The proposed strategy is based on the research conducted that incorporated a large
number of different sources. Apart of articles, publications and scientific newspapers, we
also applied several tools in order to deeper understand the current strategy and
positioning of Lancôme in the luxury beauty segment:
1) Online survey with more than 150 people participated;
2) Consultations with and insights from people currently employed in beauty industry
3) Observation of company’s customer profile
4) Visits of the points – of – sale (laRinascente, etc.)
Moreover, we also analyzed and evaluated the official web-site of Lancôme in order to
investigate the the product, price and promotional strategy of the company. Discovered
data was used for the marketing plan and budget estimations, as well as for overall goal
evaluation of the new strategy. The final result of the developed strategy is promising an
boost of US$70B additional revenues, around 2% rise of ROS and 11% of ROMI
L’Oréal in 2014
Brand: Lancôme - leading company in the Premium Cosmetics Industry.
Revenue model: Skincare is its business segment best seller, followed by fragrances and
Challenge: Create new strategy to anticipate the increasing profitability of Travel Retail,
keeping the leading position on the market by providing a unique shopping experience.
L’Oréal – Brief History
• The company was founded in 1909 by Eugène Schueller – a graduated chemical
engineer – under the name of Société Française des Teintures Inoffensives pour
Cheveux. Schueller’s first hair dye formulae was created in 1907 and it was named
• In 1931 the company enhanced a great success by an innovative packaging solution:
individual doses to guarantee safety and comfort for hair stylists and end-customers.
Schueller invested also a lot in developing promotional events and in designing new
• On 4th April 1939, the company officially changed its name to L’Oréal
• In 1940 Schueller created a school for hair stylists providing technical training,
business development assistance, customer-loyalty tips and more. Schueller’s aim was
to create a long-lasting partnership with the profession confirming its position as the
preferred brand for hair stylists.
• In 1964 the group bought Lancôme, funded in 1935. Originally it was only a
• In 2001 L'Oréal joined the "World Business Council for Sustainable Development”,
an international association for the exchange of expertise in environmental, economic
and social matters
L'Oréal – Company Overview
L'Oréal has five different divisions in order to accomplish the mission “beauty for
1. L’Oréal Luxe has three major specializations: skin care, make-up and perfume.
These products are available at department stores, cosmetics stores, travel retail, but
also own-brand boutiques and dedicated e-commerce websites. Lancôme, Giorgio
Armani Beauty and Yves Saint Laurent are the leading L’Oréal Luxe division brands.
2. Active Cosmetics Division meets a range of different skin care needs. Its brands can
be found in pharmacies, drugstores, and medi-spas. The division is world leader in
3. L’Oreal Consumers Product Division aims to make L’Oréal products available to the
greatest number of people. Its brands are distributed in mass retailing channels and
they offer a wide range of colouring products, hair care, makeup and skin care.
4. The Body Shop products are all natural, distinctive and socially engaged.
5. Professional Products Division is a privileged partner for hairdressers. It distributes
its products in salons worldwide. The division can meet the needs of different hair
care salons, for colour, shampoos and general hair care needs.
L’Oréal Revenues in 2013
Professional Products: channel is affected by declining
salon visits in the mature markets, but remains dynamic
in the new markets. Kérastase is the first brand in terms
of growth contribution; hair care continues to grow
Consumers Products: the division is outperforming the
global market and winning market share. All division’s
brands grow faster than the market. Growth of L’Oréal
Paris is accelerating and the brand is strengthening its
worldwide leadership, thanks to a strong performance
in haircare. Garnier recorded double-digit growth in
Active Cosmetic: the division is strengthening its
position as the world leader in the derma-cosmetics
market. The New Markets are proving highly
dynamics, while division’s trends in Western Europe
are growing twice as fast as the market.
The Body Shop: the strategic body, skincare and
makeup categories grow driven by iconic ranges and
innovations. The division has a multi-channel strategy.
Focus on L’Oréal Luxe sales of 2013
• In 2013, L’Oréal Luxe significantly outperformed outperformed the market in every
geographic zone, as well as in Travel Retail. For example, Giorgio Armani is establishing itself
as a luxury brand thanks to the success of its women’s fragrance “Sì”. It is already in the
European top 5 fragrances sold worldwide. Furthermore Armani Beauty line made a real
breakthrough in 2013.
Customers’ profile (1)
Lancôme Main Target Market is “women with heart and mind”.
In the Travel Retail market the target is global shoppers:
• There has been a recent change in the customers’ profile: global shoppers are not only
businessmen travelling for work, but also fashion addicted passengers coming from
emerging countries – mainly Brazil, Russia, China and South Korea.
• The main characteristic of global shoppers is that they shop everywhere: where they live,
while they are travelling and at their final destination.
• The main need of these customers is to feel at home whenever and wherever they are.
On the other hand, they tend to spend more time in airports where the environment is
• In order to engage with them, Lancôme has developed a tailored approach:
1. Hire beauty consultants who speak different languages and offer services coherent
with the customers’ nationalities.
2. Create specific products lineup which satisfy customers’ needs.
3. Provide multilingual materials.
4. Celebrate key global cultural events (I.e. Lancôme wishes a happy New Chinese Year).
Customers’ profile (2)
Most important benefits for customers that come as a result of purchasing at the airports are:
1. Cheaper prices – buying at duty free.
2. Guaranteed good quality.
3. Limited editions and exclusive products
Buy a gift.
Browse the store and pass the time.
Take advantage of prices.
It’s what I always do when I travel.
To treat myself.
To buy a product for someone else.
To buy products for use when I’m away.
According to the customers, the main purposes for visiting a duty free shop are:
Customers’ Purchase Preferences
From a market research conducted by “LuxurySociety.com”, it emerged that:
– 82% of Chinese travelers agree that shopping is a priority while travelling.
– 56% of Middle eastern and 48% of Russians feel the same.
– 60% of Chinese travelers purchase at duty free.
Even though Chinese customers of cosmetic goods are “only” 97 million, it is still the population with the highest
level of expenditures. They spend around US$128 billion out of $ 1.159 billion total expenditure.
96% say they enjoy shopping while travelling.
83% say that shopping is very important for them
68% choose their destination according to the
brands available locally.
75% of the travelers buy at duty free and 78%
of them buy on the trip back home.
70% buy in Department Stores
(i.e. “La Rinascente” in Milan).
65% buy in Exclusive Beauty Shops
In 2013, 1.087 billion people– which represent the 15% of the global population – travelled, contributing for about $ 1159
B to local economies. The most preferred destination is Europe – attracting 52% of the total travelers. The number of
travelers is expected to reach 1.4 billion in 2020. Most visited countries are:
- France, with 83 million international arrivals.
- United States, with 70 million international
- Spain, with 60.7 million international arrivals.
- China, with 55.7 million international arrivals.
- Italy, with 47.4 million international arrivals.
Demand Structure and Trends (1)
Demand Structure and Trends (2)
The Travel Retail market has grown tremendously after 2000. In 2013 it was worth US$60 billion,
but, according to forecasts, it’s going to double its value in the next 6 years, reaching US$110 billion
in 2020. The most important product category is beauty, which accounts for 30%.
Lancôme has a market share in the premium beauty market of 4,5%, with US$4,5 B in revenues.
L’Oréal market share for the beauty market in TR is about 20%.
• 2013 Primary demand of Travel Retail = US$60 B
• 2013 Primary demand for Beauty Goods in Travel Retail = 30% x US$60 B =US$18 B
• 2013 L’Oréal Group secondary demand for the beauty market = US$22,9 B
• Lancôme accounts for the 20% of L’Oréal group sales: US$4,5B / US$22,9B
• We suppose that the Lancôme weight of L’Oréal (20%) will remain the same also in TR market.
• 2013 L’Oréal secondary demand in the beauty market in TR = 20% (MS) x US$18 B = US$3,6
• 2013 Lancôme Secondary demand in the TR beauty market = 20% (weight of Lancôme for
L’Oréal group) x US$3,6 B = US$0,72 B
• Lancôme's MS in the beauty market in TR = US$0,72 B / US$18 B = 4%.
• Potential demand for fragrances in 2013 = 2,09 billion bottles of perfumes (50 ml)
• Potential demand for mascara in 2013 = 1,91 billion units
• Potential demand for lipstick in 2013 = 2,24 billion units.
• Potential demand for eye shadow in 2013 = 0,93 billion units.
See appendix 1 for further explanation of the calculations
L’Oréal Competitive Environment
• Large number of
• Large number of
• High number of
• No bargaining
• High number of
• Low brand
• Fast industry
• Large industry
Threat of new competitors:
High entry barriers
The industry requires specific technologies, large capital
n investments & strongly established distribution network
Patents limit competition
Strong brand name is fundamental
Lancôme’s Competitors (1)
On the market there are four types of product lines:
1. Saloon products, manufactured by firms such as Aveda or Paul Mitchell.
2. Professional products, manufactured by firms like L’Oréal Professionnel and
3. Consumer products, manufactured by firms like Garnier, L’Oréal Paris, Maybelline
4. Luxury products, manufactured by firms like Lancôme, Clinique, Estee Lauder etc.
COMPETITIVE ARENA FOR LUXURY PRODUCTS
Lancôme’s Competitors (2)
Lancôme faces competition from international premium cosmetics manufacturers. The
rivalry is concentrated on a limited number of key categories by implying a product
“Premium sets/kits is a small but important category that manufacturers use to attract new
customers, and reward, or introduce new products to existing customers. Manufacturers
offering sets/kits also benefit during the gift seasons.” *
*Passport report “STRATEGIES TO SUCCEED IN THE FAST
EVOLVING PREMIUM BEAUTY MARKET”. September 2013
Lancôme’s Competitors (3)
The luxury segment is very fragmented and it has a low concentration, since there are many
competitors with a little market share – Lancôme’s market share is 4,5%. They offer similar products
– fragrances, skincare products and makeup – and satisfy the same needs – feeling beautiful,
protecting skin from damage and feel young. Moreover, these product categories are also perceived
as an expression of the social status and provide “sensorial” stimulation.
The main drivers of competition in the luxury market are brand reputation and innovation. However
Lancôme should not worry about potential entrants because the cosmetic industry has high barriers to
entry: there are high costs related to R&D necessary in order to develop a high level of expertise;
moreover customers give a lot of importance to the brand. Finally, due to the limited shelves space,
brands need to have a strong bargaining power in order to negotiate with the buyers. The only threat
might be the entrance of other luxury firms which are not in the beauty market yet.
Since it’s a very competitive industry, in order to avoid price competition, L’Oréal Group invests about €
857 M in R&D in order to introduce on the market very innovative products before its competitors.
Another source of differentiation among competitors is the Brand Reputation and the values that the
Brand represents for its customers. For instance, Lancôme focuses on three pillars:
1. Aspiration of autonomy: self-accomplishment.
2. French factor: woman’s vision of beauty and elegance.
3. Happiness factor: happiness is the primary source of beauty.
Consumers’ Perception of Lancôme
Main competitors according to the MS:
Value offered SuperiorInferior
The perceptual maps are based on the
results obtained through the survey
conducted online among 153 people of
10 diverse nationalities (see appendix 2.
for the survey findings). It appeared that
Lancôme is perceived as a very innovative
brand with a high quality-price ratio. The
main perceived competitors of Lancôme
are Clinique, followed by Estēe Lauder
(value offered) and Dior (level of
• Lancôme - 4,5%
• Shiseido - 4,2%
• Clinique - 4,2%
• Estēe Lauder - 3,7%
• Chanel - 3,5%
• Dior - 2,9%
Suppliers and Buyers
L’Oréal Group chose to adopt a largely integrated industrial model.
For what concerns the relationship with suppliers, about 85% of L’Oréal’s products are
manufactured in its own plants, in order to guarantee quality, safety and coherence with the
Group’s ethical values. The Groups’ industrial production is organized regionally in 41
plants established on all continents.
L’Oréal Group created a purchasing team in order to guarantee the quality of the suppliers,
but also to have a better management of costs of production. Because of the size of the
group, the suppliers have a very low bargaining power than the group itself.
In order to maintain a high perception of the brand image, Lancôme – like all the
premium brands – ships its products directly to the buyers (retailers or wholesalers) instead
of shipping them indirectly through regional distributors. In this way Lancôme is able to
establish a stronger relationship with the buyers and have a stronger bargaining power.
Moreover Lancôme has an established bargaining power due to the fact that any customer
who purchases through the above mentioned channels expect to find Lancôme products,
and for this reason retailers are weaker.
Although Lancôme started as a fragrances house, it now offers three categories of
Concerning the merchandise, Lancôme adopts a line extension strategy because it
constantly introduces innovative products on the market, which are part of the existing
categories. In fact, below you can see the retail and merchandizing of some of the most
important new products in TR channel of Lancôme.
“La Vie est Belle”
• Podiums & Outposts
• Show Window &
• Displays & Tray
• Free Access Perfumery
• Launch Tray
• Merchandizing Staging
• Display & Kit New Bar
• Staging Niche – Glorifier
• Pos & Show Window
Recent Sales Trend: Beauty Industry
vs TR (Values and Quantity)
Current facts in beauty
• Global expansion of
• Expected 8.5% growth in
revenue by 2014.
• Premium skin care is the
largest category in value
terms, comprising 35%
of global premium
cosmetics sales in 2012
• 3.4% growth over next 5
• Skin care sales are
expected to grow over
US$5 billion in 2012 –
• US$6 billion new sales in
between 2012-2017 just
in Asian market.
IN TRAVEL RETAIL:
• The BEAUTY sector is
the leading category
with 30% of total
estimated growth for
2013 is +7.4%
Expected trends to support future expansion and profitability:
The middle class evolvement is characterised by increasing per capita incomes and
leads to a higher access of citizens from developing countries to international global
markets. At the same time, the airports’ business model is changing: “Today airports
are big shopping malls surrounded by boarding gates”.
Lancôme Marketing mix of
Product and Prices: Make up (ITALY)*
Make up: Lancôme is positioned as a brand of MODERNITY.
3 main products are: Foundation, Mascara and Lipstick. Differentiation between young
and mature consumers in terms of diverse colour mixes.
Make up Price range
Complexion Eyes Makeup Lips Makeup Nail Polish Sun Makeup
* Information is
provided for the
Lancôme: Make up (2)
Complexion has different 4 product types.
Price range from min 27€ (“Teint Miracle” concealers) to max 56,25€ (“Teint Visionnaire” foundation):
Foundations (11 category products). Most popular line is “Taint Miracle”.
Powders (3 category products).
Blushes and enhancers (3 category products).
Concealers (3 category products).
Eyes Makeup has 4 different product types.
Price range from min 16,30€ (“Le Crayon Miracle” eyeliner) to max 50€ (“Palette Hypnôse” eye shadows):
Mascaras (12 category products). New product line “Grandiose”.
Eye shadows (7 category products).
Eyeliners (8 category products).
Eyebrows (2 category products).
Lips Makeup has 3 different product types.
Price range from min 19,15 € (“Contour Pro” lip liner) to max 29,95 € (“L'Absolu Rouge” lipstick):
Lipsticks (6 category products). Most popular line is “L’Absolu Rouge”.
Gloss (4 category products).
Lip liners (1 category products).
Nail Polish has a Vernis in Love line with
the price of 17,40€.
Sun Makeup has a Face & Body line with
3-product category of 40€.
Lancôme: Skin care (1)
Lancôme is positioned as a brand of EXPERTISE.
3 main lines are “Gènifique”, “Visionnaire” and “Absolue”. Travel retail aim at basket increase,
targeting global shoppers and offering premium line. In Italy, the cheapest product is “Bocage”
deodorant of 20,90€. The most expansive product is “Absolue L'Extrait” Regenerating Ultimate
Elixir of 330€.
Category products overview (Italian market):
Youth Activating Concentrat (6 category products).
Anti-ageing (25 category products). Differentiation among “First fine lines and wrinkles”, “Wrinkles -
Loss of firmness” and “Mature Skin”.
Basic Moisturizer (13 category products). Differentiation among Normal-Combination, Dry and
Eyes and Lips Care (13 category products). Differentiation among “Makeup removers”, “First fine
lines and wrinkles”, “Wrinkles - Loss of firmness”, “Mature Skin”, “Lips” and “Puffiness”.
Makeup removers (12 category products). Differentiation among Normal-Combination, Dry and
Masks et Exfoliating scrubs (4 category products). Differentiation between “Exfoliating scrubs”
9 Youth Ac va ng Concentrat
Eyes and Lips Care
Masks et Exfolia ng scrubs
Lancôme: Skin care (2)
Body care (13 category products). Differentiation among “Body Care“, “Bocage Deodorant”, “Haircare”
and “Aroma Experience”.
Sun care (11 category products). Differentiation among “Self-tanners”, “High Protection”, “Protection”
Men Care (9 category products). Differentiation among “Anti-ageing”, “Moisturisers”, “Cleansers” and
The focus of the brand is on rose that is considered to be the most feminine flower. Over the time, Lancôme
Perfume House has created 50 fragrances, while latest popular female lines are: “Tresor” and “La vie est belle”.
Lancôme is positioned as a brand of EMOTIONS
The most expensive perfume is “La vie est belle” with the price of 55,80€ for 20ml, while the
cheapest is “Ô de Lancôme” that costs 52,70€ for 75ml. As for male, Hypnôse Homme Cologne
(42€ for 100ml) is an affordable version of Hypnôse Homme that costs 57,40€ for 50ml.
Price Range of Lancôme Products*
20,9 42,6 42
MAKE UP SKIN CARE FRAGRANCE FEMALE FRAGRANCE MALE
Travel Retail Specials (1)
In Travel Retail the focus is on gifts and desirability.
We know that Travel Retail
serve special offers in terms
of sizes, colours, quantities as
well as exclusive deals,
limited editions and gift kits.
Special size (100ml) &
Special sets (DUOS / TRIOS)
✔ Routine Set
✔ Palettes of Make Up
✔ Miniatures Fragrances
✔ Premium Coffret
*Data of female
based on the on
the 2 most
30ml (for min
price) and 75 ml
(for max price).
For male, in
fragrance is the
75ml is the
Travel Retail Specials (2)
TR exclusive Lancôme palettes, lips & mascara sets:
• Absolue Au Naturel
• Absolue Voyage
• Idéal sculpt
• Idéal glow
• Idéal bronze
Duos Mascara: Doll
Mascara and Eye
2 products set
Mascara and Eye
3 prodcuts set
TR exclusive Lancôme Skincare
TR exclusive Lancôme Fragrances
Mainly use of indirect multichannel
strategy.Lancôme’s main channels:
Department stores, such as
Exclusive beauty stores, such as
Travel Retail Specials (3) & Distribution
• Internet Banners & Registration Page
• Airport Advertising
• Out of Home Advertising
• In-Flight Magazine Advertising
• In-Store Advertising
• Events by nationality
short info on
the best -
Digital Marketing of Lancôme
Promotion & Communication Strategy
Market Share: Eventual Sales
L'Oréal is leading the beauty segment of the Travel Retail market, with > 20% MS and estimated
growth in 2013 of +1.3 points. Overall sales of the Luxury division in 2013 were US$5,865.2
millions, while operating profit was US$1,174.2 millions.
Lancôme is leading the beauty market with 4.5% market share. “La Vie est Belle” was a top seller
in fragrances, while in skincare dynamic sales due to the innovative “Advanced Génifique” and
Research expenses increased strongly at 8.4% and thus increased as a percentage of sales from
3.5% to 3.7%. Advertising and promotion expenses did not change compared to 2012, they came
out at 30% of sales. Selling, general and administrative expenses came out slightly higher than in
2012. Expenses remained stable as a percentage of sales, if not considering acquisitions.
Basically, in every segment of beauty industry the two main competitors of Lancôme are Estee Lauder with
3,7% market share (2nd on the market) and Channel with 3,5% market share (3rd on the market). An
increase of competition in the market is expected due to the introduction of cross benefits and functions
products, especially in the skin care segment. An example can be a “2 in 1” combinations of sun protection
for acne prone skin and after-sun with whitening benefits.* A current competitor in this segment is, for
instance, Clarins BB Cream that can be used in conjunction with Clarins Double Serum.
Another competitor mainly in skin care market is organic beauty industry. The main players on the market
are Bare Escentuals, Burt's Bee, The Body Shop, Yves Rocher , Aveda, Origins and The Hain Celestial
Group, some of which belong to the L’Oréal Group. The global demand for organic personal care products
market is expected to reach US$13.2 billion in 2018 growing at a CARG of 9.6%, while the expected
revenues growth rate is forecasted to be 9.9% between 2012-2018.**
The last competition faced is one coming from mass-market products in beauty industry. The graph below
provide a comparison between Premium and Mass Market cosmetics by region between 2012-2017.
*Passport report “STRATEGIES TO SUCCEED IN THE FAST EVOLVING PREMIUM BEAUTY MARKET”. September 2013.
**Transparency Market research “Organic Personal Care Products Market for Skin Care, Hair Care, Oral Care and Cosmetics
- Global Industry Analysis, Size, Share, Growth, Trends and Forecast, 2012 – 2018”.
• New technologies (i.e. online check in)
reduce the time spent at the airport
• Democratization: low costs flights
increase the number of lower-income
travelers -> Increasing competition due
to the higher number of mass brands
• Existence of “similar” products offered
by competitors at lower prices
• Risk of cannibalization with the
product of the other brands of
• Premium price not always justified
by higher quality
• Not active in natural/organic
products, which is an emerging
trend on the market
• Special products available only in
• Exclusive services offered to
• High and time-tested quality
• High brand credibility
• Continuous introduction of
• Growing number of international
travelers & increasing demand of
the TR market
• Increasing importance of shopping
• Increasing income of the
developing countries population
The main goal of our strategy is to attract customers into our store and provide them with
a unique and unforgettable shopping experience. Therefore, the aim of the strategy is not
to simply sell a product, but to inspire clients and make them explore the world of
Lancôme: our history, heritage and values.
The main factors that influence our strategy are:
– The change of the TR customer profile
– Growth of the primary demand of the travel retail market
– Customers shop in airports mainly to purchase exclusive products
– Customers purchase while travelling to make gifts
We believe that the proposed strategy will create a sophisticated environment, coherent
with the Lancôme image and the global shoppers’ needs. Therefore we will be able to
attract and engage more customer, thanks to the new implemented services and the new
We want to increase the coverage degree, especially thanks to the digital wall strategy,
which will boost customers to buy more products.
Goal Sales Forecast and
Market Share of Lancôme
With the implementation of our strategy we want to achieve a market share of 4,9% -
which is 0,4% higher than the Market Share we expect to achieve without the
implementation of the new strategy (4,53%).
• Secondary demand of Lancôme in the beauty market in TR in 2013 = US$0,72 B
• Primary demand of the TR channel in 2014 = US$70 B
• Primary demand of the beauty market in TR for 2014 = 18B + (18B x 4,12%) =
US$18,75 B * (data of our elaboration).
• Secondary demand goal of Lancôme in the beauty market in TR 2014 = US$18,75B x
4,9% = $ 0,92 B ** (data of our elaboration).
• Without the new strategy, Lancôme’s forecasted sales in 2014 in TR = US$18,75B x
4,53 % = $ 0,85B*** (data of our elaboration).
• 2014 new strategy net impact on revenues = $0,92 B - $0,85 B = US$70 M.
*18B is the primary demand of the beauty market in 2013. 4,12% is the forecasted growth rate for the
beauty market in TR for 2014.
** 4,9% is the market share goal for 2014
*** 4,53% is the forecasted market share for 2014 without any strategy implementation
Let’s start with…
Roses petals path decals
on the floor, leading to the store. Our
aim is to take our customers by the
hand from the moment they start their
shopping experience – after the
security gate – till the moment they
reach Lancôme products.
HERE OUR JOURNEY BEGINS
… Once you are in …
Inside the shop you will find an interactive
digital wall, providing different services. On the
top of the wall there are several screens that
display the faces of the current users around the
A face-scan will analyze the customers’ facial
treats, skin and eyes’ colours. The software will
analyze the data and suggest the best makeup and
skincare products according to customers’
personal needs (i.e. the software allows to choose
the occasion of use) and characteristics.
Customers can choose between two options:
1. “Total look”: the software will provide a
selection of the most suitable and available
product from each category (i.e. 1 lipstick, 1
2. “Your choice”: customers can select just
one product category they are interested in
and the software will provide the best solution
among the available products.
Customers can also click on the product and
discover all its features.
Another service provided by digital wall is the
possibility to create a personal profile
containing all customers’ information,
including the face-scan, the purchase history,
etc. Thus, every time accessing a Lancôme
shop, they can log-in their profile and the
software will provide a new selection of
products considering the available information
and the local assortment.
… but also …
We will develop a specific present’s kit with exclusive
packaging, which differs from airport to airport (i.e. “Idéal
Lancôme Dubai”, “Idéal Lancôme Instanbul” etc.), and
that can be found only there. We will introduce three
version of kit sold in the ten main airports, each
containing products specifically mixed up according to the
main customers’ geographical profile: Asian, European
and South American. At the same time, the packaging will
reflect the local atmosphere and traditions.
Create your fragrance: at the Lancôme shops the
customer will find a fragrances’ expert who will create a
perfume for him/her – “TOI DE LANCÔME” – mixing
the typical flavours of the local country with standard
ones, according to his/her preferences.
We will offer 6 standard fragrances and 3 local ones:
customers can choose up to 3/4 and mix them.
Numbers of the Strategy
• US$70 is the average expenditure in the premium beauty market and we assume that this
expenditure is the same in TR .
• In 2013 Lancôme revenues in the beauty market in TR were worth US$1,8 B. So the
number of customers buying from Lancôme was US$1,8 B/ US$70 = 25,7 million. (2,6 % of
the travelers, who are 1 billion).
• Petal Rose Path: we expect this strategy to increase the foot store traffic by 10% (2,6 million
travelers more) and it will contribute to the increase in sales of 4% of the additional revenues
(4% x US$70 M) = US$2,8 M. We expect an increased number of customers of (US$2,8
M/US$70) 40.000 per year for the ten airports.
• Digital Wall: We believe that the digital wall will increase the foot store traffic of the 30%
(7,71mln passengers more) and 5,9% of them (453.600) will actually purchase. Since the new
average purchase price is US$100 instead of US$70 - because we expect the wall to incentive
to buy at least one more product - we expect an increase in sales of. US$45,36 (64,8% of the
• Present Kit: We expect to sell 50 product kits everyday in each airport. So each year we
expect to sell 50 x 10 x 365 = 182.500 present kits. Since the price we set for each unit is
US$60, the goal in terms of revenues is US$10,95 M (182.500 x US$60) (15,6% of the total
• Toi de Lancôme: we expect to sell about 60 bottles per day in each airport (customers
purchase it for themselves and as a gift) at the price of US$50. So quantity goal is 219.000
units. Revenue goal is 219.000 x US$50 = US$10,95 M (15,6% of the total revenues).
Products Pricing Strategy
The price of the fragrances and the present kits has been decided taking into account
their belonging to the accessible luxury sector following internal and external factors:
– Production costs
– Evaluation of the Lancôme’s products portfolio prices: the prices of the
introduced products are affected by their exclusivity and compact size. Therefore
we could maintain affordable prices, which also allow us to prevent product
cannibalization: in fact we expect customers to buy the new products along with
already existing ones.
– The effect of expected sales on price: knowing the expected sales volume, we
have set a price which allows us to achieve our market share goal.
– Demand: the price has been set accordingly to the trends of beauty market in
the Travel Retail segment, considering the low price sensitivity of the luxury
products’ customers. The Demand Price Elasticity is low due to uniqueness and
exceptional quality of the products offered.
Given that prices of luxury products in beauty industry are similar, we did not focus on
the competitors’ pricing strategies as one of the main factors affecting our decision. We
use the profit maximizing approach by implementing a premium price strategy. At the
same time, the price of present kits was also affected by the product-bundle strategy.
The New Products and Services
• We implemented a flankering strategy due to the introduction of two new types of
already existing products. For instance, “Toi de Lancôme” has a different size (20 ml)
and flavor, which differs according to the customers’ taste and the location. At the
same time, the exclusive present kit contains a special products’ mix and has an
unique packaging according to the airport.
• We also improved the customers’ shopping experience by increasing the service
level: the introduced digital wall is able to give full information about the available
products and gives individually customized advices.
• The new offering is coherent with the customers’ needs: we offer exclusive products
that can also be purchased as a gift, and we provide a unique service which makes the
shopping experience unforgettable.
• Our marketing target: we want to stimulate our actual customers to purchase the new products
and to attract a larger number of clients.
• Our communication target is made of potential customers because we want to make Lancôme
more desirable for them.
• The goal of our strategy is to provide customers with unique services in order to create an
unforgettable shopping experience. In this way we establish loyal relations with our clients, that
will make them more willing to purchase in the future.
• We want to communicate to our customers that once inside the shop, they will find products
and services tailor-made for them.
• What makes Lancôme special is the continuous seek for product and service innovation, a
philosophy which is perfectly embodied by our strategy. For example the Digital Wall combines
two existing technologies (the face scan and the led video wall), giving them a whole new
• We speak with our clients on both emotional and rational levels:
– The Digital Wall engages customers on a rational basis.
– The Rose Path, “Toi de Lancôme” and the Present Kit engage customers on an emotional
level; the drivers are uniqueness and exclusivity.
• In order to promote our strategy we will place about three banners in each airport at least for
the first implementation year.
We decided to implement our strategy in
already existing Lancôme display stands, in
the most visited airports in 2014, which are:
Istanbul, Doha, Kuala Lumpur, Taipei,
Dubai, Seoul, Honk Kong, Barcelona,
Singapore and Tokyo.
The shops through which the strategy is
implemented are owned by Lancôme itself.
The only cost related to the placement is the
rent of the space, which consists of the yearly
The new products developed – “Toi de
Lancôme ” and “Ideal Lancôme” – are sold
through the same distribution channel. Both
the products reflect the characteristic of the
country in which they are sold.
The first product requires additional assistance because of its high degree of innovation and
customization. Instead, the latter one is an intuitive product, and therefore the standard level of
customer service is adequate.
Budget of Lancôme in TR
Lancôme 2013 2014 (without strategy) 2014 (with strategy)
Lancôme MS in TR Beauty 4% 4,53% 4,90%
Lancôme share of L'Oreal revenues 20%
Revenues of Lancôme $ 720.000.000,00 $849 375 000,00 $ 918.750.000,00
Production Cost $ 208.800.000,00 $209 906 640,00 $ 216.330.640,00
Industrial Margin $ 511.200.000,00 $639 468 360,00 $ 702.419.360,00
Industrial Margin % 71,00% 75,29% 76,45%
Total Channel Costs $ 216.000.000,00 $217 144 800,00 $ 229.272.890,00
Net Marketing Contribution $ 295.200.000,00 $422 323 560,00 $ 473.146.470,00
ROS 41,00% 49,74% 51,5%
ROMI 137% 195% 206%
See the appendix for further information
Budget of Our Strategy
See the appendix for further information
Revenues Petal Rose Path $ 2.800.000
Revenues Digital wall $ 45.360.000
Revenues Present Kit $ 10.950.000
Revenues Toi de Lancôme $ 10.950.000
= Total Revenues goal 2014 with strategy $ 70.060.000
Cost of Present Kit $ 4.562.500
Cost of “Toi de Lancôme” $ 1.861.500
Tot production costs of the new products $ 6.424.000
INDUSTRIAL MARGIN $ 63.636.000
Marketing expenses - cost of digital wall and petal rose path $ 502.090
HR $ 1.020.000
Promotion $ 3.600.000
Channel costs (10% of revenues) $ 7.006.000
Total Channel Costs $ 12.128.090
= Net Marketing Contribution $ 51.507.910
Total Channel Costs Impact 17%
We expect the developed strategy to be successful, since it is coherent with the Lancôme brand and
values. At the same time, it introduces the customers to the world of exclusivity and uniqueness:
they will not just travel and shop, but experience an unforgettable “Lancôme Journey”.
….From now on customers would wish their flight to be late….
To sum up, the results of our proposed strategy turned out to be quite profitable. We expect an
increase in revenues of US$70 millions. In fact, the ROMI index of the strategy alone is 425%,
while ROS index is expected to achieve 74%, which are very beneficial results. We are aware that
the before mentioned outcomes could be too optimistic, since they are based on conjectures.
At the same time, the Present Kit strategy could be adjusted according to the goals, economic
possibilities and financial constraints of L’Oréal Group. For instance, the Present Kit proposed by
us is made up of already existing products. However, it could be composed by new products,
specifically developed for the Travel Retail Market. This new format will increase the exclusiveness
of Lancôme experience, but will also boost the development and production costs.
Talking about the Digital Wall, we decided to place it only in the 10 major airports due to the cost
restrictions. Nevertheless, Lancôme could install them in in-town regular shops. Our suggestion is to
wait till the strategy will be known world–wide and customers will get customized with the new