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Meeting customers’ needs through the Internet Introduction

Amway

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In recent years the Internet has moved closer to the heart of the communications strategy of many different organisations. The Internet combines two simple ideas. Firstly, that computers can be linked together; not just one computer to another, but many different computers to each other. Secondly, concepts and key ideas can be linked across different documents. For example, the word advice when clicked may take a website user to another document that provides advice. This is known as hypertext. These links need not all be in one place. A website enables people to communicate, no matter where they are or when they work. This brings huge advantages to organisations that centre their communication strategy around the Internet with a view to keeping their many Internet-linked customers happy. Combining 2 ideas Linking computers together

Founded in the USA in 1959, Amway is a global business with 6,000 corporate employees worldwide. It is one of the world’s largest direct sales companies that services and supplies over 3.3 million IBOs in more than 80 countries and territories in Asia, Africa, East and Western Europe and the Americas. The critical relationship between Amway and the seller, or IBO, is at the heart of Amway’s approach to direct selling. This form of selling allows each IBO to focus upon individual consumers and their needs, with the IBO delivering direct to the consumer rather than the consumer having to visit a shop. Because Amway manufacturers its own branded products and distributes these through ‘direct selling’, its operation differs from that of more traditional distribution channels. Traditional supply chain

Amway’s supply chain

raw materials

raw materials

manufacturer

Amway manufacturing & distribution

retailer

IBO

consumer

consumer

Hypertext

The Internet

Decision-takers have to make strategic decisions that affect their organisation’s long-term direction. Many cannot afford to ignore the Internet. It is here to stay and has forced businesses to rethink their operations. Although it is a potentially exciting medium, it challenges businesses to devise ways of taking maximum advantage of what it can offer. This Case Study illustrates how Amway uses the Internet not just for communication but also to serve wider needs by linking the organisation’s logistical and production operations to its consumers (customers) through millions of Independent Business Owners (IBOs) worldwide.

Having signed a contract to work within Amway’s Rules of Conduct and Code of Ethics (best practice), IBOs are self employed and the Amway business gives them the flexibility to work where and when they want. They sell to people they know or meet, introduce others to the Amway business and form their own sales group. The personal contact and care they provide is an important element in direct selling. To do this they need support, and rely on having ready access to a quick, efficient supply chain so that they can meet customer needs. Increasing use of the Internet has created real potential for businesses to develop different types of business models and to try out new approaches to reach users directly and quickly in their homes. Amway was well placed to make such a move. With high levels of Internet use within the UK and Europe, market research showed that IBOs were Internet-ready, and that the time was ripe for Amway to develop ecommerce opportunities that would offer the 24 hour/7 day service its customers were wanting.

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Having received supporting merchandising materials, literature and training so that they know the best way to promote the features and benefits of Amway products, IBOs order the product direct from Amway having taken an order from their customer. Most operate their business part time from home, as many have full time jobs and want a flexible working pattern with Amway. They want to work at a time convenient for them, which can be any hour of the day or night, with an organisation they can rely on. The Internet offers the opportunity to meet these needs.

Strategic development of interactive communications 3

Amway’s IBO customers depend on Amway for more than products. They look to Amway for support that will help them manage their businesses. For an organisation to be competitive in a crowded market place it has to be market-focused. Amway knows that it succeeds only when it helps its customers to succeed. By placing customers at the centre of its focus, an organisation then builds processes designed to satisfy their needs. For Amway, this involves a whole series of activities that link the supply of raw materials to production processes, to physical distribution management and finally getting the goods in a timely way to the IBOs, who can then meet their commitments to their customers. With more than 3.3 million distributors in more than 80 countries and territories and with own branded products ranging from ARTISTRY™ skin care and cosmetics to NUTRILITE™ nutrition and wellness products, Amway faced a huge challenge in providing customers with goods at the right time, in the right place and in the right condition. The starting point was to undertake some market research that would enable Amway to understand its customers better, and provide a model for how a web ebusiness opportunity could best be developed.

Independent Business Owners (IBOs) 4

In order to understand what IBO customers want in terms of products and service, Amway builds up typical customer profiles. These are made as full and accurate as possible. In that way, Amway can target its current support services. Equally important, it is able to anticipate the future needs of its various customer groups, and can target them with specific product information. Amway knows that most IBOs are entrepreneurial individuals who want to sell quality products to people they know or meet. Most also fall into the ABC1/2 categories of socio-economic grouping. This is often used by marketing departments to segment the total audience and identify particular groups they want to target.

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Social class

Type of occupation

Examples

A

upper class/ upper

higher managerial,

surgeon, barrister,

middle class

administrative,

director of a large

professional

company

intermediate

bank manager,

managerial, professional,

head teacher, surveyor

B

middle class

administrative C1

For Amway’s IBOs the web had many potential benefits such as: ◗ providing up-to-date feedback and information with fewer clerical

lower middle

supervisory, junior

manager of a small

class/white collar

managerial or administrative

retail outlet, bookkeeper

clerical C2

D

E

skilled working

skilled manual

joiner, welder,

class/blue collar

workers

plumber, plasterer

working class

semi-skilled and

driver, postman,

unskilled

porter

those at the

low paid/

casual workers,

lowest level of subsistency

unemployed

state pensioners, unemployed

◗

errors receiving access to valuable business information and advice 24

◗ ◗

hours a day, 7 days a week both from Amway and elsewhere offering a range of evolving functions such as live online ordering enabling IBOs to check the bonuses they receive on their

◗

purchases providing a modern and exciting way in which to run and promote a retail business opportunity to like-minded entrepreneurs.

Hungary, Poland, Romania, Czech Republic, Slovakia, Croatia, Slovenia, Turkey The more established sites showed that, no matter what the size of the business, the Amway business model works across the Internet. Given this successful outcome, Amway was able to identify best practice on these older sites and then apply it to new sites such as the AMIVO site used by IBOs in the UK.

Conclusion 6

The AMIVO website development has given UK-based IBOs an alternative, enhanced way of managing their businesses. The website rapidly attracted a significant number of IBOs keen to try the online service. Promotions helped to encourage repeat use of the site by demonstrating its unique benefits. Today, over one third of Amway’s UK business is transacted through the AMIVO UK website and it’s well on the way to reaching 50% by the end of 2004. The average value of orders is 25% larger online than offline, and this has resulted in more efficient handling of orders and lower freight costs per order.

Most of Amway’s IBOs are well educated and ambitious, and many have families. Working from home, they supplement their family income mainly by working part-time, although some work full-time. Most of these IBOs have web access, many of them having bought PCs to support their children’s educational progress. The research revealed that many IBOs felt they needed more support for their selling activities. In particular, they wanted quick, secure access to more accurate, up-to-date information that related specifically to them. The answer had to lie in a carefully constructed, properly run, well thought-out Internet operation.

UK, Italy, Germany, Ireland, Austria, Sc andinavia (De nmark, Finland, Sweden, Norway), South Africa, Netherlands, Belgium, Greece

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Business strategies are designed to be consistent with an organisation’s overall purpose or mission. As a world leader in direct selling, Amway builds opportunities and partnership with individual customers so that they can share in its success. To support this purpose, corporate strategy involves making far-reaching long-term decisions that look to match an organisation’s activities with its business environment. With huge changes in technology and many IBOs ready to make use of web access, Amway felt that the web would be one of the most effective way of meeting their needs.

When organisations make strategic decisions they have to take into account many of the changes taking place in their business environment. This Case Study illustrates how, in a rapidly changing consumer goods industry, with IBOs facing significant competition from traditional channels of distribution, Amway has used emerging technology in a way that provides both it and its partners with a distinct advantage in the marketplace.

Glossary Ebusiness: Using the Internet and associated technologies for trading purposes. Economies of scale: Reductions in average cost that stem from large-scale operation. Entrepreneurial: Self-motivated and willing to use initiative in pursuit of profits. Hypertext: The linking together of different electronic documents through the use of text. Logistics: The process of integrating materials management and physical distribution management. It involves a whole series of activities from moving raw materials through to manufacturing processes, and moving finished goods to customers. Market-focused: Describes an organisation that analyses customer needs and attempts to identify, anticipate and satisfy them profitably. Market research: The systematic gathering, recording and analysing of data about problems related to the marketing of goods and services. Mission: Overall purpose, providing a direction for an organisation. Pan European: Reaching across Europe. Physical distribution management: The distribution of goods to customers at the right place, the right time and in the right condition. Production processes: The various stages of production that transform raw materials through various phases to produce finished goods. Socio-economic grouping: Classification of consumers based upon their income and so-called social class. Strategic decisions: Decisions made to provide advantages for an organisation, and affecting them long-term.

Amway's eastern European website.

Making a strategic decision to develop the Internet for their IBOs enabled Amway to match technology with a whole range of functions such as marketing, operations and logistics in a way that would meet its needs more closely. As part of a Pan European decision, Amway’s strategic plan was to increase its use of the Internet by ‘e-enabling’ all of its European markets in a phased roll-out plan over 24 months,

Supply chain: The chain of processes linking the manufacture of products with physical distribution management so that goods are moved quickly and efficiently through various processes to meet consumer needs.

For more information about Amway please browse: In order to develop an online presence, Amway grouped countries together wherever possible so as to link parts of the business in a way that would serve customer needs. This enabled it to gain economies of scale, e.g. a reduction in distribution costs. Each of the following websites have common features for each region as well as services tailored for each country:

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www.amway.com www.amivo.com www.vebso.com Amway's eastern European website.

The Times Newspaper Limited and ©MBA Publishing Ltd 2004. Whilst every effort has been made to ensure accuracy of information, neither the publisher nor the client can be held responsible for errors of omission or commission.

Developing an Internet strategy

Socio-economic grouping Socioeconomic group

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