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Executive Summary
LOreal was founded in 1907, in Clichy, France, by the chemist Eugene Schueller to
provide advanced hair care products for customers of French hairdressers. Under the
guidance and control of Schueller's family the company had evolved to provide
cosmetic, skin and hair care products with the principle strategy of 'quality and
innovation. They also focussed on geographic expansion over the period of time. Within
the context of L'Oreal, Plenitude existed to target consumers of skincare products via
the mass market retail channels. Other ranges focused on hair care and 'Lancome' for
cosmetic markets.
The huge success of L'Oreal Plenitude in France as the premium skin product with
"class to mass" strategy was the primary reason for L'Oreal to expand the product to US
market. The company started to enter the US market skin care in 1989 through mass
channel by introducing the entire product line (14 SKU's) that had been developed in
France, instead of launching the products one by one. Before Plenitude entered the US
market, L'Oreal had had good reputation for its cosmetic and hair product, so the name
was critical to sell the products. The company used the same formula "star" system in
advertising as in France by putting bulk of dollars on the newest, most technologically
advanced product. Even though Plenitude had a very strong introduction in the US by
becoming the number 2 brand in the market, the brand performance had been rather
disappointing. In 1995, they had lost an approximate $12.5 million on the brand, and
lost the number 2 position to Pond's.
In 1995 and 1996, the company conducted three market research studies. From those
studies, the company found out that the value proposition for Plenitude's daily cleanser
and moisturizer was not that well established because of the "star" system. The studies
also proved that American women had differences in pace of life, they just didn't have
time to read a label about their skin products. They thought that the skincare line was
too complicated and in particular the boxes and the labels would take too long to read.
Many consumers thought that because of the product message "Reduces Signs of
Aging", Plenitude was targeting older women. The company needs to decide how to
improve further upon Plenitude's current position in the US, in terms of promotion,
product offerings and packaging so the consumers would see it as a premium, effective,
easy-to-choose brand at every age. Another important decision to be made is how to
introduce the new product (Revitalift-eye) into the product line.
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MARKETING MANAGEMENT (BPMM 6013)
CASE STUDY - GROUP
5C ANALYSIS
1. Customer
LOreal is focused on mature skin segment and has daily moisturizers and cleansers
segment.
2. Company Skills
The L'Oreal Group is the world's largest cosmetics and beauty company founded in
1907. The firms consistent strategy has been delivering quality, innovation &
geographic expansion. It has 500 brand names over 150 countries & 81% revenue
from cosmetics 20 % from US & Canada.
Its consolidated sales were 53.4 billion French Franc in 1995 from over 2,000
products.
3. Competition
LOreal faces stiff competition from primarily the following players:
P&G (Olay)
Unilever (Ponds)
Nivea
4. Collaborators
The company uses mass marketing and hence works together with various
department store, speciality store, mass merchant, drugstore & grocery store.
5. Context
It introduced Plenitude Skincare Line using Class for the Mass in US following
success of 1982 launch in France & in 1987 became market leader in France. In
France It positioned as high end, superior performance, but accessible (class to
mass strategy).
It then decided to export class to mass formula to U.S. & its positioning was to
reduces the Signs of aging. It covered 3 products - Basic moisturizers, Treatment
moisturizers, Cleansers. But response from US consumer wasnt similar to French
and hence LOreal didnt do much success as compared to France.
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MARKETING MANAGEMENT (BPMM 6013)
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SWOT ANALYSIS
Strengths
LOreal has competitive Edge in market.
It has a very good brand recognition
Revitalift posseses a very product potential
LOreal also has products in mature skin market segment
It has expertise in R&D department,Innovative technology
Weaknesses
LOreal is unaware about consumer behavior in US
It incures high advertising costs & hence the lack of profitability
LOrealhas not differentiated in daily moisturizer/cleanser market
Opportunities
LOrealshould try to gain mass market share via Revitalift product to capture the
big market in US
Youth felt local product is old fashioned
It can further develop mature skin segment with Revitalift Eye
LOrealshould revise pricing strategy and reduce advertising costs to make better
use of US maker has many channel for LOreal product
Threats
It has a expensive product Image
Competition from Olay in mature skin segment and lack of acceptance from
youthful customers
Also consumers loyalty to competitor product.
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MARKETING MANAGEMENT (BPMM 6013)
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The challenge at L'Oreal was to leverage its position and innovation capabilities to
transfer the Plenitude product line to the United States market and achieve both bottom
and top line growth. In 1988, the L'Oreal 'Plenitude' line was launched in the U.S.
market consisting of a 14 SKU (Stock keeping units) line-up that was sub-divided under
cleansers and moisturizers (both daily and treatment). By early 1995, the line had
extended to 19 separate products.
Each segment was further categorised according to criteria such as skin type and time
of usage. The packaging of each product was captivating and informative and there was
a very unique purpose for the information provided on the packaging as the strategy of
L'Oreal was to push such products in retail outlets without dedicated sales staff which
entailed that the consumer was to be educated via instructional packaging.
To give a brief overview of the company, it was founded in 1907, in Clichy, France, by
the chemist Eugene Schueller to provide advanced hair care products for customers of
French hairdressers. Under the guidance and control of Schueller's family the company
had evolved to provide cosmetic, skin and hair care products with the principle strategy
of 'quality, innovation and geographic expansion'. Later the holding company 'Gesparal'
and Nestle became major shareholders of the company which provided deep-pockets
for it's innovation philosophy and geographic expansion plan. Within the context of
L'Oreal, Plenitude existed to target consumers of skincare products via the mass market
retail channels. Other ranges focused on hair care and 'Lancome' for cosmetic markets.
The company's collaboration with channel partners was vital for the products distribution
across markets. Relationships were essential with retail partners that ranged from high-
class department stores (e.g. Les Galeries Lafayette) to small boutique hair and beauty
salons which it's Redken, Professionelle and Salon Classics ranges targeted. In the
U.S. this extended to operators such as K-mart and Wal-Mart.
The branding and communications of the product portfolio was also a critical success
factor at L'Oreal and cooperation with agencies including 'Publicis' was imperative to
convey the message of each sub-brand within markets. Other essential collaborators in
the launch and maintenance of its product portfolio included market research agencies
like 'AC Nielsen' that tracked both quantitative and qualitative aspects of target markets
(especially in the United States). Another form of collaborator included its U.S. licensee,
Cosmair, which marketed its salon based product lines.
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This can also be related to the reasoning behind the companies advertising campaigns
that launched a call to action entitled 'because you're worth it'. The nature of such
products transcended functional values and the emotional attachment that consumers
felt was also important to distinguish and create 'star' products. This is alluded to in the
'Customer Value Hierarchy' which identifies core, basic, expect and augmented product
values. In the case of L'Oreal, the Plenitude line is clearly competing on an augmented
level which attempts to exceed customer's expectations through high quality and
innovation.
Within the context of the U.S. industry, the Plenitude range was positioned within a
highly competitive sector that was dominated by large operators such as Proctor &
Gamble and Ponds (Exhibit 11 and 12 highlights the various players in both the
moisturizing and cleansing sectors in a graphical BCG and depicts the amount of
growth with volume; from this analysis the leaders in moisturizing and cleansing are
'Olay' and 'Noxzema' respectively). Another feature of the industry which is pertinent to
describe is the industry point of view regarding the products which they sell. The former
CEO of Revlon Inc., Charles Revson, alluded to this sentiment with the quote "In the
factory, we make cosmetics. In the store, we sell hope" which indicates the high-level of
consumer need which the industry clearly understands and is appealing to.
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2. What explains the lack of success of Plenitude in the U.S.? How is this different
from the situation in France?
Both markets are comprised of varying demographic and cultural differences. In the
U.S., the market is considerably less informed about the use of L'Oreal's product line
whereas the French population are more sophisticated regarding the use of these
products. Within the context of both countries a reciprocal relationship exists between
indigenous brands and their sense of tradition and established position which has been
facilitated by a generation-based system wherein family and peer groups play a huge
role in marketing the products. This is true in the situation of both Pond's and Oil of Olay
within the U.S. and with L'Oreal in France.
The lack of success in the U.S. was evident in the fluctuating positions that Plenitude
maintained regarding market share between Oil of Olay and Pond's and for the 8-9
years that the product line existed without generating profits. Factors which affected
L'Oreal's performance included the firm's relatively recent entry into a very competitive
marketplace which would be depicted according to Porter's 5 Forces model as
demonstrating a high level of rivalry.
Rivals such as Pond's and Oil of Olay benefitted from established positions in terms of
branding, channel management and the amount of intimate knowledge of consumers
and the competitive landscape. Additionally the strategy of L'Oreal involved licensing
the company's Technique Professionelle, Salon Classics and Redken divisions to
Cosmair. The separation of these identities gave the corporate brand less controlling
influence over the entire business initially.
The plenitude range was originally launched in France circa 1982 with phenomenal
results and in total,the French market for cosmetics was larger than that in the U.S. with
contributions to revenue of 23% and 20% respectively. The positioning of the line was
"high-end, superior performance yet accessible" and the environment was competitive
yet the mass-market offered only a handful of significant players. In light of this
opportunity, management launched their so-called "class of the mass" strategy which
positioned high-tech products at a premium of 30% over rival brands such as Nivea and
Diadermine.
The French success saw the rise of a 'star' strategy which involved investing heavily in
advertising and promotion of product s such as basic moisturizers which contained
'action liposimes'. However, the pricing for such offerings was placed at a significant
premium and financed R&D efforts to maintain innovative products which would become
the future stars of L'Oreal's product portfolio. Another important element of the overall
French marketing strategy was the incremental basis with which each product was
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launched and advertised. For example, initially only a moisturizing range was built as
innovation in the cleansing segment was deemed to be difficult to achieve. Furthermore,
awareness was created by a print campaign which then evolved to incorporate
television ad spots. However the big question amongst executives was how to transfer
this proven success formula and strategy to the United States?
The smooth roll-out of the Plenitude line was quite the opposite in the United States
where management seemed to adopt a 'blast' type strategy that launched 14 SKU's
immediately within 3 categories upon the market. This seemed contrary to the original
'trickle down, fire-up' philosophy and reaction from the U.S. marketplace was mixed with
many customers feeling confused and over-whelmed by the product's communication
strategy. Therefore the lack of understanding of U.S. customers was initially a huge
stumbling block for the company.
Furthermore, if the strategy of L'Oreal is considered within the context of Ansoff's Matrix
it is quite clear that in France, the Plenitude product line comprised of relatively new
products in a market where L'Oreal already existed in 1982 which is quite different to
the strategy applied to entry in the United States. This involved entering a new market
with an existing set of products and entailed little diversification. The disregard, of this
seemingly pure 'market development' approach, for products that were adapted for the
market was a major weakness of Plenitudes launch in the United States and contributed
significantly to L'Oreal's trailing position.
The basis for success would have been provided by developing a diversification
strategy that aligned products with the diverse wants and needs of the American
market. The feedback gained from focus groups and research could have provided the
means for applying such market intelligence to the Plenitude portfolio.
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MARKETING MANAGEMENT (BPMM 6013)
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Positioning the L'Oreal Plenitude line in the most effective manner can be addressed by
understanding the current perception of the line in the U.S. market. Focus groups have
identified some key issues concerning the complicated nature of the Plenitude brand
and the confusion with which potential buyers face in the buying process. Yet buyers
credit the brand with high-quality given its association with parent brand L'Oreal. The
strength of L'Oreal to transmit connotations of high-quality and innovative features is
marginally offset by the brands diametrically opposed weakness in being associated
with high-price; yet positioning the brand to convince and assure target segments of the
benefits is a good strategy for both value creation and appropriation.
Within the brand relationship spectrum, the positioning would best fit under a Sub-brand
strategy that places the L'Oreal master brand as a key driver. This rationale is in-line
with the findings of focus groups that have identified the strengths of the L'Oreal brand
in its appeal to the 'masses' yet find the sub-brand 'Plenitude' somewhat lacking in
stature and credibility. It is also a brand which "doesn't really mean anything" to some
focus group members therefore it's ability as a co-driver in a master-brand strategy is
significantly impaired and relegated to providing distinction as L'Oreal's retail brand.
Such a scenario maintains high-value for the end-user but also allows L'Oreal to prevent
instances of channel conflict with its high-end and professional product lines.
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and brand promise with which management relied upon to 'educate' the target segment.
The front of each package contained the Masterbrand, sub brand and product name
(e.g. L'Oreal, Plenitude, Revitalift) in heavy typeset with the active ingredients and
functional attributes beneath.
However, the overwhelming feeling that some consumers experienced in the buying
process suggests that a slightly modified approach to the packaging of the Plenitude
range is required. Therefore, an enhanced approach to this delicate issue of 'educating
vs. overwhelming' target segments involves deemphasizing complicated and cluttered
package facades with simplistic names indicative of product functionality combined with
appealing imagery and emphasis on the Masterbrand. The rear of the package will
include concise information for the engaged consumer.
In the process of creating a coherent marketing strategy for the plenitude line, pricing is
also critical. A 1995 market study which identifies five benefit segments indicates that
the "Unconcerned", "Price Conscious Socialisers" and "Age Focused" groups are all
concerned and influenced by price. From a channel point of view, the exposure and
bargaining power of L'Oreal with retail partners is also quite important as higher margins
will permit greater control for category managers of merchandising and positioning of
bottom and top-line products amongst competitors in the channel. At the product range
level, the 'Plenitude' brand offers the fourth highest margin to retailers amongst the top
5 competitor brands in skincare with its cleanser range reducing the average margin
significantly. However, the product range of Olay commands the highest market share
in the industry yet provides the least amount of margin for retailers, which suggests that
a possible strategy for L'Oreal is to decrease prices of its 'Daily Moisturizing' range to
increase share against Olay which would complement the company's goal of top-line
growth. Furthermore, the average retail margin for 'Daily Moisturizers' is 58,2% which
suggests that L'Oreal are in a healthy position to offer value pricing to customers and
thus gaining market share against Olay and Noxzema in their respective segments.
From the outset, extending the product line length could be perceived by management
at L'Oreal to be a low-risk, low-cost exercise that will increase profits of the range by
more precise customer segmentation. Yet this is a somewhat myopic approach to
increasing sales, lowering inventory and allaying competitive intensity and includes
assuming the risks of lowering brand equity and loyalty, diminishing relationships with
trade partners and may ultimately fail in acting as a demand catalyst. However,
management could chose to stretch the line downward to attract price sensitive
segments or upwards in order to maintain a price premium across the product range.
L'Oreal could also decide to extend its product width in the introduction of new lines,
which would prove costly without clearly established innovations and segments or
provide greater product depth in terms of the total number of SKU's available in the
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MARKETING MANAGEMENT (BPMM 6013)
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market. However, such an approach would undoubtedly add to the confusion that
current shoppers experience during an encounter with the Plenitude range.
New product innovation and the 'star' system is another key element which has served
to facilitate product innovation through high growth and profitable products, yet success
in the U.S. market will not be sustainable based on the premise that one successful
product determines the outcome of the product line, this is too risky. L'Oreal's situation
in 1995 is depicted by the launch of 'Revitalift Face' which requires a high investment to
launch and the return on investment (ROI) is not easily quantifiable. Thus, the use of
high technology products and innovation should be equally distributed across the
product portfolio to achieve a mix of high value with high performance while focusing on
the moisturizing and daily cleansing segments. This scenario decreases the
dependency of the portfolio on one product while reinforcing the strength of the master
brand based on the innovation of the product groups. This strategy also provides
consistency across the range.
Finally, the implementation of the marketing strategy should take into account the theory
and framework behind creating blue ocean strategy's. A strategy canvas identifies the
key competing variables of the industry and attempts to create value by adjusting these
criteria in order to create a form of 'uncontested market space' . In the case of L'Oreal
Plenitude, U.S. market entry depends on maintaining the core elements of the product's
high-tech nature, the emphasis on advertising plus promotion and the inclusion of
aspirational role-models to drive the brands image.
While there are many obvious and logical reasons for leveraging the power of the
corporate brand, this facet needs to be approached with conservatism and prudence in
light of the potential risks posed to the parent in the event of instances which may
contaminate the L'Oreal Masterbrand. Therefore a de-emphasis of relying on the
corporate brand is also recommended. Additionally, a blue-ocean value curve will be
achieved by lowering the complicated nature of the packaging (while keeping
instructions on the back) and creating an element of simplicity for U.S. consumers that
otherwise find the product range 'overwhelming' and 'complicated' according to focus
groups. For example, customer testimonials indicate motivation to purchase 'eye
defence' products based on clarity and self-descriptive titles which is the opposite of
products such as 'Excell A' which add to the busyness and confusion of the products.
Building on such changes to the tradition industry value curve, will be a reduction in
prices for the cleanser and daily moisturizer segments in order to become more
competitive as mentioned previously yet the treatment product line should maintain its
premium pricing strategy while extending the special purpose of products within this
category.
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