Key Words: Avon, Brand Building, Brand Positioning, Brand Recognition, Competitive Advantage, Customers, Decisions, Innovative Solutions, Problem Solving, Sony, State of the Art, Strategic Branding, Technology

What does a once highly profitable consumer electronics company have in common with a previously successful global beauty company? If history provides any guidance, the missteps of Sony and the recent stepping down of Andrea Jung, Avon’s CEO, will provide considerable content for future MBA case studies.

As I read recent articles in Forbes and Fortune magazines, which chronicled the demise of Sony and the Avon Company, I could not help but ask what went wrong.  After all, both companies were known to be proven “innovators.” Each had gained “iconic” status in their industries.

For example, Sony had historically been the “giant slayer” in the consumer electronics industry.  The Japanese company had excelled in creating new markets and cutting edge electronics. Who doesn’t remember the bragging rights you could claim, if you were the first to purchase the larger-sized Trinitron television, Sony camcorder, Walkman CD or the Playstation?

Avon on the other hand, became the recognizable brand for women entrepreneurs selling beauty products around the world. In 2004 the Company’s market value topped $21 billion.  Independent sales representatives, better known as “Avon Ladies,” were central to the Company’s success. Armed with an order book and passion for the product, “Avon Ladies” sold muted lipsticks and multi-color eye shadow compacts to everyday women. They provided their customers with an opportunity to have a more “personal beauty experience” by shopping at home with the help of a beauty consultant. Whether in Baltimore or Brazil, “Ding Dong, Avon calling” was the calling card of the Company’s 6.4 million sales force.

Reversing the lyrics from Disney’s Hercules movie, how do you go from “hero to zero,” given the financial strength and market achievements of both companies?

Adam Hartung, Forbes Contributor, noted that at its inception “Sony looked for advances in technology.” With laser focus, executives spent 85% of their time in developing new applications for technology and new markets. The Company’s goal was all encompassing – to engage in “innovative thinking” that would allow Sony to apply technological advances to improve the lives of its consumers.

However, as Hartung observed the financial success of Sony began to change, when the Company’s leadership embraced a “hardware only” marketing approach.  Rather than investing time in developing “state of the art” products that could be sold at a premium (like cutting-edge digital rather than analog devices), Sony committed its financial resources to manufacturing standard products at a reduced cost. Sony lost its technological advantage by employing “industrial-era tactics.” It focused on ‘the bottom line,” rather than creating a premium experience for its consumers.

In Avon’s case, Andrea Jung, the CEO of the Company, had enjoyed the status of being the polished, well-dressed “darling” in the retail beauty industry.” At first blush, it appeared that she had amassed picture perfect credentials.  Jung, who had a merchandising and global marketing background, had spent most of her career at high-end retailers like Bloomingdale, I. Magnin, and Neiman Marcus.

As the first woman CEO of Avon, Jung embraced a new vision for the Company. Ignoring Avon’s competitive position of being the world’s largest direct seller, the young CEO began implementing a retail strategy. The new strategy changed the Company’s focus from selling affordably priced beauty products to everyday women, to attempting to re-invent Avon’s product line to compete against prestige brands. By opening Avon retail stores, salons and spas, Jung shifted the target market for the Company’s products. Similarly, Jung embraced an aggressive growth strategy that included non-core initiatives such as purchasing a direct seller of silver jewelry and the proposed launch of an Avon “baby line.”

Jung’s retail branding model was based on appealing to new customers, both in the U.S. and international markets. The goal was simple.  Avon was to become the “beauty product of choice” for higher-end, college aged women. However, the failure of a new information-management system in Brazil that delayed processing orders; a ban on direct-selling in China; and potential corruption violations impacted the Company’s ability to achieve financial targets.

Leadership Reflection:  Both the executive leadership at Sony and Avon engaged in decision making that cannibalized previous success by the Companies.  Whether it was Sony’s shift from manufacturing consumer electronics that had a “Wow” factor or Avon’s attempt to move from being a direct seller to becoming a luxury retailer of cosmetics, each Company lost a sense of its core business culture and brand.

In trying to change the Sony and Avon brand, leadership attempted to make the companies something that they fundamentally weren’t. Compounding a failed “re-branding approach,” without ensuring that infrastructure (talent and technology) was in place to accommodate the shift in the Companies’ focus, achieving the new goals became almost impossible.

Leadership Reflection:  In their efforts to grow revenues and gain a larger share of the market for their products, leadership at Sony and Avon minimized the value of the “customer experience.”  Sony consumers had come to expect that their purchases of electronic products represented the best of “advanced technological thinking.” More importantly, Sony customers were willing to pay a premium to have a “state of the art” experience.

Like Sony, Avon customers had become accustomed to the benefits of having their very own “Avon Lady” visit their home and provide a personal demonstration of the Company’s beauty product. Such a customer experience was difficult to replicate in a retail environment.

By pursuing business strategies that changed the Companies’ relationship with their customers, Sony and Avon discounted the desires and expectations of their customers.

I am interested in your thoughts. For those of us who are in the process of reassessing our organization’s branding strategy or changing our relationships with our client/customers, what can we do to avoid the Sony and Avon experience?

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Sony Share Price Falls Below 1,000 Yen For 1st Time Since 1980. June 4, 2012.


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