Amway and Waterford Crystal- A special relationship - Business 2000

Amway
and
Waterford
Crystal-
A special
relationship
Business 2000
Amway was set up in 1959 and today, almost
40 years later, it is one of the largest direct
selling companies in the world. There are a
number of ways of getting products from the
manufacturer to the consumer. Retailing,
where the customer goes to a shop to
purchase a product from a range of goods
displayed, is one. Direct selling, where the
distributor goes directly to the consumer,
offering a choice from a range of products, is
another. The advantage of direct selling is
that the customers do not need to leave their
homes and the distributor can get to know
the customers, their wants and needs.
Amway was set up to manufacture and
market household cleaners and related
products. It has expanded its manufacturing
base to include toiletries, cosmetics, houseware
and food supplements. Thus, it is a key
mover in marketing terms in the process of
own-brand marketing. Today Amway also
markets other branded products which are
perceived as having high quality, value for
money and reliability.
This case study will examine how Amway
selected Waterford Crystal Company as a
preferred supplier and the benefits to both
companies. A preferred supplier is defined
by Amway as a company which understands
Amway’s culture and philosophy, has an
awareness of the Amway global vision and
has demonstrated the capacity to deliver to a
high standard. By associating itself with
the Waterford Crystal family of
brands, Amway gained prestige and
Waterford Crystal gained a valuable
distribution network.
The Amway method
of direct selling
The Amway method of direct selling is to
offer a portfolio of over 450 products to
distributors via product literature. The
distributor demonstrates the product to the
customer, who then orders the product. The
product is then delivered to the distributor,
who calls on the customer and will often
achieve repeat sales. This differs from
retailing, where the customer goes to an
actual physical location such as a shop,
Amway goes to the home of the customer,
bringing samples, taking orders and
delivering the product.
Amway distributors are not employees of
the company. They have an independent
business link to Amway. The way they
earn their money is from the profit on the
goods they sell. Profit, in its simplest
terms, is the difference between the price
of the product from the manufacturer or
wholesaler and the one paid by the
customer.
Distributors also receive commission from
the volume of sales they achieve personally
and from sales generated by others in their
groups. Amway also introduces incentive
schemes whereby those who perform well by
selling a large number of products qualify for
rewards such as bonuses and/or trips.
Training
A key to Amway’s success is that its
distributors are informed of all developments
and additions to the goods on offer. Today’s
consumers are extremely well-informed and
will expect Amway distributors to have the
answers to their questions. Amway keeps its
distributors fully up-to-date by training,
organising events and through its
publications. The company is proud of its
communications policy, which enables its
distributors to offer a first-class service.
Amway Corporation
Amway’s main headquarters are at Ada,
Michigan in the USA. Here, manufacturing
takes place and it is the nerve centre of the
operation, controlling the administration and
distribution for its worldwide operations.
Most of the countries in which Amway
operates also have a head office for the
administration and distribution in that region.
Amway is a global company in that it operates
outside national boundaries. It has over 3
million distributors in over eighty countries
and territories worldwide. An organisation so
wide and far-reaching requires standardised
procedures, good communication systems
and well-trained people.
A preferred supplier
Amway has formed a relationship whereby
Waterford Crystal sources and supplies a
product that is exclusive to Amway. This
product is branded Marquis by Waterford
Crystal. Marquis is a sister brand of crystal
carrying the endorsement of the classic
brand. The Marquis brand offered Amway
price point and design opportunities which
were more appropriate than the classic brand
for the Amway distribution network.
The relationship between Amway and
Waterford Crystal is one that will span a
number of years. Both parties will benefit
from their success, although individual
growth and achievement is not necessarily
linked to mutual success.
Competing globally requires so many
resources and so much manufacturing
capacity that it makes sense for companies to
work together. Thus, Amway gains from the
manufacturing expertise and the quality of
the Marquis by Waterford Crystal name and
Waterford Crystal gets an additional
distribution outlet where its reputation as a
premium product is maintained.
Waterford Crystal is able to have a
relationship with Amway competitors while
at the same time maintaining an exclusive
product for Amway. Amway is still Amway
and carries on its business as before.
Waterford Crystal also continues with its
other products and its other methods of
marketing. For selected items the two
companies will pool their competencies and
offer each other advantages.
Amway’s objectives
Amway chose to form a business relationship
with Waterford Crystal after a great deal of
research and consideration. As a preferred
supplier, Waterford Crystal treats the
relationship as a partnership to ensure open
and supportive communication. Amway saw
three main reasons for this partnership:
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■
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It wanted to extend its Home-tech
range of goods. This range extends
from cookware and storage to serving
dishes, tableware and giftware. Crystal
fits in the giftware range and gives a
wider range and quality.
Amway has a strong presence in Ireland
and wanted to reinforce this connection.
A well-known Irish company with a global
brand would do this. Distributors
themselves wanted Marquis by Waterford
Crystal in their range of products. Amway
has a strong communication policy and one
of its aims is to hear and take notice of its
distributors.
Amway showed willingness by increasing
its range and thereby providing more sales
opportunities for its distributors.
Why Crystal?
The decision to go into crystalware was
part of a strategic plan on Amway’s part.
Home-tech is a wide range of products
carried by Amway. It consists of items such
as cookware and serving dishes. In order to
expand this range of products, crystal was
identified as an appropriate addition. The
current portfolio would be increased by a
giftware/tableware category. Rather than
undertake a new manufacturing venture, it
was decided to go ahead in partnership with
a company in the crystal business. Waterford
Crystal designs and develops all the Marquis
products made under their agreement.
Spending on giftware
Research in the US showed that while
household spending will increase by only 2%
between 1995 and 2000, spending on giftware
and furnishing will increase by 21%.
There are a number of reasons for this. People
have more disposable income. The baby
boomer generation, whose children are now
growing up and leaving home, is spending
money on quality items for the home rather
than on food, clothes and other more
mundane items.
Social trends have an impact. In the USA and
in other parts of the world, the house is seen
as a safe retreat from a stressful society.

Therefore, spending on things to improve the
quality of life at home will seem to make
sense. There is more leeway for people to
spend money on small luxuries. It is seen not
as self-indulgence to treat oneself but as a way
of enhancing self-esteem and status in the
world.
In order for a product to give these
feelings to people, it needs to be seen to be
of the highest quality. Waterford and the
Marquis by Waterford Crystal brands are
seen to be the gold standards in America.
They have the qualities that other crystal
companies and consumers aspire to.
Supply and demand
It is a key precept in marketing that if you are
selling a product and creating demand, then
you must be able to meet that demand.
Waterford Crystal has the manufacturing
capacity to supply what Amway can distribute.
Amway looked at other suppliers throughout
the world but chose Waterford Crystal because
the two crystal brands have a combined market
share of approximately half of the total crystal
market.
In the crystal market itself, Waterford Crystal is
number one. Sales within the Waterford group
are increasing and Waterford Crystal is looking
for expansion possibilities. Waterford Crystal
saw Amway as a useful distribution outlet and
was willing to design an exclusive range of
items under the Marquis by Waterford Crystal
brand. This range of items is called the
Diamond collection and is available
exclusively through Amway.
Global marketing
International or global marketing refers to
the marketing of products across national
boundaries. Most companies start with the
domestic or home market and then move
on to exporting to other countries. The
next step is to set up local bases in other
countries and use local markets and local
labour. They have then become global
companies.
A company must decide on the rules and
needs of the market where it operates.
These include cultural factors, language,
social structures and differing buying
habits. Amway has successfully operated
in this global market and when seeking a
partner, it wanted one also that traded
globally and knew the implications of
international marketing. Waterford Crystal
is such a company.
Global marketing, despite the challenges it
presents, also offers many advantages.
Companies can achieve economies of scale.
Businesses can spread their research,
development, technology and distribution
costs and achieve production efficiency.
Consumer tastes are becoming more unified,
national differences in tastes are beginning to
merge and international products are seen as
desirable in many countries. The downside of
this globalisation is that national differences
can be minimised, leading to bland
acceptance of international taste. However, it
can also create opportunities for local
products to be sold to a wider audience.
International marketing means that Amway
can access markets that are growing. The
relationship with Waterford Crystal and the
combination of the two well-known names
will give an assurance of quality and
recognition.
Global yet local
As well as trading globally, companies
that operate on a global stage must become
aware of local differences. Global
companies can standardise many of their
offerings but to succeed, local differences
must be respected.
Amway has a very strong local base in
each country where it operates. It prides
itself on its communication with its local
distributors and provides opportunities for
feedback. It has a policy of linking in with
companies that have a national basis and a
global perspective.
Product range
Amway is very selective in choosing its
product range. It tries to ensure that the
product matches the quality and image that
will fit into the existing range of products.
Amway identified a gap and an opportunity
in its portfolio. The giftware market is
growing and there was an opening for
tabletop products. Amway decided to launch
a number of selected items of Marquis by
Waterford Crystal that would enhance the
range. The products chosen were a heart
shaped dish, a footed bowl, a flower vase and
candlesticks. Other items would be added as
the range grew.
Giftware qualities
Getting the price right means profits for
the manufacturer and distributor. At the
luxury end of the market, it is crucial
because, unlike with household goods, the
consumer can choose not to purchase at all.
Amway’s pricing strategy was to have
price parity with Marquis and Waterford at
retail in each market.
Promotion
Promotion would be extensive with a clear
strategy. Amway deals with distributors and
has a very well-developed communications
strategy. It uses many ways to get its products
known.
The core features of the launch are the
production and distribution of the colourful
and high quality brochure illustrating and
describing the crystal. A video was also
produced, outlining and drawing attention to
the features of the range and also to sales
opportunities for distributors. It was made
available some weeks before the launch so that
they would be able to answer their customers’
questions and also be able to show them the
features and quality of the products. A poster
for internal use and for distributors was also
produced.
Rathborne Candles
One of the key features of the UK launch
would be an association and a link with
Rathborne. Amway sells Rathborne
candles through its distribution network.
Rathborne is an Irish company which has
been making quality candles since 1488.
This was a link that would help both
companies. The same criteria of quality
and supply were used and Rathborne is an
approved supplier to Amway.
The Launch
The crystal product was launched in the
USA and Australia in 1997 and in the UK
in 1998. The European launch will take
place in late 1998 and will benefit from the
information gained in the UK, which in
turn benefited from information gained
from the USA and Australia. The sales so
far have exceeded expectations.
The UK launch took place in 1998 and is
still referred to as a trial. Sales have
already exceeded forecasts. One of the key
periods for the sale of crystal and giftware
is Christmas, so although the launch
period is April to September, it has been
extended to Christmas.
A primary objective of the relationship
between Amway and Waterford Crystal was
to bring advantages to both companies.
Amway gets a quality product and Waterford
Crystal gets a reputable and large distribution
network, thus making the relationship a
success story.
TASKS AND ACTIVITIES
Identify three advantages to home
1
shopping. Give two examples of
groups of people who might benefit from
having access to home shopping instead of
having to go to the shops.
The quality of gifts reflects well on
2 the giver and the receiver. Discuss
how this idea has implications for Amway
and for Waterford Crystal.
In the area of giftware where presents are
exchanged, recognition and status are very
important. It is not just the product itself that
is important but the prestige associated with
its name that can bestow value on the gift. In
the luxury markets, such intangibles as
status (the ideas associated with the
product) have to be marketed. The Marquis
brand with the Waterford endorsement
enhances the gift with the assurance of
quality and other desirable attributes. It is
seen to be more desirable to give Waterford
products than any other crystal. The price
must reflect its premium product status and
yet make it attractive enough for consumers
to buy on a large scale.
Outline two advantages for Amway
3 in choosing Waterford Crystal as a
‘preferred supplier’.
What are the main differences
4 between being an exporting company
and being an international company?
Are there any global companies
5 operating in your area? Check out their
products, their markets and the number of
employees.
While every effort has been made to ensure the accuracy of
information contained in this case study, no liability shall attach
to either The Irish Times Ltd or Woodgrange Consultants Ltd for
any errors or omissions in this case study.
Business 2000