Avon 2006 Annual Report Download - page 4

Our Swarovski-inspired fragrance, Crystal
Aura, performed well around the world, and
in North America, the Derek Jeter fragrance,
Driven, was well received by consumers.
In color, our 2006 performance continued to be
disappointing. Comprehensive plans to totally
transform our color line were developed during
the year. Avon Color is being relaunched in the
spring of 2007 with major new innovations, a
broader shade palette and contemporary new
packaging. The category will also benefi t from
alliances with leading fashion designers and a
celebrity makeup artist. To support the relaunch,
our color advertising investment will be triple
what it was in 2005.
WIN WITH COMMERCIAL EDGE
Another area where we are signifi cantly
increasing our investments is to support our
more than fi ve million Avon Representatives
around the world. They are our direct link with
consumers and deliver our commercial edge
in the marketplace.
In early 2006, we put in place a new global
merchandising team to work with local markets
to improve the Avon shopping experience.
We also began focusing on how to reduce the
large size of Avon’s product line, which drives
complexity and cost. Through some early
actions, we were able to reduce our size-of-line
by 25% during 2006, but size-of-line reduction
continues to be a major focus.
With these efforts under way, in mid-2006,
we began a comprehensive study looking
at the total value proposition for our
Representatives. As part of this study, we
completed an in-depth analysis quantifying
the paybacks of our various fi eld investments.
The data showed high paybacks for many
of our channel investments, and created a
compelling case for accelerating investment
levels for our channel as well as our brand.
As a result, in the fourth quarter 2006
we increased our channel investments
in selected markets and saw some early
improvements in active Representative
growth. In 2007, we intend to invest an
incremental $100 million to further strengthen
the Representative value proposition.
To enhance Representative earnings, we have
developed tailored plans by market, including
increasing the frequency of our sales campaigns,
launching our Sales Leadership opportunity and
reducing the Representative's cost of doing
business with Avon. To reduce the effort it takes
to sell Avon, we are investing in a major global
initiative to give Representatives comprehensive
Internet and mobile phone tools to help them
manage their businesses.
While improving the overall Representative
experience, we also remain focused on
continuing to build our fi eld force in our priority
geographies around the world. Certainly the
launch of direct-selling in China was one of
the highlights for us in 2006. In late February,
Avon received the fi rst license granted by
the Chinese government under new direct-
selling regulations. We ended the year with
over 350,000 licensed Sales Promoters,
approximately 150,000 of whom fi t our
standard defi nition for active Representatives.
As we built our direct-selling base, we
successfully stabilized our 5,400 retail
Beauty Boutiques and created a new earning
opportunity for them as direct-selling service
centers. With our Beauty Boutiques and
Sales Promoters now working together in one
integrated direct-selling model, revenues in
China are growing again, and we continue to
be excited about the long-term potential in this
important market.