Though the Avon Products brand has some challenges ahead, the chief Avon lady, CEO Andrea Jung, is singing a happy tune: despite sales declines in North America and China, the company’s third-quarter earnings beat estimates.
Avon came out on top by staying in tune with the makeup of the marketplace. It’s been focusing its appeal to the cash-strapped by promoting lower-priced products, and will be heavily targeting Latin America, where, the company says, people spend a high proportion of their income on beauty products.
Avon plans to lower its advertising budget, a strategy unlike the very expensive one undertaken by a well-known search-engine brand, but will hire more sales reps (while cutting 1,200 other jobs by 2013). It sounds like a plan that puts the focus on one-on-one customer interaction, which was what build the brand, rather than a broader blanketing of media messages. Reese Witherspoon remains the celebrity face of the brand.
The bumpy future includes growing international competition and a drag on profits by its slate of non-beauty products, a line that Avon plans to de-emphasize. But Steven Mallas of Blogging Stocks is optimistic:
Long-term shareholders should fear not, I would argue. Sure, Avon may be having a rough time today, but remember that the company has a decent amount of brand equity behind it.
Mallas’ idea that Avon must get its reps “excited about selling and moving the inventory” recognizes the brand’s employees, especially customer-facing employees, as the most vocal brand evangelists. The Avon lady who visited my mom wasn’t just some sales drone: she maintained personal relationships with her clients -- and, most importantly, used and loved Avon products.
With a growing, energized workforce and a focus on high-margin products like skin cream and fragrances, Avon is set to enter 2010 smelling like, if not roses, then refreshing coconut and lemongrass.