By Stephanie Thurrott

Remember Avon? The Avon lady and the memorable "Avon Calling" ad campaign might seem like something from your mother's generation-or even your grandmother's-but today the company is reaching out to younger women and garnering praise on Wall Street, even as it sticks with the direct sales model it's been using for more than 100 years

The company's recent success follows a mid-'80s slump and takeover attempts by Amway and Mary Kay in 1990. Today, you'll see the company listed among smart buys in financial columns-for good reason. If you had invested $1,000 in Avon stock a year ago, you'd be up almost 31 percent, to $1,308.48. (Compare that to the S&P 500, which is up about 18 percent for the same time period.)

Part of Avon's success stems from the company's community focus. By having women (and, today, men) sell its products directly to customers, Avon and its sales reps forge a strong bond with customers.

"You're buying makeup from someone you know. That inherently ties you to the brand," says Kasha Lewis, vice president and planning director of the research firm Wunderman New York. Wunderman's survey ranked Avon among the top 10 companies for women consumers in 2002.

The community-focused, direct-sales model may have seemed doomed in the 1960s and '70s, when droves of women were leaving their homes for the workplace. As it turns out, though, many women are still home, whether full time or part time, and others find themselves working alongside a colleague who moonlights as an Avon rep. Busy women can also buy Avon's products online, at www.avon.com, and can order online while taking advantage of the personal service of a sales rep through the eRepresentative program.

Looking for Growth in All the Right Places

As its customers aged, Avon needed to find new markets. The company pushed beyond the United States, expanding to Canada in 1914 and taking its products overseas, beginning with Puerto Rico and Venezuela in 1954. Today, the company operates in 143 countries.

Outward bound. Avon's direct-sales method works well in countries like Japan, where women have tight-knit social circles. "Women are in touch with their social groups and the wives of their husbands' working mates, so it's a natural fit for Avon," says Melinda Minton, a health and beauty expert based in Fort Collins, Colo., and owner of Minton Business Solutions.

"Avon is also strong in those countries where there's not a lot of competition," Minton says. "In Eastern bloc countries, often the best way to get to women is through other women, so Avon makes sense." Even in countries that discourage entrepreneurship, such as China and Russia, the Avon business is thriving.

Get 'em while they're young. The company's latest push for new customers came in August 2003, when it launched the "mark" line-makeup, skin-care products and accessories targeted to the 16- to 24-year-old crowd (www.meetmark.com). "Avon is a smart, very conservative company, and they think through what they do," Minton says. "They are making some strides in the right direction. Mark is a great example of that. It's a hurdle getting over the old Avon stigma, but it seems like that's what they're doing."

If it's broke, fix it. Avon also takes steps to correct its mistakes. The beComing line, for example, was sold in JC Penney stores and was designed to compete with department store lines such as Clinique and Lancôme. When the line faltered, Avon pulled the products out of stores and allowed beauty advisors, sales reps who completed special training, to offer the beComing line to their clients.

Terry Campbell, a part-time Avon rep who lives in New Jersey and works in New York City, says that women in her hometown were comfortable with Avon, but her city colleagues were less familiar with the products. "The beComing catalog had packaging and marketing that was classy enough to catch their eyes. I was able to convert a lot of non-Avon people into Avon people with beComing," she says.

Selling selling. Avon makes it lucrative for sales reps to recruit new reps. In recent years, corporate attention to its leadership program has made reps realize they can make money by mentoring new reps and then earn a commission on the recruits' sales. As the new reps recruit more reps, the original rep earns a commission on the newest reps' sales as well. Recruit enough additional salespeople, and a rep can see his or her income soar-the average senior executive unit leader (a company designation indicating a certain number of reps earning for you) earned $194,000 in 1999.

Anne Naylor of Chicago is tapping into that earning potential. The 21-year-old began selling Avon with her mother at age 14 and took over her mother's business at age 18. She's maintaining her customer base, which is about 100 strong, but also focusing on finding and mentoring new reps. "More of my focus now is on recruiting, and I have about 30 people now. It's growing by the minute," she says.

Give Them What They Want

Avon pours substantial cash outlays into research and development, and takes credit as the first major company to stabilize retinol (an anti-aging ingredient) and the first to take alpha hydroxy acid products to the mass market. "Avon's putting more money back into its products, and that's going to pay off for a lot of years," Minton says. "Avon's own research and development arm is putting money back into pharmaceutical-grade products, and there are not a lot of companies doing that. It's a really strong maneuver."

By arming its sales reps with a money-back guarantee they can offer clients, Avon can motivate customers to take a chance on a product they want to try. "If you think you'll like a product but it's too tacky or too dry for you, or the wrong color, you can get your money back, no questions asked," Campbell says. "It really makes it an easier sale." Product samples, long a staple of department store skin-care promotions, also help promote sales.

Avon's much-publicized philanthropic efforts help build a sense of community and worth with its customers. The company has succeeded in making a name for itself as a company that does good. The Avon Breast Cancer Crusade is among its best-known efforts, but it has been supporting worthy causes since 1955, when the Avon Foundation was established. Organizations as diverse as Big Brothers/Big Sisters, the Boston Ballet and Literacy Action, Inc., are just a few of the foundation's beneficiaries. "People feel a part of something bigger when they use the brand," Wunderman's Lewis says.

It's this combination of financial success, independence and philanthropy that should keep Avon calling for decades to come.