Principles of Marketing Case Study

Name: Saadia Mazhar Class: MCOM Subject: Principles Of Marketing Assignment: Case Study Date: 01/11/2010 C A S E S T U D Y Question Number 1: Avon was selling its products for 112 years by using the motto “Ding Dong, Avon Calling” successfully. Demand of Avon’s beauty products was very high and selling was done successfully. This company earned $4 Billion worldwide as a result.

This company was incorporated as California Perfume Products in 1916 and was founded in 1886, deploying an army of 40 million. It constituted of women, selling products door to door. This army sold products to its neighbours, friends, relatives etc, and took commissions on the products sold. A time came when out of these 40 million ladies, 500000 were willing to earn more money, but did not want a full-time job outside the home, as they were homemakers. Recruiting sales persons was easy who could encourage the customers to make repeated purchases.

But during the late 1970s and 1980s, environment trend changed a lot.

Firstly, more women found that they needed to work outside the home. As a result, when these ladies rang the door bells, either they were not answered or were not given a positive response. Secondly, many Avon ladies decided that they needed more than part time jobs, and Avon’s annual turnover force rised up to more than 200%. Thirdly, because of high sales force turnover, many Avon customers, wishing to see a sales person could not find one.

Fourthly, many competitors like Amway, Mary Kay Cosmetics, and Tupperware, were competing for the pool of people, interested in full time and part time direct selling jobs. Lastly, in edition to all these factors, increasing mobility of the U.

S. population meant that both customers and salespeople were moving. This made it difficult for salespeople to establish loyal, stable customer bases. QESTION NUMBER 2 Avon’s competitors such as Amway, Mary Kay Cosmetics ; Tupperware were competing for the pool of people interested in full or part time direct selling jobs.

To deal with the issues that Avon was facing, it hired James E.

Preston as its chairman and chief executive. First he decided to change Avon’s marketing strategy. He sold all the extra businesses and focused on selling cosmetics, fragrances and toiletries. Also he cut prices on Avon’s products. He started a compensation program called leadership which allowed the sales representatives to earn up to 21% on sales, of newly recruited sales representatives, in the form of bonuses.

But in later 1991, Avon killed the program, arguing that it did ‘nt fit Avon’s culture.

Preston believed that Avon had left as many as 10 million former or potential customers stranded. Due to more sales turnover force & lack of sales people, customers could not find a representative to buy or order products. According to an analysis 14% of American women accounted for one third Avon’s sales. Another 62% were frindge customers, means they appreciated Avon’s products, but did ‘nt buy them regularly.

Another 15% of American women were potentially receptive to Avon, but were not necessarily interested in dealing with a traditional Avon sales representative.

Thus Preston decided to develop another program which he named as AVON SELECT. This program featured catalog & toll free telephone number that allowed direct mail selling. Avon’s research revealed that its median customer was 45 years old, and had an average household income of under $30,000. This catalog would reach younger, higher income customers. Preston believed that with a catalog, the company could get the median customer age to 38 and increase average household income to more than $30,000.

Avon supported the catalog by kicking off a national advertising campaign that featured the slogan “Avon – The Smartest Shop In Town”. To find the advertising, the company cut sales commissions and incentives and laid off scores of executives. QUESTION NUMBER 3 On the rule, “change we did, change we must and change we will”, Preston launched a $30 million ad campaign in 1994 with the theme, “Just Another Avon Lady. ” Market searched showed that despite all changes, consumers still thought of “Ding Dong” and the Avon Lady, when they associated with the company.

Observers wondered if the use of the term “Lady” in the mid-1990s would provoke negative reactions among many women. After all, even Avon had avoided using the term in advertising, for 20 years.

Between 1992 and 1996, Avon’s sales and profits rose slowly, but steadily, driven primarily by sales in international markets. Then in late 1997, Avon announced what might be its most radical change yet. It announced that it would soon introduce retail stores in the U. S. market, which were although running in foreign markets, but were to be tested in the U. S.

, being a new approach in markets.

Preston argued that no doubt, Avon’s products were loved and appreciated in the markets, but still the idea of direct selling was not good, as when the sales representatives rang the door bells, they were not given any appropriate response. To calm down Avon’s 440000 U. S. sales representatives, Avon gave them share in its new business either through franchising or through referrals from the stores. Avon cut down its product line by 30percent to focus entirely on the limited products, in aspects of marketing, promotion and brand recognition on global level.

QUESTION NUMBER 4

Because of the effective marketing efforts, many competitors of Avon realized its global reach and came forward for partnerships to increase their sales. For example Mattel Inc. asked for Avon’s sales people to sell its Barbie dolls. According to Avon’s president of global marketing, the powerful distribution channel of Avon combined with the powerful brand of Mattel Inc.

Mattel found that Asian girls preferred the standard American Barbie. As a support to this, Avon planed to introduce a Barbie – branded line of toiletries and fragrances for girls in the U.

S. and abroad. Due to Avon’s good marketing strategies, many companies were attracted and used the concept of direct selling rather than making retail stores, as hiring sales representatives was economical in developing countries, and it was an attractive job for many women there, hence their recruitment was easy. However, turnover used to be often high and more representatives were needed to be hired, but many of them were not seriously committed to the company.

Also, many did‘nt have formal business training or basic skills needed to perform their duties.