Thesis on "Product Decisions Pricing Strategies and Distribution Channels"

Thesis 5 pages (1532 words) Sources: 5 Style: APA

[EXCERPT] . . . .

Product Decisions, Pricing Strategies, And Distribution Channels

"Avon calling China:" Avon's marketing and launch in the Chinese market

The Avon Corporation is one of the oldest purveyors of makeup in the world. The familiarity of the slogan 'Avon calling' and 'Avon lady' indicates its iconic status as an American brand. Rather than retailing through drug and department stores, Avon first preferred to sell its products through company representatives, usually trusted individuals who sold their customized, mid-market lines to friends and family. The company began in 1886 as the California Perfume Company, and sold its Little Dot Perfume Set door to door. It soon expanded to other types of makeup products. Makeup was only beginning to take root in American life at the time -- once upon a time, nice women did not wear cosmetics. The company created a wholesome image for its product lines, and using trusted female representatives to sell the community enabled it to make inroads into American buying habits. In 1937, after the death of its founder, the son of the founder David McConnell renamed the company Avon, to give it a neutral image and to make more competitive nationally (Avon product history, 2009, essortment).

Today, Avon Products is an international company. Its current CEO, Angela Chung, is considered to be one of the most talented corporate leaders in the world, for her role in turning around the flagging fortunes of the venerable brand during the 1990s (Avon product history, 2009, essortment). Currently, Avon is expanding its outreach into China with a colorful and more edgy style. The website for Avon China is half in Chinese characters, half in English, and proclaims "yes, Avon can," and "let's talk," under bright, bold, feminine pink graphics. Although the women on the front webpage are Asian, interestingly the rest of the site depicts Western women, often blonde and blue-eyed, even in the sections of the site devoted to skincare and information about other products like shampoos that would seem to need to be customized to the consumer. Cosmetics, however, enjoyed a 20% growth in China in 2007, indicating a strong, developing market that is unlikely to remain a copycat of the U.S. China may develop a unique character and image of beauty because of its sheer size (Changing Chinese buying habits, 2008, Export News).

Research question

How to market Avon in China?

Product decisions

Do Chinese women find Avon products attractive because of Avon's Western image and qualities or should Avon strive to create a truly Chinese niche? Given the size of its burgeoning middle class, China is potentially one of the world's largest markets for cosmetics. On one hand, Chinese women may associate Westernization with desirability and affluence, and doing something for themselves. On the other hand, Chinese women soon may wish to assert their nation's new status as a world powerhouse by affirming their own, unique beauty standards. Should a product be suggested that capitalizes upon a desire for Westernization through beauty, or create a uniquely Chinese image for Avon in the region?

Avon's overall image is that of an ethical company: its Avon Foundation tries to use philanthropy to improve the lives of women globally, according to the company's official slogan. Also, it has disdained fantasy images of women in most of its advertising. Its image is that of a realistic woman and the seller of the cosmetics wears your neighbor's face, and is not a vision of perfection. Thus, to sell Avon Color "which offers a variety of color cosmetics products, including foundations, powders, lip, eye and nail products" in "shades that suit the skin tones of women of all ethnicities" would seem like the ideal way to gain an inroad in the Chinese market in a positive way (Avon brands, 2009, Avon). The Avon signature brand product of would be established by a product that was specifically marketed to suit a wide variety of skin tones and undertones. Chinese women would be able to see Avon as 'their' Avon, part of a global company, not merely an American icon. However, the stress upon customization of color would still have a touch of Westernization to its image, as it would stress self-care and 'doing something for yourself' in a way that was Western, middle-class, and in line with the changing ideals and values of the New China.

Pricing strategies

Avon is not the cheapest cosmetic company -- it is not as inexpensive as Maybelline or Cover Girl, two budget drugstore brands oriented towards teens. Most of its products are priced slightly more or comparable with higher-line drug store cosmetics like Neutrogena. When most people bought Avon from Avon 'ladies' rather than over the web, the slightly higher cost was accepted, given that the purchaser knew that at least part of the price would pay the familiar seller's salary. Avon's relatively reasonable pricing makes it well-suited to the Chinese middle class: even the wealthier members of China's rising class may not wish to overindulge after many decades of austerity, given that there is still a strong ethic of saving in China, in contrast to the United States. Also, Avon has never tried to compete with the higher-end makeup retailers only sold in department stores, like Chanel or Clinique.

The middle-class, consumer population of China is roughly "divided into three groups: those born from 1946 -- 1964, who have lived through some of China's most turbulent times; those born from 1965 -- 1976, who came of age during China's drive to development; and those born after 1976, who have grown up in an increasingly affluent and stable environment. Although there are significant differences between the first two groups, they share similar spending habits: they are both extremely price sensitive and conservative about spending, with extremely high savings rates. The most recent generation of consumers is different, however, having embraced a consumption-oriented lifestyle. They are more willing to spend money and to experiment, are much more style conscious, and are more sensitive to advertising" (Changing Chinese buying habits, 2008, Export News). However, they still remain influenced by some of the attitudes of the first two groups, particularly since older adults remain more influential upon the values of their offspring than in America.

First distribution channel: Department stores

Department stores, might be one venue to explore for Avon in China, or higher-end drug stores. Chinese consumers in higher-end income brackets "are placing a premium on famous brands or buying in venues with a solid reputation. Also, higher-income consumers tend to be very health and nutrition conscious, from both a traditional Chinese and a more science-based perspective" (Changing Chinese buying habits, 2008, Export News). Avon's stress upon healthy cosmetics, and customization of skin tone could be used to sell the product in Chinese department stores, in a one-on-one fashion. In China, door-to-door salespeople are rare. However, using the product's wholesome Americanness, yet still providing the customer with a service tailored to his or her specific skin tone might be one way to bridge this desire for well-known brands, yet to also stress health and naturalness in both the composition of the makeup and also the look conveyed by the product.

Going to department stores and shopping as a pastime is a relatively new trend in China, and Avon could capitalize upon this, by creating a slightly more upscale, yet uniquely customized and Chinese image for the brand within the context of stores. Friendly and well-trained salespeople could convey a personally interested tone in their customer's beauty decisions, much like Avon salespeople did during the early years of the company's history.

Second distribution channel: The Internet

Although not all websites in America are accessible by the Chinese, using the Avon website to convey the product's Chinese orientation is essential. Instead of Western women, images of Asian women of various ages with various… READ MORE

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