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MINOR PROJECT REPORT

ON

RELATIONSHIP MARKETING WITH FOCUS ON AMWAY

Submitted in partial fulfillment of the requirements

for the award of the degree of

Bachelor of Business Administration (BBA)

MAHARAJA SURAJMAL INSTITUTE, JANAKPURI

AFFLIATED TO:

GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY, NEW DELHI

SUBMITTED TO: DR.PARAMVEER SINGH SUBMITTED BY: ISHAN GULATI

DEPARTMENT OF BUSINESS ADMINISTRATION ROLL NO.01514901713

BBA(G) 3RD SEMESTER

MORNING SHIFT

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CERTIFICATEI, Mr./Ms. ISHAN GULATI , Roll No. 01514901713 certify that the Minor

Project Dissertation (BBA-209) entitled “RELATIONSHIP MARKETING

WITH FOCUS ON AMWAY” is done by me and it is an authentic work

carried out by me. The matter embodied in this project work has not been

submitted earlier for the award of any degree or diploma to the best of my

knowledge and belief.

Signature of the Student

Date:

Certified that the Minor Project Report/Dissertation (BBA-209) entitled

“RELATIONSHIP MAREKETING WTH FOCUS ON AMWAY” done by

Mr/Ms. ISHAN GULATI , Roll No. 01514901713, is completed under my guidance.

Signature of the Guide

Date

Name of the Guide:

Designation:

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ACKNOWLEDGEMENT

Project work is never the accomplishment of an individual rather it is an amalgamation of the efforts, ideas and co-operation of a number of entities.

I would like to thank GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY, NEW DELHI for giving me an opportunity to work on a project as valuable as this.

The completion of the project study that follows, seemed to be a distant goal had it not been for the contribution of Dr. PARAMVEER SINGH for allowing me to work on a very intrinsic part on RELATIONSHIP MARKETING WTH FOCUS ON AMWAY. I thank him for the ideas and basic concepts he delivered and shared with me, as they helped me a lot in accomplishing this project of mine.

(ISHAN GULATI)

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TABLE OF CONTENTSChapter Number

Particulars Page Number

1. INTRODUCTION 1.1 Nature 1.2 Objectives Of Study

1.3 Data Collection Methodology

6 6 7 8

2. RELATIONSHIP MARKETING 2.1 Overview 2.2 Approaches to RM 2.3 Rise in Relationship Marketing

9 9 13 14

3. VARIOUS ASPECTS OF RELATIONSHIP MARKETING 3.1 Trust and Commitment theory 3.2 Loyalty and RM 3.3 Effects of Environment on RM

18 18 20 22

4. AMWAY PROFILE 4.1 Company History 4.2 Business Model 4.3 Current Scenario 4.4 Amway India

26 26 27 31 32

5. AMWAY’S DECLINE IN INDIA 5.1 Hurdles in RM of Amway 5.2 Market Share Analysis

38 38 42

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6. QUESTIONNAIRE ANALYSIS 6.1 Survey Method 6.2 Limitations of the Project

44 45 54

7. THE FINAL AGENDA 7.1 Conclusions 7.2 Bibliography

55 55 57

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1. INTRODUCTION

1.1 NATURE

Relationship marketing refers to a wide range of ‘relationship type strategies’ that have developed over the past few decades in product as well as service markets and in consumer as well as business to business sectors. The antecedents of RM go to Industrial marketing and Services marketing. RM found ready acceptance in a marketing world where it had become obvious that strategic competitive advantage could no longer be delivered on the basis of product characteristics alone and where corporate profitability was beginning to become associated with satisfying existing customers (John Egan, 2001). Relationship marketing as contrasted to transaction marketing involves relational exchanges that trace to previous agreements. There are four types of buyer-seller relationships – bilateral relationships, seller-maintained relationships, buyer-maintained relationships, discrete exchanges (Dwyer, Schurr and Oh 1987). For a firm, relational exchanges could occur with goods suppliers, services suppliers, business units, employees, functional departments, intermediate customers, ultimate customers, competitors, nonprofit organizations, government (Hunt and Morgan 1994). Though conceptualizing relationship marketing accommodates all types of above mentioned relational exchanges, an adequate definition of relationship marketing for the purpose of this paper will relate to exchanges with intermediate customers and ultimate customers.

1.2 OBJECTIVES OF STUDY

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Amway is a unique company. It is defined by the fundamental philosophy of helping people help themselves. Amway has helped millions of people run their own independent business around the world. Today, Amway continues to grow by offering new products and business opportunities to people from all cultures and walks of life. Whether they are employees, distributors, or citizens in the community, Amway touches their lives for better. India with its rich reservoir of will, talent and enterprise is perhaps the most fertile ground for the Amway Corporation. In short it has made substantial value addition to India‘s social economic life.

The main objective is to carry out an in-depth studyof Relationship Marketing in India with primary focus on Amway. In order to achieve this primary objective, I have focused my research in these main segments:

1. What is Relationship Marketing?

2. Role of Relationship Marketing in Modern India.

3. Understanding the theory of Trust and Commitment & Trust with Loyalty in RM.

4. Analyzing the problems/hurdles in Relationship Marketing with focus on AMWAY.

5. Study of decline in market share of AMWAY.

1.3 METHODOLOGY FOR DATA COLLECTION

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In today’s world, there are many sources of data collection that help us in bringing out important facts which prove to be relevant in compiling projects of this stature.

The methods I used are briefly explained below:

Primary Data Collection: Direct Interview with people who are associated with the Amway Corporation in India.

Questionnaire filled by a selected group of people.

Secondary Data Collection: The data has also been collected from:

Books

Magazines

Editorials

Internet

Amway Business Planner

Amway Opportunity Brochures etc.

2. RELATIONSHIP MARKETING

2.1 OVERVIEW

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Relationship marketing was first defined as a form of marketing

developed from direct response marketing campaigns which

emphasizes customer retention   and satisfaction , rather than a

dominant focus on sales transactions.

As a practice, relationship marketing differs from other forms of

marketing in that it recognizes the long term value of customer

relationships and extends communication beyond intrusive advertising

and sales promotional messages.

With the growth of the internet and mobile platforms, relationship

marketing has continued to evolve and move forward as technology

opens more collaborative and social communication channels. This

includes tools for managing relationships with customers that go

beyond simple demographic and customer service data. Relationship

marketing extends to include inbound marketing efforts, (a

combination of search optimization and strategic content) PR, social

media and application development.

DEVELOPMENT

Relationship marketing refers to an arrangement where both the buyer and seller

have an interest in providing a more satisfying exchange. This approach tries to

disambiguiously transcend the simple post purchase-exchange process with a

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customer to make more truthful and richer contact by providing a more holistic,

personalised purchase, and uses the experience to create stronger ties.

From a social anthropological perspective we can interpret relationship

marketing theories and practices as commodity exchange that instrumentalise

features of gift exchange. It seems that marketers—consciously or intuitively—

are recognizing the power contained in 'pre-modern' forms of exchange and have

begun to use it. This particular perspective on marketing opens up fertile ground

for future research, where marketing theory and practice can greatly benefit from

in-depth research of the principles governing gift exchange.

According to Liam Alvey, relationship marketing can be applied when there are

competitive product alternatives for customers to choose from; and when there is

an ongoing and periodic desire for the product or service.

Modern consumer marketing originated in the 1960s and 1970s as companies

found it more profitable to sell relatively low-value products to masses of

customers. Over the decades, attempts have been made to broaden the scope of

marketing, relationship marketing being one of these attempts. Arguably,

customer value has been greatly enriched by these contributions.

The practice of relationship marketing has been facilitated by several

generations of customer relationship management software that allow tracking

and analyzing of each customer's preferences, activities, tastes, likes, dislikes,

and complaints.

For example, an automobile manufacturer maintaining a database of when and

how repeat customers buy their products, the options they choose, the way they

finance the purchase etc., is in a powerful position to develop one-to-one

marketing offers and product benefits.

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In web applications, the consumer shopping profile can be built as the person

shops on the website. This information is then used to compute what can be his or

her likely preferences in other categories. These predicted offerings can then be

shown to the customer through cross-sell, email recommendation and other

channels.

Relationship marketing has also migrated back into direct mail, allowing

marketers to take advantage of the technological capabilities of digital, toner-

based printing presses to produce unique, personalized pieces for each recipient

through a technique called "variable data printing". Marketers can personalize

documents by any information contained in their databases, including name,

address, demographics, purchase history, and dozens (or even hundreds) of other

variables. The result is a printed piece that (ideally) reflects the individual needs

and preferences of each recipient, increasing the relevance of the piece and

increasing the response rate.

SCOPE

Relationship marketing has also been strongly influenced by reengineering.

According to (process) reengineering theory, organizations should be structured

according to complete tasks and processes rather than functions. That is, cross-

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functional teams should be responsible for a whole process, from beginning to

end, rather than having the work go from one functional department to another.

Traditional marketing is said to use the functional (or 'silo') department

approach. The legacy of this can still be seen in the traditional four P's of

the marketing mix. Pricing,  product management,  promotion, and placement.

According to Gordon (1999), the marketing mix approach is too limited to

provide a usable framework for assessing and developing customer relationships

in many industries and should be replaced by the relationship marketing

alternative model where the focus is on customers, relationships and interaction

over time, rather than markets and products.

In contrast, relationship marketing is cross-functional marketing. It is organized

around processes that involve all aspects of the organization. In fact, some

commentators prefer to call relationship marketing "relationship management"

in recognition of the fact that it involves much more than that which is normally

included in marketing.

Martin Christopher, Adrian Payne, and David Ballantyne  at the Cranfield

School of Management claim that relationship marketing has the potential to

forge a new synthesis between quality management, customer service

management, and marketing.

2.2 APPROACHES TO RELATIONSHIP MARKETING

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SATISFACTION: Relationship marketing relies upon the communication and acquisition of consumer requirements solely from existing customers in a mutually beneficial exchange usually involving permission for contact by the customer through an "opt-in" system. With particular relevance to customer satisfaction the relative price and quality of goods and services produced or sold through a company alongside customer service generally determine the amount of sales relative to that of competing companies. Although groups targeted through relationship marketing may be large, accuracy of communication and overall relevancy to the customer remains higher than that of direct marketing, but has less potential for generating new leads than direct marketing and is limited to Viral marketing for the acquisition of further customers.

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RETENTION: A key principle of relationship marketing is the retention of customers through varying means and practices to ensure repeated trade from preexisting customers by satisfying requirements above those of competing companies through a mutually beneficial relationship. This technique is now used as a means of counterbalancing new customers and opportunities with current and existing customers as a means of maximizing profit and counteracting the "leaky bucket theory of business" in which new customers gained in older direct marketing oriented businesses were at the expense of or coincided with the loss of older customers.

2.3 RISE IN RELATIONSHIP MARKETING

Relationship marketing refers to an

arrangement where both the buyer and

seller have an interest in providing a

more satisfying exchange. This approach

tries to disambiguiously transcend the

simple post purchase-exchange process

with a customer to make more truthful

and richer contact by providing a more

holistic, personalised purchase, and uses

the experience to create stronger ties.

From a social anthropological perspective we can interpret

relationship marketing theories and practices as commodity

exchange that instrumentalise features of gift exchange. It seems that

marketers—consciously or intuitively—are recognizing the power

contained in 'pre-modern' forms of exchange and have begun to use it.

This particular perspective on marketing opens up fertile ground for

future research, where marketing theory and practice can greatly

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benefit from in-depth research of the principles governing gift

exchange.

Factors that led to rise in Relationship Marketing are briefly explained below:

1.Branding and Demand Generation

50 years ago, the communications world was simple, where marketers found success in a formulaic, predictable brand “push.” Messages went from marketers to their target customers en mass—promoting the brand through magazines, television, radio and outdoor channels; resulting in 1:N marketing.

Back then, marketing success was dependent upon the Four P’s: Product, Price, Place and Promotion. By balancing the Four P’s, marketers would theoretically move a prospect through a traditional response flow of Awareness, Interest, Desire and Action. Their tools included print collateral, print and broadcast advertising, direct mail, telemarketing, news releases and media pitches.

Marketers were marketing the known to the unknown. They knew exactly what messages they were placing on which billboards or into which magazines. And they also knew the size of the audience they might reach—after all, they bought advertising space using cost-per impression measurements. But what they didn’t know is who saw their

ads… or what those people did afterwards.

2. Segmentation and Personalization

There is a view that in consumer markets, loyalty and ongoing relationships are illusory, and recently launched brands have been observed to have as much loyalty as longer established ones.

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With the arrival of digital print technology and later, email, marketers were able to define and segment their audience and therefore, narrow the focus of their programs based on segmentation rules. They were then able to send personalized materials directly individuals:

“Dear Mrs. Smith, you may have already won $25,000 in a Reader’s Digest Sweepstakes.”

Permission-based marketing bloomed in the mid-1990’s, largely due to mistrust of marketers and their personalized messaging. In fact, during that time, a McKinsey study found that only five percent of consumers trusted what they saw in advertising. As a result, permission-based or “opt-in” marketers worked from the premise that consumers were much more willing to trust marketers than surveys or studies indicated. They believed that customers would be willing to provide personal information as long as they were approached respectfully and their information was treated with trust and security.

3. Building Conversations and Communities

In today’s marketplace, control of your messages has shifted to consumers. Anyone with an Internet connection can find nearly anything they want and easily compare offerings.

This new marketing era is built around the online conversations of millions of people. They’re connecting, communicating, consuming and sharing information. In other words, marketers are dealing with crowds talking to crowds about their products and services.

On one hand, marketers (and their sales counterparts) now have access to a huge pool of potential customers. On the other hand, they’ve lost control of their messages. Today buyers and sellers, friends, fans and flamers are using cheap, ubiquitous technology such

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as blogs and social networking tools to connect, create, share and communicate with each other—regardless of the time and place.

Messages, positioning and brands are suddenly in the hands of millions of people and largely beyond the marketer’s control.

4. Creating Relationships and Building Trust

In a world where people are bombarded with more than 3000 messages every day, where more than 80% of people trust word-of-mouth (WOM) more than any other resource, and with brands in the hands of consumers; marketers must approach customer engagement and acquisition in a whole new way.

No longer can they depend on simply turning data into information or a “rear-view mirror” approach to segmenting and positioning in order to engage with consumers. Today’s marketer must utilize technology and their own insights in order to engage customers: to Reveal their most valuable visitors, Reward their actions, Respect their time and Retain their interest in products and services in order to build brand trust.

3. VARIOUS ASPECTS OF RELATIONSHIP MARKETING

3.1 TRUST AND COMMITMENT THEORY

The commitment-trust theory of relationship marketing says that two fundamental factors, trust and commitment, must exist for a relationship to be successful. Relationship marketing

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involves forming bonds with customers by meeting their needs and honoring commitments. Rather than chasing short-term profits, businesses following the principles of relationship marketing forge long-lasting bonds with their customers. As a result, customers trust these businesses, and the mutual loyalty helps both parties fulfill their needs.

TRUSTTrust is the confidence both parties in the relationship have that the other party won’t do something harmful or risky, according to the book “Relationship Marketing and Customer Relationship Management,” by Annekie Brink and Adele Berndt. Businesses develop trust by standing behind their promises.

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COMMITMENTCommitment involves a long-term desire to maintain a valued partnership, according to Brink and Berndt. That desire causes the business to continually invest in developing and maintaining relationships with its customers. For example, a business might follow up after a purchase to ensure a customer was satisfied with her experience. If not, the business might refund the customer or offer a discount on her next purchase. Further, the business could incorporate the feedback to ensure that other customers don’t have the same bad experience. In other words, through a series of relationship-building activities, the business shows its commitment to the customer.

EFFECTThe results of a relationship based on commitment and trust are cooperative behaviors that allow both parties to fulfill their needs. Customers not only get the product or service they’re paying for, but they also feel valued. Your business receives customer loyalty in return, which is valuable, because you won’t have to waste resources acquiring new customers. In other words, investing money in excellent customer service actually can save you money, because you won’t have to invest in, for example, numerous marketing campaigns to obtain new customers.

CONSIDERATIONSFew businesses have the resources to develop long-term relationships with every customer. That’s why it’s important to identify the customers who are most valuable to your business

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and focus your efforts on them. Identifying and developing relationships with the right customers allows you to devote your resources to the customers who mean the most to your business’s overall strategy, according to Brink and Berndt.

3.2 LOYALITY AND RELATIONSHIP MARKETING

In the business world, relationship marketing is very power full tool to gain and keep the customers. The concept of relationship marketing (RM) is widely understood, both academically and professionally. Main goals of relationship marketing are enhancing good relationship between customer and organization and convert indifferent customers into loyal ones. It involves a process of attracting, maintaining and enhancing relationships with customers and stakeholders (and, when necessary, terminating them) at a profit, so that the objectives of the parties involved are achieved through mutual exchange and the fulfillment of promises.

Customer loyalty can be defined as a highly deep commitment to keep on purchasing a product or service in the future regardless of the fact that there are situational factors and marketing efforts, which have been potential to create switching behavior. In the banking sector, it is the main job of manager and marketers to create and develop customer loyalty if they want to maintain their company and increase its profitability.

Loyalty is a deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite there are situational influence and marketing efforts having the potential to cause switching behavior (Oliver, 1999). Kotler defined the term loyalty as a lasting commitment to family, friends or country and believes that it initially entered to the marketing literature by emphasizing on brand loyalty.

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One of the basic assumptions in relationship marketing is that long-term loyal customers are profitable.

Customer relationship profitability is achieved through a chain that starts with perceived value that creates customer satisfaction that, in turn, strengthens the relationships so that it lasts longer and thus becomes more profitable. It is assumed that it is cheaper to keep an existing customer than to acquire a new one.

3.3 EFFECTS OF ENVIRONMENT ON RELATIONSHIP MARKETING

A retrospective analysis is undertaken to try and understand the reasons that might explain the rise of relationship marketing during the 1990s. Following this, current and projected future environmental trends are examined and an assessment made of their likely impact on the future development of relationship marketing.

TECHNOLOGICAL ENVIRONMENT

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Many authors have attributed the development of relationship marketing to the ease with which technology can now allow large organizations to communicate with thousands, or even millions of individual consumers of their products. It has been noted that computers have allowed corporations to recreate the personal relationships that SMEs had previously enjoyed.

IT developments during the 1980s and 1990s effectively allowed companies to catch up with the pattern of relationships that had slipped away during the period of industrialization. 

Although information technology has had the potential to add to a company's relationship advantage, this is dependent upon two principal factors: whether the company needs large volumes of information about its customers; and whether a relationship based program will provide information that the company did not previously have. It is also crucial that marketing managers have the skills with which to handle large volumes of customer information. It has been noted that IT skills among senior marketing managers remain weak and many prefer to rely on instinct rather than data which is available from data warehouses.

SOCIAL ENVIRONMENT

It might seem interesting that individuals' relationships with commercial sellers have become more significant while their other relationships would appear to be in decline. During recent years, a number of commentators have noted the weakening of relationships which individuals in western cultures have with a number of institutions, especially the church and family. In the UK, regular church attendance has declined to below 5% while families have become more fragmented, demonstrated in the extreme case by a rising

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proportion of single person households, and by the “cellular” family in which each member functions with much greater autonomy.

How does relationship marketing fit this observed phenomenon?

The need for greater social responsibility has encouraged the development of business-consumer relationships in some sectors. Legislation and voluntary codes of conduct have recognized that it is unethical to sell many types of services without the seller first entering into some form of relationship with the seller to establish their needs. The absence of such relationships and an over-emphasis on transactional exchanges has led to many financial services providers being fined by regulatory bodies for failing to establish the true needs of their clients.

ECONOMIC ENVIRONMENT

Two important economic arguments have been advanced to explain the

development of relationship marketing in the 1980s and 1990s. Firstly,

there is the familiar argument that it is more cost effective to retain

existing customers than to continually recruit new customers to replace

lapsed one. This argument was of course nothing new, but information

technology has allowed for more precise tracking of customers and the

development of personalized retention strategies.

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Secondly, the quality of buyer-seller relationships emerged as a point

of sustainable competitive advantage. A previous pre-occupation with

tangible design properties in the 1960s was followed by a pre-

occupation with augmented services (e.g. financing, warranty and

maintenance services) but this itself was replaced in the 1990s by

competition on the basis of superior ongoing relationships.

Relationship marketing also arose at a time when the choice available

to consumers within most product categories increased markedly.

Buyer behavior models are essentially concerned with understanding

how buyers simplify their choice processes in order to reduce the

psychological cost of a decision and it has been noted that buyers'

motivation to enter into a relationship with a seller  is essentially based

on a desire to reduce their choice set and simplify their choice process.

POLITICAL/LEGAL ENVIRONMENT

The political environment of many western economies during the 1990s

emphasized a desire to dismember state monopolies and to develop

competitive markets. The outsourcing of many functions traditionally

carried out by government organizations (and by large private sector

firms) created the need for close co-operation between autonomous

units in place of previous unified command and control structures. In

Williamson's terminology, outsourcing of peripheral functions through

networks of supplier's leads to a transition from hierarchies to markets,

with hybrid organizations being the end result.

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Simultaneously, governments of many western countries have sought to

outsource many services provided to consumers (e.g. many health and

pension services) and encouraged the development of ongoing

relationships between the two parties. Sometimes this has been

enshrined in legislation, as in the case of private pension provisions

where the existence of some form of relationship is a prerequisite to

advice being given by a pension provider.

4. AMWAY PROFILE

4.1 COMPANY HISTORY

Amway began in 1959 with two young entrepreneurs in the United States, Rich DeVos and Jay Van Andel. Their concept for an innovative business opportunity, centered around person-to-person marketing, established itself as a leader among one of today's fastest-growing industries.

Today, more than 3.6 million independent business owners distribute Amway products in more than 80 countries and territories. Amway is part of the Alticor family of companies whose global sales totalled $4.5 billion in its most recent fiscal year.

1950s - A Friendship Forms

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Rich DeVos and Jay Van Andel's friendship actually began with a business proposition, when Rich struck a deal with Jay for a ride to school for 25 cents a week. After high school they entered the military, but they planned to start a business together after separate tours of duty. A friendship formed and became a business relationship that has lasted to this day.

1960s - The Early Years

Amway quickly outgrew its original facilities in the basements of Rich DeVos's and Jay Van Andel's homes. In its first full year of business, Amway's sales were more than half a million dollars.

1970s - The Decade of Growth

As vowed by Jay Van Andel the night of the 1969 disaster, Amway rebuilt the aerosol plant and went on. The ' 70s began with sales of more than $100 million at estimated retail, and kept going strong. After a lengthy investigation, the FTC verified that Amway is a genuine business opportunity and not a "pyramid."

1980s - The Billion-Dollar Decade

The 80s will be remembered for the first Billion Dollar Year at estimated retail in 1980. Building expansion at Amway World Headquarters continued at breakneck speed as Amway scrambled to keep pace with demand, opening its new cosmetics plant in Ada.

1990s - The Second Generation

As carefully planned by Rich and Jay, the second generation Van Andel and DeVos families took the helm during the ' 90s. Steve Van Andel and Dick DeVos succeeded their fathers as Chairman and President. Distributors witnessed a similar trend, with the second generation of many distributor families taking on important leadership roles.

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2000s - The New Millennium

In 2000, Amway Corporation became a wholly-owned subsidiary of Alticor, Inc. Chairman Steve Van Andel and President Doug DeVos share the Office of the Chief Executive.

4.2 BUSINESS MODEL

Direct Selling is a remarkable business model, which brings the market to the customer and offers a unique business opportunity to anyone eager to adopt the spirit of enterprise. Direct Selling can best be described as the selling of products and services directly to consumers in a face-to-face manner, through demonstration of usage, by an independent direct salesperson. Direct Selling benefits consumer because it sells high quality products at the consumer's convenience, often at his/her home or workplace. Customers value the advantages of convenience, personalized attention, demonstration of usage, and a wide choice of products backed by Customer Satisfaction Guarantee.

One of the most tangible impacts of Direct Selling in its new advent has been the fact that it has touched the average man and women in a manner never experienced before. Amway India Corporation is the country's leading Direct Selling Company. It is perhaps the best example of the contribution Direct Selling is making to India. In a little over two years of commercial launch Amway India has emerged as the country's largest Direct Selling Company. It closed its financial year with a turnover close to Rs. 250 crores (the Amway Financial year runs from Sept. to Aug.). It will reach its target of Rs. 1000 crore turnover much before its declared target of the year 2004. Because it

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focuses upon direct selling, Amway is different from more traditional distribution channels. Its Independent Business Owners own their own business, with the flexibility to deal directly with their own clients and to build up personal relationships. These Independent Business Owners also have the ability to deliver Amway's products to their customers' homes. Independent Business Owners sell to people they know or meet. The personal contact and care they provide is an important element in direct selling.

They are also self-employed and can introduce others to the business to form their own sales group of Independent business owners.

The channel of distribution describes the stages of ownership that take place as a product moves from a manufacturer to a consumer.

The increasing use of the Internet by consumers has created a real potential for developing different types of business models and for new approaches to reaching users directly and quickly in their homes. This

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report examines in detail the marketing strategy of the leading global direct marketing major, Amway in India. In the initial stages of the report I have focused on Amway‘s current position in the Indian market. As the research progresses I have tried to analyze the companies marketing objective for India and how they set out to achieve them. This report also provides a brief introduction to the concept of multilevel marketing and tries to make the reader understand the difference between multilevel marketing and the traditional distribution setup in the FMCG sector, so as to give an idea as to how the system is being utilized by companies like Amway.

MULTI-LEVEL MARKETING

Multilevel marketing allows sellers to build a business through their own sales efforts and by inviting others to become sellers. Remuneration is based on a seller's personal sales AND on the combined sales of those people they have sponsored, trained and motivated. The story of Amway is intended to drive home the point of a company being alert enough to modify its globally accepted practices to suit the local market‘s needs. This report has been made keeping in mind the benefits which can be derived from my research.

BENEFITS TO CUSTOMERS

This report will be beneficial for consumers who prefer the marketing goods or services directly to them: at their own convenience often in his/her home either on a one-to-one basis, or in the context of a sales party. Through this the customers will get a better idea about the company‘s product offerings and value the advantages of: convenience, personalized attention, and a good selection of quality products available at their door steps.

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BENEFITS TO SELLERS

Many people have chosen direct selling because they want to build their own business, but do not have: considerable funds required to buy a franchise or start a new company. Among the top five reasons people sell direct because they like and believe in the product, like being their own 7 boss, and working their own hours, like the supplemental family income or making extra money for themselves. It can be beneficial from the sellers point of view as it may give them the idea of exactly how they can go about creating their own business and benefit from the Amway‘s unique business opportunity.

BENEFITS TO COMPANIES

In this report I have deeply analyzed the marketing strategy for Amway through personal interviews by many IBOs and Amway customers who have helped in adding valuable data to this project which can be useful for the company. The suggested recommendations can be considered by the corporation for further expansion and increasing market share.

4.3 THE CURRENT SCENARIO

Amway is the largest multi-level marketing (MLM) organization in the world. It is a multi-billion dollar company based on the sale of a variety 10 of products. Amway‘s philosophy is defined by commitments, trusts, enduring relationships, and the ideal of perfection above profit. From a humble beginning in 1959, using an old gas station, Amway the brainchild of Co founders Rich DeVos and Jay Van Andel, is now one of the largest and most successful direct sales companies. Amway has also worked to provide better opportunities for people through active support of various community projects.

Corporate Profile:

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Between then and now, Amway corporation has grown into a US Multibillion dollar company managed by 12,000 employees. It operates across 80 countries and territories in Asia, Africa, Europe and the Americas with a turnover of US $5.7 billion. Amway is the wholly owned subsidiary of Alticor Inc. It has a sales force of over 3.3 million distributors.

The company Manufactures 450 products of which 350 are patented. The company is also a long standing, active member of the World

Federation of Direct Selling Association (WFDSA).

Over 500 R & D scientists and professionals ensure the exceptional quality of its products across five product lines:

Home Care

Personal care

Home Tech

Cosmetics

Nutrition and Wellness

2.4 AMWAY INDIA

Amway India is a wholly owned subsidiary of Amway Corporation, Ada, Michigan, USA. Amway Corporation is a 42 year old company, and is among the largest Direct Selling companies in the world. It was established in 1995. It commenced commercial operations in May 5th,1998. In the brief period since launch, it has emerged as the Country‘s largest Direct Selling Company.

Facts:

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Over 200,000 entrepreneurs have adopted the Amway business opportunity; and are actively involved in building their independent Amway business.

Amway has invested US $ 35 million in India. Of this, US $6 Million is in the form of Direct Foreign Investment. (IDSA)

US $4 million has been spent in transferring state-of-the-art technology. The company Amway India was launched with 5 offices (New Delhi, Bangalore, Mumbai, Chennai, Kolkata) which serviced 150 locations. At present, in addition to 32 offices in all metros and major cities, Amway India services over 379 cities and towns in the country with a turnover of Rs 100 cr. and Rs. 250 cr. in the first and second years of operation respectively & plans to reach Rs. 1000 turnover by the year 2013.

In India, Amway Corporation comprises of 72% women, 24% Couples, and 4% men. (Source IDSA) Amway India is the founder member of the Indian Direct Selling Association (IDSA).

Direct Selling requires expertise and special skills. Using the benefit of Amway's leadership status in the global Direct Selling industry,

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Amway India has in the past 12 months, conducted over 8000 training sessions with an attendance of approximately 350,000 Distributors.

Amway India was honored by the AICB Millennium Outstanding Service Award, 2000 by the All India Confederation of the Blind in recognition of its sterling contribution to the cause of India's blind. The Karnataka Welfare Association awarded Amway India with the `Rising Business Star of the Millennium' during a ceremony held at Bangalore during October, 2000.

In the short period since its advent in the country, Amway has made several contributions to India‘s socio economic milieu. It as either introduced unprecedented benefits, or upgraded existing facilities to international standards.

CORPORATE RESPONSIBILITY

Through its presence in India, Amway continues to enhance human resource development using its experience in entrepreneurial opportunity and self employment. Amway has conducted several seminars on "Entrepreneurial Development and Direct Selling" in concert with the Confederation of Indian Industries (CII) and the All India Management Association (AIMA) to educate popular opinion on the benefits of organized direct selling.

HOW IT WORKS

Amway is different from the more traditional distribution channels in that the business has developed through direct selling. In Amway, one is recruited as an "independent" distributor of Amway products by buying a couple of hundred dollars worth of the products from the one who recruits you, known as your "up-line." Every distributor in turn tries to recruit more distributors. Income is generated by sales of

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products by the distributor plus "bonuses" from sales of his or her recruits and their recruit-descendents.

How do you begin? First, you are sponsored by another Amway distributor and you obtain the Amway Business Kit. The Business Kit contains basic AMWAY products and literature for your use and for sharing with others. You begin by developing both customers and distributors. Customers or clients are the people who buy the AMWAY products from you but who aren't Amway distributors. One of your best sources for building a customer base is a group of people you already know.

These acquaintances try AMWAY products and become your customers as they use and re-order various AMWAY items. However, I have found that people everywhere need high-quality, Satisfaction Guaranteed products which they believe Amway is able to provide.

Independent Business Owners or Distributors are people who have evaluated the Amway business opportunity and elected to join the 14 business. IBOs deal directly with Clients, build up personal relationships and deliver direct to Clients' homes. They are highly motivated, selling to people they know or meet. The personal contact and care that they provide is an important element in direct selling. IBOs are self-employed and can introduce others to the business, and so form their own sales network. The most successful Amway businesses enjoy a balance of merchandising AMWAY products and sponsoring distributors. Growth in your business comes from sharing the Amway business opportunity with others and helping them decide if it's right for them. This is called sponsoring. Amway distributors who sponsor others generally have higher average sales volumes than those who don't sponsor.

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Your "Group" is the team of distributors you've sponsored. Many you've sponsored personally, but others were sponsored by those you personally sponsored. You train and motivate your group and, as a result, you earn extra income when they earn income. As you continue to grow your business and they continue to grow theirs, you both can benefit.

Like any other business, your Amway distributorship needs frequent input and activity to grow. However, whatever your goals are, you control how quickly or how slowly you build your business. After all, it's your independent Amway business.

Over time, a distributorship can grow considerably. The more distributors in your group who become successful in the Amway business, the stronger your business will become, and the higher the pin levels you can qualify for. We call them "pin levels" because you earn incentive pins at the various achievement levels of the business. Each pin level features a set of incentives and rewards for being successful.

Income Incentives and more

The Amway Opportunity offers distributors many benefits. Some are financial, others are intangibles, such as peer recognition, pride in achievement, the joy of helping others, working with family, and the esteem of owning your own business.

Special leadership programme

As you qualify at various levels of achievement, you may be eligible to attend various Amway leadership programs:

Annual Business Meetings

In countries around the world, company - paid invitations are extended to Amway leaders to meet in a business-building atmosphere.

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Variety of Special Programs

When your business qualifies at a specific distributor level, a special invitation occurs. Imagine your special day at an Amway facility, your own success story featured in our distributor magazine, and your name and picture added to the Distributor Hall of Fame in Amway's World

Headquarters.

TARGET AUDIENCE

Amway‘s products appeal to a large number of buyers all over India. It is targeting people who believe in using high quality products which are conveniently available to them.

Amway business opportunity is attracting the middle income group to earn extra income. Amway‘s target audience include a lot of professionals and young couples who are very ambitious to earn high level of income in a short span of time.

Amway‘s products being good in quality are also very much preferred by the upper class segment who can easily afford the pricing but they don‘t want to get involved with the business opportunity. They are mostly associated with Amway as their customer.

Target group

Men – Professionals and small business owners

Age - 23 - 50 years

Income Status – Working class, Middle income, upper middle income

Women- Women –professional and housewivesAge- 25-50 years

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5.AMWAY’S DECLINE IN INDIA

For many years, AMWAY has implemented Relationship Marketing (RM) to increase revenue. Best practices and innovation in RM strategies has helped them gain and keep customers - and, therefore, profit. But simply using RM doesn't guarantee business benefits. Using RM successfully involves planning, identifying clear business objectives and, most importantly, focusing on customers.

Relationship Marketing is, first and foremost, a strategy that deals with the management of a company's actions and its interactions with clients, customers and prospects.

5 . 1 HURDLES IN RELATIONSHIP MARKETING OF AMWAY

1. INAPPROPRIATE STRATEGY

While it is argued that the approach to Relationship Marketing is of win-win, it may not always be appropriate to pursue this problem solving approach. Parties may feel they can reach a more equitable solution but the vulnerabilities associated with the approach might be harmful.

AMWAY has installed Relationship Marketing software without establishing a sound business strategy. They have all the tools and software in place, and assume that's all there is to it. A successful RM

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initiative, however, focuses more on unified business objectives; RM technology only acts as a support.

2. NEGLECTING USER NEEDS When Amway deployed a software or system, everybody on board didn’t know how to use it. The problem with RM is that some people ignore it, yet they still do their jobs well.

There are three situations that lead to poor RM adoption among company employees:

o Employees do not know how to use the systemo They don't see the value in using the new CRM systemo Employees are unaware of the benefits of using the CRM

software

Customers can become attached to specific salespeople. While you run the risk of losing the salesperson and having to rebuild the relationship with the customer, this kind of neglection can decrease sales. To avoid this kind of situation, you must train your salespeople in the techniques of building customer relationships. These techniques include: making follow-up calls without trying to sell anything, calling a customer to offer a solution to a problem they are having, asking questions about customer needs and maintaining contact through social media.

3. NOT HAVING CLEAR MEASURES AND SUCCESS INDICATORSAmway hasn’t implemented specific goals and found ways to measure them as part of their business RM strategy. With this, RM initiatives are set up for failure because employees do not know

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where their company stands and the types of steps to move it forward. 

Relationship marketing of Amway focused on interacting with customers in long term, rather than simply trying to make a quick sale. If you focus on learning customers' personal tastes and understanding, their individual issues, you can eventually get to the point where you make actual sales, because you will know how your products or services specifically solve their problems. This strategy affects multiple aspects of RM in the way that it leads to delays and measurement of profits in short term isn’t possible. Also, Amway doesn’t get clear indicators of product development for the future.

4. SCAMS INVOLVING TOP MANAGEMENT KILL TRUST

Companies like Amway call themselves Direct Selling FMCG companies. In other words they sell directly to the customer rather than using the conventional distribution chain. The company sells its products through members who are called Amway Business Owners. The key to success for such a member is not only selling the product but to recruit other people (down-line). Business owners are then encouraged to increase the length of the chain by adding more members down-line. 

The Business Owner makes money from his own sales as well as from those recruited by him or his down-line, just as his up-line will make money from him. The Business Owner normally does not sell the product but sells the scheme. In other words he camouflages the financial scheme behind the product. And when the Business Owners' are not able to sell their products, they buy it themselves to achieve a level of sales which will give them higher incentives.

A division bench of the high court held that Amway's scheme is an illegal money circulation scheme and fell within the "mischief of definition of money circulation scheme." Amway tried to file a special leave petition in the Supreme Court which was dismissed. Andhra Pradesh's CID had in fact cautioned public against joining Amway. 

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It is not only in India that Amway and companies doing similar kind of businesses are targeted by law enforcement authorities. Even in the United States, the country of origin for Amway, there are issues. 

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5 . 2 MARKET SHARE ANALYSIS OF AMWAY IN INDIA

Amway India, which is facing challenges in the Indian market due to regulatory issues, has witnessed a reduced 4.3% growth in

2013-14 compared to 12.2% in 201213 fiscal, says a report. Gross sales stood at Rs 7,472.2 crore in 2013-14 while

the company had posted a growth of 12.2% in 2012-13 with sales amounting to Rs 7,164.1 crore, said a report issued by industry

chamber PHD in association with the Indian Direct Selling Industry (IDSA).

Although the growth rate in India is on a decline in the past three fiscal years, on a global basis Amway has grown over 8% in 2013, it added. The North region accounted for 29% of sales the highest level with an increase of 12.2%, followed by South region with 25%. However, the South region saw a drop in sales."Southern region, which was earlier our main base, is not doing well due to lack of clarity on the policy for direct selling. In state like Kerala, direct selling has stopped," said IDSA Secretary General Chavi Hemanth.

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Products related to healthcare/wellness contributed 44%, followed by cosmetic and personal beauty with 33% and 12% respectively, the report added.

The report further said Bengaluru was the most attractive market for the direct sellers followed by Delhi, Ludhiana, Mumbai and Jaipur. According to the IDSA Chairman, untoward incidents "have severely impacted" the sentiment of industry players.  Following Prime Minister Modi's invitation to 'Make in India', Amway has targeted reduction of its export to 10% by fiscal 2019-20 from existing 30% levels.Yet, Amway India is one of the companies that continues to face strong regulatory challenges. 

 

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6. QUESTIONNAIRE ANALYSIS

My project involves the study of Amway‘s Relationship Marketing strategy in India.

I had planned my work on the project along the following lines:

Data Collection

Data Analysis

Data Compilation

The preparation and presentation of the report:

My first step in data collection involved meeting my guide for having a

general understanding of what my product should be like and then

some specific understanding of the company.

After deciding upon the broad frame work of my project, I proceeded

on a search for secondary sources of data. After analyzing the data I

prepared, I proceeded towards the primary sources in which direct,

phone and online interview were conducted so as to substantiate my

research with more facts.

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6.1 SURVEY - QUESTIONNAIRE METHOD

This has been conducted by asking the people to fill in the questionnaire and express their views about the company.

Sample Design: Questionnaire method

Sample size: 100 respondents

Sample Unit: IBOs, Customers and others

Segment Respondents

Women 55

Men 36

*Others 9

Total 100

*Others include elderly people and children.

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Q1. Are you an:

Independent Business Owner

Customer of Amway products

None of the above

60%  55%                    

                     

50%

                         

                         

                         

40%                         

                         

30%       

20%

  25%    

             

20%

                   

                   

                         

                         

10%                         

                         

0%                         

 

Independent Business

 

Customer of Amway 

None of the above.       

     

Owner   

products         

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Q2. What is your income level: (per Month)Below Rs.10, 000Rs 10,000- Rs 20,000Rs 20,000- Rs 30,000Rs 30,000- Rs 40,000Rs 40,000- Rs 50,000Rs 50,000 and above.

35%30%

30%25%

25%

20% 18%

15%10%

12%

10%5%

5%

0%

Below 10,000- 20,000- 30,000- 40,000- 50,000 andRs.10, 000 20,000 30,000 40,000 50,000 above

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Q.3 How do you feel are the Amway products priced: Too ExpensiveExpensiveEconomical Cheap Poor

A)

40%35%

35%30%

30%

25%20%

20%

15%

10% 7%

5% 3%

0%

Too Expensive Economical Cheap PoorExpensive

B) Are the prices right for you?YESNO

49%Yes

51% No

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Q.4 How do you feel about the Relationship Marketing technique of Amway :ExcellentGoodAverageBadPoor

45%40%

40%35%

35%

30%

25%

20%15%

15%

10%

5%0% 0%

0%

Excellent Good Average Bad Poor

Q.5 Are the required products easily available for consumption and further selling?

Yes/No

40%

YES

No

60%

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Q.6 What is it that attracts you more towards Amway?

Customer ServiceIncome Opportunity

50% 50%

Customer Service Income Opportunity

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Q.7 How do you rate the presence of Amway in the market?

Very strongStrongModerateWeakLow

60%50%

50%

40%

30%

20% 15%12% 13% 10%

10%

0%

Very strong Strong Moderate Weak Low

Q.8 Rate the trust level of Amway’s advertisements as a customer and dealer?HighModerateLow

60%50%

50%

40%

30% 25% 25%

20%

10%

0 High Moderate Low

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Q.9 Do you think the decline in market share of products of Amway would affect the loyalty of customers?

YesNoMaybe

70%60%

60%

50%

35%40%

30%

15%20%

10%

0%

Yes No May be

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Q.10 How much trust and commitment as a dealer do you show towards Amway Products?High

Average

Low

Not at All

TRUST AND COMMITMENT

High Average

Low Not at All

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6.2 LIMITATIONS OF THE PROJECT

1.The company or the IBO’s were hesitant to give

time and good information to students, so

information required for the primary research

which is a basic need of this project was not easily

available in required quality and quantity.

2. I have conducted this type of an elaborate and

analytical project for the first time so information

might not be utilized adequately.

3. Time constraint.

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7. THE FINAL AGENDA

7.1 Conclusions

POSITIVE SIDE TO RELATIONSHIP MARKETING OF AMWAY

The only positive side to Amway is the chance to make money. It is

the chance to get oneself involved in a trade as a side business,

especially if one is trying to recover from a failed (or failing

business) or one has lost one's job. To the extent that a few people

will surely make money, the system works.

Amway has also helped solve the problem of unemployment in the

country and given a hope to earn high incomes through their

independent business to millions of people all over India.

It is involved in a lot of community services. Amway feels that it is

their responsibility to serve the community in which they live.

Through Amway Motivational Organizations (AMOs) it has try

reach out to a lot of handicap people and provided them with free

services at any time. It is also involved in helping the blind by

providing them with proper education. Amway is also actively

involved various environmental projects such as planting more

trees etc.

Amway offers a wide range of good quality products which are

easily available to people at their door steps.

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UNDERSIDE OF RELATIONSHIP MARKETING OF AMWAY

While doing this research, I have found that the only way to

succeed in the business is to be able to sign up vast numbers of

people and make them use the products for themselves. The other

way is to run around peddling soap from door to door after having

bought it from Amway at a discount.

This is exactly where the Amway business strategy comes into play.

It makes people hand over their savings to Amway to buy them a

dream.

If all Amway did was to manufacture and sell their products

through door-to-door salespeople there would be no problem. The

choice of purchase is left up to the individual. By asking for

deposits from buyers —in the beginning and again every year as a

renewal fee— it looks like Amway seeks to build a captive

consumer base. Once someone has paid Rs. 4,400 to Amway, he is

naturally disinclined to buy Nivea hand cream instead of Amway

Gly-Honey hand lotion. The element of personal choice is thus

prejudiced.

By involving their "distributors" in a complicated system of down-

the-line commissions they are given the impression that there is a

limitless market for Amway products.

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The truth is that the market share for Amway is as limited as the market

share for any other product. Traditional retail trade is not about to

collapse and because of the expensive price structure; the growth of that

market is restricted to the very wealthy. Calling this "an opportunity to

use world class products" is a bit like calling the purchase of a Mercedes

Benz for Rs. 25 lakhs an "opportunity", when an efficient Maruti 800 for

one-tenth of that price will do nicely.

With all these constraints, telling people of profit mechanisms tied into

several thousand people buying Rs. 1,500 worth of Amway soaps every

month seems laughable in a country where entire families lead their lives

on less money.

7.2 BIBLIOGRAPHY

This project work is based on the information collected from various sources. To name a few, some of them have been listed below for reference:

www.amway.co.inwww.amway.co.ukwww.thehindu.comwww.books.google.comAmway Brochures & PamphletsGuide to Relationship Marketing, a book by William Tyne and Dale MurphyTrust, Commitment and Loyalty in Market Endeavours, a book by Ram Shankar and Vikram SahaiRelationship Marketing- Any Good? ,by Philip Cotler

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