Although Amway entered Chinese market by unique marketing method and succeeded, the need of target market will change with the continuous change of competitive environment. Successfully entering the target market does not mean successfully occupying the whole target market. Hence, Amway has to re-evaluate the future market trend, from which catches its own core competence.
Currently, Chinese government only permits Amway to develop business in the cities alongside the ocean such as Guangdong and Fukien provinces. However, analyzing marketing strategy of Amway is fairly beneficial. According to marketing strategies of the Amway (China)’s website, they can be analyzed as follows:
4.4.1 PYRAMID ORGANIZATION AND TEAM WORK MECHANISM
The traditional pyramid structure is designed for huge amount of production and marketing. The first line of employees only can devote to selling as many as products, but can not choose product and manufacture method, and change products to satisfy customers’ needs. Nevertheless, under the Amway’s direct-selling model, tasks can be completed in groups across different functions. If a small but multi-functional group has a specific target market, it can get larger authority to implement self-management to deal with all questions related to products. The marketing team excludes members who can not achieve goals to reduce communication hurdles, and self-management can shorten the decision time. In addition, the task of the team actually centers customers.
4.4.2 E-COMMERCE MARKETING-B2CMODEL
In China, Amway has 300 thousand active sales representatives and many registered preferred customers. There are several ways that sales representatives and preferred customers can get products, such as phone-ordering, buying in retail stores, buying with faxing to retail stores, ordering on “Amway commercial portable” customized cell phones or on the Amwaynet website. Except for purchasing in retail stores, other digital means are B2C purchasing experience. The B2C process consists of the logistics and delivery from business to consumer and the cash flow from consumer to business. Amway’ e-commerce marketing strategy creates a more convenient and speedy approach for consumers to get products, and this strategy also provide customers opportunities to experience.
4.4.3EXPAND WITH STABILITY
Because of the condensation of Amway’s products, sales representatives have to explain and instruct to customers while offering service. Thus, Amway consider the acceptance degree of sales representatives and customers when introducing new products and setting operation sites. In addition, Amway takes the marketing strategy of making progress while ensuring stability. Amway started business in Guangdong and Fukien provinces in 1995, and then set up an east China office in Shanghai in January 1996, and in July, Amway launched business Hangzhou and Nanjing. Amway (China) kept opening new market based on stabilized market during the initial period. Until now, Amway’s business has spread all of the provinces and cities around the country, and established 60 retail stores. Amway (China) also takes the strategy of making progress while ensuring stability when launching products. Considering the training of sales representatives and the acceptance of market, Amway (China) launches one or two new products monthly.
4.4.4INCENTIVE MARKETING STRATEGY:MODULAR OPERATION
Amway’s model is like MacDonald’s, building up a successful original store first to get the revenue model from it and then duplicate its operation method continuously. Amway designed the
original model by commission system and engagement probability. To be specific, in every three sales representatives, one is active, another is inactive, and the other is neutral. When you recommend 20 people to be the sales representatives, there will be 6 active, 8 inactive, and 6 neutral.
Referring to the Amway’s successful standard, Diamond, for which are the most common target sales representatives strive. A sales representative who own the diamond pin title must have 6 teams, and each team’ s volume is more than 10 thousand points half a year. According to the Journal issued by Amway in 2001, the average annual salary of diamond managers is RMB790 thousand. Based on the business path designed by Amway, when starting your business, you should recommend 20 sales representatives, 12 of whom have volumes, 6 of whom have volumes accounting for more than 3%
of the total volumes in this so-called “eagle” structure. If regarding this structure as a brick, Amway actually plays a game about duplicating and accumulating bricks. Each eagle structure has to achieve at least 1600 points, and is your team generates more than 6 eagle structures, then your volumes will achieve more than 10 thousand points (1 sector), and then you can get the silver pin title. After maintaining for 6 months, you will become sales executive. If you have 6 sectors and each sector has 6 eagles, then you will become the diamond manager.
Hence, Amway’s bonus incentive strategy has the following features:
1. This mechanism is surmountable, that is, promotion of distributors is not limited by their boss, and those who work hard and have abilities can surpass their boss. The distribution of salary of business should break the rule of years of working, and that can motivate people’s creativity and make business alive.
2. Multi-level salary design is more motivating and compatible than single-level
one. However, the percentage of the bonus for distributor needs to be reasonable, so the firm can get the certain revenue. For instance, the leader bonus makes seniors develop juniors and seniors can enjoy the benefit through transforming their abilities to juniors. By doing so, business has motivation to make progress, strengthen employees’ loyalty and create corporate peaceful culture.
4.4.5 BRAND MARKETING STRATEGY:REVERSE MARKET CRISIS
Amway mainly produces daily-use products including Nutrilite nutritious and health care food, Artistry beauty and cosmetics, personal care, house care and crown pots and pans. All of them can be divided into five categories and 198 kinds, with features of high-end technology, condense formula, natural ingredients, good quality, various kinds, environmentally-friendly and durability.
1. Researching and developing on products is foundation
Nutrilite, a global leading brand about vitamin and mineral and consecutively became the only exclusive supplementary food for the 27th and 28th Chinese Olympic representative team. 6 kinds of products among Nutrilite are recognized exclusive products for the
“Chinese North and South Pole Exploration team”.
Artistry beauty and cosmetics are in a stable position as the global best seller among the top 5 brands and gains many patents about innovative ingredients. As to the house clean products, Amway mostly adopts condense, environmentally-friendly and high-effective formula, and those also are selected the only products for the “Chinese North and South Pole Exploration team”. In addition, 9 of them even acquires the certificate of environment I sign type issued Chinese government.
The outstanding performance is resulted from Amway’s strong research and development ability. Amway has 97 professional labs and 65 quality test centers in the globe to do research projects about product formula, evaluation and process establishment. So Amway has gained nearly one thousand patents until now. Meanwhile, Amway cooperate with 85 business organizations and 75 colleges in technology for long term, and the research results and thesis are published more than 200 professional journals and acquires many international academic rewards.
2. Product quality is assurance
High international level of research and strict manufacturing process make Amway can guarantee good product quality for consumers. The process from material selection, procession, quality examination to package is followed strict rules of quality examination to make sure the quality of products on market.
The factor of Amway (China) already passed the strict examination of product quality and management level by two international authorized certificate organizations, the Underwriter Laboratories Inc. (UL) and the British Standards Institution (BSI), and that make Amway became the 1st daily-use product company that gained the both certificates at the same time.
For consumers, Amway offers “satisfaction guarantee” after-sales service, and initiates the service of “return goods without any reasons” in the daily-use product industry. Improving
quality makes Amway gain positive images such as “the brand customers believe” and
“satisfying products for users”.
3. Multi-brand strategy
First, in market position, when Amway entered in China market in the early of 1990s, it only has two series of products, personal care and house clean. As the income of Chinese rapidly increases, Amway gradually launched the Artistry series in 1997, the Nutrilite series in 1998, and Crown pots in 2008. Nowadays, many people make Amway’s products as daily necessities; accept the price of Amway’s products; show their social positions through Amway’s brand, then become Amway’s’ loyalty users.
Second, in consumer position, the benefit of consumers is from their perspectives, that is, what value from the brand can satisfy consumers’ expectation. Speaking of the selection of benefit position, in addition to the basic product benefit, psychological and symbolized benefits also account, then a firm complete the transformation from product to brand. Thus, position and brand are the both sides: if brand is consumer’s cognition, then position is the process a firm delivers its brand to consumers. Consumer benefit must display two benefits as follows:
(1) Rational function is the value of using brand product. Consumers first consider the using value of products such as function and C/P value. After coming out conclusions through experiencing product practical functions, consumers will have impression on these products. The rational function is the base for building brand personality, and it can make consumers raise affection with the brand
(2) Brand also have nature of emotion and self-display. Using a brand for a long time causes consumer’s reliance on brand. In addition, The image and value of individual consumer also can appear through using high-quality, high-effective and well-known brand products.
4. Finally, in brand strategy, Amway has various kinds of products and adopts different brand strategy depending on the characteristics of product series.
(1) Single brand strategy
The main strategy of single brand management is brand expanding. When encountering one brand, people have same reaction to its new products as old products. Because new products associated with the famous and reliable brand name, it is easy for customers to accept the new products. Amway’s Nutrilite nutritious health care food applies single brand strategy, containing vitamin C, natural vitamin B group, calcium tablet, magnesium tablet and so on, and keeps a high quality image. Additionally, there is sufficient connection between old and new products, so new products strengthen the brand position. Amway’s reasonable brand expansion acquires success in market.
(2) Multi-brand strategy
Multi-brand strategy is a firm owns at least two brands because the firm would like to consider and satisfy different customers’ needs and to make customers different stimulation and recognition. Amway’s beauty and cosmetics belong to this strategy. The original meaning of Artistry is “art skill”, representing the brand spirit of “elegant, high-class, and beautiful”, and uses “beauty is possible” as a brand slogan. Additionally, Yizi series focuses on fashionable young women through passing on young, active, fashionable, low-profile and intellectual images, expressing a brand spirit of “easy use, easy make-up”.
(3) Leading and side brand strategy
A firm can take advantages of consumers’ love for its brand to expand brand. Namely, launching new products or entering a new business field based on the current brand to save promotion cost, raise the acceptance level of consumers. For instance, Amway’s house and personal care series are less famous as the side brands and increase product recognition though Amway’s well-known business name. A good brand can accumulate its brand asset and has certain market influence, and brand expansion achieves the two effects.
4.4.6 PUBLIC WELFARE MARKETING STRATEGY:IMPROVE MARKET COMMUNICATION
The image is really important for a multinational business, in particularly for a direct-selling company. Before the Chinese government banned multi-level marketing companies in 1998, many
illegal multi-level marketing companies appeared, and it caused inconvenience to Amway in developing business. Under this situation, Amway attempted to get involved in China local society to become part of their life and to differentiate from other illegal multi-level marketing companies.
Amway sponsored a lot in China social public welfare activities. In order to search for appropriate public welfare theme, Amway has hired experts who master in the “public welfare business and market” to investigate Chinese culture since it entered the market. Since 2004, Amway has set three themes of “Children, Environment, and Health” to be project management. “Children” is future and own unlimited shiny prospect, and that is suited for the business spirit of “adding color to your life”.
Moreover, “health” and “environment” are “Chinese features”, and also become social issues that people care about. Since 10 years ago, Amway has invested millions of capital and cooperated with universities such as Ching Hua to run the activity of “Amway famous school” in poor areas, establishing scholarship, donating teaching facilities, improving the teaching environment, and encouraging students to contribute in the teaching business in western China. This business also ranks the 5th in “Donation by Cross Country” in the Forbes Chinese version.
In the respect of environment, Amway insist using environmental-friendly material, plants
“Amway woods” for consecutively 7 years, do many big activities to pass on green ideas and healthy life style. According to the report from Nelson in 2006, Amway (China)’s reputation reached average 83% among people in first-tier cities such as Beijing, Shanghai and Guangzhou.
The performance of public welfare marketing is clear: indirect promotion, brand image increase, put employees together at activities; gain more recognition from government and media and that is the key factor for Amway to set policy direction. A successful business has at least two abilities: one is business management, the other is public relation with government, and the latter is beneficial to business development, and without any doubt public welfare marketing is one of the most effective ways for international firms to engage in public relation with government.
4.4.7 DIRECT-SELLING STRATEGY:CORE STRATEGY OF AMWAY
Instead of delivering products though agents and wholesalers between firms and customers, Amway (China) directly uses retail stores. Since 2001, Amway has promoted products through both mass media advertisement and world of mouth from sales representatives. Sales representatives who
obey the policy and procedure are key roles in the whole process from knowing products, buying products to after-sales. They are core and successful key factor of Amway, and Amway (China)’s all marketing strategies are developed surrounding them. The features of Amway’s direct-selling are as follows:
1. Direct sales: Because there are no intermediates between manufacturers and consumers, it is beneficial to process management from manufacturing to sales, information communication, policy implementation, easier to contact market and save cost.
2. Network establishment. Amway organizes huge sales teams to promote products. Networks are also called sectors, and distributors develop downlines through direct or indirect sponsor to form their own network. Amway erects more strict management rules for networks that can be inherited.
3. Multi-level commission. Distributors can gain profit not only from their own sales volumes but also from the volumes of their whole team or network or sector composed of those who are direct or indirect sponsored.
4. Transformation of distributor rules. Distributors are not only sales representatives but also loyalty consumers of Amway and repeatedly purchase products. In addition, part of their bonus is from how much they buy.
5. Product explanation and demonstration. Before selling products, distributors arrange meetings for product explanation and demonstration, especially for those high added-value products. Explanation contains ingredient, function, effect and so on; demonstration includes using products on spot and share their own experience about products. By doing so, customers can understand products more and increase desire and confidence of consumers to buy products.
6. Distributor conference. There are many types of conferences, including product seminar, sponsor meeting, experience sharing, tour seminar for senior leaders, and so forth. Sponsor meeting is important, which is a means that Amway promote itself and recruit new distributors through sales explanation, experience sharing and all kinds of beliefs promotion.
The other conferences are to encourage distributors and promote their business through tour and communication with senior leaders of the firm.