Old habits die hard. But for the chief executive of a multibillion-dollar beauty firm, complacency means losing ground to a growing circle of competitors.
After a tough 2005, the need to look at her business objectively and address its challenges without bias is precisely why Andrea Jung engaged in the mental exercise of firing herself as chairman and chief executive officer of Avon Products Inc., and then rehiring herself the next morning.
During her keynote address, she challenged her peers to write their own virtual pink slips.
“You’ve got to fire yourself and rehire yourself tomorrow morning,” she said. “You’ve got to act. Because you all know what happens when you change a ceo and someone comes in and is able to look at everything extraordinarily objectively, go out of the box, break all paradigms, lose any emotion to the way things were and be able to make the kind of change that is necessary, sometimes a seismic change…. And if you can do that while you’re there, it’s harder, but it’s the best of both.”
In Jung’s case, the exercise resulted in a multiyear restructuring plan for Avon that involved trimming layers of management and focusing on fewer, but better, products.
Jung declared that the seismic shifts of the retail landscape — including consolidation, multichannel strategies and new distribution partnerships — will “redefine the business.”
“That’s going to be the final endgame-changer for this industry in the next several years, and we’ve got to break the channel paradigm,” she said.
Jung nodded to several paradigm-breakers, such as Target, which has peppered its mix with Boots products; J.C. Penney for its partnership with Sephora, and the Estée Lauder Cos.’ deal with Kohl’s Department Stores. She also acknowledged that Avon’s partnership with Penney’s fell apart after a solid try, saying, “I still believe it was a good thought at the wrong time.”
“Those of us who have tried to spawn new businesses from the mother ship know it’s tough,” said Jung, adding that it requires incubating the project to protect it from antibodies that want to destroy it.
Reflecting on Avon’s need to “break its own mold” after 110 years of selling items door-to-door, Jung noted the company has pursued selective franchise opportunities, including kiosks in U.S. malls and in China, where prior to this year it was forced to forge a retail business due to a government ban on direct selling. “I think this concept of a single-brand, single-retail channel that defined us for more than a century had to be broken for us to really go forward and see what the potential could be,” she said.
In Jung’s view, thinking in tune with the summit’s theme of “Bigger than Beauty” must include breaking from formulaic advertising and marketing efforts, and taking a worldview that includes emerging markets, such as Brazil, Russia, India and China.
She acknowledged that paving a viable path in emerging markets is complex, but that “you can’t run from the numbers.” The growth rate of these markets far outpaces those in the developed countries, but success there will require what Jung called “market creation,” given that consumers in China, for example, spend $5 a year on beauty. The question is, noted Jung, what’s the industry’s ability to accelerate the beauty market in China or Brazil?
Turning to advertising, Jung commented that beauty companies continue to pour money into the same tired formula of model shot on the left, logo and product shot on the right.
She called on her industry peers to shatter the current advertising template, which often includes a hefty dose of celebrity. “I don’t think people and consumers want faces, I think they want voices. How do we challenge that paradigm?”
“In our case, we didn’t want to sign Salma [Hayek] unless she would stand up before Congress and testify about domestic violence,” said Jung. “That’s how emotional connections are going to be made — through the voice, not the face.”
In Jung’s view, building the right emotional connection for the brand is what will separate companies from one another so that, theoretically, there are no true competitors.
“I’m a believer that every strength can be a weakness if you let it,” said Jung. “It’s an unbelievably crowded playing field. There’s not only the advent of private labels and commoditization, but there’s a lack of differentiation.”
“Now, if you don’t have brand loyalty and you don’t have channel dominance, you can’t even play anymore. But it’s hardly a winning formula,” said Jung, noting that succeeding ultimately hinges on an emotional connection. “It’s about relationships, not customers.”