The Corporation
STRATEGIES

AVON CALLING -LOTS OF NEW REPS I t has been a cold spiing on the East Coasit, and une afternoon in late Aj)nl. the température drops and the wind picks up. But that doesn't koe|i Luz Stella Bongiovi from buttoning up her black wool coat and walking three blocks from her office to Knickerbocker Avenue in Bushwick, a workingciass 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, Hijeciiically futui*e Avon sales representatives. Bongiovi has a system that starts with the catalogs, 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 newspapei'. It generated 7:i solid leads in six weeks. But no matter how she goes about (hiimming

A sales-force makeover helps the company's U. S. turnaround up interest, she saves the best for last. Bongiovi shows fiotential recruits photocopies of her own biweekly checks for recruiting and managing other rejîs. Each one is for about S2,0(K). A]id that's before the $5,000 she averages for her own yales. That usually clinches the deal. Bongiovi is one of 25,000 U. S. rejK of Avon Products 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-yeai' tumai-ound in Avon's U.S. business. As Avon C O AnK
C EO JUNG

drea Jung moves the program beyond the U. S. ;md further into the worlduide markets, which make up almost twothirds 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 stnicture iji some area of their business: Sara Lee, Virgin Group, .\0L Time Warner, and Berkshire Hathaway. In l!)90. only 2(m of companies in the Direct Selling Assn. had multilevel pay packages, says President Neil H. Offen! Today, it's 80%. The need to keep up with othei- direct sellers is part of what di-ove Avon's multilevel eíTort. Today's mainstream multilevel maj'keting is different from eiU'lier, more controversial schemes at other cnnipanies that paid people to recniit 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 recniits. So not only does Bongiovi make her own sales, bul there is also an incentive for her tn 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 :iny taint from scandals elsewhere. "Multilevel done in a contrt)lled 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 Euro|)e. and Asia, by 1999 the number of Avon ladies in the U. S. had fallen by K/« from the year liefore. That was the yeai- 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 Lu expand AOL TIME WARNER Its Southern Living at I!ome unit sells home furnishings and decorations on a multitier basis. With 14,000 reps, it rackiHi u]) s