Group 4, Section A Ajitesh Jaiswal (08P007) Anuj Dharnidharka (08P013) Reeti Bhatia (08P039) Siddharth Singh (08P048) Subhratosh

Khan (08P050) Varun Malik (08P053)

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 Worlds 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

 Promoted reps with other jobs to sell the products at

work By 1988, these at work sales accounted for 25%-30% of all Avons sales. Experimented with direct mail in mid 1990s Failed because the order sizes tended to be too small to meet Avons required profit margins

Challenges for Andrea Jung

Strengthening and enhancing Avons 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

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

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

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 representatives list ordered $20 worth of products per campaign Avon provided 100% satisfaction guarantee

Marketing
Mission of the company was to provide exciting and

lucrative career opportunities for women Avon Worldwide Fund for Womens 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

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 companys revenues

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

Issue
How Avon would utilize the Web in its B2C and B2B

relationships?

Avon

B2B

Avon Rep

B2C

Customer

B2C

B2C
Use Avon.com as a content or community site Decide on the following strategies Commissions Marketing Product Shipping

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

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

Present cost of processing orders

Cost of order processing= $1 per for each customers order No. of Avon sales reps= 0.5 million
Each rep participated in 12 of Avon campaigns per year Each rep had 15 customers on her list

Hence, total customers 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

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

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

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

THANK YOU