The case study, which has been written by Rochelle Brunson and Marlene Reed, focuses on the challenges and opportunities, faced by Avon Products, Inc. This enterprise is one of the largest manufactures of cosmetics and perfume in the world. At the moment, the management of this firm tries to implement a new marketing strategy that would allow them to strengthen their positions in the domestic and foreign markets.
The authors of this case study discuss the following problems, which Avon should address: 1) brand image that does not appeal to many customers; 2) inability to establish new distribution channels; 3) intense competition (Brunson & Reed, as cited in Fred, 17, 28). This case also describes the history of the company, their mission and values, current business models, the structure of this organization, and top management.
Apart from that, this article includes extracts from Avon’s financial statements, namely, net sales by product categories, revenues by product segments, and the data about Avon’s performance in various regions of the world such as North and Latin Americas, Western Europe, Middle East and Asia (Brunson & Reed, as cited in Fred, 26). Furthermore, this case explains the differences between Avon and its major competitors such as Mary Kay.
The authors do not suggest solutions toward the problems of this organization; instead they carefully explore those factors, which contribute to these problems. The information, presented in this case, can be or great assistance to both managers and students, because on its basis, one can map out strategies that would enhance the performance of Avon Products, Inc.
The challenges, faced by Avon Products, Inc
Branding
In part, the challenges, encountered by this company, can be explained by the inappropriate approach to branding. For a very long time, Avon has styled itself as “housewife’s favorite” (Haig, 272).
Yet, the role and position of women in society have dramatically changed over the last decade, and they no longer want to associate themselves with housewives. This image is no longer appealing to them. Rochelle Brunson and Marlene Reed also point out the fact that this firm usually targets women, (usually, housewives) living in suburban areas, rather than “urban trendsetters”, who can significantly increase the market share of this corporation (Brunson & Reed, as cited in Fred. 26).
In sharp contrast, Avon’s key competitors like L’oreal or Max Factor try to target women who are willing to be strong and independent. More than that, Avon has never positioned itself as a luxury brand that aims to raise client’s self-esteem. This is why many potential customers tend to disregard their goods. Overall, branding is one of the key problems, which needs to be addressed by the management.
Distribution Channels
The business model, adopted by Avon, can be classified as multi-level marketing (MLM). The main peculiarity of this approach lies in the fact that the firm markets its products through a network of independent distributors, who, in their turn, recruit other sales representatives (Cohen & Roussel, 92).
At the moment, there are more than five million Avon representatives in more than 100 countries (Brunson & Reed, as cited in Fred. 25). Therefore, we may say that it take much time and effort to find, recruit and train this representatives. Certainly, Avon has tried to implement new business models; in particular, they attempt to distribute their products through websites.
However, this approach does yield good results. The thing is that the marketing model of this organization is based on close relationships between the seller and the customer. Again, it should be mentioned that their major rivals such as Loncome and Revlou successfully distribute their products to the customers through cosmetic counters in pharmacies and department stores. This is one of the reasons why Avon cannot get competitive advantage over them.
Supply Chain
The companies, which rely on multi-level marketing, often cannot accurately estimate the demand for their products. Avon manufacturers a great variety of cosmetics and perfume, but the management of this company does not know which products will enjoy popularity among the customers in the near future. One should bear in mind that this enterprise has a very short selling cycle; in fact they start a new marketing campaign every three weeks. As a result, their factories often have to break their manufacturing schedules in order to switch from one product to another (Cohen & Rossel, 92).
The problem is that such interruptions often lead to great expenses and delays. This inability to predict the sales volumes increases the amount of unsold merchandise (Cohen & Rossel, 92). This underdeveloped supply chain immensely hinders operational and financial performance of Avon Products, Inc.
We need to take into account that the companies, which operate at international level, must develop methods of reducing shipment expenditures, and Avon cannot do that due to their inability to forecast demand for their products. This is one of the key obstacles, which need to be overcome.
Opportunities
Variety of Products
As a manufacturer of cosmetics and perfume, Avon can offer their clients a wide variety of products. There are very manufactures that compete with Avon in terms of product variety, except only Mary Kay or Oriflamme.
Avon sells more than one hundred different items: if we look at the competitive strategy of this enterprise, we can say that it has taken a focus approach, which means that it tries to address various needs of a particular target audience (Porter, 22). As it has been noted before, Avon tried to build close relationships with a particular group of people, namely women, whose age ranges from twenty to fifty.
Even by the roughest estimations, we may say that this target audience numbers more than one billion people, who know about this company. Provided that this enterprise manages to modernize its brand image, they will be able to attract even larger number of new customers. The variety of products is one of Avon’s major strengths and still needs to be fully utilized.
The increasing popularity of word-of-mouth advertising
Avon is arguably the most experienced company that uses direct marketing approach. It strongly relies on the so-called word-of-mouth advertising, which means that a potential customer learns news about the product from someone, who is closely familiar to him/her (Harris. 47). The development of informational technologies has provided modern businesses to advertise their goods and services at various social networks and forums, visited by a large number of people.
Very often the visitors of such websites discuss various, including cosmetics and perfumery. More than that, on the basis of such discussions, people often make their purchasing decisions.
The thing is that consumers usually put more trust in word-of-mouth advertisements, than in TV or radio commercials. This is why Avon should advertise their cosmetics and perfumery at such forums and networks. This will allow them to attract new customer and more importantly, spread the news about their products in the quickest possible way.
Changing demands of the consumers
Women throughout the world continue to set higher standards for quality of cosmetics and perfumery. Their requirements for products as well as their preferences constantly evolve, and this requires companies to bring changes into the manufacturing process as quickly as possible.
More than that, in many cases it is necessary to disrupt manufacturing processes in order to better suit the demands of the consumers. As we have said before, Avon has a very short selling cycle, they bring new items to the market almost each month (Cohen & Rossel, 92), and this can become their core advantage over other their rivals.
The production of cosmetics and perfumery is one of those industries, where the success or failure depends upon the company’s ability to manufacture new products. Certainly, Avon often incurs heavy expenses due to such disruptions of manufacturing process; however, they manage to better forecast future demand for their products, they will be able to enhance their financial performance and improve their operations.
Conclusion
This analysis shows that Avon’s recent decline in revenues can be explained by the following circumstances: 1) their brand image has become less appealing to the target audience: 2) the company is too dependent on one distribution channel, namely direct marketing; 3) Avon cannot accurately predict the demand for their products. Nonetheless, this organization can still retain competitive advantage over other due to the fact they offer a wide variety of products and can adjust themselves to the changing demands of the customers.
Works Cited
Cohen. Shoshanah & Roussel J. Strategic supply chain management: the five disciplines for top performance. NY: McGraw-Hill Professional, 2005. Print.
Fred David. Strategic Management: Concepts and Cases. 13th ed. Vol. 306. Upper Saddle River, NJ: Pearson Prentice Hall, 2007. Print.
Haig. Matt. Brand Royalty: How the World’s Top 100 Brands Thrive & Survive. NY: Kogan Page Publishers. 2006. Print.
Harris G. Advertising on The Internet. Atlantic Publishers & Distributors, 2001. Print.
Porter Michael. On Competition. Cambridge: Harvard Business Press. 2008. Print.