Yakult built an effective operating model with its female salesforce called “Yakult Ladies”. The operating model is well aligned with its business model and creates competitive advantage for the company.
What is Yakult?
Yakult is a leading Japanese probiotic beverage company, and is also the name of its core beverage product. Since its first production in 1935 based on the research by Dr. Minoru Shirota, the founder of the company, its operation has expanded globally. As of March 2015, Yakult operates in 33 countries and earns annual revenue of $3 billion with sales volume per day exceeding 30 million.
Yakult’s business model is producing healthy probiotic beverages with investment in R&D and selling them to local households all over the world. The value Yakult provides to customers is shown in the following company’s principle called “Shirota-ism”:
- Preventive medicine
- A price anyone can afford
- A healthy intestinal tract leads to a longer life.
Effective operating model with Yakult Ladies
Yakult’s success over 80 years can be attributed to the alignment of its business model and unique operating model based on its female salesforce “Yakult Ladies”. There are 80,000 Yakult Ladies all over the world, including 40,000 in Japan. The roles of Yakult Ladies in its operating model are summarized as follows:
Creating trust in Yakult among customers
Since its inception, it was among the biggest challenge for Yakult to convince customers to believe in the value of its beverages. People had negative image when they first learned about Yakult as a beverage which contains bacteria. Therefore, it was critical for Yakult to create conversation with customers so that they believed that the bacteria in Yakult had actually positive impact on their health and worth paying extra money to have that benefit.
In order to capture the value of its product, Yakult built home delivery sales channel and deployed Yakult Ladies for the channel. Yakult hired local women as Yakult Ladies who could understand local culture, communicate well with local house holds, and also keep schedules. Their communication ability was essential for Yakult’s operating model because Yakult Ladies had to explain well to customers about the healthy benefit of Yakult. Customers trusted Yakult Ladies because these sales ladies were from their regions, frequently visited customers, and were able to talk about not only their business, but also issues related to local communities.
Today, the customer base of Yakult ranges from the rich in developed countries to the poor living in the slum in developing countries. Yakult Ladies are effective, especially to the latter customer segment. These customers learn about the value of probiotic beverage not from school or media, but from Yakult Ladies. In addition, the customers in poor neighborhoods trust local Yakult Ladies because they have strong ties with people from their communities.
The trust Yakult Ladies gain from customers is important not only for selling products, but also creating barriers for entry. Even if other companies succeeded in producing similar probiotic beverages, it is hard for them to win customers’ trust over Yakult once Yakult establishes the sales channel in a region with local Yakult Ladies.
Shifting fixed cost to variable cost
Yakult Ladies are paid on commission. Also, with home delivery channel, there is less need for capital investments to market its products. Therefore, in this operating model, Yakult essentially converted some of fixed cost to variable cost. Having flexible cost structure is important especially for entering into new markets. It takes time for Yakult to hire and train its salesforce, raise awareness among customers about the healthy benefit of its product, and scale up the business. The cost structure of the sales channel with Yakult Ladies is well designed for lowering the cost of new market entry and also sustaining the business until it becomes profitable.
The operating model with Yakult Ladies might seem old fashioned in the age of digital marketing. However, Yakult Ladies continue to be essential for Yakult’s business. Yakult’s success over decades makes it a good example of how creative operating model can contribute to the sustainable competitive advantage of a company.