Amway's Indian Network Marketing Experience
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PICKING UP THE PIECES
Amway soon woke up to the reality that it had to take steps to put its MLM
machinery back to the track. For this, it had to first identify where it had
gone wrong. Amway realized that like most direct marketing networks, it had
hoped to leverage the global promise of the lucrative business opportunity for
its distributors. Though this made sense in the developed consumer markets of
the West, in India, distributors also needed to know the value of the products
they were selling, this aspect was overlooked by the company.
One of the first ‘corrective'measures it took was putting stickers on its
products, which clearly indicated the number of usages very clearly. For
instance, it introduced stickers on the packs of its car-wash solution to
emphasize the number of washes that a consumer could get per bottle. The idea
was to firmly establish the fact of Amway's products being highly concentrated
and with very low per usage cost. This practice was later expanded to other
products as well.
Amway realized that a complicated market such as India needed a focused approach
for each of the product categories. To strengthen its product focus, Amway set
up strategic business units. Thus, though Amway had centralized marketing of all
products worldwide, its Indian arm appointed category managers for individual
product categories.
Amway also decided to focus on the market in the smaller towns. Quick expansion
of the distribution network to smaller towns was identified as a major tool to
offset the impact of attrition. The gameplan was to reach consumer homes all
over directly by making the current distribution system more effective and
decentralized. In early 1999, Amway realized that servicing distributors in 160
cities through its 13 locations was curbing growth due to unavailability of
critical infrastructure like networked banks, toll-free phones and multi-service
courier companies. The cost of making long-distance calls, the courier
companies'refusal to accept cash and the time taken to deliver products were
the three major hurdles that Amway faced. The typical direct selling system
comprised a central warehouse located close to the manufacturing locations,
which sent the products to regional hubs like the metros and then on to the
branch offices. As opposed to the traditional FMCG delivery setup, where the
distributors or retailers carried inventory, here it was taken care of by the
company warehouses and their region-specific distribution centers. Long distance
calls and courier companies took care of distribution in cities where the
company had no presence. However, with these facilities not being upto the mark,
Amway decided that it had to effectively handle these issues and rapidly expand
its offices in order to capture the growing direct selling clientele in the
country.
The company also decided to give incentives to cost and freight agents (C&FAs)
who could deliver parcels in the same city within 48 hours outside, in about 72
hours.
Amway then planned to tap unemployed youth in smaller towns by subsidizing the
entry fee for the starters'sales kit. Amway also offered to finance the sales
kits through interest-free loans. It even gave free kits to visually impaired
youth in Rajasthan. But media reports were skeptical about Amway's strategy to
use localized strategies for its global products. This ‘gamble'as Amway's
biggest test case the world over, they remarked.
In a bid 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 ‘Indianisation'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 specially 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 Gh ar 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. Amway also utilized the Internet and electronic kiosks
to hook up with its distributors and give them information.
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