1. LEUNG, Shuk Ching1155011566 LUN, Cheuk Wing1009630543 TSOI, Shuk Yung1155003655 HUI, Yan Ting1155007201

2. Project Description Study Objective Flow of research Project Description Study Objective Flow of research Literature review Case study Hypothesis Methodology Literature review Case study Hypothesis Methodology Questionnaire and Field experiment Result and data analysis Questionnaire and Field experiment Result and data analysis Discussion and Suggestion Limitation Summary Discussion and Suggestion Limitation Summary Introduction Direction of Study Research Conclusion

3. Cosmetics products “To enhance the appearance & confidence of a human body” —Sharon Tay (2009)

4. Competitive! Greater emphasis on customer loyalty program > retain their customers

5. LANEIGE Our Study Target: Investigate purchase habits and behaviors of customers Build up a member-oriented loyalty program Build up a business- customer relationship Differentiate the brands from competitors

6. To retain the existing members of LANEIGE To attract the new potential customers To improve the loyalty program for LANEIGE

7. Progress Project title: Customer Understanding Research For LANEIGE ActivityJulyAug.Sept.Oct.Nov.Dec. Meeting with LANEIGE1 st 2nd2nd Research on Loyalty program of other cosmetic brands Research on Loyalty program of brands in other industries Literature review and Secondary data analysis Questionnaire design for Online survey and Face-to- face interview Online survey and Face-to- face interview Experiment design for Field observation Field observation Data analysis and interpretation Preparation for final presentation and final report

9. What affect the decision making process? Perception Self-concept Social and cultural Background Personality Social class Information they received

10. How consumer acts as to gain higher value of satisfaction - Prefer for more choice - Not very brand loyal - Willing to try competing brands  Marketers to find their target customer and set marketing strategies What should a consumer research involved - What consumers likes or dislikes - What consumer needs and wants  A company can make its marketing decision, sell its product effectively and do better than its competitors

11. Strategies taken by company Stressing on value pricing Relationship marketing Direct marketing

13. How do we let the customers develop a strong attitudinal commitment to the brand? Relational instruments e.g. Loyalty program —Keller (1998) Loyalty is stronger if a partnership between the customer and the company is built up — Fournier (1998)

15. "Loyalty schemes are not being used to their best advantage“ — José Alvarez * Retailers nowadays lack of experiencing their customers * An effective loyalty schemes: “understanding the needs, practice the customer and then serve“ * We believed that understanding the purchasing habits of customers can set up a customer-centralized loyalty program

16. Study the loyalty program in 2 fields: 1. Cosmetic industry 2. Other industries Making face-to-face and telephone enquiries of shop consultants Collecting leaflets and catalogues from the shops Case study

18. LANEIGE Segmentation of active customersWatery, Icy and Snowy Qualification of membership For Watery: Any purchase For Icy: Purchased not less than 4 times with total amount between HK$3000 and HK$7999 within 12 months For Snowy: Purchased not less than 4 times with total amount more than HK$8000 within 12 months PrivilegesWelcome gift For all member: Sample of hero products For Icy and Snowy: 1)Free skin consultation 2) free brow shaping / hand massage Discount For Icy and Snowy: 10% VIP discount Bonus PointBonus Point exchange HK$100 = 1 bonus point For Icy and Snowy: 1 bonus point = HK$10 for purchase Minimum points to redeem gift 15 bonus points Gift redemptionCosmetic products Validation of bonus pointUntil the end of next year LANEIGE PrivilegesBirthday privileges For Icy: Birthday card and birthday gift For Snowy: Birthday card with BC handwriting and birthday gift NotificationMail of product news Others For all members: 1)Happy call in one month 2) Appreciation mailer with special offer in 2 months 3) gift for membership renewal For Snowy: Festival gift ValidationNo expiration

20. Summary of investigated brands Segmentation of active customersOne-third of the brands have different segmentation of customers Qualification of membership For Basic membership: Any purchase or purchase of products not less than a specific amount of money For more exclusive membership: Most of the brands require purchase of products with a higher amount of money PrivilegesWelcome gift Half of the brands offer welcome gift to new customers, including sample of cosmetic products and cosmetic services. A few of them choose to offer cash coupon and makeup pouch DiscountMost of the brands do not have discount for purchase Bonus Point Bonus Point exchange 90% of the brands offer bonus point earning plan for customers. Minimum points to redeem gift The minimum amount of purchase of these brands in order to redeem a gift ranges from HK$1000 to HK$10000. Gift redemption All brands provide cosmetic products for their gift redemption A few of them have other type of gift such as accessories, skincare and makeup service, etc. Validation of bonus point Most of them set the end of year as the expiry day of bonus points * Summary of Loyalty Program of cosmetic brands Privileges Birthday privileges Most of the cosmetic brands provide birthday privileges to their members, while some of the privileges are limited to more exclusive membership. Privileges include extra bonus points and special discounts for purchase during birthday month, birthday card, make up service, skincare treatment and birthday gifts, etc. Notification All brands will send email, direct mailer or SMS to their members and inform them about new products, activities and promotions. Others Some cosmetic brands will also provide other diverse benefits to their members such as invitation to exclusive VIP events, complimentary sample of new products, gifts for further purchase, double bonus points on specific days, free skincare service, etc. ValidationThe majority of brands have membership validation of around 1 year, while a few of them have no expiration.

22. * Summary of Loyalty Program of brands in other industries

23. Understanding customer purchase behavior is a significant factor to design a good loyalty program The following suggestions are feasible and enable to improve the current loyalty program of LANEIGE Issuing Membership Card Online shopping with delivery service Birthday and holiday privileges Regular product promotion exclusively for member Rewarding members according to visit frequency Rewarding members by introducing new members Send notification to members in a more diverse way Online checking for membership information

24. QuestionnaireField experiments Online survey - No. of target samples = 200 - From social network – Facebook - Only close-ended questions Face-to-face interview - No. of target samples = 50 -Interviewees: Females -From CU campus, Mong Kok, Tsim Sha Tsui - Both close-ended and open-ended questions - No. of target samples: 20 - From Shops: official brand retailers, supermarkets, department stores - Semi-structured observation with checklist 201 38 20

25. * Part 1: personal information * Part 2: customers’ behaviour on choosing cosmetic brands * Part 3: factors that affect the choice of cosmetic products * Part 4: membership policy * Part 5: open-ended questions (appeared in the face-to-face interview only)

27. Q= 239

28. In the market of cosmetic product Main consumers: Female 2/3 Respondents : Age 20 – 24

29. Respondent: Mainly university students Young consumers Potential consumers Will spend more on buying cosmetic product when start work ∵ the increased income

30. 1 st : Relatives and friends Credible Convenient ∵ Often contact in daily life Acceptable and Reliable Trustworthy Advertisements have promotional purposes 2 nd : Newspaper/ magazine The mass media people read every day Easy understand the main effect of the product Know whether the product is suitable for them immediately

31. 1 st : Retailer stores Locate everywhere Cheaper 2 nd : Official brand retailers: Original genuine Salesperson service Membership scheme 3 rd : Supermarket Diversified Cheaper

32. How much do you agree with the following statements? 1. For “ I prefer purchase various products from the same brand. ” > 60% choose the choice of agree and strongly agree. Once gain faith to a brand, the confidence to its various products will increase 2. For “ The quality of products increase with price. ” > 60% disagree with this statement The majority thinks that quality of products may not proportional with its price. 3. For “ I will gather relevant information before purchase. ” ~ 80% agree with the statement Tend to do research in a certain level before purchase but not simply choose by intuition or recommendation from beauty consultant. 4. For “ I will compare similar products from different brands.” 5. For “ I seldom repatronize the same brand once I am disappointed to its product. ” > 80% agree The quality requirement of every product is very important. The brand needs to make a good impression on its product so as to attract customers repurchase the same or even other products.

33. If yes, why?

34. Total respondsMean score Brand name 1483.033783784 Price 1483.222972973 Product performance 1483.418918919 Product Ingredients 1483.027027027 Friend recommendation 1472.965986395 Brand image 1472.918367347 Product packaging 1482.567567568 Service quality 1482.824324324 Gifts redemption 1482.533783784 Discounts1482.851351351 Q: How much do the following factors affect your decision of buying cosmetic products? Median of the rating: 2.5 Result: All > 2.5 > High the score of product performance, greater influence in the decision of buying cosmetic products

35. Total respondsMean score Membership card1482.7972973 Discount1483.27702703 Regular product promotion exclusively for member1482.94594595 Reward offered according to visit frequency1482.94594595 Reward offered by introducing new members1482.58108108 Gifts redemption1482.95945946 Birthday and holiday privilleges1482.98648649 Latest newsletter1482.5 Enjoying other companies privileges1482.83783784 Invitation to attend brands' activites and gatherings1482.44594595 Online shopping with delivery service1482.60810811 Provide online platform for membership information checking1482.5 Q: How important are the following items to the loyalty program? Discount: Has the highest rating

36.  What improvements can be done in the current loyalty program? More information and discounts for new products Lower admission requirements of membership Longer membership validity

37.  Please describe your purchase habits and behaviors: In accordance with individual needs Switch to other products in different seasons Compare price of the products in different places Pay attention to promotion Search for information about the product in the internet before purchase Ask friends for comment Go to official brand retailer to try the product

38. Check ListNo. of people Try on sample?14 Have target product?16 Consult beauty consultant?17 If yes,Customer initiated?6 Beauty consultant initiated? 11 Content discussedPrice8 Product function16 Product ingredients10 Method of use8 Discounts5 Did purchase?15 If yes,Purchase amount~ $400 Already member?8 If not, join membership?Customer initiated?2 Beauty consultant initiated? 4 Stay duration~ 10min

39. Qualification of joining membership is usually not high Willing to join the membership. > It is not difficult for a brand to recruit new members. > 70% : Try on sample Experiencing the product performance and texture is one of the essential conditions to make purchase decision Have target products when entering the shop. > 80% : Discussion with beauty consultants

40. Issuing Membership Card Online shopping with delivery service Birthday and holiday privileges Send notification to members in a more diverse way

41. Regular product promotion exclusively for member Rewarding members according to visit frequency Rewarding members by introducing new members Online checking for membership information

42. Suggestions and recommendations for LANEIGE

43. 1. Issuing membership Card - Respondents have a quite positive attitude - Improve customer retention rates and customer loyalty - Enhance company’s image 2. Online shopping with delivery service - Respondents have a quite positive attitude - Online shopping has already become a mainstream way to shop - People pursuit a more convenient way of shopping in order to save time

44. 3. Birthday and holiday privileges to all members - Nearly 80% of the respondents would like to enjoy discounts at their birthdays - Most of the investigated brands offer birthday and holiday privileges - LANEIGE: only Icy and Snowy member but not to watery member - Help its brands to stand out in the cosmetic market 4. Regular product promotion exclusively for member - Respondents think that discount most important benefit - LANEIGE: Watery member do not have any discount when they purchase - Select a product as monthly promotion exclusively for members - Encourage customers to try new products and so boost the sales

45. 5. Rewarding members according to visit frequency - Respondents think that ‘reward offered according to visit frequency’ is a important benefit - Younger members have financial limitation - But they are main consumers in future - Attract young members to visit the shops more often and result in more purchase, more sales 6. Rewarding members by introducing new members - ‘rewarding members by introducing new members’ is supported by the data - People always affected by their friends - Invite more new members - Motivates the present members to buy more in the future

46. 7. Send notification to members in a more diverse way - Social network - Low cost - Inform members about product news, activities and promotion and thus encourage repurchase 8. Online checking for membership information - respondents deem that it is not important for the loyalty program - members can check the points through asking salesperson - Seems not a necessary for a loyalty program

47. ! We cannot accurately determine which suggestions are feasible ! We cannot control the component of respondents

48. Loyalty program benefits both the company and the customer Understanding the purchasing habits and behaviors of the customer and then serve  enhance the competitive power of the business Loyalty programs are not being used to their best advantages If LANEIGE pay attention to the opinions of the customers  its loyalty program  more refined

49. Further studies focus on: * Measure the suggestions * Age distribution should be more widen

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