Amway case study

Amway
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.
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 chainso 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.
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

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)

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.
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.

Developing an Internet strategy

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 strategyinvolves 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.
For Amway's IBOs the web had many potential benefits such as:

providing up-to-date feedback and information with fewer clerical 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.

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. 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:

amivo: UK, Italy, Germany, Ireland, Austria, Scandinavia (Denmark, Finland, Sweden,
Norway), South Africa, Netherlands, Belgium, Greece
v.e.b.s.o. from Amway: 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.

Communicating the strategy

Good, clear communication is essential in making sure that

the CSR strategy relates directly to the company business objectives. Communication also
helps in putting the strategy into practice.
A number of communications media are used:
1. Face-to-face communication: Regular meetings take place between UNICEF, Amway and
its IBOs. Through meetings with UNICEF staff, Amway is able to discuss the vision and
objectives. It then passes the message on by meeting with IBOs. In 2005 the two
organisations arranged a joint briefing day for IBO Leaders. They were able to hear
firsthand experiences from UNICEF staff about their roles and UNICEF's work as well as
where the money goes.
2. Printed material: Amway produces a monthly magazine for all IBOs called Amagram.
3. Public relations materials are also important, particularly at launch events for the initiative
(e.g. in Milton Keynes in 2006).
4. Email communication: Email is very important in the company it plays a significant part in
keeping IBOs up-to-date.
5. Online activities: There is a micro-site dedicated to the Amway UK/UNICEF partnership on
the UNICEF UK website.
Fundraising

Amway Europe provides support for fundraising to the

extent of 500,000 euros (about 350,000) per year through selling items such as:

greetings cards
multi-cultural gifts and cards
stationery and wrapping paper
toys for children.

However, Amway UK's support goes well beyond these activities. In addition, it involves
staff fundraising events and raffles organised by the IBOs.
UNICEF attends IBO major events (usually supported by 1,000 or more IBOs) where
requested. A UNICEF stand outlines the work with speakers, literature and merchandise.

Conclusion

Amway is a family business with family values. Its IBOs are

people who want to make a difference to the communities in which they operate and to the
wider world community. This is Corporate Social Responsibility (CSR) in action.
The clue to Amway's success is the careful planning of its strategy and its involvement with
many stakeholders in getting the strategy right. Of course, it is early days in the latest
chapter of a strong relationship between Amway and UNICEF.
Evaluation is taking place to measure the success of the initiative in terms of meeting
fundraising goals. Customer research is carried out to test customers' views on the
relationship and to find out how aware the general public is about what Amway is doing in
the field of CSR.