Chief Avon lady to be replaced

Bob Moon Dec 14, 2011

Kai Ryssdal: Raise your hand if you know — off the top of your head — the name of the world’s biggest door-to-door cosmetics company? Anybody?

Avon’s been struggling of late. And now it’s looking for a new chief executive. Andrea Jung, the longest-serving woman CEO of a Fortune 500 company, is going to stay on as chairwoman of the board. But our senior business correspondent Bob Moon explains there are questions being raised about Avon’s famous 125-year-old business model.

Avon commercial: Avon calling!

Bob Moon: It’s been a long time since Avon has used that old slogan. The company improved its sales by giving itself a younger, more upscale image makeover and expanding overseas. It’s been especially successful with its door-to-door marketing model in Britain — and takes in more than 80 percent of its revenue from outside the U.S.

Lately, though, it’s stumbled badly in Brazil and China, and its financial performance has been erratic. Kent Grayson is a marketing professor at Northwestern University. He doesn’t see Avon’s troubles as a sign that its approach is outdated. He suggests Avon just isn’t adapting to the challenges it faces, particularly in growing its business abroad.

Kent Grayson: They sell products to different kinds of customers in different markets, and the executives have to relate to those different kinds of customers in different ways. These kinds of problems are problems that any big global company has, regardless of their distribution model.

At the University of Illinois at Chicago, direct-selling expert Charles King says overall, the marketing-through-networking industry has been thriving — in spite of, or perhaps due to, the tough economy. Companies like Mary Kay Cosmetics and Amway.

Charles King: More and more people are trying to get involved in having their own business as an alternative income stream.

King says direct selling and network marketing accounts for $118 billion in sales worldwide, and online sales are no immediate threat, as he sees it.

King: When it comes to me convincing you, and explaining to you, word-of-mouth, person-to-person is the most powerful.

The experts say Avon doesn’t need to abandon its approach — just fix it.

I’m Bob Moon for Marketplace.

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