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Avon Presentation
1. Group 4, Section A
Ajitesh Jaiswal (08P007)
Anuj Dharnidharka (08P013)
Reeti Bhatia (08P039)
Siddharth Singh (08P048)
Subhratosh Khan (08P050)
Varun Malik (08P053)
2. Background
Formed by David McConnell in 1886 as the California
Perfume Company.
Name changed to Avon in 1939
100 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 products
5th
largest beauty company overall with annual sales of
$5 billion
2.8 million sales reps worldwide and .5 million in US
3. 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 1990s
Failed because the order sizes tended to be too small
to meet Avon’s required profit margins
4. Challenges for Andrea Jung
Strengthening and enhancing Avon’s beauty image
around the world
Leveraging the equity of the Avon brand into new
markets
Building new products and new channels
Accelerating top-line growth
Enhancing the experience of the Avon reps
5. Avon Products in 1999
Designed 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
6. Sales force
0.5 million sales reps in the US
All Avon reps were independent contractors
Extensive sales management hierarchy to recruit,
train and advise the reps
The reps tend to sell in one-on-one meetings either at
work or at home
7. Selling Process
Direct selling by women sales reps
The leadership program allowed a rep to earn additional
money by encouraging other women to become Avon
Sales rep
The Beauty Advisor Program
Avon ran 26 two week selling campaigns
Full color brochure featuring the products available for
sale
On an avg. each customer on a representative’s list
ordered $20 worth of products per campaign
Avon provided 100% satisfaction guarantee
8. Marketing
Mission of the company was to provide exciting and
lucrative career opportunities for women
Avon Worldwide Fund for Women’s health
Annual Avon Breast Cancer 3-Day Walk
Spent very little on traditional advertising
According to a survey, 70% consumers buy Avon
through a rep
9. Avon.com (1997)
LIMITATIONS
Commerce only, very little community building
Site provided direct to consumer sales only i.e. no role for
the representative
Sold only beauty products which was only 60% of the
company’s revenues
10. Avon.com under Edwards
The 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 collection
Invited experts in e-commerce for opinions
Hired a well known e-commerce consulting firm
Held a series of focus groups with reps in order to get
their feedback
11. Issue
How Avon would utilize the Web in its B2C and B2B
relationships?
Avon Avon Rep Customer
B2C
B2CB2B
12. B2C
Use Avon.com as a content or community site
Decide on the following strategies
Commissions
Marketing
Product
Shipping
13. B2B
Make easy for the reps to place their orders online
Fully functional online ordering would cost in excess
of $60 million over 3 to 5 years
Cost 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
14. Analysis of B2B option
Projected Cost
Cost of updating the 1997 version of Avon.com= $5 million
Cost of fully functional online ordering system=$60 million
over three to five years
Total Cost= $65 million for 5 years
15. Present cost of processing orders
Cost of order processing= $1 per for each customer’s order
No. of Avon sales reps= 0.5 million
Each rep participated in 12 of Avon campaign’s per year
Each 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 yearly
For the next 5 years, total processing cost = $90*5 million
= $450 million
16. Conclusion
Hence, 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
17. Recommendations
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
18.
19. The present Avon.com
There is a provision for customers to shop online as
well as contact an Avon rep
There is also a user friendly provision to become an
Avon rep