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Avon Presentation






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Avon  Presentation Avon Presentation Presentation Transcript

  • 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
    • World’s largest seller of beauty products
    • 5 th 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 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
  • 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
  • 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 representative’s 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 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
  • Avon.com (1997)
    • 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
  • 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 B 2 C and B 2 B relationships?
    • Avon Avon Rep Customer
    B 2 C B 2 C B 2B
  • B 2 C
    • 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 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
  • 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 B 2 B path and ease the ordering style for the representatives by eliminating the filling of the archaic purchase orders
    • The company should also use the B 2 C 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