Friday, May 02, 2008

Amway India: We Are Listening

Corporate Brand : Amway

Agency : Rediffusion Dy&R

Brand Analysis Count : 324


Amway is one of the global leaders in direct marketing. The name Amway is derived from the words "American Way " . Amway was established in 1959 by Jay Van Andel and Richard Devos. Amway global now have a presence in over 88 countries and has a $6.5 Billion turnover.

Amway was established in India in 1995 and commenced operation in 1998. Currently the company have 80 products in 4 categories. Amway operates in the following categories :
Personal Care
Home Care
Nutrition and Wellness
Cosmetics

Amway is often used as an example of a direct marketing company. The company sells its products using direct distributors called Amway Business Owners ( ABO). The model works on a business networking model .
The ABOs can build a team by recruiting a team of ABOs under him. The ABO earns commission on the products sold . Further , the ABO also gets commission for the sales done by other ABOs recruited by him. The payout is decided by the point system. The Amway business model also divides the ABOs into different categories based on the sales performance of the team. The payout varies with different levels.

Amway India in now a 800 crore company with its operation spanning across India. It has more than 4.5 lakh independent distributors and 117 offices across the country.
Considering the nascent stage of Direct Marketing Industry in India, Amway India has been reasonably successful. According to Business Line, the direct marketing Industry in India is estimated to be Rs 3150 crore.

The success of Amway products is predominantly driven by the quality of the products. Amway India's products are mostly sourced from manufacturing units from India. It has outsourcing contracts with 5 major units in India. The products are sourced after strict quality checks.

Amway is a 100 % direct marketing company . That means the consumers will not get any Amway products from shops. The products can be bought through ABO's. Hence the sales are driven by the efforts of ABOs. Since the company does not advertise its brands, the only communication channel is through ABOs who visits households and make presentations. There are two tasks of a typical ABO : the first task is to sell Amway products and second task is to appoint new ABOs .

Typically direct marketing firms faces issues of reach and cost. Since the sales depend entirely on the independant distributors , the company has to pay huge commission. This results in the increased cost of the product. Hence the products become expensive resulting in lower sales.

Amways also faces this issue. The products of Amway are excellent but very expensive. For example, the Persona brand of soaps cost Rs 30 which is almost double the rate of an ordinary soap. Persona is one of the best soaps in terms of quality but price is definitely a dampener. Another example is the range of cosmetics under the brands Attitude and Artistery . Artistery is targeted at the premium class and Attitude at the middleclass. But the price of these brands make the consumer think twice before buying it. Hence the ABOs have a tough time convincing the value proposition.

In a value conscious country like India, the expensive tag of Amway products is the singular reason for the lack of popularity of its products.

Understanding this issue, Amway launched its first corporate branding initiative in India . The brand came out with a Television campaign highlighting the customer-centric approach .

Watch the TVC here : Amway

Amway uses the slogan " We are listening " . The idea revolves round the theme that Amway understands the Indian consumers and the products are derived from this understanding . The purpose of the campaign is two fold :

a. The company wants to build equity around the corporate brand which will enable the ABOs to tide over the initial customer resistance.
b. The enhanced corporate image will also attract people to join Amway as independent business owners.
Along with this, the company is also rationalising the pricing strategies. The company is launching a new range of value products like coconut oil , shaving creams. But here again the company will face certain issues . For lower priced products, the commission payout will be less and hence the ABO will have to sell more volume to get higher commission. Amway had introduced sachets for most of the products, but the low commission payout for sachets has prompted ABOs to try and sell high value items.

Another significant change that the company made was rationalising the entry cost for new ABOs. Earlier, a person had to shell out Rs 5000 to join the firm. The cost was to buy the Amway business kit which consists of various Amway products and brochures. The ABO can recover the money by selling these products. Now the company has introduced a starter pack for Rs 995 which does not have Amway products but brochures . This will be a big relief for the existing ABO since the higher joining costs turned away most of the potential ABOs.


Among the 80 products, one of the best seller for Amway is the Nutrilite brand. Nutrilite is a nutraceautical supplement and this brand contributes around 50% of Amway's turnover. The brand virtually faces no competition so far. The Indian nutraceauticals market is estimated to be around Rs 1500 crore and is rapidly growing. Many Indian companies are eying this segment and has serious plans to enter this segment.

Amway has understood that doing business in India will require a new business model. The company has started to take steps in the right direction. It had tried to rationalise prices and bring in new value products. But to balance the price , cost, quality and higher commission is no easy task.

9 comments:

  1. Nice analysis. One thing to consider with regards to price/commissions is that the lower expenses involved in setting up and running an Amway business means that revenues can be lower yet still maintain a decent income.

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  2. when 500 people will loose money one person will earn it.

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  3. Theoretically possible, yes. There's nothing in the Amway model that requires it though. In a group of 500 there's no reason all 500 can't make money, if they want.

    More typically you'd find 200 of them joined then decided to nothing. They probably bought some starting products, but if they didn't think they were worth it, then they could send them back. Of the 300 left, 100 were just shoppers. Paid money, got what they ordered, like any other "store". That's not "losing money".

    Of those left, 125 dabbled a little - some of these made money, some lost some money, probably varies month to month. That leaves 75 folk who made decent money.

    Statistically, very few people "lost" money so that 75-200 people could make money, and there's no reason at all they couldn't all have made money if they'd decided to pursue it and work hard.

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  4. "Among the 80 products, one of the best seller for Amway is the Nutrilite brand. Nutrilite is a nutraceautical supplement and this brand contributes around 50% of Amway's turnover. The brand virtually faces no competition so far."

    Allow me correct your statement. Nutrilite is a better supplement when you compare to low grade products/companies. There are other superior supplement (world's best single selling supplement.....Lifepak) from pharmanex.

    Please take note Amway's Nutrilite is listed too. All the challengers failed to meet the RDA requirements except Lifepak.

    Read below article from Pharmanex:

    LifePak Challenge

    Pharmanex is so confident that the LifePak Family of Products will meet your unique supplementation needs that we developed the LifePak Challenge and dared the world to find a better multi-vitamin/mineral supplement. The
    LifePak Challenge is based on the most recent U.S. Government
    Recommended Dietary Allowances of essential vitamins and minerals
    (known as RDA's) set in 1999.

    We Challenge you to find a better multi-vitamin/mineral product. When submitting a request for a LifePak Challenge please use the following 3 check points:

    1. Has the comparison already been done? You can verify this by
    telephoning or e-mailing Pharmanex Product Support OR see the list of
    completed challengers by clicking on the LifePak Challengers button below.

    2. Is the product suitable for a comparison?
    a) The product to be compared must be intended as a nutritionally complete multi-vitamin/mineral product. If the
    product is not intended to be a nutritionally complete multi-vitamin/mineral supplement, we will not be able to
    process your request.
    b) Pharmanex LifePak is a premium multi-vitamin/mineral supplement. Therefore, to ensure a fair comparison we
    ask that you limit your comparison requests to a company's most complete multi-vitamin/mineral product. If the
    company-in-question has another more comparable multi-vitamin/mineral supplement we will not be able to
    process your request.

    3. Sending in Challenger packaging
    To initiate a comparison, Pharmanex Product Support must receive the product's original packaging including
    nutritional information. Product brochures, photocopies, or hand copied ingredient lists will not suffice. For legal
    purposes we must have the product's original packaging. It is not necessary to send in actual product samples.

    Mail Product to:
    Pharmanex
    75 West Center Street
    Attention: Product Support
    Provo, UT 84601
    Phone: 1-888-PHARMANEX
    E-mail: productsupport@pharmanex.com

    CHALLENGERS

    2Xtreme Performance Int. AM Force® and PM Theta Sleep®
    Advocare MNS Platinum
    AdvocareMetabolic Nutrition System Maximum Energy
    Amni® Added Protection III® (without copper and iron)
    Amni® Basic Preventive®
    Amway® Nutrilite® Double X®
    Arizona Integrative Physicians Nutrient Pack Formula VII
    Awareness® Corp. Daily Complete® Nutrient
    Bayer One A Day® 50 Plus
    Bio VitaMins
    Biotics Research Corp. PMT® For Women

    Body Wise® Right Choice®
    Bonne Forme® Women Over 40 Multivitamin Program
    Bristol-Myers Squibb Theragran® M Advanced
    Bronson® Pharmaceutical No. 1 Insurance Formula®
    Bronson® Pharmaceutical Performance Edge for Men
    Bronson® Pharmaceutical Performance Edge for Women
    Centrum Silver - Whitehall-Robins
    Centrumtm with Lutein - Whitehall - Robins
    Clinician's Choice Men's AM & PM Multi
    Cooper Complete Iron Free
    Creating Wellness Nutritional Supplements
    Daily Nutritional Support System A.J.'s Ultra Formula (without iron)
    Douglas Laboratories® Ultra Preventive®IX
    Dr. Julian Whitaker's Forward Plus Daily Regimen®
    EBS Consultants The Ultimate Multiple®
    E-Caps Endurance Supplement
    FreeLife® Basic Mindell Plus Advanced Formula
    GNC Mega Men®
    GNC Multi-Gel®
    GNC Solotron®
    GNC Women's Ultra Mega
    GND Nutritional Formula IV®
    Health Ventures Partners Nature's Code® For Men Over 50
    Health Ventures Partners Nature's Code® For Men Under 50
    Health Ventures Partners Nature's Code® For Women Over 50
    Health Ventures Partners Nature's Code® Nutritional System
    Health Watchers® Wellness Source®
    Healthier You Next Generation®
    Healthywize Vital Nutrients
    Herbalife® Thermojetics® Formula 2
    Interplexus, Inc. Poly Vyta-Myns®
    Isagenix Essentials for Men
    Isagenix Essentials for Men with Isagenix Antioxidants
    Isagenix Essentials for Women
    Isagenix Essentials for Women with Isagenix Antioxidants
    Kirkland Signature® Premium Multivitamin with Herbs
    Lederle Centrum®
    Leiner Health Products Spring Valley® Sentury-Vite®
    Life Extension Mix Caps
    Life Extension Mix Tabs
    Life Plus TVM-49
    LifeTime Fitness Peak Performance Multivitamin w/advanced antioxidants
    MDR® Fitness Tabs® for Women AM & PM
    Maxi Vision Whole Body Formula
    Mega Foods™ One Daily™
    Melaleuca, Inc. Mel-Vita (3 tablets daily)
    Metagenics® Multigenics™
    Metagenics® Multigenics™ Intensive Care Formula
    Mountain Home Daily Advantage®
    NF Formulas, Inc. Spectrient
    NF Formulas, Inc. Spectrum 2C
    NF Formulas, Inc. Vegetarian Spectrum 2C
    NF Formulas, Inc. Women's Formula w/out iron Vegetarian
    Natural Factors Men's MultiStart
    Nature Made® Essential Balance®
    Nature's Sunshine Super Supplemental Vitamin & Mineral Without Iron
    Nature's Secret Ultimate MultiPlus®
    Nature's Plus Ultra Source of Life Whole Life Energy Enhancer
    Nature's Wealth Synergy 2000
    New Chapter Every Man II
    Nutra-Life Enzogenol High Potency
    Nutramin Complete Body System
    Nutri-All Complete
    Optimal Health System Custom Health Pak
    Ortho Molecular Products Alpha Base without Iron

    PHD Phyto-Vite®
    Pathway to Healing Basic Nutrient Support
    Physician's Optimal Health Program, Inc. VPak™ 51
    Pinnacle International Nutrition Pinnacle Performance Pak™
    Prestige Multi-Blend
    Prolongevity Life Extension Mix® (capsules)
    Pure Encapulations™ UltraNutrient®
    Puritan's Pride® Mega Vita-Min™
    Purity's Perfect Multi
    Rainbow Light® Living Source® Master Nutrient System®
    Reliv Classic
    Reliv now
    Rexall® Daily Essentials
    Rexall® For Life Cellular Essentials®
    Rexall® The Ultimate Plenanmins™


    Btw, I was an Amway distributor before I knew Pharmanex. TQ

    ReplyDelete
  5. Hey whatever comments people say, Keep up your good work..I liked it ..
    For Amway India, New Automatic PV calculator is available at http://www.mlmnetworkbusiness.com.

    I Nice site Infact.

    ReplyDelete
  6. Anonymous7:50 PM

    There is no doubt that no equal products to amway.but it is not available in less quantity,for example to purchase iron folic, we should have to invest for 90 tablets for paying more money,instead of that they may sel in blister pack 10s

    ReplyDelete
  7. but still then people will have other opinions...so i think Amway is well aware of what it is doing or else it wudn't have grown to this height...

    ReplyDelete
  8. http://www.directsellingnews.com/index.php/site/entries_archive_display/global_100_the_top_direct_selling_companies_in_the_world

    ReplyDelete

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