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[ T y p e t h e c o m p a n y a d d r e s s ]

ASSIGNMENT A

NISHA ADHIKARI

Fall

16


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Case Summary

Amway is a global direct selling company and manufacturer that use network

marketing to sell variety of products. Set up in 1959 by DeVos and Van Andel

families of US along with publicly traded sister companies it supported 53 affiliate

operations worldwide. In 1994 the Foreign Investment Promotion Board (FIPB)

provided Amway with permission to invest $15 million in the Indian operations

and to source products from India.

In the late 1990s, the global direct selling giant Amway had to contend with

increasing doubts regarding its survival in India. Most of the products bought by

the distributors were consumed by themselves. Amways products began to be

perceived as being very expensive and meant only for the premium segment. The

sales staffs were themselves unsure about the price value equation of the products

they were selling and hence they could not effectively convince the consumers

either. Amway also had to contend with customers complaining of poor customer

service on the part of the company. But Amway was satisfied as long as the

volume of the products that moved through the sales network was high regardless

customer satisfaction. The company was in fact never involved in direct interaction

with the consumers.

Amway, before entering in the Indian market had done extensive internal and

market research through agencies. Amway did recognize the need for a special

India-specific pricing strategy and eventually there were just few marginal cuts in

the prices but were still 20% higher than those of other competing FMCG

products.

In the beginning Amway had to deal with the negative attitude of many Indians to

direct selling as it was typically seen as unwelcome and an intrusion into ones


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privacy. Amy later realized that like most direct marketing networks, it had hoped

to leverage the global promise of the lucrative business opportunity for its

distributors. Then it started putting stickers on its products that clearly indicated

the number of usages very clearly. Later, Amway appointed category managers for

individual product categories and also decided to focus on the market in smaller

towns. In order to make its products more affordable, Amway introduced value for

money small pack products targeting consumers from lower income levels.

The most significant of Amways Indian initiatives were its efforts to cope with the

Indian standards. Later, the concept of network marketing was being threatened by

the growing popularity if e-commerce and the internet. The belief of Indians to

take time to gradually move towards online shopping but soon the Indian

consumers were into online shopping. Later another company Modicare set itself

up as a promising competitor as its product targeted both upper and middle class

customers unlike Amways upper class only. That along with other appealing

schemes from Modicare set a threat in future of Amway.


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Identify in your opinion the blunders made in Marketing Mix by Amway in

India while launching their products.

Ans

Marketing Mix in short is a combination of elements used to market a product or

service. The elements include Price, Product, Place and Promotion collectively

known as the 4Ps.

The first blunder made by Amway in marketing mix is regarding the product. The

distributors of Amway were not aware of the facts of the product and were not able

to communicate properly with the consumers regarding it. Few of Amways

products were concentrates and the distributors were not able to convey that to the

consumers. Regarding the price value, the distributors were not quite sure about

the price value of the product and were unable to convince the consumer to buy the

product.

Before Amway made its way into the Indian market, they knew that they had to

drop the prices of their products significantly in order to make products more

appealing to the Indian consumers. But regardless of the knowledge about the

Indian market and the Indian consumers, Amway only marginally cut the prices of

their products. Even after the deduction in Amways product prices, it was still

20% higher than that of their competitors. They roped in their Indian distributors

through NRIs living in the USA. That included friends and families of the

particular NRI. Amway even gave them introductory kits that included samples of

the products, sales material, and information on the products. But the kits were

used by the distributors themselves rather than using them to promote it within

their potential consumers. Because of that volumes demanded after did not pick up.


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Amway didnt focus on training their sales representatives and that resulted in a

lack of motivation for the sales group.

Sales personnel used hard selling methods and often forced the products on the

consumers which were not appealing at all. The products were sometimes of

mediocre quality with false premium image and that resulted to total consumer

dissatisfaction. Another reason was the lack of networked banks, toll free phone

lines and online shopping that resulted to lack of good and consistent performance

in the Indian market; Distributor Attrition was another case. Amway was also not

directly involved with the end consumers and had no idea what the Indian

consumers wanted or were looking for. That led to real poor customer service

which eventually led to the initial downfall of Amway in Indian market.

Suggest a Marketing Mix for Amway with specific reference to Product P of

the 4 Ps. You will have to justify your answer with market based facts in

which Amway is operating in India.

Ans

I would suggest the following Marketing Mix for Amway after going through the

case regarding its blunders in Marketing Mix in the Indian market.


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Product

The most annoying problem was regarding the lack of product knowledge to the

distributors affiliated to the Amway. That wouldve been a shamewhen they could

not give proper information to the consumers. So recalling that incident, I would

first give proper information regarding the product, its price values to the

distributors before sending them off for the job. I would only suggest trustworthy

and professional distributors for the product distribution responsibility as the case

complains about the distributor involved in consuming the products themselves.

So, the things of top priority here would be knowledge about the product and its

product values to the distributors and only involving trustworthy distributors who

perform professionally, not cheat.

Price

The case states that the products were expensive to the consumers in the Indian

market although, Amway thought their price value were convincing and appealing

to the consumers. Here, I would suggest a thorough research about the pricing

strategy in the Indian market before entering, rather than making any hypothetical

analysis. Analyzing the local products price value would also provide a lot of help

in understanding the pricing strategy in Indian market because it is always different

as Amway had never before involved itself in Indian market and the American

market scenario would definitely vary from the Indians. Understanding the

purchasing capacity and buying behavior of the Indian consumers, I would set the

product price accordingly taking competitors pricing strategy into consideration.


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Place

Since, Amway is an American company, it hardly knew details about the Indian

market scenario and the consumer behavior; and things were not similar between

the two countries when it came to product marketing with buyers economy and

buying capacity in concern. Thus, I would beforehand suggest a thorough research

on the ongoing market strategy including the marketing mix for future products to

be made available in the Indian market. That would definitely provide a clear

concept and knowledge for building up at the very first strategy for Amway to

begin with the business in Indian market.

Promotion

As the case stated, Amway were not directly involved with the end consumer and

didnt know the opinion of the consumers regarding the product and its customer

service. Lack of proper knowledge and product information among the distributors

were not helping in any promotional activities, instead led to the initial downfall of

Amway. I would suggest turning things around by first training the employees and

any other affiliated to Amway; that includes distributors too. Amway neglected

switching into e-commerce. The mistake made by Amway by involving the NRI, I

wouldve suggested skipped the part because instead of wasting time and energy in

convincing some few number of friends and families, it would be appropriate and

fruitful to invest in training and developing manpower to work under the Indian

market scenario and circumstances good enough to convince and attract the

consumers.


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Clearly explain the market segmentation strategy and your suggestion for

Place of Marketing Mix?

Ans

Talking about the market segmentation of Amway, it started its market

segmentation by first starting with its business in the Indian market. Then later to

make its products more affordable, Amway introduced value-for-money 'chhota

(small) packs' in December 1999. The sachets significantly boosted sales. Sachets

had two advantages - they helped Amway shake-off the 'super-premium-products-

only' tag, and with their lower prices invited consumers from lower income levels

to try the products. This was expected to brand penetration

The most significant of Amway's Indian initiatives were its 'Indianization' efforts.

The company started printing Hindi slogan 'Hamara apna business' (our own

business) on its stationery. The company's first product line, Persona, was created

especially for the Indian consumers. Amway even named its expansion drives as

'Operation Gaadi' and 'Operation Ghar.'

Operation Gaadi was launched in east-Uttar Pradesh where a store was mounted on

a truck and made trips to different regions on different days. The project was later

extended to West Bengal as well. Operation Ghar was primarily designed to

provide better service to the customers as well as to its large family of distributors.

Involving an outlay of Rs 15 crore in its Phase I, Operation Ghar eventually

covered 19 state capitals. Operation Ghar was designed to provide five Es - ease of

ordering, ease of paying, ease of receiving, ease of returning and ease of

information/operations. Later, Amway announced an ambitious expansion of its

distribution infrastructure in Andhra Pradesh, which included setting up a


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warehouse. Once the marketing business in urban areas was strengthened, Amway

planned to turn its attention to untapped rural areas as well.

As Ive already stated in the earlier answer, Amway is a foreign company trying to

establish in Indian market where things are totally different compared to that of

America. Amway was about to face a totally new challenge. The geography,

consumers buying behavior, psychology, perception, social values and norms

everything differs from one another. Starting a business in totally new place would

obviously be challenging, and as it says in Rome do as the Romans do, Amway

should set and prepare itself to deliver the product and services according to the

wants, demands and moreover according to the market scenario since it is no more

their home territory. Therefore in my opinion, had Amway done a proper thorough

research/ study on the Indias market scenario, consumers buying behavior,

purchasing capacity and all, Amway would not have to face an initial breakdown

and period of frustration.

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