CoverGirl Brand Experience Audit By Beyond Brands (Word Count:1,999 ) Paul Chen Evonne Chiu Rajeev Kalavar Susan Song
Executive SummaryCoverGirl’s business strategy has utilized product innovation to increase its current user base anddrive adoption in its core segment, as well as widen its appeal to other segments. It strives toincrease its color cosmetics revenue.CoverGirl has built brand awareness by establishing an emotional bond with its consumers, andpositioning itself as fun, sassy and fresh. CoverGirl chooses spokespersons with personalitiesthat exude these characteristics. CoverGirl has exhibited a remarkably convergent onlinemarketing campaign to drive brand awareness and in the process collected a wealth of customerdata for more personalized targeting. In addition, in online interactions CoverGirl is the “trustedbest friend” who is always there for teen consumers.There exist discrepancies between CoverGirl’s brand positioning and the customer experience,with the primary being the perception of low product quality that has led to avoidance and/orabandonment by the customer.CoverGirl needs to address the quality issue by incorporating “quality” as an integral part of theirbrand messaging strategy. A key observation is that the bold colors and innovative packagingcontributed significantly to LashBlast’s success. We believe this can be replicated successfullyacross other products within the CoverGirl portfolio to augment sales.
Business TrendsSeveral recent trends are driving lower usage of makeup products: layoffs and higherunemployment during the economic tumult has led women to forego expensive departmentbeauty products for the basic products and as more working women telecommute, there is lessneed to use makeup. In a survey conducted by Mintel, almost half of the respondents stated thatthey only wear makeup when they are out in public. Lastly, there is a growing trend for natural-looking faces, which reduces demand for dramatic, bold and bright makeup.Market TrendsThe color cosmetics category consists of makeup for eye, lips, and face. There has been a steadygrowth in sales, driven primarily by eye makeup1. Eye makeup sales are forecasted to continue toincrease on an average of 2.5% each year during the next five years2.Use of makeup among adult women by age, July 2007-September 2008Base: 13,861 women aged 18+ All 18-24 25-34 35-44 45-54 55-64 65+ % % % % % % %Yes 89 89 92 91 86 87 88SOURCE: Mintel/Experian Simmons NCS/NHCS: Summer 2008 Adult Full Year—POP1 Exhibit 1 and 2 show a 2.6% increase in sales for color cosmetics from year 2006 to 2008, led by 10.2% change ineye, 1.5% in face, and -7.3% in lips. Eye makeup sales was over $1 billion in 2008, or 40% of the total colorcosmetics market in FDMx.2 See Exhibit 3
Makeup usage among teens, by age, April 2007-June 2008Base: 683 girls aged 12-17 who use eye shadow, eyeliner, eyebrow pencil All 12-14 15-17 % % %Any makeup 91 88 95Eye shadow/liner/eyebrow pencil 71 57 85Mascara 66 54 78Foundation 54 46 62Blusher 40 36 44Lipstick & lip gloss 38 38 37SOURCE: Mintel/Experian Simmons NCS/NHCS: Spring 2008 Teen Full Year—POPIn the tables above, makeup usage is highest in those aged 25-34 (92%), and 91% of teenagegirls use some form of makeup. Eye makeup, eye shadow/liner and mascara, is the most popularcolor cosmetics segment among teenage girls, with CoverGirl being the preferred eye makeupbrand for those teenage girls3. The U.S. Census Bureau estimates that the total U.S. populationwill grow to 392 million by 2050,4 with growth rate of younger demographics expected to belower compared to the overall U.S. population and that of immigrants to be higher.Competitors3 See Exhibit 44 U.S. Census Bureau, Population Profile of the United States – National Population Projections as of July 8, 2008(http://www.census.gov/population/www/pop-profile/natproj.html)
In the mass market retail spaces, CoverGirl competes with brands such as Almay, Neutrogena,Revlon, L’Oreal and Maybelline (owned by L’Oreal). Sales from brands owned by L’OrealUSA, Procter & Gamble, and Revlon, account for more than 75% of the color cosmeticscategory5. Maybelline is CoverGirl’s leading competitor, as both compete for the same targetsegment and price their products similarly. Maybelline currently commands 29% of sales in theeye makeup category6. Maybelline brands itself as funky and leverages its stance against animaltesting to differentiate itself.There is also a growing buzz for natural and eco-friendly products, made with organicingredients, as well as a growing trend towards mineral-based products, with Bare Escentualspaving the way. Almay – through product extension – and Iredale Mineral Cosmetics enteringthe competitive landscape.Price continues to be a large factor in most of cosmetic purchase decision, especially teenagers7.Several respondents mentioned price sensitivity as a reason for their purchases of CoverGirlproduct – “it was available in the color I wanted and priced either same or less than competitor”and “magazine article about expensive vs. inexpensive cosmetics.”8Business StrategyThe vision for P&G set by Chairman and CEO, A.G. Lafely, is to sustain growth via innovation.CoverGirl is one of P&G’s leading mass market cosmetic brands with sales in excess of $5005 See Exhibit 56 See Exhibit 67 More than half of those aged 18-44 surveyed preferred to purchase their makeup at Walmart, followed bydrugstores such as Walgreens and CVS. Nevertheless, consumers seek the best value for their money, or highestquality for a given price, and good product selection – see Exhibit 78 We conducted an online survey with over 35 target consumers
million9. P&G will utilize innovation to aggressively capture additional market share in colorcosmetics, especially in the growing eye makeup segment.Brand StrategyCoverGirl seeks to establish an emotional rapport with its consumers by conveying a brandessence of fun, sassy, and fresh persona. Its ad campaigns in the late 90s were designed to be“leading edge but not over the edge,” and to address a changing market that was trendy andtinged with excitement10. Subsequently its “fresh” image evolved into a “fresh new look” as thegirl next door now is exciting and flirty too; her make-up has to be fun, hip and effortless toapply but gives an instant transformational and beautiful look.CoverGirl deploys three strategies:1. Using innovative technology (e.g. Moldtrusion in Lashblast Mascara)11 to fulfil an unmet need of mascara users – separation for lashes while adding volume.2. Using online media to reach its core users – the 12-16 year olds. Its online media marketing strategy aims to portray CoverGirl as a “trusted best friend” who is always there and understands her when no one else does. 12 The connection provides CoverGirl a rich personalized data source about its consumer.3. Using carefully selected spokespersons to exemplify the characteristics and essence of the CoverGirl brand. These are models or celebrities consumers can relate to or would aspire to become. In 2008, CoverGirl strove to increase its current user base and recruit new customers9 See Exhibit 510 Barbara Brady “Proctor & Gamble Company/Cover Girl: Easy, Breezy, Beautiful Cover Girl campaign”,Encyclopedia of Major Marketing Campaigns Volume 1, 2000 at www.galegroup.com11 The Arf David Olgivy Aware “CoverGirl Lashblast: ‘Next Big Thing’”, Personal Care, Gold, Grey Worldwide, 2009 atwww.thearf.org12 See Exhibit 8
by selecting spokespersons that widen its emotional appeal to a different consumer segments – Queen Latifah for ethnic and full- figure demographic, and Ellen DeGeneres for sophisticated working women.Operating StrategyCoverGirl prices its products in the lower tier of makeup industry to allow for entry levelpurchases. CoverGirl’s pricing strategy reflects its strategic positioning of being “the cheapestmakeup that delivers the highest quality in its class.”Customer TouchPointsPre-PurchaseMarketing/Advertising/PromotionsTelevision advertising is an important medium via which potential customers first come intocontact with the CoverGirl brand 13 . CoverGirl advertisement follows the standard format ofhaving the spokesperson reconfirm the magic of the products in transforming their looks into asexy yet clean image. In addition their sponsorship of the reality series “America’s next topmodel,” provides the brand with publicity on prime time TV and creating luster for the brandamong aspiring teenagers.13 In our online survey over 50% of people surveyed stating that they first heard about CoverGirl in either TV ormagazine commercials, and 35% stating that seeing the commercial was the poignant moment that triggered theminto action towards researching about CoverGirl or making their first purchase - See Exhibit 9
Magazine advertisement also presents an alternative means to kiosk stands to promote latestproduct with sample offerings. The advertisement has been strategically placed in variousmagazines to reach its target segments14.P&G controls a dedicated online coupon and deals site called P&G Everyday Solutions.15 Uponregistering, one can access various coupons including CoverGirl discounts. In this way,CoverGirl also gets additional target for conversion.CoverGirl maintains the popular teen website BeingGirl.com16 that is expressly tuned to the teenmarket. Through this website, CoverGirl projects an image of a “trusted friend”, giving advicevalued by this segment and establishing an emotional bond.The CoverGirl website17 is its main marketing website. The site offers information about variousproducts, tools like ColorMatch and MyMakeupAdvisor which suggest the best color andshades for that customer, if the user shares personal information. CoverGirl in turns gets atreasure trove of personalized data unavailable elsewhere.Lastly CoverGirl understands these mobile websites are a growing hangout for teenagers, as suchCoverGirl run ads and promotions on its Text Club.18 .14 Teenage market (Seventeen, Glamour, Teen People), Mass market (Cosmopolitan, Elle, CoverGirl, People) andEthnic minorities (Ebony).15 “P&G Everyday Solutions”, http://www.pgeverydaysolutions.com/pgeds/en_US/jsp/EDS_Page.jsp?pageID=HP16 “BeingGirl teenage website, owned by CoverGirl”, http://www.beinggirl.com17 “CoverGirl’s main online property”, http://www.covergirl.com18 Giselle Tsirulnik, “CoverGirl targets women with mobile ads for LashBlast mascara”, posted Sept 2, 2009,http://www.mobilemarketer.com/cms/news/advertising/4079.html
CoverGirl is known for their multi-pronged coordinated promotions for new launches. In 2008,they launched their largest US marketing campaign for “LashBlast” by partnering with VogueMagazine and other well known beauty editors and bloggers to discuss the hottest finds of theseason.PurchaseMass-market retailers such as discount stores, drugstores, and supermarkets carry CoverGirlproducts. Over 61% of color cosmetics were sold through drugstores in 2008.19 Photo exhibits 2-10 illuminate the sale environments in Safeway, Walgreens, and Target.In Safeway, basic color cosmetics (pressed powder, mascara, and eye shadow/liner) by the topthree brands were sold on a cluttered wall space. There were no banners, nor colored sales tools.Given supermarket visitors’ primary focus is grocery, this retail channel services the minimaldemands of existing or knowledgeable consumers.In Target, CoverGirl products were displayed much more prominently. End of aisle shelf andwall shelves were used, complete with photos of celebrity endorsers as well as a productselection guide for foundation products.Walgreens allocated nearly ten feet of shelf space towards the back of the store to CoverGirl.CoverGirl’s latest mascara product, Lashblast Elasta-Nylon commanded an island shelf20. This19 See Exhibit 120 See Photo Exhibit 3
retail channel lacked, however, product selection guides. Competitors Maybelline and L’Orealwould easily have swayed consumers looking for mascara or foundation products with theirselection guides21.We reviewed the packaging for several mascara products across three brands - CoverGirl,L’Oreal, and Maybelline.22 CoverGirls Lashblast mascara innovative packaging is the most eye-catching. With its bright orange round bottle, and a wand unlike any other mascara wandhighlighted against a white background with black strokes, Lashblast shouts its “bold” and“volume” claims through its packaging.Post-PurchaseCoverGirl offers an extensive FAQ on its website, live online chat, email, and a toll-freetelephone customer support. Customer service personnel were pleasant to talk to and haveextensive knowledge of CoverGirl products. The online chat and email options, however, werecumbersome as they required the user to enter personal information and product information.CoverGirl has a hassle free product return policy. Our survey indicates that a majority ofcustomers are satisfied with the return policy. This aligns well with CoverGirl’s message ofdelivering an “effortless” experience.21 See Photo Exhibit 13-1622 See Photo Exhibit 1
Customer Brand Experience AnalysisWe highlight our assessment of how well CoverGirl’s key touchpoints align with its brandingstrategy based on our primary data collection of surveys, interviews and mini focus groups, andsecondary market research.Successes Selection of models: as the brand seeks to recruit new user groups, continue to identify spokesperson, such as Drew Barrymore and Queen Latifah, who can establish an emotional connection with new user groups as well as retain its relevancy and appeal to existing core users will become ever more important. Packaging: Lashblast’s distinctive bright colors and design of bottles and unique wand makes the product stand out and instantly recognizable. Customers rate CoverGirl’s packaging as good when compared to its competitors.23 CoverGirl should leverage this experience to improve its product packaging for other products.Improvements o Use of online medium: invite interactions with the teenagers on issues ranging from packaging to commercial ideas, or electing the America’s Next Top Model contestant that should be featured in CoverGirl ads. o Product versatility: innovation in products that allow one product to be used to create a variety of different looks, which is critical to this user group who are highly price sensitive and are interested in having good product selection.23 See Exhibit 10
o Ensure that their selection guideline information is consistent in all in-store point of salesCrucial GapsPerception of low product quality is an issue for CoverGirl24. Approximately 35% of past andcurrent CoverGirl customers surveyed used the products for less than a year25, which indicates ashort customer lifespan. Although our survey may be skewed due to limited population size, itnonetheless shows a potential discrepancy between CoverGirl’s brand positioning and the actualexperience delivered. o Marketing campaign to address perception of quality. o Consider exploring use of organic and natural ingredients for products to improve actual quality of products.26 o Create products offering more than one function, which is critical highly price sensitive consumers who are also interested in having good product selection.SummaryCoverGirl has a strong brand essence and a clear positioning strategy. Base on our audit results,CoverGirl is successful in delivering the brand image and creating the emotional bond of thebrand to its customer via various touchpoints. A major shortfall identified is CoverGirl’s productquality. CoverGirl’s current inferior product perception is a major roadblock for prospectivecustomers and a likely reason for customers to stop using its products. We recommend CoverGirl24 nearly half of respondents discontinued using CoverGirl products due to its inferior quality, and many (bothyoung and older segments) cited quality as the reason for not using CoverGirl products – See Exhibit 1125 See Exhibit 1226 In our online survey, many older consumers cited concerns that chemicals in make-up would be detrimental totheir skin care
to work on improving its overall product quality and perhaps consider introducing an organicmake up lines as well to enhance its quality perception.
EXHIBITSExhibit 1 U.S. FDMx sales of color cosmetics, by retail channel, 2006 and 2008 2006 2008 Change 2006-08 $million % $million % % Drug stores 1,486 61 1,534 61.4 3.2 All other* 951 39 966 38.6 1.6 Total 2,437 100 2,500 100 2.6 * excludes sales through Walmart SOURCE: Mintel/Based on Information Resources, Inc. InfoScan® Reviews™.Exhibit 2 FDMx sales of color cosmetics, by segment, 2006 and 2008 2006 2008 Change 2006-08 $million % $million % % Eye makeup 922 37.8 1,016 40.6 10.2 Face makeup 915 37.5 929 37.2 1.5 Lip makeup 600 24.6 556 22.2 -7.3 Total 2,437 100 2,500 100 2.6 * Totals may not add due to rounding. SOURCE: Mintel/Based on Information Resources, Inc. InfoScan® Reviews™.
Exhibit 3 U.S. FDMx sales and forecast of eye makeup, at current prices, 2003-13 Year Sales at current prices Index Index $million % annual 2003 = 2008 = change 100 100 2003 775 - 100 76 2004 787 1.5 102 77 2005 856 8.8 110 84 2006 922 7.7 119 91 2007 955 3.6 123 94 2008 1,016 6.4 131 100 2009 (fore.) 1,008 -0.8 130 99 2010 (fore.) 1,022 1.4 132 101 2011 (fore.) 1,049 2.7 135 103 2012 (fore.) 1,095 4.3 141 108 2013 (fore.) 1,148 4.9 148 113 U.S. FDMx sales and forecast of lip makeup, at current prices, 2003-13 Year Sales at current prices Index Index $million % annual 2003 = 2008 = change 100 100 2003 685 - 100 123 2004 640 -6.6 93 115 2005 612 -4.4 89 110 2006 600 -2 88 108 2007 584 -2.7 85 105 2008 556 -4.8 81 100 2009 (fore.) 564 1.4 82 101 2010 (fore.) 561 -0.5 82 101 2011 (fore.) 552 -1.6 81 99 2012 (fore.) 535 -3.2 78 96 2013 (fore.) 514 -3.8 75 92 SOURCE: Mintel/Based on Information Resources, Inc. InfoScan® Reviews™.
Exhibit 4 Preferred brands for eye shadow/liner/pencil, by age, April 2007-June 2008 Base: 683 girls aged 12-17 who use eye shadow, eyeliner, eyebrow pencil All 12-14 15-17 % % % Cover Girl 42 45 41 Maybelline 31 23 36 wet n wild 24 23 24 Avon 21 27 17 Revlon 18 19 17 L’Oréal 16 12 19 Clinique 14 13 15 Mary Kay 14 15 14 Almay 13 16 11 M.A.C 11 8 12 Lancôme 7 4 9 Max Factor 6 3 7 Chanel 4 5 4 Other brands 40 46 37 Preferred brands for lipstick/gloss, by age, April 2007-June 2008 Base: 713 girls aged 12-17 who use lipstick/gloss All 12-14 15-17 % % % Cover Girl 25 27 24 Wet n wild 25 27 22 Avon 20 21 20 Maybelline 18 16 20 L’Oréal 12 15 10 Mary Kay 12 15 9 Revlon 12 10 14 Bonne Bell 10 13 8 M.A.C 9 9 10 Clinique 9 9 9 Neutrogena 7 5 10 Rimmel London 6 6 6 Lancôme 6 4 7 Almay 5 6 4 Chanel 4 5 4
Olay 4 5 2Max Factor 3 2 4Jane 3 3 2Estée Lauder 3 3 3Fashion Fair 2 2 2Bobbi Brown 1 2 1Merle Norman 1 1 1Elizabeth Arden 1 1 1Ultima II - 1 0Other brands 62 65 59
Exhibit 5 FDMx sales of color cosmetics, by leading manufacturers, 2008 and 2009 Manufacturer Rolling 52 Rolling 52 Change % point weeks weeks 2008-09 change ending ending 2008-09 March 23, March 22, 2008 2009 $million % $million % % L’Oréal USA 938 37.9 942 37.6 0.4 -0.3 Procter & 487 19.7 508 20.3 4.5 0.6 Gamble Revlon Inc. 476 19.3 495 19.8 3.9 0.5 Private label 19 0.8 4 0.2 -79.5 -0.6 Other 552 22.3 555 22.2 0.6 -0.1 Total 2,471 100 2,504 100 1.3 - Data may not equal totals due to rounding SOURCE: Mintel/Based on Information Resources, Inc. InfoScan® Reviews™. Exhibit 6FDMx brand sales of eye makeup in the U.S., 2008 and 2009Company Brand Rolling 52 Rolling 52 Change % weeks weeks 2008- point ending ending 09 change March 23, March 22, 2008- 2008 2009 09 $ million % $ million % %L’OréalUSA:Maybelline 294 30.4 299 28.9 1.9 -1.5LLC Dist. Maybelline Great Lash Mascara 53 5.5 51 4.9 -5.5 -0.6 Maybelline Define-A-Lash Mascara 37 3.8 33 3.2 -9.6 -0.6 Maybelline Expert Wear Eye 27 2.8 24 2.3 -11.5 -0.5 Shadow Maybelline Volume 206+ Express 0 0 22 2.1 - 2.1 Colossal Mascara Maybelline Volume Express 25 2.6 21 2 -17.5 -0.6
Exhibit 7 Preferred retail outlet for makeup purchase, by age, February 2009 Base: 711 women aged 18+ who wear makeup, and who are internet users All 18- 25- 35- 45- 55- 65+ 24 34 44 54 64 % % % % % % % High-end department store like Neiman Marcus, 7 13 8 5 7 7 4 Saks or Nordstrom Mid-end department store like Macy’s or Dillard’s 23 19 24 26 26 25 18 Discount department store like Kohl’s or JCPenney 8 10 9 7 10 11 5 Online 15 13 20 13 21 11 7 Specialty beauty store such as Sephora or Ulta 20 22 24 29 22 13 5 Drug store such as Walgreens or CVS 41 36 43 42 43 38 42 QVC or HSN 5 1 5 1 7 8 4 Mass merchandiser like Target or Kmart (excluding 29 36 41 24 30 25 19 Walmart) Walmart 43 53 47 45 39 43 35 Direct-to-consumer like Avon or Mary Kay 25 19 22 25 31 28 21 Dollar store 6 9 12 7 4 3 4 Other (please specify) 6 2 8 4 7 6 10 SOURCE: MintelExhibit 8Excerpt of messages and article themes on BeingGirl.com: • "New to makeup? That’s okay! If you go to www.CoverGirl.com, they have live beauty consultants that will help you find the perfect look." • "So you think you’re old enough to wear makeup? Your dad absolutely refuses and your mom doesn’t trust you to do a good job. Hello! You’re, like, 12 years old—what’s wrong with a little eye shadow?!" • "Aah, Autumn! School is in full swing and hot summer nights have turned into chilly test crams. It’s time to put the baby blue eye shadow away and get some warm and glittery makeup tones."By appealing to their insecurities, rebel streak, as well as their coming of age sexuality allattributes of the typical teenage girl, BeingGirl.com builds an emotional bond based on trust withits readers. With prominent CoverGirl branding throughout the site, teens are then driven to theCoverGirl website where they are introduced to CoverGirl products.
Exhibit 9 E vent that trig g ered you into making firs t ever puc has e A dvertis ement (33.3% ) S pec ial P romotions (6.7% ) R ec ommended by other Us ers (6.7% ) W idely ac c es s ible (26.7% ) O thers (26.7% )Exhibit 10 C over G irl P roduc t P ac kag ing vers us C ompetitors P oor (6.7% ) F air (26.7% ) G ood (66.7% )
Exhibit 11 R eas ons for not c hoos ing to us e C over G irl make up C heap B rand for teens 15% 20% A vailability of c hoic es 20% P erc eived quality 45%Exhibit 12 F or how long have you us ed/been us ing C over G irl? 40 35 30 25 20 15 10 5 0 L es s than a year (35% ) 1+ year (10% ) 2+ year (25% ) S till us ing (30% )