted was a minuscule

0.10 per cent of the market.

While the size of the cheese market was a mere Rs 140 crore, it was growing at 20 per

cent per annum. The Rs 400-crore butter market was growing at 10 per cent a year, and

Amul-the only national butter brand-had an 85% share. The Rs 350-crore dairy-whitener

market was growing at 10% a year, but large brands like GCMMF's Amulya

(marketshare: 45%), Nestle's Everyday (32%), and HLL's Milkana (14 %) dominated it.

Analysts felt that for BIL, using brand equity alone to break into competitors' domain,

may not be that easy. BIL had to make sure that the products it made were acceptable

to Indian tastes. The mere fact that a product in its parent, Danone's portfolio was

successful abroad was no guarantee that it would succeed in India.

The best example, analysts pointed out, was that of 'Mini roule,' a Swiss roll from

Danone, which failed to take off, in India. BIL, however seemed to believe that its core

competence was foods, and that by going into dairy products, it was not moving from its

original focus. BIL also believed that its makeover plan had worked well, and that this

was reflected in the remarkable improvement in profits.

Accordingly it set ambitious targets for the future. Said Alagh, "Our vision is to make

every third Indian a Britannia consumer within the next three years …We want to be part

of our consumer- at home, out of home, a natural part of his life. Consume the product of

your choice, but consume Britannia."

Analysts felt that the challenge for BIL lay, in continuing to remain aggressive and in

evolving to meet the needs of dynamic markets of the new millennium. If BIL was to

achieve the objective it had set for itself, it had to continuously strive to deliver products

with value that exceeded consumers' expectation. BIL's gamble and its long-run success

would ultimately depend on whether consumers liked the new products it introduced in

the market or not.

QUESTIONS FOR DISCUSSION

1. "For a company that wished to cater to a varied customer-base, it (BIL) needed

to posses a large portfolio of brands, with different USP's positioned at different

price-points, yet unified under a uniquely differentiate mother brand." In the light

of the above statement, discuss various strategies followed by BIL.

2. Do you think BIL's diversification is a wise move? Explain.

3. If you were the brand manager of BIL, what would be your future course of

action?

CASE STUDY

Until the early 1990s, Dabur, the 100-year old ayurvedic products manufacturer, was

looked upon as a rather staid company that marketed herbal and ayurvedic products.

But the launch of Dabur Vatika in 1995 brought about a sea change in that perception.

Within six years of its launch, Vatika had become the market leader in the value-added

hair oils segment. Its success pushed Dabur into the league of top FMCG product

companies in India. Dabur Vatika’s success can be attributed to the company’s

differentiated product offering and meticulous brand building initiatives. The company

concentrated on differentiating the brand in all aspects, right from positioning to

packaging. At the time of its launch, Dabur positioned Vatika as value-added hair oil that

contained pure coconut oil enriched with natural ingredients such as henna, amla

(gooseberry), and lemon. Till then, the hair oil market had been dominated by plain

coconut oil brands with Marico’s flagship brand, Parachute, being the market leader.

Questions for Discussion:

1. Dabur Vatika, one of the youngest brands in the country (launched in 1995), has

become a leading brand in the natural personal care product segment. What were the

factors that enabled Vatika to become a flagship brand of Dabur in such a short span of

time?

2. Marketing communications play an important role in building brands. Discuss the role

played by marketing communications in making Dabur Vatika a successful brand.