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.

Marketing Q&A : SEC Classification

Marketing Practice Reader Ajith Pillai asks a very important question

"SEC Classification is not exhaustive…how will you include a housewife..who is not working…but has some required education…what about households where there are two earning members…whose classification will you take…one who is a graduate sales man and the wife is a graduate shop owner… how can the classification of a house hold be done in this case…? I think its High time to Shift to LSM classification in india

Ajith is very true and SEC classification cannot be fully depended as a tool to understand Indian consumers. The main drawback of SEC is that it considers only two parameters , education and earnings. The classification also takes into account the education and earnings of the chief wage earner. So in the case of the example sited by Ajith, the classification fails.

Having said that , there is no alternative to SEC classification right now. There are experts who say that SEC 's failure is noted only on the top 10% of the classification. ie SEC A1 & A2 while the SEC still relevant in other sections where education and earnings of the CWE is a good indicator.

Ajith also mentions the relevance of using LSM. LSM stands for Living Standard Measurement. This is a proprietary tool used by HUL for better understanding of Indian consumers. LSM divides the Indian consumer class into 18 clusters based on 25 parameters. But since it is proprietary , I am not sure whether everyone will be able to use this classification.

It is time for Indian marketers to add more tools for understanding Indian market. The sheer size of the Indian market calls for a huge investment in research . Indian marketers still have some inhibitions in investing in such kind of researches.

Related Post
SEC Classification

Pankajakasthuri : Breathe Easy

Brand : Pankajakasthuri
Company : Pankajakasthuri Herbal Products


Brand Analysis : 323

Pankajakasthuri is an example of successful marketing. Pankajakasthuri is an ayurvedic cure for asthma. The brand came into existence in 1990's. The brand is a classic example of a brand identifying a need and capturing that space using aggressive marketing.

Asthma is a dreaded disease. The disease is dreaded because it changes the entire life of a person to the worse. Although modern medicine has provided new medicines for this disease, a perfect cure is still at bay. The stress associated with the disease and the possible relapse at the older age makes life worse for those who have this condition.

The modern lifestyle is also a perfect feeding ground for such conditions. The increasing pollution, lack of fresh air, lack of exercises and a sedentary lifestyle are all adding to the situation.
It is in this context that Pankajakasthuri gained prominence . Pankajakasthuri claims to be a combination of herbs which offers cure/relief to asthma patients . Pankajakasthuri is the brain child of Dr Hareendran Nair who is also the Managing Director of the company.

Pankajakasthuri was launched as an OTC product. When a medicine is launched as OTC, the biggest issue that it faces is the lack of support from doctors. Hence Pankajakasthuri had to rely on aggressive promotion through advertising campaigns.
The fortune of this brand changed when the brand roped in the Malayalam Superstar Mohanlal as the brand ambassador. From there on , the brand was on a growth track.

Mohanlal and Pankajakasthuri is a perfect example of successful celebrity endorsement. Mohanlal gave the brand excellent visibility and more than that TRUST. The brand was targeting the parents whose kids suffer from asthma. The biggest hurdle for this brand was to get the trust of the customers . Since Pankajakasthuri is a medicine and the end-user was kids, establishing trust was extremely important. The association with celebrity made this task easier for the brand.
The brand also was very aggressive on the media. The campaigns featuring the Star and the brand was hard hitting. The brand was positioned as a life-enhancer rather than a cure.

Watch the TVC here : Pankajakasthuri

Interestingly the brand name do not have any connection with the purpose of the brand. The name was coined by joining the names of the founder's mother and daughter.
The heavyduty campaigns made this brand a bestseller in the Kerala market. Initially the brand was focusing only in the home state. From the revenue from this brand, the company diversified into many categories including FMCG.

Two years back, the brand launched another variant Breathe Eazy which was positioned as a health supplement . The variant is endorsed by another film superstar Madhavan.

The main reason for the success of this brand from its humble begining is the investment on the brand. The brand never rest in the past success. Pankajakasthuri always invested heavily on the brand promotion. The message also has been consistent .

Recently the brand has moved from asthma-cure to healthy-breathing. The brand is now being positioned as a breath-enhancer rather than a cure. But the brand is not without competition. Recently Dabur has launched a similar product Dabur Swasamruth endorsed by Big B.

Pankajakasthuri is an example of a local brand achieving grand success . It also gives confidence to small players to invest more on brand promotion rather than bargaining with the trade.

Marketing Q&A : Ready to Eat Market

A Marketing Practice reader asks the following question

Is the Ready-to Eat( RTE) category going to be affected by inflation/price rise ? Why is that RTE brands are not targeting the bachelors ?

According to ITC press release on March 2008, Indian RTE market is worth around Rs 80-100 crore. The market is somewhat in a stagnant state and the growth is minimal.

The general price rise that we see today will have an impact on most of the food product segments. The Indian middleclass segment spends heavily on food products. Hence when there is a price rise, there is a chance that the consumers will tighten the purse-strings .
In the case of RTE category, the segment is not price sensitive. As you are aware of , RTE products are highly priced and is often targeting the upper middle and higher segments of the society. Hence a general price rise may not have an impact on this segment.

Unlike the western market, RTE brands have not been able to break into Indian consumers kitchen in a big way. It is more of a cultural issue aggravated by the price factor. Even though many Indian households are ripe for such a category, the brands have not been able to make an impact. Many middleclass have now women working which makes this category relevant. But there is a cultural preference for freshly cooked food.

The price and taste is also a dampener. The value proposition of RTE products are not attractive for an average Indian consumer. In my experience, the packs does not have enough contents to justify the price. This has prevented many repeat purchases. Again , the same taste of the food also inhibits customers to checkout the products often. For non-vegetarian dishes, consumers are doubtful whether the food will remain unspoilt for such a long period. Hence there is a inhibition of buying these foods regularly.

Regarding the bachelor segment, RTE cannot target this segment because of two reasons :
For the bachelor segment, I doubt whether the size is big enough to be considered as a target segment.
Second, this segment mostly prefers fast food joints and restaurants and RTE brands maynot be able to bring in a new habit of cooking oneself among these consumers.

Brand Update : Ceat

The rebranding bug has caught Ceat too. The brand is now sporting a new logo. The saddest part is that Ceat has done away with the famous mascot ( Rhino) and the golden tagline " Born Tough".

The Rhino mascot has been with Ceat for almost 50 years. The tagline was also deeply etched in the mind of the public. According to Harsh Goenka , the reason for changing the mascot is that there is a general perception that Rhinos are getting extinct and is a sloth. ( Source : Financial Express). Hence the brand wants to change into something modern. I think it is one of the most unconvincing reasons for changing such a blockbuster mascot .
Currently the brand is promoting the new logo. The new logo is being promoted in the same way as Vodafone. Both TVC and print campaigns scream " Change is inevitable" and " Change is here ". No wonder the agency is O&M which handled the Hutch - Vodafone rebranding. The current campaign is a cut-copy-paste of the " Change is Good " campaign for Vodafone.

The brand also denounced its tagline " Born Tough ". The current re-branding campaign is only talking about the logo and the new tagline is not revealed.
The question now remains as to why a brand would want to change a mascot and slogan which is deeply embedded in the consumer's mind. It has to be noted that Ceat has never invested in the brand. Except for some occasional bursts of campaigns, Ceat never invested in the brand. If people still remember the brand, its because of the power of the mascot and the slogan and not because of any sustained campaigns. By denouncing the most powerful brand elements, Ceat has taken a big risk.
I think the current rebranding exercise is not going to be sustained over time. After the rebranding, the brand will again go in for a silent mode and also may be forgotten by the consumers.

Related Brand
Ceat

Yera : Think Glass, Think Class

Brand : Yera
Company : Shreno Ltd ( Alembic Glassware)


Brand Analysis Count : 322

Yera is a brand that has redefined the glassware market in India. This brand can be credited with popularising glassware in Indian households . Yera is a brand which came into existence in 1965. The brand now holds a lions share in the Indian glassware market in India. The brand can be said as the pioneer in promoting glassware in India

The emergence of glassware as a serving-ware came through the restaurant route. My assumption is that the first glass serving -ware was the glass tumbler that is still used in restaurants and hotels. It is interesting to note that still 80% of Yera's turnover is from the no-frill tumbler ( source:HDFC securities)
Now Yera has almost 150 different designs of glassware ranging from tumblers, icecream bowls to dinner sets.

Yera became popular household name mainly as a gifting item. At one time Yera was the most sought after gifting item for the 'gifters' . The main factor being the Price. From a range starting as low as Rs 100, Yera made gifting easy. But yera was a nightmare for the gift-receiver. After the ocassion, the house will be full of different types of Yera products.The institutional segment also boosted the turnover for this brand . Now in Kerala, many textiles uses Yera products for gifting the customers.

The brand now faces two issues :
a. Cheap glassware products from local players and also cheap imports have hurted Yera most. Yera now operates in the low-price segment and the flooding of products has commoditized the category .

b. Although Yera had some campaigns for brand-building, the brand was primarily playing the pricing game. Although the brand has made glassware popular, it has not been able to upgrade itself into a premium player in the segment. This is the typical ' class or mass' dilemma. I am not advocating that Yera should be targeting the premium segment and forgo the volume. But the doubt is whether Yera can command some premium over the rest of the players in this market.

The brand also failed to see the emergence of Crystalware as the preferred category for the premium customers. Now this segment has foreign players and La Opala's Solitaire.

To be fair to the brand, the glassware market is very small. I got a 2001 figure putting the glassware market in the range of Rs 25 crore. Now I estimate this market in the range of Rs 60 crore.
The glassware market is also moving towards ceramic wares which are more stylish and up-market looking. Yera has the power of its brand equity to take it through the price competition from cheap imports and local players. But the brand is silent in the media and I don't remember any campaigns for this brand in the last 2-3 years.

In a market full of price-competitors, Yera cannot afford to rely on past glory . The brand may fade from the memory of the new generation. What the brand needs now is a measured dose of brand- building campaigns . According to the brand's website, Yera boasts of having a brand recall of 84%. The brand must consistently build on the existing platform.

I would even suggest a complete makeover for the 'brand'. The brand should think of upgrading itself to a premium player. The brand should exit from commodity mindset and start its journey towards a value-added player. The brand has the tagline " Think Glass, Think Class ". It should be focusing on the class part.

The brand is now having commanding mind-share. Now is the time for the brand to ladder-up.
Laddering is deepening the meaning of the brand to core brand values or other more abstract considerations. ( Kevin Lane Keller)

The brand should ladder-up to some higher attribute like enjoyment, togetherness etc. The laddering-up will help the brand to move a notch higher from the price-players. And such a focus on non-glass attribute will bring back the interest of consumers to the brand. A heavy dose of campaigns and some celebrity can boost the image of this pioneer.