AVON Cosmetics-Place and Price Analysis

AVON Cosmetics-Place and Price Analysis

AVON Cosmetics Place and Price Analysis

AVON Cosmetics uses a distribution strategy based on representatives. The mechanism behind this distribution system is relatively simple -- individuals sign up to become AVON representatives. They can sign up with a local sponsor, directly with the company or even online. The new AVON representative has the ability to purchase the company's cosmetics products at discount prices. He will in fact purchase all of the AVON products at discount prices, but will further sell them to his clients at catalog rates. The difference between the discounted price he pays to the company and the catalogue price charged the customer represents the earning of the representative.

This distribution method is commonly referred to as multi-level marketing, in which the company seeks not only to sell its product, but to gather more and more representatives that sell products and enroll more AVON representatives. The method is useful and adequate for the company from at least two standpoints:

First of all, it creates word of mouth publicity and promotes the company through representatives enrolling campaigns

Secondly, it sells the company products without incurring the high costs associated with a traditional distribution channel (such as direct distribution through company stores or indirect distribution through intermediaries)

It removes geographic barriers and allows the company to grow globally (Direct Selling Education Foundation)

More recently, the AVON Cosmetics Company has developed a new distribution channel through which to interact with both prospective customers but also prospective representatives. This new channel is represented by the online community, mostly by the company's own website (http://www.avon.com/), where interested users can communicate with AVON representatives.

Price Analysis

The AVON Cosmetics company implements a complex pricing strategy. At the core of price setting lies the variable pricing strategy, through which retail prices are set in accordance with the costs incurred in the manufacturing and distribution of the AVON products. As a result of the implementation of this pricing strategy, whenever a modification is incurred in the price of the commodities used in the process, this modification is reflected in the products' retail prices. In other words, when the costs of manufacturing and distributing the AVON cosmetics increase, the retail price of the products will also increase. Vice versa, as the costs decrease, the retail price would decrease.

The second component of the pricing strategy is that of discount pricing. Discount pricing generally implies the vending of the company's merchandise at reduced prices in order to achieve various goals, such as promoting a product or rewarding the loyalty of customers or representatives. The AVON pricing strategy is unique as it offers discount prices for the representatives on the one hand, but also for the products in the catalogue on the other hand.