Mary kay case


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Mary kay case

  1. 1. Mary Kay India I. Summary of Facts A. Market – Personal Care Products 1. Hair care consumers in India a. Unsophisticated, low income consumers who use traditional hair oils b. Live in rural and semi-urban areas 2. Hair care preferences and practices in India a. Used for washing, coloring and conditioning hair b. Use traditional oils 3. Frequency of shampoo products in India a. Use shampoo infrequently, once every 7 to 14 days b. Urban middle-class consumers typically shampoo more frequently than rural consumers c. Urban middle-class and northern India prefer bottles than other regions d. Sachets are more popular for lower-income consumers 4. Hair care category in India a. Colorants, conditioners, perms/relaxants, shampoos, styling agents, and salon hair care b. Conditioners and shampoos represented 81% of hair care sales in 2009 5. Economic market - Monopolistic competition B. Product 1. Existing Mary Kay products in India a. Skin care and body care b. Makeup and fragrance 2. Hair care products a. Shampoo b. Conditioner 3. Benefits a. Core: Beauty b. Secondary 1) Sanitation, cleanliness 2) Cosmetic 3) Anti-dandruff 4) Damage repair 5) Wellbeing 4. PLC - Maturity stage C. Price 1. Manufacturer’s unit costs for delivering packages to India ranges from $1.25 to $1.75 2. Costs associated with product development and sales training is $55,000 3. $650,000 is used for advertising, promotions and public relations in the first year 4. Elasticity - Relatively elastic to relatively inelastic D. Promotion 1. Direct selling/personal selling through sales consultants 2. Forms of advertising a. Billboards/sponsorships/print/television/website advertising b. The quarterly “The Look” catalog 3. Expansibility - Relatively expansible
  2. 2. 2 II. III. E. Place 1. Headquartered in Dallas, Texas with products sold in more than 35 markets on five continents 2. The Top Fours Markets served by Mary Kay, Inc. are the U.S., China, Russia, and Mexico 3. All of the competitive companies in the market sell their products through retail channels 4. Mary Kay India imported products into India from China, Korea, and the U.S. 5. Products shipped to regional distribution centers in Delhi and Mumbai 6. Channel: Manufacturing Centers/Contract Manufacturers - Regional Distribution Centers - Independent Consultants - Consumers/Users F. Other 1. Competition a. 40 hair care competitors in India b. 10 out of 40 companies represent 77.4% of hair care product sales in 2009 c. Top 3 out of 5 competitors were multinational firms 2. Shampoo benefit statistics a. Cosmetics account for 50% to 55% of sales b. Anti-dandruff accounts for 20% to 25% of sales c. Damage repair accounts for 20% to 25% of sales 3. Branded hair care product growth in India a. Indian upper and consumer classes are growing and frequency of usage has risen in purchasing power b. Population is overwhelmingly young and optimistic, median age is 26 years old c. Growing number of working women, boosting beauty and cosmetic sales in urban areas d. 40% of households use branded shampoos and conditioners e. Broadened distribution, lower prices, and mass media efforts allowed switch to shampoo 4. Brand building guidelines in India a. Keep the offering simple and skin care focused for the new Indian sales force b. Open with accessibility priced basic skin care products in relation to the competition in order to establish Mary Kay product quality and value c. Avoid opening with products that would phase out shortly after launch d. Address key product categories of skin care, body care, and color-based cosmetics Problem/Opportunity A. Primary – Whether to introduce hair care products in India B. Secondary 1. When to launch the product 2. Training for India’s Individual consultants 3. Packaging characteristics 4. Product line characteristics 5. Product packaging size Recommended Action A. Primary – Introduce hair care products to India B. Secondary 1. Launch the hair care products in less than two years 2. Online training using “How to…” videos to help consultants 3. Sachet and bottle packaging style 4. Introduce three types of shampoos and three types of conditioners
  3. 3. 3 5. Introduce the 6 millimeter sachet and 100 millimeter bottle for each type of conditioner and shampoo IV. Plan of Action A. Plan of Action In September 2007, Mary Kay initiated operations in India. Management believed that India provided an opportunity for growth based on three reasons. Indian upper and consuming classes were expected to grow to 500 million individuals. The population consisted of young individuals who have a blurred line between luxury and basic items. The number of working women in the middle-class is growing, which can boost sales of cosmetics, body care, skin care and fragrances. In addition, industry analysis forecasted 50% market growth between 2010 and 2014. Mary Kay currently offers ninety skin and body care products to India, which would make the introduction of hair care products a smooth transition. In addition, Mary Kay already imports skin and body care products from facilities in the United States and China. The hair care products can follow the same process to avoid local manufacturing costs. In addition, Mary Kay needs to decide when to launch the products into India. Some executives believe a new category launch in India is premature while others believe a hair care product launch should be initiated as early as January 2012. Since product development and a marketing launch could take up to 18 months, a realistic time frame for launching would be in two years. The future launch date would allow executives and the team adequate time to determine product characteristics, pricing strategy, marketing plans, and package considerations. Mary Kay needs to provide training for India consultants regarding the new products. Mary Kay’s direct selling is the key component to the brand’s marketing strategy. New independent sales representatives receive two to three days of intensive training. In addition, the representations will receive a starter kit that includes products, information about products, sales presentations, the
  4. 4. 4 company’s history, and team building. Culture training is very important to Mary Kay. Without adequate training, a possible language barrier could form and dampen the launch and future hair care sales. In addition, Mary Kay needs to determine product characteristics. Branded and packaged hair care oils, shampoos, and conditioners are sold in sachets and bottles. Sachets are small, closed plastic packets that are convenient for traveling and small gifts. Sixty percent of shampoo and conditioner unit sales in India come from sachets. In rural and northern India, consumers prefer bottle package. Therefore, Mary Kay needs to introduce the sachet products due to the afford ability for the lower-income consumers as well as the bottle package for the rural and northern consumers. Mary Kay should introduce three types of shampoo and conditioners. The first type of shampoo and conditioner is the cosmetic platform, which contains shine, health and strength. The cosmetic platforms type will strengths and protects hair. The second type of shampoo and conditioner is the anti-dandruff platform. The objective is to reduce the shedding of dead skin cells from the scalp. The final type of shampoo and conditioner is the damage repair platform. The final type will fix dull, brittle, frizzy and out of control hair. Lastly, Mary Kay needs to determine the packaging sizes for the shampoo and conditioner. Mary Kay should to introduce a 6 milliliter sachet and a 200 milliliter bottle for the three styles of shampoo and conditioner. Compared to the competition, the sachet packaging sizes range from 6 to 8 milliliters while the bottle packaging sizes range from 80 to 400 milliliters. By developing the 6 milliliter packaging, Mary Kay will have affordable products for lower-income consumers. The bottle packaging is more popular in urban areas and should attract the middle class consumer. By
  5. 5. 5 launching a 6 millimeter sachet and a 200 milliliter bottle, Mary Kay will be able to reach the diverse income groups as well as be aligned with their competitors. B. Set of Plausible Alternatives 1. Do not introduce hair care products in India 2. Introduce only a bottle for shampoo and conditioners 3. Introduce only a sachet for shampoo and conditioners 4. Create and promote a bath soap for shampoo use 5. Introduce a globally standardized hair shampoo and conditioner 6. Provide information about the products instead of hands on training 7. Introduce a 2-in-1 shampoo and conditioner product 8. Produce a 7.5 millimeter sachet to match competitors 9. Produce a bottle size from 80 to 400 millimeters to match 10. Joint venture with local manufacturer 11. Use the party method as a second as selling process 12. Cross sell other Mass-tige products 13. Utilize retail channel distribution C. Incorporated Assumptions 1. Due to not being easily represented and demonstrated, an introduction of a new product line in India can cause fears 2. The bottles are more popular in urban areas and the growing market will keep costs significantly down and avoid the need to deploy sachet packaging 3. Bath soap will continue to be used as a substitute for shampoo products
  6. 6. 6 4. Since beauty consultants are still learning about the company and the existing products, executives have concerns about launching a new product line D. Supportive Argument Mary Kay should extend production in India with the addition of hair care products. The hair care industry in India consists of colorants, conditioners, perms and relaxants, shampoos, styling agents, and salon hair care. In 2009, the beauty and personal care market in India produced $55.6 billion and the total hair care market produced $14 billion. In 2009, the top selling items were conditioners and shampoos. Currently, Mary Kay has five competitors in the India hair care product market. In order to stay competitive, Mary Kay needs to develop a hair care line to obtain market share in the industry. The top two companies are Hindustan Unilever Ltd. with 18.7% and Dabur India Ltd with 13.0% of the market share. The market share is very competitive, which would allow Mary Kay to have a stable market share with the launch of hair care products. With higher hair care product sales and lower market share competition; Mary Kay will effectively and efficiently develop hair care products in India. Mary Kay needs to launch the hair care products in December 2011. With a launch date in 2011, Mary Kay will have a little more than a year to determine the product development process in a feasible time frame. By launching the hair care products in October, Mary Kay will develop greater product determination before the spring season begins. With a launch date in October, many consumers will have less discretionary income after the holiday season. Mary Kay will be able to utilize the holiday season for greater sales incentive. Furthermore, Mary Kay needs to develop a training process for consultants in India. Mary Kay's key marketing brand strategy is direct selling with consultants. In 2010, Mary Kay had 4,000 independent beauty consultants present in over 200 cities out of about 1,500 Indian cities and
  7. 7. 7 towns. The company’s approach to direct selling utilizes the “party plan,” in which independent sales representatives host parties in a customer’s home to demonstrate and sell products. Attendees have the opportunity to experience the products before they make a purchase decision. The consultants receive two to three days of intensive training and a starter kit. By utilizing online training, Mary Kay can effectively and efficiently develop additional consultants. The online training would be in various languages depending on the country where Mary Kay uses consultants. In addition, Mary Kay can use "How To" videos and various other platform tools to further train beauty consultants. Mary Kay hair care products must utilize the sachets and bottle packaging. Currently, the top-five competitors use both types of packages. The sachet package size is very popular as sixty percent of the shampoo and conditioner unit sales come from sachets. The bottle package is the standard in most countries, which is a benefit for Mary Kay. The bottle package will appeal to standard and everyday consumers. The sachet package style would appeal to lower-income consumers, first time consumers, and can be used to stimulate new brands. In addition, the sachet and bottle packages can be used for gifting and convenient purchases. In order to compete with the top firms, Mary Kay should utilize the bottle and sachet packaging styles. In addition, Mary Kay needs to introduce three styles of shampoos and conditioners, which will be catered for the certain hair types and features. The three features will include specialization for cosmetic, anti-dandruff, and damage repair. The features are benefits of hair care products and are necessary to satisfy consumers. By proposing three styles, Mary Kay can develop the hair care brand. Once the hair care product is successfully established in the country, Mary Kay will be able to produce different features and product styles in the near future.
  8. 8. 8 Mary Kay needs to introduce a 6 milliliter sachet and a 200 milliliter bottle for the shampoo and conditioner. Out of the top five competitors, these two sizes are the most popular and most commonly used. Currently, three out of the top five competitors use the 6 milliliter sachet package size, while four out of the top five competitors produce the 200 milliliter bottle package size. By producing these two packaged sizes, Mary Kay will be aligned with the competition and reach various income level consumers. Mary Kay will be able to design, develop, and launch the hair care product line strategically and cautiously.