Avon 2008 Annual Report Download - page 5

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Annual Report 2008
With many aspects of those programs
successfully completed, we now have the
management capacity to undertake new
cost opportunities. In February 2009, we
announced a new restructuring program that
is targeted to deliver annualized savings of
approximately $200 million by 2012–2013.
Even beyond these programs, we have
embedded a “constant turnaround mentality”
throughout the organization, refl ecting our
commitment to continually drive costs out of
the business. Over the past three years, we
have focused on achieving zero overhead
growth. In 2009, we are accelerating our
aggressive focus on cost reduction to deliver
negative overhead growth in response to the
challenging macro environment.
Avon’s Advantaged Business Model
The second competitive asset we will leverage
in 2009 is Avon’s advantaged business model,
which is uniquely suited to adjust to times
like these. With unemployment increasing
in many countries, and with recessionary
fears spreading, promoting Avon’s income-
generating opportunity will be one of our
most critical areas of focus in 2009.
Avon is the largest engine of economic
opportunity for women on earth. We sell to
our Representatives on credit, so that for the
most part, our Representatives don’t pay us
until they get paid by their customers. This
makes us the largest microlender to women.
Additionally, unlike other entrepreneurial
opportunities, there is minimal cost to start
an Avon business. Our brand name has 90%
recognition worldwide and is consistently
listed as one of the world’s top global brands.
So Representatives are selling products that
consumers know and want.
With these strengths, in 2009 we are shifting a
greater portion of our total advertising budget
against our Representative recruiting effort,
doubling both the amount we spend and
the number of markets where we advertise
Avon’s earning opportunity. We are also
strengthening this advertising to address
people’s concerns in the current economy,
with messages like: “I can’t get fi red. I can’t
lose my job. This is my business.” We are also
seeking high-profi le venues to share this
message, such as the 30-second advertising
spot we recently ran during the pre-game
show of the U.S. Super Bowl.
We are supporting this advertising with equally
high-profi le public relations opportunities,
including a recent appearance by several
Avon U.S. Representatives on Good Morning
America, and similar appearances in key
markets around the world. We are also capital-
izing on many other different venues to get our
messages to the public. These include show-
casing the Avon earning opportunity at career
fairs and on internet job sites, as well as more
prominent focus on Avon’s own internet home
page and in our brochure, which is one of the
highest circulation publications in the world.
In addition to Representative recruiting, in
2009 we will ensure that our sales brochure
offers consumers a far greater amount of
products in the under $5 or equivalent range
to meet the needs of increasingly value-
conscious consumers. Avon offers a broad
product assortment at every price point and
we also have full control over our store—the
Avon brochure. This gives us the fl exibility
to quickly rebalance our product mix as
consumer needs shift.
We have also sharpened our “smart value”
messaging. This includes creating special
value sections in sales brochures around
the world as well as separate fl yers and
mini-brochures. For example, a sales fl yer in
the U.K. features the cover line: “Want to Be
Beautiful on a Budget?” The message here is
not about discounting. The goal is to remind
consumers of our everyday low prices. Or as
we say in one of the mini-brochures: “Forget
one-day discounts. Avon prices will always be
appealing because we believe that women
should look and feel fabulous for less.” In
addition, we are combining this “smart value”
focus with clear messages about the ease
of the Avon shopping experience compared
with retail, emphasizing personal home
delivery by Avon Representatives with no
delivery fee.
A History of Experience
By accelerating our focus in 2009 on these
recruiting and “smart value” strategies, our
goal is to outrun the contraction in consumer
spending and protect our market share. This is
the strategy we have relied on during fi nancial
crises in the past, and each time we have
emerged stronger and better.