Avon Learns Lessons From Global Agency Bid.

<FONT SIZE="+3"><B> Avon Learns Lessons From Global Agency Bid</B>

Mary Ann McNulty

<I>New York -</I> Knowing when <I>not </I>to consolidate travel globally with one agency is just as important as knowing when to try it. For Avon Products Inc., consolidation wasn't the solution, it was the problem.

However, the bid process wasn't for naught, as travel manager Mike Kabo took the opportunity to build regional travel councils that began talking about their common goals. The RFP also resulted in a one-year transaction fee-based contract with American Express for the transient business in the United States. Outside the States, Avon executives are aware that American Express is the company's preferred agency and are asked to consider using it, when appropriate.

Hired as Avon's director of global travel, conferences and administration in February 1995-just as the commission cap hit-Kabo went out to bid for a consolidated global travel and meetings program in April. The reason was simple: "Management wanted to make sure we were getting the best value and best service from our agency, look at opportunities to have a global program and bring our meetings and conferences into a transient program."

Avon was looking for one agency to handle bookings for $15 million in air booked in the United States, as well as several million more overseas. Globally, the company spends $50 million on T&E and meetings. Kabo also sought an agency to handle the air, arrival and departure lists, reconfirmations for return flights and other tasks for about 50 high-visibility meetings a year his department plans. The RFP requested a menu of transaction-based pricing for services Avon would need.

A cross-functional team of travel arrangers, travelers, managers and a representative of one of Avon's larger countries in Europe reviewed the eight bids received from mega and regional agencies.

"It became clear that through a traditional RFP process, we weren't going to get a single agency that could guarantee and provide consistent service to all Avon locations around the world," Kabo said.

The franchises, alliances and other arrangements between agencies around the globe result in a situation in which no one can guarantee consistency, Kabo said. Another problem is that agencies don't have offices everywhere he needs them. Avon has offices in 40 locations worldwide and operates in 102 countries.

Kabo was quick to note that suppliers aren't the only ones unprepared for global consolidation. Throughout the process, Kabo said, he realized his department had not laid enough groundwork to make global consolidation viable. "We began to ask, 'Culturally, are we ready?' " he said. "Do I have the business processes in place to pull this off?' I now view my role from the global perspective as the facilitator and consultant. I want to facilitate and communicate regionally, then I'll be able to do it internationally. We're all recognizing the extreme difficulty in a decentralized environment to make some of this happen."

By October, Kabo opted to focus on the domestic transient business and selected American Express for a one-year contract. Negotiating a transaction-fee contract to replace the management fee contract that expired last year took several months as Avon and Amex hashed out auditing terms.

"In my view, the records are mine and I want to have access to those records at any time for an audit, whether its an outside auditor or internal auditors," Kabo said. However, the agency was concerned about tying up its resources for a frivolous audit or one so detailed and time consuming that it required all the agents to devote themselves to it. Finally agreeing on terms in May, Amex and Avon must now go back through all transactions since October to compute the net effect of transaction-fee pricing.

Despite the time involved, Kabo said, he favors a transaction-based agreement as it "articulates very clearly what kind of service we expect on a consistent basis. It gives us a way of measuring performance and American Express a way of doing better by exceeding our objectives."

According to Avon's contract, the transaction fee can slide up or down quarterly based on agency performance. The criteria is jointly determined by Avon and Amex, although performance is determined only by Avon.

Kabo said he was disappointed that none of the respondents to his RFP "gave me a good reason to have the same agency do both transient and meetings." Nor could any of the agencies vying for the business agree with Kabo on the basis of pricing. The agencies wanted Avon to itemize all services it would need for each meeting before quoting a price. But Kabo said that if he were to do that, he'd have to rebid the business. Instead, Kabo requested a menu of prices for all services offered.

Avon continues to look for an agency partner for its conferences and has begun testing various agencies to handle single meetings.

"I got one-third of what I wanted," Kabo said. "The moral of the story is the minute you step outside the U.S. and transient travel, it gets a lot more complicated, particularly if you're in a decentralized environment where you're not looking to cut costs. We're looking to improve value, enhance service and make sure our travelers are satisfied.