Assuming the role of management consultants, you will analyze the cases and present your analyses/recommendations for three different case studies. Each person will answer the

319

marketing SPOTLIGHT

Avon

Avon, the world's oldest direct-sales beauty company, got

its start in 1886 after door-to-door book salesman David

McConnell began offering free perfume to attract female

customers. When the perfume proved more popular,

McConnell ditched the books and started the California

Perfume Company, which his son later renamed after

Shakespeare's birthplace. McConnell hired 50-year-old

Mrs. P. F. E Albee to peddle perfume and recruit a sales team,

giving women one of the first opportunities to work outside

the home and earn an income in an era when this was far

from the norm. Avon's first catalog was printed in 1905 and

its first print advertisement appeared the following year in

Good Housekeeping, which 25 years later gave its seal of

approval to eleven Avon products, a record for one company.

The Avon Ladies who knocked on doors, hosted parties,

and enlisted friends were ensured a niche in popular culture

when the company's "Ding Dong, Avon Calling" TV commer­

cials appeared in the 1950s and 1960s. Avon's basic direct­

selling model hasn't changed drastically through the years.

The buy-in for an Avon rep is inexpensive. Reps can choose

one of three starter kits-$25, $50, and $1 DO-containing

catalogs, product samples, order pads, delivery bags, and

recruiting forms. Avon prints a new catalog for every two­

week "campaign" period. Reps shop the catalogs around to

customers and prospects and take orders that they fill from

inventory shipped to them from Avon. Customers now can

also order directly online. Commissions start at 20 percent for

individual and team sales up to $150, and go up to 40 percent

for sales exceeding $500; sales of more than $10,000 earn

50 percent commission. Ten "leadership" levels offer bonuses

and incentives depending on campaign sales levels.

Sales reps also recruit others to join their team, who

then recruit new reps of their own, on down the line, add­

ing up to more commissions for the team leader. But there

are boundaries. Avon caused a stir when it quit the Direct

Selling Association, citing the need for stricter ethics for

multi-level marketing, sometimes viewed as Ponzi schemes.

The company has placed a limit on the amount of profit that

can be reaped from recruiting others. Avon allows reps to

claim commissions from only three downline generations of

their personal sales organizations, rather than from an infinite

number, which puts the focus on customer sales rather than

on team-building.

Avon was an early entrant into international markets;

Brazil became Avon's biggest sales market in 2010. But the

company faced increasingly stiff competition both interna­

tionally and at home. Multinationals like P&G and Unilever

made inroads in developing nations, while department and

drug stores expanded their selection of affordable cosmetics,

and retailers like Ulta Beauty and Sephora appeared. While

Ulta's sales rose from $1.45 billion to $3.2 billion between

201 0 and 2014, Avon's North American sales fell from $2.2 billion to $1 billion during that time.

One of the reasons for the decline in Avon's market share

was that the company was slow to pick up on the prolifera­

tion of online marketing and social networking. Only in 2014

did Avon attempt to refurbish its website, which hadn't had a

makeover in a decade, and create marketing materials specifi­

cally for its Hispanic reps, who far outsold their non-Hispanic

counterparts. Social media and online selling were becoming

more important as face-to-face contact became increasingly

difficult in a world where women make up almost 50 percent of

the workforce. In addition, Millennials, a rapidly growing market

with annual spending power estimated to reach $1.4 trillion

by 2020, preferred online to in-home events and were paying

attention to Facebook, lnstagram, and Twitter influencers-the

type of social media marketing that Avon had failed to facilitate. ( continued)

320 PART 5 I COMMUNICATING VALUE

In 2015, Avon split its operations by selling most of its

North American business to private investment firm Cerberus

Holdings (its U.S., Canada, and Puerto Rico businesses now

operate as "New Avon LLC") and moving its headquarters

to London. By 2017, Avon's stock market value had fallen

to $1.3 billion-a dramatic decline from its over $21 billion

market valuation a little more than a decade earlier. Many of

the causes sprang from an unclear marketing strategy that

dated from the early 2000s, which saw Avon straddling the

line between direct sales and retailing, having difficulty imple­

menting a workable software platform that could facilitate the

transition to online sales, engaging in a number of corporate

restructurings that were more about cost-cutting than stra­

tegic vision, and facing regulatory challenges in the rapidly

growing Chinese market.

Realizing that Avon had lost its way and needed to step

up its ability to capitalize on emerging trends and opportuni­

ties in order to grow and prosper, Jan Zijderveld, the former

president of Unilever's European business unit who became

Avon's CEO in February 2018, partnered with Salesforce.com

and announced an investment of approximately $300 million

in IT, new products, and marketing, training, and digital

tools. To bring Avon into the digital age, chief beauty and

brand officer James Thompson, formerly with Diageo,

resolved to intensify ongoing training for reps on how to use

Facebook and lnstagram platforms effectively, in addition

to growing Avon's own platform that connects direct online

purchases with reps. Avon also appointed its first-ever chief

digital officer to develop personalized beauty apps that link

customers with reps via a phone camera and focus on data

analytics to take the guesswork out of cosmetics purchases.

By building on its direct-selling roots, while embracing new

technologies and the changes in the way consumers social­

ize, exchange information, and shop, Avon is seeking to

revamp its business model and regain its market position.

In January 2020, Avon was acquired by Natura &Co, a

Brazilian multinational cosmetics and personal care com­

pany, creating the world's fourth-largest pure-play beauty

company. The acquisition adds Avon to Natura &Co portfolio

of brands which, in addition to the company's own brand

Nature, includes The Body Shop and Aesop. The acquisition

enabled Natura &Co to gain leading position in relationship

selling, on and offline, with over 6.3 million consultants and

representatives for the Avon and Natura brands.49

Questions

1. What factors contributed to Avon's initial market

success? How did these factors evolve over time?

2. What is Avon's value proposition for its customers, its

sales force, and its stakeholders?

3. How did the role of personal selling change during the

past several decades? Can personal selling continue to

be a viable business model, given the ubiquity of social

media and mobile communications?

236

marketing SPOTLIGHT

MUJI

MUJI was founded in 1980 as a private label for Japanese supermarket The Seiyu. At the time, foreign brands were becoming increasingly popular as the economy grew. As a result, cheaper, low-quality imitation goods became attractive alternatives for budget-conscious consumers. MUJI goods were created to fill the growing market for quality goods that were affordable and long-lasting. MUJI started with 9 household and 31 food products, which were advertised with the slogan "lower priced for a reason." Products were packaged in simple materials such as clear cellophane and brown paper. Over the next couple of years, MUJI expanded its product line to include stationery, clothing, kitchen appli­ ances, and home furnishings. It also began opening its own stores across Japan.

The company's full name, Mujirushi Ryohin, means "no-brand quality goods," a design philosophy that reflects the simplicity and functionality of its products. MUJI claims that its products are "brandless," which means that they do not have logos or distinct markings. They are designed not to stand out, but rather to look minimalist-as MUJI describes them, to be just "enough" to deliver the one function they were designed for. This can be seen in MUJI socks, which are made with a 90-degree angle rather than the normal 120. The right angle helps with heel slippage when the socks are worn inside boots and increases overall comfort. MUJI intends its products to be simple in both function and style, so they can be mixed and matched to suit any user's needs and lifestyle.

MUJI follows three core principles to create quality, minimalist products that anyone can afford. First, MUJI carefully selects the materials used to manufacture its products. The company has been known to use industrial materials that it can buy in bulk at low cost. This concept

started with the food that MUJI carried in the early 1980s; MUJI sold U-shaped pasta after buying the ends of spa­ ghetti cut off after manufacturing, as well as canned salmon made from undesirable parts of the fish. Second, MUJI streamlines its manufacturing process; products typi­ cally use natural or unfinished materials that don't have to be painted or dyed. This not only makes MUJI products uniform in color and material but also creates less waste and reduces costs. Third, MUJI uses bulk packaging for its products, placing them in plain containers. Besides being in line with MUJl's "brandless" philosophy, the minimalist packaging saves resources and keeps the company envi­ ronmentally friendly.

MUJl's "no brand" philosophy can also be seen in its promotional strategy. The company keeps its advertising budget modest by relying on word of mouth to spread aware­ ness. Instead of running huge advertising campaigns on TV and print media, MUJI prefers to reach people through press and in-store events. Resources are invested in the salespeople employed in its physical locations. Locally hired store managers are sent to MUJI offices in Tokyo for training on how to sell MUJI products. By ensuring that customers