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L'Oreal Brandstorm - Lancome in Travel Retail


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This report containts information about:
- L'Oreal company;
- Travel Retail;
- Travel Retail Beauty Market;

Published in: Marketing
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L'Oreal Brandstorm - Lancome in Travel Retail

  1. 1. L'Oréal Brandstorm 2015: Lancôme in Travel Retail Chiara Cozzolino - 1596758 Pierandrea Miglietta - 1590553 Anastasia Yarkina - 1578533 20171 STRATEGIC MARKETING & MARKETING PLAN
  2. 2. INDEX Executive summary – slides 3. Introduction – slide 4 History – slides 5. Company Overview – slides 6-8. Customer Profile – slides 9-11. Demand trends and Structure – slides 11-12. Lancôme's Competitive Environment – slide 13. Lancôme's Competitive Analysis – slides 14-17. Relationship with suppliers and buyers – 18. Lancôme's Internal Analysis – slides 19-31. S.W.O.T Analysis – slide 32. Strategy Goals and Objectives – 33-34. Our Strategy – 35-38. Strategy Implementation – 39-42. Budget – 43-44 Conclusions - 45
  3. 3. Executive Summary 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 indexes.
  4. 4. Company: 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 make-up. 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. Introduction 1st Cosmetic Group World Wide Distributed in 130 countries with 28 international brands 77.400 employees around the world of 156 different nationalities € 22.98 billions of revenues in 2013 6,3 billions of units produced worldwide
  5. 5. 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 Oréal. • 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 advertising campaigns • 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 fragrances house. • 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
  6. 6. L'Oréal – Company Overview L'Oréal has five different divisions in order to accomplish the mission “beauty for everyone”: 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 dermo-cosmetics. 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.
  7. 7. 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 strongly. 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 hair colorants. 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.
  8. 8. 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.
  9. 9. 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 more sophisticated. • 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).
  10. 10. 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:
  11. 11. Customers’ Purchase Preferences From a market research conducted by “”, 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. Amongtheinterviewed: 96% say they enjoy shopping while travelling. 83% say that shopping is very important for them while travelling. 68% choose their destination according to the brands available locally. Forwhatconcernsthe purchasechannel: 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 (i.e. “Sephora”). 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 arrivals - 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)
  12. 12. 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 B • 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
  13. 13. L’Oréal Competitive Environment Bargaining power of customers: •Large number of customers •Weak bargaining power Bargaining Power of Suppliers: • Large number of substitute inputs • High competition between suppliers Bargaining power of customers: • Large number of customers • High number of competitors in the beauty/cosmetic industry • No bargaining power Threat of substitutes: • High number of competitors • Product differentiation is not always perceivable by customers • Low brand loyalty Intensity of Existing Rivalry: • Fast industry growth rate • Large industry size 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
  14. 14. 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 Kérastase. 3. Consumer products, manufactured by firms like Garnier, L’Oréal Paris, Maybelline New York. 4. Luxury products, manufactured by firms like Lancôme, Clinique, Estee Lauder etc. COMPETITIVE ARENA FOR LUXURY PRODUCTS L’Oréal Group
  15. 15. 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 innovation. “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
  16. 16. 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.
  17. 17. Consumers’ Perception of Lancôme Main competitors according to the MS: Value offered SuperiorInferior InnovationLowHigh ValueofferedInferiorSuperior PriceLow High 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 innovation). • Lancôme - 4,5% • Shiseido - 4,2% • Clinique - 4,2% • Estēe Lauder - 3,7% • Chanel - 3,5% • Dior - 2,9%
  18. 18. Relationship with 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.
  19. 19. Lancôme’s Strategy Although Lancôme started as a fragrances house, it now offers three categories of product: 1. Skincare. 2. Fragrances. 3. Makeup. 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. Retail “La Vie est Belle” • Podiums & Outposts • Show Window & Perfumeries • Displays & Tray • Free Access Perfumery Merchandising “Lip Lover” • Display • Launch Tray • Merchandizing Staging Retail “Visionnaire cream” • Display & Kit New Bar • Staging Niche – Glorifier & Gondola • Pos & Show Window • Podiums
  20. 20. Recent Sales Trend: Beauty Industry vs TR (Values and Quantity) Current facts in beauty industry: • Global expansion of beauty industry. • 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 (+4% increase). Future evaluation: • 3.4% growth over next 5 years. • Skin care sales are expected to grow over US$5 billion in 2012 – 2017. • US$6 billion new sales in premium cosmetics between 2012-2017 just in Asian market. IN TRAVEL RETAIL: • The BEAUTY sector is the leading category with 30% of total turnover with estimated growth for 2013 is +7.4% 20 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”.
  21. 21. 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 21 27 16,30 19,15 17,4 40 56,25 50 29,95 17,4 40 0 10 20 30 40 50 60 Complexion Eyes Makeup Lips Makeup Nail Polish Sun Makeup min max * Information is provided for the overall beauty market
  22. 22. 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). 22 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€.
  23. 23. 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€. 23 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 Oily skin.  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 Oily skin.  Masks et Exfoliating scrubs (4 category products). Differentiation between “Exfoliating scrubs” and “Masks”.
  24. 24. 6 25 13 13 12 4 13 11 9 Youth Ac va ng Concentrat An -ageing Basic Moisturisers Eyes and Lips Care Makeup removers Masks et Exfolia ng scrubs Body care Sun care Men care 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” and “After-Sun”.  Men Care (9 category products). Differentiation among “Anti-ageing”, “Moisturisers”, “Cleansers” and “Shaving”. 24
  25. 25. 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: Fragrance Lancôme is positioned as a brand of EMOTIONS 25 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.
  26. 26. Price Range of Lancôme Products* 26 56,25 330 94 70 16,30 20,9 42,6 42 0 50 100 150 200 250 300 350 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. For example: Special size (100ml) & Special sets (DUOS / TRIOS) Special kits: ✔ Routine Set ✔ Palettes of Make Up ✔ Miniatures Fragrances ✔ Premium Coffret *Data of female fragrance is based on the on the 2 most popular sizes: 30ml (for min price) and 75 ml (for max price). For male, in fact, 100ml fragrance is the cheapest and 75ml is the more expensive.
  27. 27. Travel Retail Specials (2) TR exclusive Lancôme palettes, lips & mascara sets: 27 • Absolue Au Naturel • Absolue Voyage Absolue Palettes • Idéal sculpt • Idéal glow • Idéal bronze Frenzy collection Juicy Tubes (2 kits) Rouge in love Gloss in Love (3 kits) MASCARA SETS Duos Mascara: Doll Eyes & Hypnose Drama Mascara and Eye Product: 2 products set Mascara and Eye Product: 3 prodcuts set TR exclusive Lancôme Skincare
  28. 28. 28 TR exclusive Lancôme Fragrances Distribution: Mainly use of indirect multichannel strategy.Lancôme’s main channels:  Department stores, such as “La Rinascente”  Exclusive beauty stores, such as “Sephora”  E-shop  Duty-free shops TRAVEL RETAIL: Airports 57% Down- town duty free shops 33% Airlines 6% Cruises 4% Travel Retail Specials (3) & Distribution
  29. 29. 29 • Internet Banners & Registration Page • Emailing • Airport Advertising • Out of Home Advertising • In-Flight Magazine Advertising • In-Store Advertising • Events by nationality • Billboards Facebook page: involves the customers, promotes events, increase the visibility of new products. YouTube channel: videos to teach customers to use company’s products; new commercials promotion Lancome on Twitter: short info on latest news Weekly newsletter: info about the best - sellers Lancôme Virtual Palette app: make-up simulation Digital Marketing of Lancôme Promotion & Communication Strategy
  30. 30. 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 “Dreamtone”. 30 Company Expenses 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.
  31. 31. Competitors’ Products 31 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”.
  32. 32. Travel Retail THREATS • 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 retailers’ offers • Existence of “similar” products offered by competitors at lower prices WEAKNESSES • Risk of cannibalization with the product of the other brands of the Group • Premium price not always justified by higher quality • Not active in natural/organic products, which is an emerging trend on the market STRENGTHS • Special products available only in TR channel • Exclusive services offered to customers • High and time-tested quality • High brand credibility • Continuous introduction of innovative products OPPORTUNITIES • Growing number of international travelers & increasing demand of the TR market • Increasing importance of shopping while travelling • Increasing income of the developing countries population
  33. 33. DESTINATION ROSE GARDEN 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 products offered. We want to increase the coverage degree, especially thanks to the digital wall strategy, which will boost customers to buy more products.
  34. 34. 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
  35. 35. 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
  36. 36. … 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 world. 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 mascara etc.). 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.
  37. 37. … 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.
  38. 38. 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 additional revenues). • 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 revenues). • 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).
  39. 39. 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.
  40. 40. 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.
  41. 41. Promotion • 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 meaning. • 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.
  42. 42. Place 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 sales’ percentage. 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.
  43. 43. 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
  44. 44. 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 ROMI 425% ROS 74% Total Channel Costs Impact 17%
  45. 45. Final Conclusion 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 technology.