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Boots Hair Care Case Study
- 1. Boots Hair CareSales Promotion: HBR Case Study
- 2. Objective To drive upsales volume and trade up consumers from lower brands , while retaining or building brand equity for a line of professional hair-care products at BOOTS.
- 3. CaseBackground • One ofthe largest retail names in United Kingdom. • Employed 75000 people in 130 countries in 2004. • Apart from health and beauty products, deals in optician, insurance services etc.
- 5. Competition • These brandswere widely available in supermarkets and at drug retailers including Boots and Superdrug. • The sales of these brands were directly proportional to the amount of advertising expenditure.
- 6. Marketshare • Over 60major brands in hair-product market in 2000. • No brand enjoyed more than 9% market share. • Severe price competition.
- 7.
- 8. Understanding ConsumerBehaviour • Lackof Brand Loyalty • Dynamic consumer behaviour • Consumers found it difficult to identify product differentiation.
- 9. Demographics • Consumers whopurchased professional brands were largely fashion-conscious women in the 20-35 age category. • Most Boots consumers bought both basic and premium brands. • Other customers bought basic products for everyday use and premium products for special occasions such as weekends or social outings.
- 10. The Problem • DaveRobinson, the sales manager at Boots needs to come up with a strategy to promote sales in UK in December 2004. • He has 3 different promotional strategies at his disposal, and needs to choose the most effective one.
- 11. The Decision • Averagebottle size is 250 ml (shampoo/conditioner). • Average pre-promotional price is 3.99 pounds. • Industry average retail margins :- 40%. • Mass-market brands had an average retail price of 2 pounds with retailer margins of 25%. • Manufacturer’s margin :- 8- 12%.
- 12. PromotionalStrategies 1. Buy twohair-care items at regular price and receive one free.
- 13. Analysis • Loss of Brand Loyalty. •Not a long term solution • Competitors cannot replicate the strategy. • Sales would increase by 300% • 60% new customers.
- 14. Analysis • We donot know whether all consumers will buy 3 products every time, hence calculating the exact profitability is not possible. • Assuming they do, and consumers buy only from mass-market brands ( more likely in such a scenario), pre-promotional profit per unit is 1.3. For 100 units, it is 130 pounds.
- 15. Analysis • After promotionalstrategy, effective price becomes 1.33 pounds. Profit margin is 65% ( minus manufacturer and retailer). Hence profit per unit is 0.86. For 300 units, it is 258 pounds. Profit increases by almost 200%. • Also, there is more consumer reach (60%) and competitive advantage.
- 16. PromotionalStrategies 1. Customers tobe given a product sample along with their purchase.
- 17. Analysis • Average cost of93p per unit. • Competitors can easily replicate the strategy. • Sales would increase by 170% • 40% new customers.
- 18. Analysis • This strategywill cost 93p per unit of bottle. • Pre-promotional profit was 0.65*2*100 = 130 pounds. • After promotional strategy, (1.3-0.93)*170 = 68 pounds. • Profit is decreasing by almost 48%.
- 19. PromotionalStrategies 1. Customers wouldbe able to redeem the 50p off coupon during their current store visit.
- 20. Analysis • Affects brand equityand long term sales. • Sales would increase by 150% • 50% new customers.
- 21. Analysis • This strategywould cost 50p per unit. • Pre promotional profit was 0.65*2*100 = 130 for 100 units. • After promotion, profit is (1.3-0.5)*150 = 120 pounds. • Profit is decreasing by approximately 7.7%.
- 22. “3-for-2” seems tobe the best possible strategy since it increases profit as well as consumer reach.
- 23. • Objective • CaseBackground • Market Analysis • Consumer Analysis • Problem and Analysis • Conclusion
- 25. PreparedByAnchitAhuja, duringan internshipunderProfSameer Mathur, IIMLucknow.