Presentation on theme: "Bringing “Class to Mass” with Plénitude"— Presentation transcript:
1 Bringing “Class to Mass” with Plénitude Channin CampbellSamantha ChanSabrina MinayaErica RyanRose San JuanItael Toibman
2 L’Oréal’s BACKGROUNDFounded in 1907 by French chemist, Eugene SchillerWorld-wide presence (1995)2000 products500 brand namesIn over 150 countriesL’Oréal’s Strategy :“Quality, innovation and geographic expansion”
3 L’Oréal’s BACKGROUND QUICK FACTS Sales of 53.4 billion French Francs ($10.9 billion US Dollars) (1995)Cosmetics represented 81% of revenues (1995)Cosmetics included hair care and skincare lines$300 million spent on research and 300 new patents worldwide (1994)
4 L’Oréal U.S.A.L’Oréal U.S.A. became a wholly owned subsidiary (operating under the name Cosmair) (1994)US sales - $1.5 billion (1995)Acquired Maybelline, a leader in color cosmetics to broaden participation in the mass market (1996)Combined L’Oréal Haircare Division and Cosmetics and Fragrance Division to form the L’Oréal Retail Division headed by Joseph Campinell
5 L’Oréal’s MARKETING STRATEGIES “Trickle Down and Fire Up”Revenue from mass market products fund R&D for next generation products (high-end products)“Maintain premium pricing to reinforce quality and performance”Concentrate resources and support “star product” to pull entire lineFollow the “Golden Rules” of AdvertisingFeature star productProvide technological superiorityDepict an executive, up-to-date and assertive executive woman
6 PLÉNITUDE by L’Oréal Launched the Plénitude brand in 1982, France Introduced a single product initially, a general purpose moisturizerFrance advertising positioning:“high end, superior performance but accessible”“class of the mass” (“class to mass”)“Delays Signs of Aging”Strong performance in France 1982 – 1987
7 Share of French Mass Moisturizer Market PLÉNITUDE by L’oréalShare of French Mass Moisturizer MarketL’OréalHenkel’s DiadermineNivea19.6 %13.0%8.8%L’Oréal delayed introduction of cleansers until it established a concrete position in the French mass moisturizer market
8 PLÉNITUDE U.S.A. LAUNCH Test launch in Atlanta & Dallas (1988) US advertising positioning:“high end, superior performance but accessible”“class of the mass” (“class to mass”)“Reduces Signs of Aging”Introduced entire line (as developed in France) nationwide after US test markets showed a 14% share in the moisturizer
9 PLÉNITUDE U.S.A. Retail Presentation of Entire Line 14 SKU’s introduced covering 3 categoriesBasic moisturizersTreatments moisturizerscleansers
10 PLÉNITUDE U.S.A.Advertising resource allocation followed the “star products” system1989Full Plénitude product line1990Action Liposomes1991Eye Defense CreamHydra Renewal/Wrinkle Defense Crème updated to “Advanced”1994Excell-A-31995Revitalift Face
11 PLÉNITUDE U.S.A. – Early Results Strong US performance hitting sales targets – 1995, but have failed to generate profits the 8-9 years after it was first introduced hitting a four-year sales plateau19901995Sales$31.7MMApprox. $63.4MMAdvertising and promotion$35.5MM$38.3MMPre-tax loss-$25.4MM-$12.5MM
12 5C FrameworkCompanyL’Oréal known as a luxury brand in the beauty industryL’Oréal known for its superior technological innovationPlénitude brand very successful in FranceCompetitorsUnited StatesOil of Olay, Ponds, NiveaWorldwideEstee Lauder, Clinique, Christian Dior, ChanelContextYouth market can’t afford L’Oréal’s premium pricesConsumerYounger franchiseWorking, successful and the career womanMenCollaboratorsDepartment storesDrug storesBeauty salons
13 SWOT Analysis Strengths Innovative technology L’Oréal brand recognitionProduct potential with Revitalift lineMature skin market segmentSuperior research & development departmentExperience in consumer cosmetic productsWeaknessesNo differentiation in daily moisturizer/cleanser marketHigh advertising costsLack of profitabilityConsumer behavior in US unknownUnattractive product coverNo awareness in US marketOpportunitiesLarge US marketOpportunity to tap into younger consumer segmentMany channels for L’Oréal productRevise pricing/marketing strategy to increase consumer appealOpportunity to develop mature market with Revitalift productThreatsCompetition with Olay’s similar productConsumer loyalty to competitor productExpensive product imageLack of acceptance from younger marketDomestic products more widely known
14 I think the answer is no.” Problem Analysis“Will luxury companies in the next century, which do not have the mass market base, have the resources necessary to do the research to compete?I think the answer is no.”How L’Oréal’s Lindsay Owen-Jones, Chairman and CEO of L’Oréal, saw the “trickle down and fire up” philosophy.L’Oréal’s unsuccessful attempt to bring the “class to mass” strategy to the US skincare market resulted in a four-year sales plateau. They were unable to market to the varying skincare needs of US consumers, which may lead to more years of unprofitability in the US and may delay the introduction of the Plénitude brand globally and may even hurt L’Oréal’s superior reputation, supported by its technological innovation, in the skincare industry.
15 Problem AnalysisThe main problem in the case is how to increase profitability and sales, and how to improving its position in the market in the United States for the Plenitude line of products.Are aspects of the strategy "too French" for the U.S market?When doing such do they try to establish the "class" part of a value proposition by focusing more on their moisturizers and cleansers?Or do they continue with the promoting "Revitalift-Eye" as a "star product" where they would put all money and marketing support towards that one product?
16 Assumptions and Missing Information The Plénitude product line has been unprofitable since its U.S. introduction in 1988.L’Oréal is willing to consider changing its premium pricing strategy.The main problems with the Plénitude brand are pricing and packaging. That is consumers perceive the line to be too complicated, due to the amount of information on the packaging, and too expensive.The major issue in the Plénitude case is branding and consumer perception.L’Oréal wants to continue selling the Plénitude line in the U.S.Plénitude’s global success is dependent upon its success in the U.S. market.L’Oréal is basing it’s U.S. marketing strategy on it’s French strategy, without properly adjusting for cultural differences.
17 Assumptions and Missing Information (cont.) What do U.S. consumers look for in facial skin care products?Is technology an important factor in over-the-counter cleaners and moisturizers?Are American women as educated French women when it comes to skin care?How would U.S. consumers prefer to receive product information if not on the packaging?Sales figures for each of the products in the Plénitude line. For example, what are the least popular products? Which are the “stars”?Consumer demographics (not just the five identified “benefit” segments).
18 Strategic Alternatives Alternative #1: Focus on differentiation and target niche marketDescriptionAdvantagesDisadvantagesDifferentiate L’Oréal by focusing on innovations in specialty products.Continues L’Oréal's success on innovationLose potential market in younger customersTarget niche market who will value innovations in skin care. The stressed out and age focused groupsKeep premium pricing strategy to earn moreCustomers perceive L’Oréal brand for older women or for women with problems.Use niche market to build brand equity
19 Strategic Alternatives (cont.) Alternative #2: Simplify product lineDescriptionAdvantagesDisadvantagesReduce the number of SKU's offered to consumersMay reduce confusion among consumers who do not know how to purchase L’Oréal productsEliminates consumers' opportunity to make choicesSome consumers may be more willing to try L’Oréal
20 Strategic Alternatives (cont.) Alternative #3: Simplify pricing structureDescriptionAdvantagesDisadvantagesReduce the current number of price points reduce average price for cleansers and moisturizersSimpler price structure could make product line easier to shopCould alter perception of L’Oréal products as less valuableEnter competitive pricing strategyCould win over some younger consumers with lower pricesLower prices may not be competitive enough against Pond's and OlayCurrent structure is 2 price points for cleansers, 3 for moisturizers, and 3 for treatment moisturizersConsumers would be more likely to try and convert to L’OréalNegatively affect financial performance
21 Strategic Alternatives (cont.) Alternative #4: Divide product line to target younger and olderusersDescriptionAdvantagesDisadvantagesTarget younger customers with cleansers and moisturizers and older women with the specialty productsLarger potential market if L’Oréal markets to younger and older womenFinancially challenging to split marketing resourcesOffer different pricing strategies for the two product linesCan gain brand equity from all generationsYounger women will consider staying loyal to L’Oréal products when they're older
22 Strategic Alternatives (cont.) Alternative #5: Differentiate brand by educating consumersabout skin careDescriptionAdvantagesDisadvantagesEducate American consumers on how French women take care of skinCreate a value for L’Oréal brand because L’Oréal also teaches consumers about skin careFinancially costly to educate women about skin careTarget women who are interested in skin careReduce confusion about the product and useNot addressing a consumer problem or concern, but trying to create a problem to solveAbandon star program of focusing advertising on one product
23 Evaluation of Alternatives Alternative #1: Focus on differentiation and target niche marketBy making sure that the product is differentiated, it allows L’Oréal to stand out in a market saturated by competition. The current issue to address includes improving Plénitude's operations in the US as well as introducing a Revitalift-Eye into existing product line. Further, this alternative will capitalize on the strongest strength that L’Oréal has which is its brand name. One of the likely consequences of this is the possibility of losing customers not included in the targeted niche market, such as the younger group.
24 Evaluation of Alternatives (cont.) Alternative #2: Simplify product lineThis alternative directly improves Plénitude's current operations since the issues that were mentioned in the surveys included people being confused about too many options.The issue with simplifying is that it may reduce the amount of choices people have when making a decision about the products they have, but on the other hand it is an opportunity to market to the segment that does not necessarily need all the information to begin with and may be intimidated by too much. With this alternative one thing to watch out for is not taking too much information out so that everyone is confused.
25 Evaluation of Alternatives (cont.) Alternative #3: Simplify pricing structureSimplifying the price structure could potentially attract new customers.At the same time, it would also possibly hurt L’Oréal financially as some people might see it as a decline in value.
26 Evaluation of Alternatives (cont.) Alternative #4: Divide product line to target younger and olderusersDividing the product line is an alternative that is in a slightly different direction than the others. While the first three alternatives focused on simplifying, this alternative is focused on specifying the product line to target younger customers with cleansers and moisturizers, while at the same time targeting advertisements of specialty products to older women.The opportunity lies in the ability to use L’Oréal brand to reach a larger potential market, however the challenge lies in the fact that they don’t have unlimited resources to spend on marketing.
27 Evaluation of Alternatives (cont.) Alternative #5: Differentiate brand by educating consumersabout skin careL’Oréal drives sales with product technology, but the department-store-gone-self-serve is a challenge to their sales. Therefore, L’Oréal can stand out by educating consumers about skin care. Many of the consumers already know and appreciate L’Oréal to be a higher quality product, so providing education instead of just product information they can promote use among the younger generation who doesn’t necessarily have the history of the commercials or advertising.
28 RecommendationOur recommendation is to use a combination of Alternative 1 and Alternative 2: We believe that the best approach is to focus on product differentiation and targeting niche markets, while at the same time simplifying the product line.
29 Marketing Objective: Target Niche Market L’Oréal should target women with beauty concerns or issues, such as signs of aging or dry skin.The company should target women 30 and older seeking a product to reduce a specific sign of aging or a product to reduce signs of aging in general.This strategy would focus on women 30 and over in the previously identified “Stressed Out” and “Age Focused” benefit segments.Example: L’Oréal’s successful product, Revitalift, helps consumers solve a specific beauty problem.
30 Marketing Strategy: Target Niche Market Using one of L’Oréal’s greatest asset, its brand name, we can increase awareness of the line by sending out targeted messages to customers age 30 or over.Specifically, targeting the ads to American women so that the products aren’t seen as too French. Possible suggestions include general slogans like, “Keep your skin hydrated during BBQ season!” or “Avoid sun-spots from cheering for the Ravens from the bleachers!” to get women to identify with the product and increase awareness.
31 Marketing Objective: Simplify Product Line Plénitude sells more moisturizers than cleansers. More specifically, Plénitude sells more treatment moisturizers than daily moisturizers; and therefore, should focus its product line around treatment moisturizers which capitalize it’s greatest asset – technology.Technology is a greater asset in selling treatment moisturizers instead of daily moisturizers. Many of its competitors were much stronger in the daily segment. In general, the moisturizers are more profitable than cleansers for Plénitude in general. The Plénitude Line is among the top 3 in market size and brand shares for moisturizers.Specifics shown in next slideFurther, they can simplify the product line by simplifying the packaging so that it’s not as intimidating to women who do not want or need too much information to make a decision.
32 Marketing Strategy: Simplify Product Line Moisturizers - Market Size and Brand Shares (Dollar Basis - All Mass Outlets)19911992199319941995Dollar Volume (Retail $)$309MM$338MM$375MM$440MM$471MMPlénitude11.713.614.113.814.0Olay38.336.132.329.728.2Almay5.46.05.64.44.6Nivea18.104.22.168Ponds5.09.113.915.1Alpha-Hydrox-1.03.85.7Neutrogena7.06.55.2
33 Marketing Strategy: Simplify Product Line 1995 Dollar Shares (ACNielsen data)MoisturizersCleansers1995 Ad Spending3Plénitude14.03.4$29.2MMOlay28.27.948.1MMPond's22.214.171.124MMAlpha Hydrox5.4-11.9MMNivea6.212.8MMNeutrogena5.213.3MMRevlon4.3Almay4.64.1Noxzema21.611.5MMSea Breeze8.9Clean & Clear6.710.0MM$ Size Category (Retail)$471MM$328MMMoisturizer Units Sold% Daily% Treatment1. Alpha-Hydrox11%89%2. Plénitude35%65%3. Pond's51%49%4. Nivea73%27%5. Neutrogena78%22%6. Olay88%12%
34 Marketing Strategy: Simplify Product Line Focus on its “star” products and profitable treatment moisturizers.
35 Financial Implications L’Oréal is spending too much on advertising and promotion, and not generating enough sales to turn a profit. If L’Oréal narrows its focus and simplifies its product line, marketing costs would change significantly. Here is how these strategies will affect marketing expenditures:L’Oréal spends $29.2MM on advertising its cleansers and moisturizers; it could easily cut its spending by 20%* ($5.84MM) by simplifying its product line and eliminating cleansers, for which it only has a 3.4 dollar share in 1995, the lowest among all of its competitors. Those savings alone would reduce the pre-tax loss (for the pre-tax loss was 12.5MM) by 50%.We estimate that segmenting markets and focusing marketing efforts, in addition to simplifying the product line, will result in additional cost savings (for which we do not have solid numbers as the case is missing financial data).*This is an estimate based on our interpretation of the financial and case information available.
36 Discussion Questions: Do you agree with the recommendation provided?Are there any other strategic alternatives you would have suggested?What are other issues or concerns L’Oréal should consider?