Avon 2009 Annual Report Download - page 23

us in acountry, thecost for future, and possibly past, contributions
could be so substantial in thecontext of thevolume and
profitability of our business in that country that we would
consider discontinuing operations in that country.
Promotion and Marketing
Sales promotion and sales development activities are directed at
assisting Representatives, through sales aids such as brochures,
product samples and demonstration products. In order to support
the efforts of Representativestoreach new customers, specially
designed sales aids, promotional pieces, customer flyers, tele-
vision and print advertising are used. In addition, we seek to
motivate our Representatives through the use of special incentive
programs that reward superior sales performance. We have made
significant investments to understand the financial return of such
field incentives. Periodic sales meetings with Representatives are
conducted by the district sales or zone managers. The meetings
are designed to keep Representatives abreast of product line
changes, explain sales techniques and provide recognition for
sales performance.
Anumber of merchandising techniques are used, including the
introduction of new products, the use of combination offers, the
use of trial sizes and samples, and the promotion of products
packaged as gift items. In general, for each sales campaign, a
distinctive brochure is published, in which new products are
introduced and selected items are offered as special promotions
or are given particular prominence in the brochure. Akey current
priority for our merchandising is to expand the use of pricing and
promotional models to enable adeeper, fact-based understanding
of the role and impact of pricing within our product portfolio.
Investment in advertising is another key strategy. We significantly
increased spending on advertising since 2006, including advertis-
ing to recruit Representatives. We expect this to be an ongoing
investment to strengthen our beauty image worldwide and drive
sales positively.
From time to time, various regulations or laws have been pro-
posed or adopted that would, in general, restrict the frequency,
duration or volume of sales resulting from new product intro-
ductions, special promotions or other special price offers. We
expect our pricing flexibility and broad product lines to mitigate
the effect of these regulations.
Competitive Conditions
We face competition from various products and product lines
both domestically and internationally. The beauty and beauty-
related products industry is highly competitive and the number
of competitors and degree of competition that we face in this
industry varies widely from country to country. Worldwide, we
compete against products sold to consumers by other direct-
selling and direct-sales companies and through the Internet, and
against products sold through the mass market and prestige
retail channels.
Specifically, due to the nature of the direct-selling channel, we
compete on aregional, often country-by-country basis, with our
direct-selling competitors. Unlike most other beauty companies,
we compete within adistinct business model where providing a
compelling earnings opportunity for our Representatives is as
critical as developing and marketing new and innovative products.
As aresult, in contrast to atypical CPG company which operates
within abroad-based consumer pool, we must first compete
for alimited pool of Representatives before we reach the
ultimate consumer.
Within the broader CPG industry, we principally compete against
large and well-known cosmetics and fragrances companies
that manufacture and sell broad product lines through various
types of retail establishments. In addition, we compete against
many other companies that manufacture and sell more narrow
beauty product lines sold through retail establishments and
other channels.
We also have many competitors in thegift and decorative products
and apparel industries globally, including retail establishments,
principally department stores, gift shops and specialty retailers,
and direct-mail companies specializing in these products.
Our principal competition in the fashion jewelry industry consists
of afew large companies and many small companies that sell
fashion jewelry through retail establishments.
We believe that the personalized customer service offered by our
Representatives; the amount and type of field incentives we offer
our Representatives on amarket-by-market basis; the high qual-
ity, attractive designs and prices of our products; the high level
of new and innovative products; our easily recognized brand
name and our guarantee of product satisfaction are significant
factors in establishing and maintaining our competitive position.
International Operations
Our international operations are conducted primarily through
subsidiaries in 64 countries and territories outside of the U.S.
In addition to these countries and territories, our products
are distributed in 40 other countries and territories through
distributorships.
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