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MINOR

PROJECT

REPORT

ON
RELATIONSHIP MARKETING WITH FOCUS ON
AMWAY
Submitted in partial fulfillment of the requirements
for the award of the degree of
Bachelor of Business Administration (BBA)

MAHARAJA SURAJMAL INSTITUTE, JANAKPURI


AFFLIATED TO:
GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY, NEW DELHI

SUBMITTED TO: DR.PARAMVEER SINGH


ISHAN GULATI
DEPARTMENT OF BUSINESS ADMINISTRATION
NO.01514901713

SUBMITTED BY:
ROLL
BBA(G) 3 RD

SEMESTER
MORNING
SHIFT
1

CERTIFICATE
I, Mr./Ms. ISHAN GULATI , Roll No. 01514901713 certify that the Minor
Project Dissertation (BBA-209) entitled RELATIONSHIP MARKETING
WITH FOCUS ON AMWAY is done by me and it is an authentic work
carried out by me. The matter embodied in this project work has not been
submitted earlier for the award of any degree or diploma to the best of my
knowledge and belief.

Signature of the Student


Date:

Certified that the Minor Project Report/Dissertation (BBA-209) entitled


RELATIONSHIP

MAREKETING WTH FOCUS ON AMWAY done by


Mr/Ms. ISHAN GULATI , Roll No. 01514901713, is completed under my guidance.

Signature of the Guide


Date
Name of the Guide:
Designation:

ACKNOWLEDGEMENT
Project work is never the accomplishment of an
individual rather it is an amalgamation of the
efforts, ideas and co-operation of a number of
entities.

I would like to thank GURU GOBIND SINGH


INDRAPRASTHA UNIVERSITY, NEW DELHI for
giving me an opportunity to work on a project as
valuable as this.

The completion of the project study that follows,


seemed to be a distant goal had it not been for
the contribution of Dr. PARAMVEER SINGH for
allowing me to work on a very intrinsic part on
RELATIONSHIP MARKETING WTH FOCUS ON
AMWAY. I thank him for the ideas and basic
concepts he delivered and shared with me, as
they helped me a lot in accomplishing this project
of mine.

(ISHAN GULATI)

TABLE OF CONTENTS
Chapter
Number

Particulars

1.

INTRODUCTION

2.

RELATIONSHIP MARKETING

3.

VARIOUS ASPECTS OF
RELATIONSHIP MARKETING

1.1 Nature
1.2 Objectives Of Study
1.3 Data Collection Methodology

2.1 Overview
2.2 Approaches to RM
2.3 Rise in Relationship Marketing

3.1 Trust and Commitment theory


3.2 Loyalty and RM
3.3 Effects of Environment on RM

Page
Number
6
6
7
8
9
9
13
14
18
18
20
22

4.

AMWAY PROFILE

5.

AMWAYS DECLINE IN INDIA

6.

QUESTIONNAIRE ANALYSIS

7.

4.1 Company History


4.2 Business Model
4.3 Current Scenario
4.4 Amway India
5.1 Hurdles in RM of Amway
5.2 Market Share Analysis

6.1 Survey Method


6.2 Limitations of the Project

THE FINAL AGENDA


7.1 Conclusions
7.2 Bibliography

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31
32
38
38
42

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45
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55
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1. INTRODUCTION
1.1 NATURE
Relationship marketing refers to a wide range of relationship
type strategies that have developed over the past few decades in
product as well as service markets and in consumer as well as
business to business sectors. The antecedents of RM go to
Industrial marketing and Services marketing. RM found ready
acceptance in a marketing world where it had become obvious
that strategic competitive advantage could no longer be
delivered on the basis of product characteristics alone and
where corporate profitability was beginning to become
associated with satisfying existing customers (John Egan, 2001).
Relationship marketing as contrasted to transaction marketing
involves relational exchanges that trace to previous agreements.
There are four types of buyer-seller relationships bilateral
relationships, seller-maintained relationships, buyer-maintained
relationships, discrete exchanges (Dwyer, Schurr and Oh 1987).
For a firm, relational exchanges could occur with goods
suppliers, services suppliers, business units, employees,
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functional departments, intermediate customers, ultimate


customers, competitors, nonprofit organizations, government
(Hunt and Morgan 1994). Though conceptualizing relationship
marketing accommodates all types of above mentioned relational
exchanges, an adequate definition of relationship marketing for
the purpose of this paper will relate to exchanges with
intermediate customers and ultimate customers.

1.2 OBJECTIVES OF STUDY


Amway is a unique company. It is defined by the fundamental
philosophy of helping people help themselves. Amway has helped
millions of people run their own independent business around the
world. Today, Amway continues to grow by offering new products and
business opportunities to people from all cultures and walks of life.
Whether they are employees, distributors, or citizens in the community,
Amway touches their lives for better. India with its rich reservoir of
will, talent and enterprise is perhaps the most fertile ground for the
Amway Corporation. In short it has made substantial value addition to
Indias social economic life.
The main objective is to carry out an in-depth study
of Relationship Marketing in India with primary focus on
Amway. In order to achieve this primary objective, I have focused
my research in these main segments:

1.

What is Relationship Marketing?

2.

Role of Relationship Marketing in Modern


India.

3.

Understanding the theory of Trust and


Commitment & Trust with Loyalty in RM.
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4.
5.

Analyzing the problems/hurdles in Relationship


Marketing with focus on AMWAY.
Study of decline in market share of AMWAY.

1.3 METHODOLOGY FOR DATA COLLECTION


In todays world, there are many sources of data collection that help
us in bringing out important facts which prove to be relevant in
compiling projects of this stature.
The methods I used are briefly explained below:
Primary Data Collection: Direct Interview with people who are
associated with the Amway Corporation in India.
Questionnaire filled by a selected group of people.
Secondary Data Collection: The data has also been collected from:
Books
Magazines
Editorials
Internet
Amway Business Planner
Amway Opportunity Brochures etc.
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2. RELATIONSHIP MARKETING
2.1 OVERVIEW
Relationship marketing was first defined as a form of marketing
developed from direct response marketing campaigns which
emphasizes customer retention and satisfaction, rather than a
dominant focus on sales transactions.
As a practice, relationship marketing differs from other forms of
marketing in that it recognizes the long term value of customer
relationships and extends communication beyond intrusive advertising
and sales promotional messages.
With the growth of the internet and mobile platforms, relationship
marketing has continued to evolve and move forward as technology
opens more collaborative and social communication channels. This
includes tools for managing relationships with customers that go
beyond simple demographic and customer service data. Relationship
marketing extends to include inbound marketing efforts, (a
combination of search optimization and strategic content) PR, social
media and application development.
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DEVELOPMENT
Relationship marketing refers to an arrangement where both the buyer and seller
have an interest in providing a more satisfying exchange. This approach tries to
disambiguiously transcend the simple post purchase-exchange process with a
customer to make more truthful and richer contact by providing a more holistic,
personalised purchase, and uses the experience to create stronger ties.
From a social anthropological perspective we can interpret relationship
marketing theories and practices as commodity exchange that instrumentalise
features of gift exchange. It seems that marketersconsciously or intuitively
are recognizing the power contained in 'pre-modern' forms of exchange and have
begun to use it. This particular perspective on marketing opens up fertile ground
for future research, where marketing theory and practice can greatly benefit from
in-depth research of the principles governing gift exchange.
According to Liam Alvey, relationship marketing can be applied when there are
competitive product alternatives for customers to choose from; and when there is
an ongoing and periodic desire for the product or service.
Modern consumer marketing originated in the 1960s and 1970s as companies
found it more profitable to sell relatively low-value products to masses of
customers. Over the decades, attempts have been made to broaden the scope of
marketing, relationship marketing being one of these attempts. Arguably,
customer value has been greatly enriched by these contributions.
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The practice of relationship marketing has been facilitated by several


generations of customer relationship management software that allow tracking
and analyzing of each customer's preferences, activities, tastes, likes, dislikes,
and complaints.

For example, an automobile manufacturer maintaining a database of when and


how repeat customers buy their products, the options they choose, the way they
finance the purchase etc., is in a powerful position to develop one-to-one
marketing offers and product benefits.

In web applications, the consumer shopping profile can be built as the person
shops on the website. This information is then used to compute what can be his
or her likely preferences in other categories. These predicted offerings can then
be shown to the customer through cross-sell, email recommendation and other
channels.
Relationship marketing has also migrated back into direct mail, allowing
marketers to take advantage of the technological capabilities of digital, tonerbased printing presses to produce unique, personalized pieces for each recipient
through a technique called "variable data printing". Marketers can personalize
documents by any information contained in their databases, including name,
address, demographics, purchase history, and dozens (or even hundreds) of other
variables. The result is a printed piece
that (ideally) reflects the individual needs
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and preferences of each recipient, increasing the relevance of the piece and
increasing the response rate.

SCOPE
Relationship marketing has also been strongly influenced by reengineering.
According to (process) reengineering theory, organizations should be structured
according to complete tasks and processes rather than functions. That is, crossfunctional teams should be responsible for a whole process, from beginning to
end, rather than having the work go from one functional department to another.
Traditional marketing is said to use the functional (or 'silo') department
approach. The legacy of this can still be seen in the traditional four P's of
the marketing mix. Pricing, product management, promotion, and placement.
According to Gordon (1999), the marketing mix approach is too limited to
provide a usable framework for assessing and developing customer relationships
in many industries and should be replaced by the relationship marketing
alternative model where the focus is on customers, relationships and interaction
over time, rather than markets and products.
In contrast, relationship marketing is cross-functional marketing. It is organized
around processes that involve all aspects of the organization. In fact, some
commentators prefer to call relationship marketing "relationship management"
in recognition of the fact that it involves much more than that which is normally
included in marketing.
Martin Christopher, Adrian Payne, and David Ballantyne at the Cranfield
School of Management claim that relationship marketing has the potential to
forge a new synthesis between quality management, customer service
management, and marketing.
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2.2 APPROACHES TO RELATIONSHIP MARKETING

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SATISFACTION: Relationship marketing relies upon the


communication and acquisition of consumer requirements solely from
existing customers in a mutually beneficial exchange usually involving
permission for contact by the customer through an "opt-in"
system. With particular relevance to customer satisfaction the relative
price and quality of goods and services produced or sold through a
company alongside customer service generally determine the amount
of sales relative to that of competing companies. Although groups
targeted through relationship marketing may be large, accuracy of
communication and overall relevancy to the customer remains higher
than that of direct marketing, but has less potential for generating new
leads than direct marketing and is limited to Viral marketing for the
acquisition of further customers.

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RETENTION: A key principle of relationship marketing is the


retention of customers through varying means and practices to ensure
repeated trade from preexisting customers by satisfying requirements
above those of competing companies through a mutually beneficial
relationship. This technique is now used as a means of
counterbalancing new customers and opportunities with current and
existing customers as a means of maximizing profit and counteracting
the "leaky bucket theory of business" in which new customers gained in
older direct marketing oriented businesses were at the expense of or
coincided with the loss of older customers.
2.3 RISE IN RELATIONSHIP MARKETING

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Relationship marketing refers to an


arrangement where both the buyer and
seller have an interest in providing a
more satisfying exchange. This approach
tries to disambiguiously transcend the
simple post purchase-exchange process
with a customer to make more truthful
and richer contact by providing a more
holistic, personalised purchase, and uses
the experience to create stronger ties.
From a social anthropological perspective we can interpret
relationship marketing theories and practices as commodity
exchange that instrumentalise features of gift exchange. It seems that
marketersconsciously or intuitivelyare recognizing the power
contained in 'pre-modern' forms of exchange and have begun to use it.
This particular perspective on marketing opens up fertile ground for
future research, where marketing theory and practice can greatly
benefit from in-depth research of the principles governing gift
exchange.
There is a view that in consumer markets, loyalty and ongoing
relationships are illusory, and recently launched brands have been
observed to have as much loyalty as longer established ones.
Factors that led to rise in Relationship Marketing are briefly
explained below:

1. Branding and Demand Generation


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50 years ago, the communications world was simple, where marketers


found success in a formulaic, predictable brand push. Messages
went from marketers to their target customers en masspromoting the
brand through magazines, television, radio and outdoor channels;
resulting in 1:N marketing.
Back then, marketing success was dependent upon the Four Ps:
Product, Price, Place and Promotion. By balancing the Four Ps,
marketers would theoretically move a prospect through a traditional
response flow of Awareness, Interest, Desire and Action. Their tools
included print collateral, print and broadcast advertising, direct mail,
telemarketing, news releases and media pitches.
Marketers were marketing the known to the unknown. They knew
exactly what messages they were placing on which billboards or into
which magazines. And they also knew the size of the audience they
might reachafter all, they bought advertising space using cost-per
impression measurements. But what they didnt know is who saw their
ads or what those people did afterwards.

2. Segmentation and Personalization


With the arrival of digital print technology and later, email, marketers
were able to define and segment their audience and therefore, narrow
the focus of their programs based on segmentation rules. They were
then able to send personalized materials directly individuals:
Dear Mrs. Smith, you may have already won $25,000 in a Readers
Digest Sweepstakes.
Permission-based marketing bloomed in the mid-1990s, largely due to
mistrust of marketers and their personalized messaging. In fact, during
that time, a McKinsey study found that only five percent of consumers
trusted what they saw in advertising. As a result, permission-based or
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opt-in marketers worked from the premise that consumers were


much more willing to trust marketers than surveys or studies indicated.
They believed that customers would be willing to provide personal
information as long as they were approached respectfully and their
information was treated with trust and security.

3. Building Conversations and Communities


In todays marketplace, control of your messages has shifted to
consumers. Anyone with an Internet connection can find nearly
anything they want and easily compare offerings.
This new marketing era is built around the online conversations of
millions of people. Theyre connecting, communicating, consuming
and sharing information. In other words, marketers are dealing with
crowds talking to crowds about their products and services.
On one hand, marketers (and their sales counterparts) now have
access to a huge pool of potential customers. On the other hand,
theyve lost control of their messages. Today buyers and sellers,
friends, fans and flamers are using cheap, ubiquitous technology such
as blogs and social networking tools to connect, create, share and
communicate with each otherregardless of the time and place.
Messages, positioning and brands are suddenly in the hands of
millions of people and largely beyond the marketers control.

4. Creating Relationships and Building Trust


In a world where people are bombarded with more than 3000
messages every day, where more than 80% of people trust word-ofmouth (WOM) more than any other resource, and with brands in the
hands of consumers; marketers must approach customer engagement
and acquisition in a whole new way.
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No longer can they depend on simply turning data into information or


a rear-view mirror approach to segmenting and positioning in order
to engage with consumers. Todays marketer must utilize technology
and their own insights in order to engage customers: to Reveal their
most valuable visitors, Reward their actions, Respect their time and
Retain their interest in products and services in order to build brand
trust.

3. VARIOUS ASPECTS OF RELATIONSHIP MARKETING


3.1 TRUST AND COMMITMENT THEORY

The commitment-trust theory of relationship marketing says


that two fundamental factors, trust and commitment, must exist
for a relationship to be successful. Relationship marketing
involves forming bonds with customers by meeting their needs
and honoring commitments. Rather than chasing short-term
profits, businesses following the principles of relationship
marketing forge long-lasting bonds with their customers. As a
result, customers trust these businesses, and the mutual loyalty
helps both parties fulfill their needs.

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TRUST
Trust is the confidence both parties in the
relationship have that the other party wont do
something harmful or risky, according to the book
Relationship Marketing and Customer
Relationship Management, by Annekie Brink and
Adele Berndt. Businesses develop trust by
standing behind their promises.
COMMITMENT

Commitment involves a long-term desire to maintain a valued


partnership, according to Brink and Berndt. That desire causes
the business to continually invest in developing and
maintaining relationships with its customers. For example, a
business might follow up after a purchase to ensure a customer
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was satisfied with her experience. If not, the business might


refund the customer or offer a discount on her next purchase.
Further, the business could incorporate the feedback to ensure
that other customers dont have the same bad experience. In
other words, through a series of relationship-building
activities, the business shows its commitment to the customer.

EFFECT
The results of a relationship based on
commitment and trust are cooperative behaviors
that allow both parties to fulfill their needs.
Customers not only get the product or service
theyre paying for, but they also feel valued. Your
business receives customer loyalty in return,
which is valuable, because you wont have to
waste resources acquiring new customers. In
other words, investing money in excellent
customer service actually can save you money,
because you wont have to invest in, for example,
numerous marketing campaigns to obtain new
customers.

CONSIDERATIONS
Few businesses have the resources to develop long-term
relationships with every customer. Thats why its important to
identify the customers who are most valuable to your business
and focus your efforts on them. Identifying and developing
relationships with the right customers allows you to devote
your resources to the customers who mean the most to your
businesss overall strategy, according to Brink and Berndt.
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3.2 LOYALITY AND RELATIONSHIP MARKETING


In the business world, relationship marketing is very power full tool to
gain and keep the customers. The concept of relationship marketing
(RM) is widely understood, both academically and professionally.
Main goals of relationship marketing are enhancing good relationship
between customer and organization and convert indifferent customers
into loyal ones. It involves a process of attracting, maintaining and
enhancing relationships with customers and stakeholders (and, when
necessary, terminating them) at a profit, so that the objectives of the
parties involved are achieved through mutual exchange and the
fulfillment of promises.
Customer loyalty can be defined as a highly deep commitment to keep
on purchasing a product or service in the future regardless of the fact
that there are situational factors and marketing efforts, which have
been potential to create switching behavior. In the banking sector, it is
the main job of manager and marketers to create and develop
customer loyalty if they want to maintain their company and increase
its profitability.
Loyalty is a deeply held commitment to re-buy or re-patronize a
preferred product or service in the future despite there are situational
influence and marketing efforts having the potential to cause switching
behavior (Oliver, 1999). Kotler defined the term loyalty as a lasting
commitment to family, friends or country and believes that it initially
entered to the marketing literature by emphasizing on brand loyalty.
One of the basic assumptions in relationship marketing is that longterm loyal customers are profitable.

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Customer relationship profitability is achieved through a chain that


starts with perceived value that creates customer satisfaction that, in
turn, strengthens the relationships so that it lasts longer and thus
becomes more profitable. It is assumed that it is cheaper to keep an
existing customer than to acquire a new one.

3.3 EFFECTS OF ENVIRONMENT ON RELATIONSHIP


MARKETING
A retrospective analysis is undertaken to try and understand the
reasons that might explain the rise of relationship marketing during the
1990s. Following this, current and projected future environmental
trends are examined and an assessment made of their likely impact on
the future development of relationship marketing.
TECHNOLOGICAL ENVIRONMENT
Many authors have attributed the development of relationship
marketing to the ease with which23technology can now allow large

organizations to communicate with thousands, or even millions of


individual consumers of their products. It has been noted that
computers have allowed corporations to recreate the personal
relationships that SMEs had previously enjoyed.
IT developments during the 1980s and 1990s effectively allowed
companies to catch up with the pattern of relationships that had
slipped away during the period of industrialization.
Although information technology has had the potential to add to a
company's relationship advantage, this is dependent upon two
principal factors: whether the company needs large volumes of
information about its customers; and whether a relationship based
program will provide information that the company did not previously
have. It is also crucial that marketing managers have the skills with
which to handle large volumes of customer information. It has been
noted that IT skills among senior marketing managers remain weak
and many prefer to rely on instinct rather than data which is available
from data warehouses.
SOCIAL ENVIRONMENT
It might seem interesting that individuals' relationships with
commercial sellers have become more significant while their other
relationships would appear to be in decline. During recent years, a
number of commentators have noted the weakening of relationships
which individuals in western cultures have with a number of
institutions, especially the church and family. In the UK, regular
church attendance has declined to below 5% while families have
become more fragmented, demonstrated in the extreme case by a rising
proportion of single person households, and by the cellular family
in which each member functions with much greater autonomy.
How does relationship marketing fit this observed phenomenon?
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The need for greater social responsibility has encouraged the


development of business-consumer relationships in some sectors.
Legislation and voluntary codes of conduct have recognized that it is
unethical to sell many types of services without the seller first entering
into some form of relationship with the seller to establish their needs.
The absence of such relationships and an over-emphasis on
transactional exchanges has led to many financial services providers
being fined by regulatory bodies for failing to establish the true needs
of their clients.

ECONOMIC ENVIRONMENT
Two important economic arguments have been advanced to explain the
development of relationship marketing in the 1980s and 1990s. Firstly,
there is the familiar argument that it is more cost effective to retain
existing customers than to continually recruit new customers to replace
lapsed one. This argument was of course nothing new, but information
technology has allowed for more precise tracking of customers and the
development of personalized retention strategies.
Secondly, the quality of buyer-seller relationships emerged as a point
of sustainable competitive advantage. A previous pre-occupation with
tangible design properties in the 1960s was followed by a preoccupation with augmented services (e.g. financing, warranty and
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maintenance services) but this itself was replaced in the 1990s by


competition on the basis of superior ongoing relationships.
Relationship marketing also arose at a time when the choice available
to consumers within most product categories increased markedly.
Buyer behavior models are essentially concerned with understanding
how buyers simplify their choice processes in order to reduce the
psychological cost of a decision and it has been noted that buyers'
motivation to enter into a relationship with a seller is essentially
based on a desire to reduce their choice set and simplify their choice
process.

POLITICAL/LEGAL ENVIRONMENT
The political environment of many western economies during the
1990s emphasized a desire to dismember state monopolies and to
develop competitive markets. The outsourcing of many functions
traditionally carried out by government organizations (and by large
private sector firms) created the need for close co-operation between
autonomous units in place of previous unified command and control
structures. In Williamson's terminology, outsourcing of peripheral
functions through networks of supplier's leads to a transition from
hierarchies to markets, with hybrid organizations being the end result.
Simultaneously, governments of many western countries have sought to
outsource many services provided to consumers (e.g. many health and
pension services) and encouraged the development of ongoing
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relationships between the two parties. Sometimes this has been


enshrined in legislation, as in the case of private pension provisions
where the existence of some form of relationship is a prerequisite to
advice being given by a pension provider.

4. AMWAY PROFILE
4.1 COMPANY HISTORY
Amway began in 1959 with two young entrepreneurs in the United
States, Rich DeVos and Jay Van Andel. Their concept for an innovative
business opportunity, centered around person-to-person marketing,
established itself as a leader among one of today's fastest-growing
industries.
Today, more than 3.6 million independent business owners distribute
Amway products in more than 80 countries and territories. Amway is
part of the Alticor family of companies whose global sales totalled $4.5
billion in its most recent fiscal year.
1950s - A Friendship Forms
Rich DeVos and Jay Van Andel's friendship actually began with a
business proposition, when Rich struck a deal with Jay for a ride to
school for 25 cents a week. After high school they entered the military,
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but they planned to start a business together after separate tours of


duty. A friendship formed and became a business relationship that has
lasted to this day.
1960s - The Early Years
Amway quickly outgrew its original facilities in the basements of Rich
DeVos's and Jay Van Andel's homes. In its first full year of business,
Amway's sales were more than half a million dollars.
1970s - The Decade of Growth
As vowed by Jay Van Andel the night of the 1969 disaster, Amway
rebuilt the aerosol plant and went on. The ' 70s began with sales of
more than $100 million at estimated retail, and kept going strong. After
a lengthy investigation, the FTC verified that Amway is a genuine
business opportunity and not a "pyramid."
1980s - The Billion-Dollar Decade
The 80s will be remembered for the first Billion Dollar Year at
estimated retail in 1980. Building expansion at Amway World
Headquarters continued at breakneck speed as Amway scrambled to
keep pace with demand, opening its new cosmetics plant in Ada.
1990s - The Second Generation
As carefully planned by Rich and Jay, the second generation Van Andel
and DeVos families took the helm during the ' 90s. Steve Van Andel and
Dick DeVos succeeded their fathers as Chairman and President.
Distributors witnessed a similar trend, with the second generation of
many distributor families taking on important leadership roles.
2000s - The New Millennium

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In 2000, Amway Corporation became a wholly-owned subsidiary of


Alticor, Inc. Chairman Steve Van Andel and President Doug DeVos
share the Office of the Chief Executive.
4.2 BUSINESS MODEL
Direct Selling is a remarkable business model, which brings the market
to the customer and offers a unique business opportunity to anyone
eager to adopt the spirit of enterprise. Direct Selling can best be
described as the selling of products and services directly to consumers
in a face-to-face manner, through demonstration of usage, by an
independent direct salesperson. Direct Selling benefits consumer
because it sells high quality products at the consumer's convenience,
often at his/her home or workplace. Customers value the advantages of
convenience, personalized attention, demonstration of usage, and a
wide choice of products backed by Customer Satisfaction Guarantee.

One of the most tangible impacts of Direct Selling in its new advent
has been the fact that it has touched the average man and women in a
manner never experienced before. Amway India Corporation is the
country's leading Direct Selling Company. It is perhaps the best
example of the contribution Direct Selling is making to India. In a little
over two years of commercial launch Amway India has emerged as the
country's largest Direct Selling Company. It closed its financial year
with a turnover close to Rs. 250 crores (the Amway Financial year
runs from Sept. to Aug.). It will reach its target of Rs. 1000 crore
turnover much before its declared target of the year 2004. Because it
focuses upon direct selling, Amway is different from more traditional
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distribution channels. Its Independent Business Owners own their own


business, with the flexibility to deal directly with their own clients and
to build up personal relationships. These Independent Business
Owners also have the ability to deliver Amway's products to their
customers' homes. Independent Business Owners sell to people they
know or meet. The personal contact and care they provide is an
important element in direct selling.

They are also self-employed and can introduce others to the business
to form their own sales group of Independent business owners.

The channel of distribution describes the stages of ownership that take


place as a product moves from a manufacturer to a consumer.
The increasing use of the Internet by consumers has created a real
potential for developing different types of business models and for new
approaches to reaching users directly and quickly in their homes. This
report examines in detail the marketing strategy of the leading global
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direct marketing major, Amway in India. In the initial stages of the


report I have focused on Amways current position in the Indian
market. As the research progresses I have tried to analyze the
companies marketing objective for India and how they set out to
achieve them. This report also provides a brief introduction to the
concept of multilevel marketing and tries to make the reader
understand the difference between multilevel marketing and the
traditional distribution setup in the FMCG sector, so as to give an idea
as to how the system is being utilized by companies like Amway.

MULTI-LEVEL MARKETING
Multilevel marketing allows sellers to build a business through their
own sales efforts and by inviting others to become sellers.
Remuneration is based on a seller's personal sales AND on the
combined sales of those people they have sponsored, trained and
motivated. The story of Amway is intended to drive home the point of a
company being alert enough to modify its globally accepted practices
to suit the local markets needs. This report has been made keeping in
mind the benefits which can be derived from my research.
BENEFITS TO CUSTOMERS
This report will be beneficial for consumers who prefer the marketing
goods or services directly to them: at their own convenience often in
his/her home either on a one-to-one basis, or in the context of a sales
party. Through this the customers will get a better idea about the
companys product offerings and value the advantages of:
convenience, personalized attention, and a good selection of quality
products available at their door steps.
BENEFITS TO SELLERS
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Many people have chosen direct selling because they want to build
their own business, but do not have: considerable funds required to
buy a franchise or start a new company. Among the top five reasons
people sell direct because they like and believe in the product, like
being their own 7 boss, and working their own hours, like the
supplemental family income or making extra money for themselves. It
can be beneficial from the sellers point of view as it may give them the
idea of exactly how they can go about creating their own business and
benefit from the Amways unique business opportunity.
BENEFITS TO COMPANIES
In this report I have deeply analyzed the marketing strategy for Amway
through personal interviews by many IBOs and Amway customers who
have helped in adding valuable data to this project which can be useful
for the company. The suggested recommendations can be considered
by the corporation for further expansion and increasing market share.
4.3 THE CURRENT SCENARIO
Amway is the largest multi-level marketing (MLM) organization in the
world. It is a multi-billion dollar company based on the sale of a
variety 10 of products. Amways philosophy is defined by
commitments, trusts, enduring relationships, and the ideal of
perfection above profit. From a humble beginning in 1959, using an
old gas station, Amway the brainchild of Co founders Rich DeVos and
Jay Van Andel, is now one of the largest and most successful direct
sales companies. Amway has also worked to provide better
opportunities for people through active support of various community
projects.
Corporate Profile:

32

Between then and now, Amway corporation has grown into a US


Multibillion dollar company managed by 12,000 employees. It
operates across 80 countries and territories in Asia, Africa, Europe
and the Americas with a turnover of US $5.7 billion. Amway is the
wholly owned subsidiary of Alticor Inc. It has a sales force of over 3.3
million distributors.
The company Manufactures 450 products of which 350 are patented.
The company is also a long standing, active member of the World
Federation of Direct Selling Association (WFDSA).
Over 500 R & D scientists and professionals ensure the exceptional
quality of its products across five product lines:
Home Care
Personal care
Home Tech
Cosmetics
Nutrition and Wellness

2.4 AMWAY INDIA


Amway India is a wholly owned subsidiary of Amway Corporation,
Ada, Michigan, USA. Amway Corporation is a 42 year old company,
and is among the largest Direct Selling companies in the world. It was
established in 1995. It commenced commercial operations in May
5th,1998. In the brief period since launch, it has emerged as the
Countrys largest Direct Selling Company.
Facts:

33

Over 200,000 entrepreneurs have adopted the Amway business


opportunity; and are actively involved in building their independent
Amway business.
Amway has invested US $ 35 million in India. Of this, US $6 Million is
in the form of Direct Foreign Investment. (IDSA)
US $4 million has been spent in transferring state-of-the-art
technology. The company Amway India was launched with 5 offices
(New Delhi, Bangalore, Mumbai, Chennai, Kolkata) which serviced
150 locations. At present, in addition to 32 offices in all metros and
major cities, Amway India services over 379 cities and towns in the
country with a turnover of Rs 100 cr. and Rs. 250 cr. in the first and
second years of operation respectively & plans to reach Rs. 1000
turnover by the year 2013.
In India, Amway Corporation comprises of 72% women, 24% Couples,
and 4% men. (Source IDSA) Amway India is the founder member of the
Indian Direct Selling Association (IDSA).

Direct Selling requires expertise and special skills. Using the benefit of
Amway's leadership status in the global Direct Selling industry,
34

Amway India has in the past 12 months, conducted over 8000 training
sessions with an attendance of approximately 350,000 Distributors.
Amway India was honored by the AICB Millennium Outstanding
Service Award, 2000 by the All India Confederation of the Blind in
recognition of its sterling contribution to the cause of India's blind.
The Karnataka Welfare Association awarded Amway India with the
`Rising Business Star of the Millennium' during a ceremony held at
Bangalore during October, 2000.
In the short period since its advent in the country, Amway has made
several contributions to Indias socio economic milieu. It as either
introduced unprecedented benefits, or upgraded existing facilities to
international standards.
CORPORATE RESPONSIBILITY
Through
its
presence
in
India,
Amway
continues to enhance human resource development using its experience
in entrepreneurial opportunity and self employment. Amway has
conducted several seminars on "Entrepreneurial Development and
Direct Selling" in concert with the Confederation of Indian Industries
(CII) and the All India Management Association (AIMA) to educate
popular opinion on the benefits of organized direct selling.
HOW IT WORKS
Amway is different from the more traditional distribution channels in
that the business has developed through direct selling. In Amway, one
is recruited as an "independent" distributor of Amway products by
buying a couple of hundred dollars worth of the products from the one
who recruits you, known as your "up-line." Every distributor in turn
tries to recruit more distributors. Income is generated by sales of
35

products by the distributor plus "bonuses" from sales of his or her


recruits and their recruit-descendents.
How do you begin? First, you are sponsored by another Amway
distributor and you obtain the Amway Business Kit. The Business Kit
contains basic AMWAY products and literature for your use and for
sharing with others. You begin by developing both customers and
distributors. Customers or clients are the people who buy the AMWAY
products from you but who aren't Amway distributors. One of your best
sources for building a customer base is a group of people you already
know.
These acquaintances try AMWAY products and become your customers
as they use and re-order various AMWAY items. However, I have found
that people everywhere need high-quality, Satisfaction Guaranteed
products which they believe Amway is able to provide.
Independent Business Owners or Distributors are people who have
evaluated the Amway business opportunity and elected to join the 14
business. IBOs deal directly with Clients, build up personal
relationships and deliver direct to Clients' homes. They are highly
motivated, selling to people they know or meet. The personal contact
and care that they provide is an important element in direct selling.
IBOs are self-employed and can introduce others to the business, and
so form their own sales network. The most successful Amway
businesses enjoy a balance of merchandising AMWAY products and
sponsoring distributors. Growth in your business comes from sharing
the Amway business opportunity with others and helping them decide if
it's right for them. This is called sponsoring. Amway distributors who
sponsor others generally have higher average sales volumes than those
who don't sponsor.
36

Your "Group" is the team of distributors you've sponsored. Many


you've sponsored personally, but others were sponsored by those you
personally sponsored. You train and motivate your group and, as a
result, you earn extra income when they earn income. As you continue
to grow your business and they continue to grow theirs, you both can
benefit.
Like any other business, your Amway distributorship needs frequent
input and activity to grow. However, whatever your goals are, you
control how quickly or how slowly you build your business. After all,
it's your independent Amway business.
Over time, a distributorship can grow considerably. The more
distributors in your group who become successful in the Amway
business, the stronger your business will become, and the higher the
pin levels you can qualify for. We call them "pin levels" because you
earn incentive pins at the various achievement levels of the business.
Each pin level features a set of incentives and rewards for being
successful.
Income Incentives and more
The Amway Opportunity offers distributors many benefits. Some are
financial, others are intangibles, such as peer recognition, pride in
achievement, the joy of helping others, working with family, and the
esteem of owning your own business.
Special leadership programme
As you qualify at various levels of achievement, you may be eligible to
attend various Amway leadership programs:
Annual Business Meetings

In countries around the world, company - paid invitations are extended


to Amway leaders to meet in a business-building
atmosphere.
37

Variety of Special Programs

When your business qualifies at a specific distributor level, a special


invitation occurs. Imagine your special day at an Amway facility, your
own success story featured in our distributor magazine, and your name
and picture added to the Distributor Hall of Fame in Amway's World
Headquarters.

TARGET AUDIENCE
Amways products appeal to a large number of buyers all over India. It
is targeting people who believe in using high quality products which
are conveniently available to them.
Amway business opportunity is attracting the middle income group to
earn extra income. Amways target audience include a lot of
professionals and young couples who are very ambitious to earn high
level of income in a short span of time.
Amways products being good in quality are also very much preferred
by the upper class segment who can easily afford the pricing but they
dont want to get involved with the business opportunity. They are
mostly associated with Amway as their customer.

Target group
Men Professionals and small business owners
Age - 23 - 50 years
Income Status Working class, Middle income, upper middle income
WomenWomen
Age- 25-50 years

professional

38

and

housewives

5. AMWAYS DECLINE IN INDIA


For many years, AMWAY has implemented Relationship Marketing (RM)
to increase revenue. Best practices and innovation in RM strategies has
helped them gain and keep customers - and, therefore, profit. But simply
using RM doesn't guarantee business benefits. Using RM successfully
involves planning, identifying clear business objectives and, most
importantly, focusing on customers.

Relationship Marketing is, first and foremost, a strategy that


deals with the management of a company's actions and its
interactions with clients, customers and prospects.

5.1 HURDLES IN RELATIONSHIP


MARKETING OF AMWAY
1. INAPPROPRIATE STRATEGY
While it is argued that the approach to Relationship Marketing is of
win-win, it may not always be appropriate to pursue this problem
solving approach. Parties may feel they can reach a more equitable
solution but the vulnerabilities associated with the approach might be
harmful.
AMWAY has installed Relationship Marketing software without
establishing a sound business strategy. They have all the tools and
software in place, and assume that's all there is to it. A successful RM
39

initiative, however, focuses more on unified business objectives; RM


technology only acts as a support.

2. NEGLECTING USER NEEDS


When Amway deployed a software or system, everybody on board
didnt know how to use it. The problem with RM is that some people
ignore it, yet they still do their jobs well.
There are three situations that lead to poor RM adoption among
company employees:
o Employees do not know how to use the system
o They don't see the value in using the new CRM system
o Employees are unaware of the benefits of using the CRM
software
Customers can become attached to specific salespeople. While you
run the risk of losing the salesperson and having to rebuild the
relationship with the customer, this kind of neglection can decrease
sales. To avoid this kind of situation, you must train your
salespeople in the techniques of building customer relationships.
These techniques include: making follow-up calls without trying to
sell anything, calling a customer to offer a solution to a problem
they are having, asking questions about customer needs and
maintaining contact through social media.
3. NOT HAVING CLEAR MEASURES AND SUCCESS
INDICATORS
Amway hasnt implemented specific goals and found ways to
measure them as part of their business RM strategy. With this, RM
40

initiatives are set up for failure because employees do not know


where their company stands and the types of steps to move it
forward.
Relationship marketing of Amway focused on interacting with
customers in long term, rather than simply trying to make a quick
sale. If you focus on learning customers' personal tastes and
understanding, their individual issues, you can eventually get to the
point where you make actual sales, because you will know how your
products or services specifically solve their problems. This strategy
affects multiple aspects of RM in the way that it leads to delays and
measurement of profits in short term isnt possible. Also, Amway
doesnt get clear indicators of product development for the future.
4. SCAMS INVOLVING TOP MANAGEMENT KILL TRUST
Companies like Amway call themselves Direct Selling FMCG
companies. In other words they sell directly to the customer rather
than using the conventional distribution chain. The company sells its
products through members who are called Amway Business Owners.
The key to success for such a member is not only selling the product
but to recruit other people (down-line). Business owners are then
encouraged to increase the length of the chain by adding more
members down-line.
The Business Owner makes money from his own sales as well as from
those recruited by him or his down-line, just as his up-line will make
money from him. The Business Owner normally does not sell the
product but sells the scheme. In other words he camouflages the
financial scheme behind the product. And when the Business Owners'
are not able to sell their products, they buy it themselves to achieve a
level of sales which will give them higher incentives.
A division bench of the high court held that Amway's scheme is an
illegal money circulation scheme41and fell within the "mischief of

definition of money circulation scheme." Amway tried to file a special


leave petition in the Supreme Court which was dismissed. Andhra
Pradesh's CID had in fact cautioned public against joining Amway.

It is not only in India that Amway and companies doing similar kind of
businesses are targeted by law enforcement authorities. Even in the
United States, the country of origin for Amway, there are issues.

42

5.2 MARKET SHARE ANALYSIS OF AMWAY


IN INDIA
Amway India, which is facing challenges in the Indian market
due to regulatory issues, has witnessed a reduced 4.3% growth in
2013-14 compared to 12.2% in 201213 fiscal, says a
report. Gross sales stood at Rs 7,472.2 crore in 2013-14 while
the company had posted a growth of 12.2% in 2012-13 with sales
amounting to Rs 7,164.1 crore, said a report issued by industry
chamber PHD in association with the Indian Direct Selling
Industry (IDSA).

Although the growth rate in India is on a decline in the past three fiscal
years, on a global basis Amway has grown over 8% in 2013, it
added. The North region accounted for 29% of sales the highest level
with an increase of 12.2%, followed by South region with 25%.
However, the South region saw a drop in sales.
43

"Southern region, which was earlier our main base, is not doing well
due to lack of clarity on the policy for direct selling. In state
like Kerala, direct selling has stopped," said IDSA Secretary General
Chavi Hemanth.
Products related to healthcare/wellness contributed 44%, followed by
cosmetic and personal beauty with 33% and 12% respectively, the
report added.

The report further said Bengaluru was the most attractive market for
the direct sellers followed by Delhi, Ludhiana, Mumbai and
Jaipur. According to the IDSA Chairman, untoward incidents "have
severely impacted" the sentiment of industry players. Following Prime
Minister Modi's invitation to 'Make in India', Amway has targeted
reduction of its export to 10% by fiscal 2019-20 from existing
30% levels.
44

Yet, Amway India is one of the companies that continues to face strong
regulatory challenges.

6. QUESTIONNAIRE ANALYSIS
My project involves the study of Amways Relationship Marketing
strategy in India.
I had planned my work on the project along the following lines:

Data Collection
Data Analysis
Data Compilation
The preparation and presentation of the report:
My first step in data collection involved meeting my guide for having a
general understanding of what my product should be like and then
some specific understanding of the company.
After deciding upon the broad frame work of my project, I proceeded
on a search for secondary sources of data. After analyzing the data I
prepared, I proceeded towards the primary sources in which direct,
45

phone and online interview were conducted so as to substantiate my


research with more facts.

6.1 SURVEY - QUESTIONNAIRE METHOD


This has been conducted by asking the people to fill in the
questionnaire and express their views about the company.

Sample Design: Questionnaire method


Sample size: 100 respondents
Sample Unit: IBOs, Customers and others
Segment

Respondents

Women

55

Men

36

*Others

Total

100

*Others include elderly people and children.

46

Q1. Are you an:


Independent Business Owner
Customer of Amway products
None of the above
60%

55%

50%
40%
30%

20%

20%

25%

10%
0%
Independent Business

Customer of Amway
products

Owner
47

None of the above.

Q2. What is your income level: (per Month)


Below Rs.10, 000
Rs 10,000- Rs 20,000
Rs 20,000- Rs 30,000
Rs 30,000- Rs 40,000
Rs 40,000- Rs 50,000
Rs 50,000 and above.
35%

30%

30%

25%

25%
18%

20%
15%
10%
5%

10%

12%

5%

0%
Below
Rs.10, 000

10,00020,000

20,00030,000

48

30,00040,000

40,00050,000

50,000 and
above

Q.3 How do you feel are the Amway products priced:


Too Expensive
Expensive
Economical
Cheap
Poor

A)
40%
35%
30%

35%
30%

25%

20%

20%
15%
10%

7%
3%

5%
0%
Too
Expensive

B)

YES
NO

Expensive

Economical

Are the prices right for you?


49

Cheap

Poor

49%
51%

Yes
No

Q.4 How do you feel about the Relationship Marketing technique of


Amway :
Excellent
Good
Average
Bad
Poor
45%
40%
35%

40%
35%

30%
25%
20%

15%

15%
10%
5%
0%
Excellent

Good

Average

0%

0%

Bad

Poor

Q.5 Are the required products easily available for consumption and further
selling?
Yes/No
50

40%
YES

No
60%

Q.6 What is it that attracts you more towards Amway?


Customer Service
Income Opportunity

50%

50%

Customer Service

51

Income Opportunity

Q.7 How do you rate the presence of Amway in the market?


Very strong
Strong
Moderate
Weak
Low

60%
50%

50%
40%
30%
20%

15%

12%

13%

10%

Weak

Low

10%
0%
Very strong

Strong

Moderate

Q.8 Rate the trust level of Amways advertisements as a customer and


dealer?
High

Moderate
Low
52

60%
50%

50%
40%

30%

25%

25%

20%
10%
0
High

Moderate

Low

Q.9 Do you think the decline in market share of products of Amway


would affect the loyalty of customers?
Yes
No
Maybe

70%
60%

60%

50%
40%

35%

30%
20%

15%

10%
0%
Yes

No
53

May be

Q.10 How much trust and commitment as a dealer do


you show towards Amway Products?
High
Average
Low
Not at All

TRUST AND COMMITMENT

High

Average

Low

Not at All

6.2 LIMITATIONS OF THE PROJECT


1.The company or the IBOs were hesitant to give
time and good information to students, so
information required for the primary research
which is a basic need of this project was not easily
available in required quality and quantity.
2. I have conducted this type of an elaborate and
analytical project for the first time so information
might not be utilized adequately.
3. Time constraint.

7. THE FINAL AGENDA


7.1 Conclusions
POSITIVE SIDE TO RELATIONSHIP MARKETING OF
AMWAY
The only positive side to Amway is the chance to make money. It is
the chance to get oneself involved in a trade as a side business,
especially if one is trying to recover from a failed (or failing
business) or one has lost one's job. To the extent that a few people
will surely make money, the system works.
Amway has also helped solve the problem of unemployment in the
country and given a hope to earn high incomes through their
independent business to millions of people all over India.
It is involved in a lot of community services. Amway feels that it is
their responsibility to serve the community in which they live.
Through Amway Motivational Organizations (AMOs) it has try
reach out to a lot of handicap people and provided them with free
services at any time. It is also involved in helping the blind by
providing them with proper education. Amway is also actively
involved various environmental projects such as planting more
trees etc.
Amway offers a wide range of good quality products which are
easily available to people at their door steps.

UNDERSIDE OF RELATIONSHIP MARKETING OF


AMWAY
While doing this research, I have found that the only way to
succeed in the business is to be able to sign up vast numbers of
people and make them use the products for themselves. The other
way is to run around peddling soap from door to door after having
bought it from Amway at a discount.
This is exactly where the Amway business strategy comes into play.
It makes people hand over their savings to Amway to buy them a
dream.
If all Amway did was to manufacture and sell their products
through door-to-door salespeople there would be no problem. The
choice of purchase is left up to the individual. By asking for
deposits from buyers in the beginning and again every year as a
renewal fee it looks like Amway seeks to build a captive
consumer base. Once someone has paid Rs. 4,400 to Amway, he is
naturally disinclined to buy Nivea hand cream instead of Amway
Gly-Honey hand lotion. The element of personal choice is thus
prejudiced.
By involving their "distributors" in a complicated system of downthe-line commissions they are given the impression that there is a
limitless market for Amway products.

The truth is that the market share for Amway is as limited as the market
share for any other product. Traditional retail trade is not about to
collapse and because of the expensive price structure; the growth of that
market is restricted to the very wealthy. Calling this "an opportunity to
use world class products" is a bit like calling the purchase of a Mercedes
Benz for Rs. 25 lakhs an "opportunity", when an efficient Maruti 800 for
one-tenth of that price will do nicely.
With all these constraints, telling people of profit mechanisms tied into
several thousand people buying Rs. 1,500 worth of Amway soaps every
month seems laughable in a country where entire families lead their lives
on less money.

7.2 BIBLIOGRAPHY
This project work is based on the information collected
from various sources. To name a few, some of them have
been listed below for reference:
www.amway.co.in
www.amway.co.uk
www.thehindu.com
www.books.google.com
Amway Brochures & Pamphlets
Guide to Relationship Marketing, a book by William
Tyne and Dale Murphy
Trust, Commitment and Loyalty in Market Endeavours, a
book by Ram Shankar and Vikram Sahai
Relationship Marketing- Any Good? ,by Philip Cotler

59