Amway’s foray into mainstream advertising is indeed a strategic masterstroke!
I n 1995,
when Amway decided to serve a huge & diverse market such as India, it did it in its own way. Before launching its products, Amway learnt, understood & prepared itself for three long years. However, the core strategies remained the same as for the other markets. No doubt, it succeeded by doing so. From a miniscule Rs.91 crore company in 1998, Amway India Enterprises went on to become a company worth Rs.738 crore in just over eight years. It’s 2007 now, and the business environment in India has changed. And thankfully, Amway’s strategy has changed too! A part of the US-based $6.2 billion, Amway Corporation, which believes in the word-of-mouth advertising to promote its range of products, has suddenly started looking at television to showcase its presence.A young professional wishing he had a bit more stamina to catch up with the fast moving world, a woman aspiring to defy her growing age, a little boy wishing to become tall and an exhausted servant in search of something that could ease his work! Well, these are nothing else but some of the scenes that make up its first television commercial through which it advertises products in health, homecare and beauty segments. “We have been advertising through hoardings and in print media in the past, and we have added TV this year to promote ourselves as a company that produces world class products,” William Pinckney, Managing Director, Amway India tells 4Ps B&M.
But then, direct selling firms hardly ever advertise, particularly on TV. Raison d’être, the concept of direct selling is based on eliminating the middlemen & pursuing promotional activities which take up 60-70% of operational costs. So, what’s the reason that Amway has started looking at audio-visual to advertise its presence? Explains Pinckney. “Amway is a direct-selling company and its products will only be sold through its distributors. Amway has had a satisfying growth graph – but we see ourselves as a Rs 3,000-crore plus company in the next few years. To get there, we believe it is necessary for larger audiences to know more about Amway.”
No doubt, the direct-selling industry has grown annually at over 17% in the past 3 years to Rs 3,100 crore. There are new entrants as well – both overseas as well as domestic. And of course, the presence of other established players (like ModiCare Ltd, Oriflame India. Ltd, Avon and Hindustan Lever Network), is enough to keep the fire on in Amway’s belly to strive for a larger market share. Amway plans to double its offices from 120 to 300 in next 3-5 years. The company is also looking to add more products to its portfolio which comprises 85 products. With an estimated growth of 22% in its home delivery model, which is limited to around 3,000 towns and a 17% growth in distributorship per annum, the company hopes to expand its reach to more tier-II towns during 2007. With such aggression, it needs to strengthen its bond with its end consumers, most of whom which happens to be its distributors too.
In addition, the past 12 years have proved to be a learning experience for Amway. It started with a bang by roping in distributors in the metros and big cities. Within years, it faced resistance from the distributors and was forced to move on to the smaller towns. However, the company realised that the ‘real’ consumers for its seemingly-expensive products are in cities like Delhi & Mumbai, where people have huge disposable incomes. The TV commercials are a step to woo a new set of customers – those who had never known Amway in its previous avatar, and have become rich in the recent years. However, while Amway is gung-ho over the growing market, its competitors, on the contrary, have a different view to share. “We don’t believe in direct advertising like TV ads. As a multi-level marketing company we always believed in word of mouth, which can be done by our members. Our core focus is to expand our membership and not just increasing consumer base,” says a source in Avon. But, then as the competition stiffens, others may follow Amway’s strategy...
A closer look at the sector and you get the right perspective. In comparison to other Asian economies, India lags far behind Japan and South Korea in direct selling despite having a larger population. “Even Mexico, which has a similar socio-economic environment and a tenth of India’s population, has an annual turnover of over Rs.15,000 crore. This showcases the potential that India has,” says Rajat Banerji, Head Corporate Communications and Social Responsibility, Amway India.
But, at the same time Amway needs to be careful as there is the fear of “negative publicity” that could hamper its growth. And who else could know better than Amway which already has witnessed it at several occasions in different geographies. But then, “It takes time for a market to understand direct selling simply because it is something new. There is resistance to something that is perceived as radically new. During and immediately after these challenging times, a clearer picture emerges,” the Amway MD tells 4Ps B&M.
Edit bureau: Manish Pandey
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Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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