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

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

20. THANK YOU