Table of Contents

1. Introduction

2. Brief History of Amway

3. Global Growth

4. Amway Values

5. Marketing Strategies

6. Conclusion

1. Introduction

Amway is an American multinational direct-selling company that uses multi-level marketing to sell a variety of products, primarily in the health, beauty, and home care markets. Its product lines include home care products, personal care products, jewelry, electronics, Nutrilite dietary supplements, water purifiers, air purifiers, insurance and cosmetics.

Amway is an abbreviation for "American Way" and was coined in 1959 by company’s founders, Jay Van Andel and Richard DeVos. Short, unique and easy to remember, Amway has been registered as a corporate name and trademark ever since. Today, Amway is a multibillion-dollar international business representing freedom and opportunity to millions of people in more than 88 countries and territories around the world. Amway generates US $ 10.9 billion (Feb’ 2012) in sales at estimated retail through this global product distribution network. The business is built on the simple integrity of helping people lead better lives. It offers over 3 million Business Owners the inspiration to grow those businesses, and work hard to provide new and better ways for them to achieve their life goals. Amway was ranked No.114 among the largest global retailers by Deloitte in 2006, and No.39, 32 and 28 among the largest private companies in the U.S. by Forbes in 2009, 2010 and 2011 respectively

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2. Brief History of Amway

Jay Van Andel and Richard DeVos, friends since school days, had been business partners in various endeavors including a hamburger stand, air charter service, and a sailing business. In 1949 they were introduced by Neil Maaskant (Van Andel's second cousin) to the Nutrilite Products Corporation. Nutrilite was a California-based direct sales company founded by Dr. Carl Rehnborg, developer of the first multivitamin marketed in the United States. In August 1949, after a night-long talk, DeVos and Van Andel signed up to become distributors for Nutrilite food supplements. They sold their first box the next day for $19.50, but lost interest for the next two weeks. Shortly thereafter, at the urging of Maaskant, who had become their sponsor, they traveled to Chicago to attend a Nutrilite seminar. The meeting was at a downtown hotel, with over a hundred people in attendance. After seeing promotional filmstrips and listening to talks by company representatives and successful distributors, they decided to pursue the Nutrilite business opportunity with enthusiasm. They sold their second box of supplements on their return trip.

In 1949, DeVos and Van Andel had formed Ja-Ri Corporation (abbreviated from their respective first names) for importing wooden goods from South American countries. After their trip to the Nutrilite seminar, they dropped this business and Ja-Ri became their Nutrilite distributorship. In addition to profits on each product sold, Nutrilite also offered commission on the sales of products by new distributors introduced to the company by existing distributors—a system today known as multi-level marketing or network marketing. By 1958, DeVos and Van Andel had built an organization of over 5,000 distributors. However, following concerns about the stability of Nutrilite, in April 1959 they and some of their top distributors formed The American Way Association to represent the distributors and look for additional products to market.

Their first product was called Frisk, a concentrated organic cleaner developed by a scientist in Ohio. DeVos and Van Andel bought the rights to manufacture and distribute Frisk, and later changed the name to LOC (Liquid Organic Concentrate). They subsequently formed Amway Sales Corporation to procure and inventory products and to handle the sales and marketing plan, and Amway Services Corporation to handle insurance and other benefits for distributors (Amway being an abbreviation of "American Way"). In 1960 they purchased a 50% share in Atco Manufacturing Company in Detroit, the original manufacturers of LOC, and changed its name to Amway Manufacturing Corporation. In 1964 the Amway Sales Corporation, Amway Services Corporation, and Amway Manufacturing Corporation merged to form a single entity, Amway Corporation. Amway bought control of Nutrilite in 1972 and full ownership in 1994.

Rich and Jay wanted to share their newfound success with others who held their values and vision. They created a unique business model that allowed others to join Amway and participate in the benefits of the expanding business. It became a model for reward and recognition that continues to be developed in Amway markets around the world.

Amway’s Home Care products, including the newly launched SA8® Laundry Detergent, proved to be big sellers. Within a few short years, the company had more than 700 employees, over 200 exclusive products, and more than 100,000 Distributors. Amway's annual sales rapidly expanded, exceeding US $500,000 (estimated retail) for the first time.

The company made its debut in India in 1995 and revolutionized the way things were sold in the Indian market. The big question is what exactly made it more successful than all its peers. Is it its pricing? Is it its marketing? Or is it its product range?

3. Global Growth

If we say that it’s the pricing then astonishingly the pricing has been high enough to make it a major player only in the niche market, something that make other companies were also providing. When it comes to its marketing strategies it was not something very new in India, companies like MODICARE, Oriflame had already been doing the same. In fact, Modicare was just a replica of Amway with just a smaller product range. Talking about the product range, the initial product range was very small covering just 4 sectors that too with a limited number of products in each.

Persuaded by the values, caring, and the potential of their business opportunity, more and more people became part of the Amway family. By the mid '70s, Amway trucks were traveling more than 3.25 million miles (approx 5.23 million kilometers) per year, shipping products to millions of distributors.

The company expanded overseas, opening markets in eight countries on three continents. Amway launched in Australia in 1971, swiftly followed by the UK, Hong Kong, and Malaysia. Amway Japan Limited (AJL), founded in Tokyo in 1979, quickly became one of Amway's largest markets.

Following in their fathers' footsteps, Steve Van Andel and Dick DeVos succeeded Jay and Rich as Chairman and President of Amway, building upon and continuing the successes of their parents. The 1990s saw continued expansion with estimated retail sales volumes reaching US $5 billion.
To increase brand awareness, Amway Japan sponsored the 1995 Nagano Winter Olympic games in Japan. Around the world, Amway's regional and country affiliates continued to support their Distributors with the launch of e-commerce sites that extend the Amway opportunity onto the internet.

Current

Amway remains a thriving, multibillion-dollar international business, improving people’s lives and representing opportunity in more than 80 international markets and territories. Currently, their global family includes more than 3 million Amway Distributors.
Their vision is to help people live better lives. Theirs is a unique global community of caring and cooperation, and they take great pride in the principles, people, and products that enable them to play a positive role in so many people’s lives around the world.

4. Amway Values

Co-founders Jay Van Andel and Rich DeVos outlined the ethical and operational standards that continue to guide both the company and its Distributors in all their activities. Those founding principles are literally carved in stone outside the World Headquarters: Freedom, Family, Hope, and Reward.

Amway will always support the fundamental FREEDOM of people to determine their own future, allowing them the time and resources to protect and nurture their FAMILY. In addition, Amway will always offer HOPE to individuals and the opportunity to receive REWARD in proportion to their efforts.

5. Marketing Strategies

This was one company that relied heavily on non-advertising. It believed on the word of mouth publicity.

Quality

One thing that Amway made very clear about its products was that the high price the customer paid for its products was for the quality he received. Even for a mere toothpaste, for which Colgate was the brand identifier, Amway sold Glister at Rs. 99 and claimed that the quantity to be consumed for every usage was far less than those of others and people realized that this actually was the scenario.

The star mark shows where Amway had projected itself.

TARGETING • Targeted at premium class • Undifferentiated approach- selected markets where there is limited segment differentiation • Typical consumer from target market is: • A professional woman • Personality conscious • Makes buying decision based on clinical evidence • Wants professional, salon quality products

POSITIONING • ‘ To those who have little time to sleep, busy lifestyle resulting in dark circles, wrinkles – artistry give you a more toned, moisturized, smooth skin day by day….’ • Point Of Difference – price, min usage, direct selling • Point Of Parity - product • Uses functional positioning strategy emphasizing on product features, price, quality and use.
The reason behind Amway’s success was its strict following the four P’s

Marketing the business is about how to position it to satisfy the market’s needs. There are four critical elements in marketing the products and business. They are the four P’s of marketing.

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1. Product. Satisfy the need of target customer by right products.

2. Price. The right product offered at the right price.

3. Place. Make products available at right price at right place.

4. Promotion. Inform potential customer about the product’s availability and price.

Each of the four P’s is a variable that can be control in creating the marketing mix that will attract customers to your business.

Product

“Product” refers to the goods and services that a company offers to the customers. Amway offers its customers a wide range of products under four major categories namely nutrition and wellness, beauty and artistry, personal care and home care. They provide the customers variety in these major categories ensuring quality that each product should cater the needs of the respective user. The products thus provided by them are designed in such a fashion that they serve the desired features. The product’s appearance, function, and support make up what the customer is actually buying. Over 450 unique, high-quality products carry the Amway name in the areas of nutrition, wellness, beauty and home, as well as commercial products and a variety of services. In addition, Amway independent business owners in selected markets sell additional brand-name goods through local merchandise catalogues, plus a variety of services and educational products. All products are backed by a customer satisfaction guarantee.

Price

“Price” refers to how much the company charges you for the product or service. The Amway pricing approach reflects the appropriate positioning of their products in the market and this result in a price that covers their cost per item and it surely includes a profit margin. The target audience or the customers of Amway are the premium or the affluent class people since the products are listed at higher prices. Amway believes in the notion that more the price the better quality is what will be served. So if their products are charged in higher ranges they assure the customers of the benefits the product is going to provide.

Thus the selection of the pricing strategy is based on the product, customer demand, the competitive environment, and the other products that the company offers.

• Cost-plus: Adds a standard percentage of profit above the cost of producing a product. Accurately assessing fixed and variable costs is an important part of the pricing method.

• Value-based: Based on the buyer’s perception of value (rather than on company’s costs). The buyer’s perception depends on all aspects of the product, including non-price factors such as quality, healthfulness, and prestige.

• Competitive: Based on prices charged by competing firms for competing products. This pricing structure is relatively simple to follow because you maintain your price relative to your competitors’ prices. In some cases, you can directly observe your competitors’ prices and respond to any price changes. In other cases, customers will select vendors based on bids submitted simultaneously. In those cases, gathering information will be more difficult.

• Going-rate: A price charged that is the common or going-rate in the marketplace. Going-rate pricing is common in markets where most firms have little or no control over the market price.

• Skimming: Involves the introduction of a product at a high price for affluent consumers. Later, the price is decreased as the market becomes saturated.

• Discount: Based on a reduction in the advertised price. A coupon is an example of a discounted price.

• Loss-leader: Based on selling at a price lower than the cost of production to attract customers to the store to buy other products.

• Psychological: Based on a price that looks better, for example, $4.99 per pound instead of $5.00 per pound.

Target – premium class – comes in expensive category

Emphasizes on “better the quality, more the price”
Price endings with ‘9’ – 1099, 2099 etc
Place
“Place” refers to the distribution channels used to get the product to your customers. What your product is will greatly influence how you distribute it. At Amway, for promoting the products the company follows the push strategy with direct selling of the product. The marketers and the channel members push the consumers to buy the product. In other words the consumers are convinced to such an extent that they are made to accept what the company offers them and they willingly buy to suit their needs. And this activity takes place in the form of direct selling where there is one to one interaction between the Amway marketer and the consumer. An advantage of direct sales would be the contact you gain by meeting customers face to face. With this contact you can easily detect market changes that occur and adapt to them. You also have complete control over your product range, how it is sold. Amway sells its products using direct distributors – Amway business owners or ABO. ABO can own and operate one distributorship only – it does not sell through retail stores, exhibitions etc. ABO’s then build a team under them who further sell and promote products through personal relationships and direct selling – also called MLM or Network marketing. Thus Implying Amway is 100% direct marketing company. Amway has a sound distribution channel.

Push strategy – direct selling – personal selling • Sells its products using direct distributors – ABO – Amway Business Owners • ABO can own and operate one distributorship only -does not sell through retail stores, exhibitions etc. • ABO’s then build a team under them who further sell and promote products through personal relationships and direct selling – also called MLM or Network marketing • Implying Amway is 100% direct marketing company • Advertising – earlier they didn’t advertised but now they advertise in magazine Like India Today etc. ads started coming up on television – emphasizing on consumer need and quality Communication • Customer brochure to build product awareness • Solution guide for proper use • Demonstration kit to help create a professional image
Amway is governed from the main office at US and commercial service offices in New Delhi, Mumbai, Chennai, Kolkata, Bangalore, Hyderabad, and Ahmedabad and New Delhi various branches like at Okhla, Greater kailash etc. to be easily accessible to distributor, consumer and communicate better.

Promotion

“Promotion” refers to the advertising part of marketing. It is how you let people know what you’ve got for sale. The purpose of promotion is to get people to understand what your product is, what they can use it for, and why they should want it. You want the customers who are looking for a product to know that your product satisfies their needs. To be effective, your promotional efforts should contain a clear message targeted to a specific audience reached via an appropriate channel. Your target audience will be the people who use or influence the purchase of your product. Promotion may involve advertising, public relations, personal selling, and sales promotions. A key channel is advertising. Advertising methods to promote your product or service include the following.

• Radio: Radio advertisements are relatively inexpensive ways to inform potential local customers about your business. Mid-to-late week is generally the best time to run your radio ads.

• Television: Television allows access to regional or national audiences, but may be more expensive than other options.

• Print: Direct mail and printed materials, including newspapers, consumer and trade magazines, flyers, and a logo, allow you to explain what, when, where, and why people should buy from you. You can send letters, fact sheets, contests, coupons, and brochures directly to new or old customers on local, regional, or national levels.

• Electronic: Company Web sites provide useful information to interested consumers and clients.

At Amway the promotion process takes through advertisements which can now be seen in magazines, television commercials, radio clips and as ads on Google. Also there is effective communication through Customer brochure to build product awareness, Solutions to guide for proper use and proper self explanatory Demonstration kits to help create a professional image.

Amway v/s many more

After an in-depth analysis of the functioning and target market of Amway and the product line we find that the company doesn’t have one main competitor. As it’s a niche market player the market doesn’t have much competition there but when it comes to its product line then HUL comes as a major competitor. In spite of the quality offered by Amway for high prices it’s comparatively a very new name in the Indian market and has a long way to go to establish its worth in the mind of the highly middle class dominated Indian society.

Strategic analysis

The process of strategic analysis helps an organization to understand more about its strategic position and to construct answers to questions such as:

1. What is happening to our business environment?

2. What do we need to know about our markets and customers?

3. What new options should we consider?

4. How can we develop our competences to meet all of the changes in the business environment?

By asking these questions to self, a business looks to match its own objectives for growth and development with the reality of the business environment. Businesses need to be realistic. They must base decisions not upon wishful thinking or blind optimism but upon close and careful analysis of products and markets. Amway was founded in the USA in 1959. Today it is a global business that, along with its parent and sister companies, directly employs 10,000 people worldwide. The business also operates strategically at a Global, European and National level. Amway (UK) began operations in 1973 and has its own distribution and Product Selection Centers. Amway makes good use of market research. This has helped Amway to anticipate developments within markets and to introduce new ideas that exploit opportunities and reduce any associated problems to a minimum.

Competition analysis is a key factor within market research. It helps Amway to identify the nature and extent of competition at a number of levels. For example, it helps marketers within Amway to find out how well products are meeting consumer needs and what aspects of competitors’ brands appeal to consumers.

Amway has helped millions of people around the world to start their own independent business, through which they engage in person-to-person marketing. This type of direct selling involves matching a consumer’s needs with the goods and services on offer.

Better the match, more lasting the relationship between the seller and the buyer.

Direct selling, therefore, is a boundary role; it is at the boundary of a supplying organization that is also in close and direct contact with customers. Feedback from IBOs about products and services, as well as feedback from an IBOs own Clients, is an important contributor to marketing analysis.

Within Amway, regular internal meetings provide an opportunity for the company to discuss and evaluate its performance. Gap analysis helps this planning process by comparing forecast performance with achieved figures. The ‘gap’ is the difference between the two, as the diagram below illustrates. Of course, this ‘gap’ may be either positive or negative. Whilst it is vital to seek to establish the reasons for ‘worse than expected performance’, it is also instructive for a company to analyze why its performance has been better than expected, as there could be lessons to learn from that too.

Market penetration

Going for market penetration has involved Amway in making the most of current products and competences by ‘stretching’ them to improve Amway’s competitive position within existing markets. One great benefit of direct selling is that it is an immediate channel to the marketplace that offers customers a good service, while at the same time providing business opportunities for individuals.

Special incentives enable IBOs and end consumers to take advantage of particular offers at certain times of the year and these incentives have also helped to increase market penetration. There are also special events such as Leadership Training Seminars. These enable IBOs to spend time with others involved in the business and to learn about ‘best practice’ from each other, whilst also sharing ideas.

Product development

Product development is a particularly appropriate strategy where an organization is strong in research and development. Product development is highly important for products that have comparatively short life-cycles. Within Amway there are approximately 500 active research and development projects in progress at any one time. With around 575 staff involved in research processes, and with strong links to many universities, Amway formulates designs and develops new products to meet customer needs and expectations within the global marketplace.

For example, based on a Euro monitor study of 1998 estimated global retail sales data, "Artistry is among the world’s top five largest selling prestige brands of facial skin care and color cosmetics. Others in this distinguished group include Clinique, Lancôme, Estee Lauder and Sofina". Amway currently holds more than 380 patents internationally and has approximately 430 patents pending. Within its product development, Amway’s technical teams use the company’s customer base to monitor and test new product ideas.

Market development

Market development involves taking existing products into completely new markets. One method used by Amway involves expanding the ways in which individuals can be involved with the Amway business. Amway has developed a structure known as the IMC model.

This increases the number of ways through which people can become involved in the Amway business. Each of the letters IMC stands for a different type of involvement.

1. I - Independent Business Owners (IBOs)

2. M - Members

3. C - Clients (customers) of the IBOs.

Members are allowed to purchase Amway products at a price equivalent to that paid by IBOs, but do not participate in the Amway Sales and Marketing Plan. They are a new type of "customer", who deal directly with Amway.

Conclusion

In today’s highly competitive environment, an organization has to develop a business strategy that provides a strategic fit between its resources and the changing business environment. This case study illustrates how Amway has continued to develop by using a range of strategies based upon product/market matrix. These strategies have enabled Amway to build its business by continuing to broaden its customer base and enhance the service it offers to Independent Business Owners, Members and Clients.

Amway covers mainly 4 product categories:

-Nutrition

-Cosmetics

-Personal care

-Home care

Nutrition:-

The nutrition products are sold under the brand name of Nutrilite, Positrim and XL energy food. Nutrilite is the supplementary food range, Positrim is for the Carb conscious people and XL is the range of energy foods.

Cosmetics

Till the advent of Amway into the beauty market of India, cosmetics by “ Shenaz Hussain” were considered for the niche market and were sought after for their quality, though they were not the ones that people used for personal use, these were mainly used for commercial purpose and the personal beautification “ Lakmé” were most sought after. Amway made the difference; its product line was targeted at women who due to their hectic life did not have ample time to pamper themselves. Even housewives who were always so busy with the household chores did not mind fishing out an extra penny for some beauty. Moreover the low effective price per usage was also lucrative for people who thought rationally.

[pic]Amway comes with complete range of cosmetic products under the banner of Artistry. Initially this product line was very limited to a few number of anti-wrinkle and age defying solutions only. But now covers nail enamels and all sorts of attitude cosmetics.

Personal care

The personal care market till now was dominated by big players like “Colgate-Palmolive”, “Hindustan Lever Limited” and “Proctor & Gamble” to name a few. Making it big here was a major challenge for Amway, but Amway relied on its mouth to mouth publicity strategy and gained some of the market, though still the personal care market is dominated by its rivals in the Indian market.

Personal care products by amway come under the brand names of Glister, Persona, Satinique, G&H and Dynamite.

Glister is for oral care, Persona G&H and Satinique is the range of body care products like body lotions and shampoos. And Dynamite is the range of men’s grooming products. [pic]

Home care

The home care line includes products like SA8, LOC, Persue and many more, its ranges from detergents to disinfectants.

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Amway’s commitment to health and nutrition led the company to pioneer water treatment systems, with very successful results. Clean water is a major challenge for many in the world, and this concern played a large role in Amway’s research and development. Amway's water treatment product line – eSpring® – continues to hold a top position in the global marketplace today.
Estimated annual retail sales exceeded $1 billion for the first time. Amway expanded its U.S. headquarters in Ada, Michigan, and built a new cosmetics plant where ARTISTRY® products were developed and manufactured.