Focusing a Brand Product Range

One of Amways most successful lines
INTRODUCTION
Amway is a global company which has built its success
on direct selling. Direct selling is different from the more
traditional distribution channels: customers visiting
shops to buy their goods. Amway has three million
Independent Business Owners (IBOs) worldwide who deal
directly with clients, building up personal relationships
and delivering direct to their homes. Amway manufactures
and distributes over 450 different products including
household goods, cosmetics and food supplements. The
IBOs are highly motivated, selling to people they know or
meet. The personal contact and care is an important element
in direct selling.
America are projected to grow by All products move through phases care technologies available today. It
is hair care products. This is a highly nearly 60% by 2001, 54% in Eastern during their life span, much like a uses the Ceramide Infusion System and
competitive market and over the years Europe and 27% in the Asia-Pacific person. New products are first con- to understand how it works requires
Amway has invested heavily in both region. This has significant implications ceived and developed for the market. some knowledge of the structure of the
research and development as well as for international marketers because Then their sales hopefully will grow, human hair.
in market research. It is important to manufacturing truly global products as consumers become aware of them,
distinguish between the two. Research can create many challenges. before levelling off as the product
Hair is comprised of three layers: the
medulla, which is the soft spongy core
and development is a key stage in the
Consumers are becoming much more reaches maturity. This is when sales
creation of new products and involves of the hair shaft. The cortex is an inner
demanding, looking for high quality and profits are likely to be at a maxi-
layer that gives the hair its strength,
experimenting with new compounds
products that are convenient to use and mum. Finally, the product sales may
and ingredients, careful testing to elasticity and texture and determines
time efficient. The biggest growth area begin to decline as it loses popularity
ensure safety and developing the man- its thickness and colour. Finally, the
in the market is expected to be in multi- or is superseded by a new, more
ufacturing processes to enable mass
functional products such as 2 in 1 technologically advanced item and it
cuticle, which is the outer protective
production. By contrast, market research layer of tiny overlapping scales. When
shampoo and conditioner for people may be withdrawn from the market
is the process of gathering information these scales are smooth, hair will look
to discover exactly what the market
with busy lifestyles. In the past, the (this is called the product life cycle).
healthy and shiny. Ceramides, found
shampoos and conditioners used in hair- Companies may try to prevent this
wants. It is focused on the end user of naturally in the hair combine with pro-
dressing salons have normally been of decline by extending the life span
the product and ensures that Amway is teins and smooth down the scales,
a higher quality than those available in through extension strategies, breathing
producing the right product at the right locking in the moisture and keeping the
the shops. Consumers are now demand- new life into an old product. Research
price for the right consumers. hair looking healthy.
ing the same quality for home use. and development are associated both
with the development stage of the Modern life styles and the environ-
Background to Technological product life cycle and any extension ment can prevent this happening. Hair
the hair care market innovation strategies. In the highly competitive styling, chemical processes, pollution
market of hair care products, it is vital and UV rays can open up these
The market for hair care products is Scientific research and the develop-
to keep developing and improving the cuticle layers, causing the hair to
enormous and continues to grow. ment of new products are extremely
products offered. become dry and brittle, allowing the
Western Europe is currently the worlds costly and are often beyond the finan-
moisture to escape and the hair to lose
largest region for hair care products and cial resources of small companies. For
by 2001 sales are expected to have Amway this investment has been key Satinique the launch its shine. The Ceramide Infusion
System is designed to reverse this
increased by nearly 16% on 1997 to its success. Amway has been a of a new product
levels. However, other economic areas problem with a formula which
market leader in researching and
such as the Asia-Pacific region, developing new products throughout After several years of research and includes natural ceramides, protein
Eastern Europe and South America are its product portfolio and designing new development, Amway has produced and Meadowfoam Seed Oil, a moistur-
expected to grow faster and offer manufacturing processes, essential if it new Satinique, a range of products ising agent, to penetrate the hair and
excellent new markets. Sales in South is to keep ahead of its competitors. using one of the most advanced hair restore its nutrients.

HAIR CARE SALES AND PROJECTIONS BY REGION 1997/2001 FORECAST SALES OF SALON PRODUCTS BY MAJOR MARKET 1997/2001
12,000
BROWSE THE WEB FOR
In Us Dollars,
current rsp 1997 1998 1999 2000 2001
% Growth
1997/2001 information on the organisation
10,000 US 2,340 2,482 2,619 2,750 2,888 23.1
Japan 190 194 200 207 213 12.1
www.amway.co.uk
US DOLLARS (IN MILLIONS)

Brazil 84 115 155 171 186 121.4

8,000 France 93 97 101 105 109 17.2
UK 75 77 81 87 92 22.7
Germany 60 61 63 86 89 48.3
6,000 Italy 79 80 82 83 84 6.3
Canada 44 45 45 46 47 6.8
1997
2001

1997
2001

1997
2001

1997
2001

Sweden 30 32 33 34 34 13.3
4,000 Netherlands 27 28 29 29 30 11.1 ACCESS THE CD FOR
12 15 18 22
1997
2001

1997
2001

1997
2001

1997
2001

Taiwan 26 116.7


Spain
Greece
18
12
19
12
21
13
22
14
23
14
27.8
16.7
printouts of the case study
hotlinks to:
2,000
Switzerland 10 10 10 10 10 -
Austria 9 8 8 8 7 -22.2
0 6 6 6 6 6 -
% OF
A sia- Western North South Eastern Middle Africa Southern


Norway
Australia 4 4 5 5 5 25.0 www.thetimes.co.uk
Pacific Europe America America Europe East Asia 3 2 2
2
GROWTH 21.7% 15.6% 25.5% 59.1% 54.2% 23.9% 93.7% 83.1% Belgium 2 -33.3
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THE TIMES 100 Edition 6


Target markets and
market segmentation
Having successfully developed the new
product in the laboratory, Amway has
to decide how it is going to be market-
ed. This is the responsibility of the
Corporate Marketing Team. Firstly, the
marketing team had to decide what the
objectives were for Satinique before
they could plan the marketing strate-
gy. What are we trying to achieve with
this new product and how are we going
to achieve it? Only then can they con-
sider the tactics they would employ.
This is called the marketing mix. One
of the first questions was who is this
new product being aimed at? This is
known as the target market. To answer
this question, Amway had to conduct
extensive market research to collect
both primary and secondary data.
The target audience
Some companies will aim their products
at the entire population, others will try to
differentiate. Splitting the whole market
up into various groups is known as
market segmentation. Although it was
recognised that groups such as children,
men and teenagers are likely to become
targets in the future, the Satinique
range was aimed at adult females
between 25 and 44 years of age.
QUESTIONS
What is meant by
1 2
market segmentation?
Why do firms try to
target certain groups?
THE TIMES 100 Edition 6
Extensive market research into this seg-
ment shows that women are often look-
ing for new products and technologies
that will provide a more satisfying hair
care experience. From the data collect-
ed, it is possible to build up a typical
consumer profile to describe current
buying behaviour.
A typical consumer from this target
group:
is probably a professional woman
is very hair conscious and always
wants to look her best
wants professional, salon
quality products
buys hair care products from
shops and hairdressing salons
relies on recommendations
from friends when making
hair care purchase decisions
makes buying decisions based
on clinical evidence.
Having decided on the target audience,
the marketing team turns its attention
to the marketing mix. In this case it
would focus particularly on the pricing
strategy, the promotional campaign
and, most importantly, the packaging.
A team of experts was brought togeth-
er to ensure that all aspects of the new
product were covered. Amway employed
Dr Phillip Wertz, a leading expert in
What are the differences
3 4
between research and
development and market
research? Why are both
important to a successful
product launch?
The Times Newspaper Limited and MBA Publishing Ltd 2000. Whilst every effort has been made to ensure accuracy of information, neither the publisher nor the clients can be held responsible for errors of omission or commission.
GLOSSARY OF KEYWORDS
ceramide technology and Nancy Flinn the packaging. The colours are light, uses advances in science and technology
an expert on the hair care industry and elegant, soft and culturally appealing. to enhance products, while market
its products. Dragoco, an internationally Soft, metallic white gives a sense of research examines changing consumer
Consumer profile: A picture of Positioning: The orientation of
a typical consumer from within a the product within the market in
renowned fragrance house, was brought clarity, while the blue caps represent tastes and fashions. The Corporate
target audience, constructed using comparison to competitor products.
in to cover design and development. water and blue sky. The silver metallic Marketing Team and team of experts
market research. For example, is the product high
Aesthete, a world class Parisian design touches add luxury and spice. All the have to co-ordinate and develop a
quality with a high price, or aimed
team, and experts from the Institute for colours are designed to suggest cleanli- cohesive marketing strategy. The key Direct selling: A method of at the lower end of the market. It
Colour Research looked at global trends ness. This design can be used to create to successful marketing is to clearly marketing and retailing consumer involves the creation of a product
in packaging colours before designing a brand image and brings together the identify at which market segment the goods directly to the consumer or brand image. All aspects of
the packaging. John Gillespie, a hair product collection. The exclusive look product should be aimed, find out pre- which relies neither on direct the marketing mix will affect its
stylist with an international reputation mirrors that used in the cosmetics sector cisely what consumers in this target mail, product advertising nor positioning.
fixed retail outlets.
was employed for public relations, and reinforces the quality message. group want and then plan the market-
Primary data: The collection of
merchandising and guest appearances. ing strategy accordingly. The focus of
Distribution channel: The path new information through quantitative
brand image and positioning of the
Conclusion product within the marketplace are of
taken by a product from the and qualitative research using, for
Packaging paramount importance.
manufacturer to the consumer. example, focus groups, interviews,
The launch of any new product requires This can include wholesalers questionnaires and observation.
One of the most important challenges and retailers.
a considerable amount of time, effort Involves research in the field.
for Amways team of experts was to
and careful planning. Research
develop the appropriate packaging for International marketing: Product life cycle: The phases of
and development
the new Satinique products. It was Marketing goods and services in a products life span. These might
important to create a brand image for different countries, which may have include conception, development,
the total product range. The image cre- very different cultures. growth, maturity, decline and
ated would reflect a great deal about withdrawal from the market.
Marketing mix: The tactics used
the product and its consumers. This is Companies will attempt to extend
to achieve the marketing strategy.
known as positioning the product These tactics would cover product,
the profitable mature phase using
within the market. extension strategies.
price, promotion, place, packaging,
people etc.
Packaging can be crucial to the success Research and development:
of a new product and Amway went to Scientific research and technological
Marketing strategy: The overall
great lengths to ensure that Satiniques development of new products and
marketing plan designed to achieve
packaging and design appealed to the processes. The process of innovation.
the objectives set for the product
target audience. by the firm.
Secondary data: Desk research
The Institute for Colour Research, a into existing sources of information
Market research: Gathering of
leading American analyst and forecaster such as statistical data collected by
primary and secondary data about
of global colour trends, helped to deter- other studies, magazine and press
buying habits, likes and dislikes,
mine the colour palette and finishes for articles, trade journals, community
usage and perceptions of actual
service order, EU etc.
and potential clients. It enables the
firm to build up a consumer profile. Segment: A group of people defined
by a common characteristic, e.g. age.
Market segmentation: Splitting
the market up by targeting groups
of consumers by age, sex, socio-
economic groups, ethnicity etc.
BROWSE THE WEB FOR
information on the organisation
What are advantages and Analyse and evaluate Working in small groups, What problems might you
5 select any fast moving
www.amway.co.uk
disadvantages of market- Amways marketing encounter with this exercise?
ing over 3,000 individual tactics for the Satinique consumer product. BROWSE THE WEB FOR
b) Look at the design of the
product lines in over range. How does it differ a) Design a market research packaging carefully. How answers to these questions ACCESS THE CD FOR
30 countries? How does from other fast moving questionnaire to enable do you think this packaging a profile of the organisation printouts of the case study
international marketing consumer goods? you to build up a typical has been designed to appeal revision help hotlinks to:
differ from domestic? consumer profile. to its target market?
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