Amway's Indian Network Marketing Experience

THE INDIAN MLM JOURNEY

While in international markets, a wide range of products was successfully sold directly to homes, this was not the case in India. In the mature economies, customers were fully aware of the competing products available, whereas in developing economies such as India, awareness levels were comparatively low. Industry observers commented, “The way the market is booming, no direct sale company can meet all its customers only through its own sales force.” However, MLM companies opted for direct selling as against the high visibility retail set up for competitive cosmetics players such as Revlon, aiming to get an image of exclusivity.

There was some resistance to the network-marketing concept in India, as Indians preferred the security of a job. Being a salesperson in an MLM setup did not provide this security. This hampered the company's ability to attract competent personnel. The problem was aggravated by the fact that companies treated direct selling as ‘just another'promotional tool, while it was mainly about motivation. One positive aspect of network selling was that it was very convenient for women as the job could be done part-time and at hours of their convenience. Also, the products sold also usually targeted at women, and this made it easier for the Indian women to accept the distributorships.

Most Indian direct selling failures stemmed from the fact that they did not understand the concept thoroughly. Companies who opted for advertising in the media soon found that it had a negative impact. Advertising created a suspicion in the mind of the salesperson that the company was taking direct orders and thus, reducing commissions. In some cases, it also negated the impact of demonstrations. Eureka Forbes handled this carefully, when it advertised not its product, but the salesperson as a friend of the customer. Advertising went hand in hand with retail, as people ought to be told where to go and get the product. In an MLM setup, advertising was not the best way to spend money. Though this did sometimes result in inadequate product exposure, the money which would have been spent on advertising was usually diverted into training and motivating the salesperson to contact as many customers as possible. Though Oriflame and Avon did advertise, it was mainly attributed to their being prima-facie into cosmetics and personal care, thereby involving an image factor. Amway, which was into home care products in a big way, had decided not to go in for advertising on a scale as large as adopted by Oriflame and Avon.

Competition was intensifying in the industry in the early 21st century. Amway seemed to be faring better than competitors like Modicare - a fact attributed mainly to its premium brand image. Both Amway and Modicare were not the typical door-to-door selling companies, as they sold only to customers known to their distributors. While Amway targeted only the upper section customers, Modicare targeted the middle and the upper middle class customers. Some of Modicare's products were priced at one-fourth of the price of Amway's products. Modicare sources said this was because its products were priced for the Indian market, while Amway's pricing was more in tune with its global counterpart. Modicare was even willing to reduce its margins in certain cases. Also, Modicare offered 100% refund even when the product had been used, unlike the 75% refund offered by Amway. This could turn out to be a cause for concern for Amway in the long run.

QUESTIONS FOR DISCUSSION:

1. Comment on the concept of network or multilevel marketing. Do you think the model would be successful in India? Also, compare and contrast the MLM model with the traditional distribution system, bringing out the merits and demerits of both.

2. Study the developments that occurred after Amway launched its commercial operations in India. List the reasons, which led to the ‘below-expectations'performance of the company.

3. Critically examine the corrective measures adopted by Amway to make the MLM model a success. What further measures can the company take in order to tackle the competition from FMCG majors like HLL and P&G? 

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