Avon
Calling—Lots
of New Reps It Has Been A Cold Spring On The East
It has been a cold spring on the East Coast, and one afternoon in late April, the temperature drops and the wind picks up. But that doesn't keep Luz Stella Bongiovi from buttoning up her black wool coat and walking three blocks from her office to Knickerbocker Avenue in Bushwick, a working-class section of Brooklyn. Standing in front of a jeans store on this bustling commercial strip, Bongiovi smiles warmly, offering passersby Avon catalogs in Spanish and English. The glossy pamphlets are crammed with cosmetics, but this ritual has become less about racking up sales of lipstick and face cream and more about a hunt for people, specifically future Avon sales representatives.
Bongiovi has a system that starts with the catalogs. Once someone takes one, she offers a free makeover, jots down her name and number, and soon schedules the beauty session. It's there that she has the time to pitch the benefits of selling Avon. Bongiovi has also run an ad in el diario/La Prensa, a New York Spanish-language newspaper. It generated 73 solid leads in six weeks. But no matter how she goes about drumming up interest, she saves the best for last. Bongiovi shows potential recruits photocopies of her own biweekly checks for recruiting and managing other reps. Each one is for about $2,000. And that's before the $5,000 she averages for her own sales. That usually clinches the deal.
Bongiovi is one of 25,000 U.S. reps of Avon Products (AVP) Inc. who are part of a multilevel sales force that Avon refers to as “Leadership.” These independent contractors, who are paid a commission not only on their own sales but also on the sales of people they recruit and train, have been the driving force behind a four-year turnaround in Avon's U.S. business.
As Avon CEO Andrea Jung moves the program beyond the United States and further into the worldwide markets, which make up almost two-thirds of its business, she's joining a wave of mainline companies that are turning to multi-tiered marketing. Among the household names that have adopted the sales structure in some area of their business are Sara Lee (SLE), Virgin Group, AOL Time Warner (AOL), and Berkshire Hathaway (BRK). In 1990, only 20 percent of companies in the Direct Selling Assn. had multilevel pay packages, says President Neil H. Offen. Today, it's 80 percent. The need to keep up with other direct sellers is part of what drove Avon's multilevel effort.
Today's mainstream multilevel marketing is different from earlier, more controversial schemes at other companies that paid people to recruit others and often left the last taker holding expensive and unsellable goods. At legitimate companies, a leader's compensation is based on the group's total sales—not just the
leader's skill at signing up recruits. So not only does Bongiovi make her own sales, but there is also an incentive for her to train her recruits to produce so that everyone prospers. And unlike earlier multilevel selling plans, if an Avon rep does drop out, she can recoup almost all her investment without question. Jung says the company hasn't suffered any taint from scandals elsewhere. “Multilevel done in a controlled way is a very powerful growth engine,” she says.
For Avon, multilevel selling has helped reenergize a flagging U.S. sales force. During most of the 1990s, the number of new reps—who were brought in by company managers rather than Leadership reps—had stalled. While Avon was growing in Latin America, Eastern Europe, and Asia, by 1999 the number of Avon ladies in the United States had fallen by 1 percent from the year before. That was the year Jung got the top job and set about reversing Avon's slide. She focused on reinvigorating the brand—which had an aging-grandmother feel to it—with new products, new packaging, and a new ad campaign. She also instituted beauty-advisory training for certain reps and pushed to expand Avon's online sales.
The fourth leg of her strategy, however, was to make the rep job more attractive to ambitious women. To do that, she expanded the multilevel sales program. It had taken root, under a different name, in the early '90s, primarily in California, but Avon had put few resources into it. The results have been stellar. The number of U.S. sales reps is climbing—up 3 percent in both 2001 and 2002—and sales, which last year totaled $6.2 billion globally, are growing by 4 percent a year. Profits climbed 20 percent, to $534 million last year. The stock, in turn, has spurted ahead 99 percent since Jung was appointed chief executive, to 58 a share. That compares with a 33 percent drop for the Standard & Poor's 500-stock index. Goldman, Sachs & Co. analyst Amy Low Chasen says the Leadership program is revolutionizing Avon's sales force. Chasen's long-term sales-growth estimates are 10 percent a year. “Leadership is a game-changer for Avon,” says Jung.
The benefits for Avon go way beyond a rejuvenated sales force. The company has also begun to cut costs, reducing the number of district sales managers—the salaried people who had traditionally been solely responsible for recruitment and training—from 1,750 to 1,500. Women like Bongiovi have picked up a lot of their recruiting duties, so district managers can now oversee more salespeople. Michael Sanchez, Bongiovi's district sales manager, now manages 450 Avon reps, up from 300 five years ago. The change has contributed to U.S. profit growth of 11.2 percent a year for the past two years, almost twice the historical average, while operating margins climbed from 17.9 percent to 19.4 percent.
The big problem now is hanging on to new recruits. The turnover rate, always high in direct selling, is even higher in Avon's multilevel plan. In their first year, two out of three new sales reps leave. In Bongiovi's district, one rep got 44 recruits in two weeks, but lost 38. Bongiovi estimates she has a turnover of about 50 percent—lower than average. To lessen turnover, Avon is investing $20 million in programs, including nationwide training seminars to help leaders boost recruits' sales.
Jung has to listen to these big independent producers, the best of whom control millions of dollars of Avon's revenue. She and other top managers sit in full-day meetings with them, picking their brains and listening to their problems. That's how Bongiovi asked for—and got—Leadership pamphlets in Spanish and makeup shades that match olive skin better. “They treat us like managers,” says Bongiovi, proudly. And she's got the paycheck to match.
Paper For Above instruction
The evolution of Avon’s sales model through multilevel marketing has played a pivotal role in revitalizing its brand and expanding its global footprint. This strategic shift focuses on empowering individual sales representatives—often women like Luz Stella Bongiovi—by providing them with opportunities to generate income through personal sales and recruitment efforts. The multilevel structure not only incentivizes product sales but also fosters entrepreneurial development among representatives, aligning their success with that of their recruits and the overall company.
Historically, direct selling companies faced criticism for controversial recruiting practices and unsustainable business models. However, modern legitimate multilevel marketing programs, such as Avon’s Leadership plan, prioritize group sales performance over mere recruitment. This approach ensures that representatives are motivated to sell products effectively, rather than only focusing on recruiting new members. As Bongiovi demonstrates with her own earnings and recruitment strategies, the model fosters a sustainable and mutually beneficial environment for all involved.
The strategic adoption of multilevel marketing at Avon has significantly contributed to reversing its decline in U.S. sales. During the late 20th century, Avon experienced stagnation amid stiff competition and an aging customer base. CEO Andrea Jung’s initiatives—such as product innovation, revitalized branding, targeted advertising, and online expansion—have reinvigorated the company's market presence. Central to this revitalization is the expanded multilevel program aimed at engaging ambitious women seeking entrepreneurial opportunities.
The results of these efforts are evident; from 2001 to 2002, U.S. sales representatives increased by 3 percent annually, with global sales reaching $6.2 billion in the previous year. The company’s profits grew by 20 percent, and its stock performance illustrated investor confidence, with a nearly doubling share price since Jung’s appointment as CEO. Analysts like Amy Low Chasen have recognized the Leadership program as a catalyst for transformative growth, underscoring its importance in modern corporate strategy.
Operational efficiencies have also improved alongside sales growth. By reducing the number of district sales managers and empowering women like Bongiovi to take on recruitment duties, Avon has increased management span and reduced costs. Nonetheless, retaining new recruits remains a challenge, with high turnover rates in the first year of engagement. To address this, Avon is investing heavily in training and support programs, aiming to foster loyalty and sustained sales efforts.
Leadership’s influence extends beyond sales figures and operational efficiencies; it has built a community of entrepreneurial women who are treated with respect and professionalism. Bongiovi, for instance, feels valued as a manager and pilot of new initiatives tailored to her market, such as Spanish-language materials and cosmetics suited to olive skin tones. These personalized touches help solidify relationships and foster a sense of ownership among representatives.
In conclusion, Avon’s strategic embrace of multilevel marketing exemplifies how innovative sales models can serve as engines for growth, renewal, and empowerment within the direct selling industry. By aligning the incentives of individual representatives with corporate goals, Avon not only expanded its market reach but also cultivated a community of motivated entrepreneurs, positioning itself for continued success in a competitive global market.
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