Analysis of an Ivey Business School case study published by the Harvard Business Review

2. Hair-Care Sales
Promotion

4. • Started in 1815 by John Boot as a herbal remedy shop
in Nottingham.
• His son took over the business and christened it
‘Boots and Company limited.
• Riding on the post war industrialization wave, Boots
expanded rapidly into neighboring areas and started
diversifying.

5. To Today

7. But Boots homegrown brands in collaboration
with top designers faced stiff competition in the
premium hair product market from the likes of:

8. Boots felt it did
not maximize
profits from
these brands
and thus
emerged the
core problem of
our case,
maximize profit
while gaining
market share
and maintaining

9. • Major competitors in the
premium segment – P&G, L'Oréal
Paris and Alberto-Culver.
• Major retail competitors:
Tesco – 1800 stores
Sainsbury’s – 700 stores
Morrison's – 400 stores
Superdrug – 700 stores
COMPETITION

10. • Large number of brands with no
brand enjoying market share in
excess of 9%.
• Less brand loyalty due to
consumer beliefs and changing
preferences and meaningful
product differentiation.
• Premium brands mainly
purchased by fashion conscious
women in the 20-35 age group.
• More than 85% women
population walked through
Boots stores every week.

11. Advertising v/s Sales Promotion
• In the competitive hair care market; market share was
directly proportional to amount of advertising.
• No budget was allocated for special advertising of
Boots’ hair care products.
• Hence, sales promotion was the only strategy
available for the marketers as a mass marketing

12. Three sales promotion strategies were proposed
–
‘3 for 2’
‘Gift with Purchase’

13. Some calculations first

14. Average Prices(/250ml):
Shampoo - 4.75 £
Conditioner - 5.00 £
Gel - 7.50 £

15. Young, fashionable women were the target. But
how many were there? And how many would
visit Boots to buy their hair products?

16. Percentage of urban Population

17. Assume:
• Mainly urban women
would buy such
premium products
• The market share of
such products is directly
proportional to the
number of stores it is
sold in.
• 250 ml shampoo lasts
for two weeks.
• Conditioner is used
twice as often as
shampoo.
• Gel is used at a quarter
rate of shampoo use.

18. Number of urban females (20-35) - 5.135
million
Number of stores selling premium hair care - 4900
Number of Boots’ stores - 1300
Average time of replacement of Shampoo(250ml) - 14
days
Average time of replacement of Conditioner(250ml) - 7
days
Average time of replacement of Gel(250ml) - 56
days

19. Boots average pre-promotional sales per day
Shampoo - 100000 units
Conditioner - 200000 units
Gel - 25000 units
Item Average Pre-
Promotional Price
Average Profit per
Unit
Shampoo 4.5 £ 1.8 £
Conditioner 5 £ 2 £
Gel 7.5 £ 3 £
Average margins for premium products were
40% of the final price

20. Shampoo,
180000
Conditioner,
400000
Gel, 75000
PROFIT/DAY
0
50000
100000
150000
200000
250000
300000
350000
Sales
Sales/day
Shampoo Conditioner Gel
Total profits – 655,000 £
Total sales – 325,000

21. Which of the three sales promotion
strategies to use?
Let’s briefly analyze them one by

23. Strategy Summary:
• Choosing any three products from the same
sub-brand and paying only for the two costlier
ones.
• Sales increase to 300% of the pre-promotional
sales with 60% of the total coming from
consumer who wouldn’t have bought the
products without promotion.
0 100000 200000 300000 400000 500000 600000 700000
Without Promotion
With Promotion
Sales Per Day
Gel Conditioner Shampoo

24. Strategy Payoff
Since conditioner to shampoo usage ratio is 2:1;
the predominant cluster sales under the 3 for 2
scheme would come from customers buying 2
conditioners and getting the shampoo for free.
Profit on one cluster(shampoo+2 conditioner) =
(2+2) – (2.7) = 1.3 £.
Profits = (300000)*(1.3 £) +(75000)*(3 £) = 615,000
£
Units sold = 975,000
New consumers exposed to products = 225,000

26. Strategy Summary:
• Attaching a small sample of complimentary
product with the actual product.
• Average cost at 93p per attachment.
• Sales would increase to 170% of the pre-
promotion sales with 40% of the final sales
coming from people who wouldn’t have
purchased a hair care product from Boots.
0 50000 100000 150000 200000 250000 300000 350000 400000
Pre-Promotion Sales
Promotion Sales
Sales With and without GWP offer
Gel Conditioner Shampoo

27. Strategy Payoff
Profits from shampoo - 1.8*(170,000) = 306,000
£
Profits from Conditioner - 2*(340,000) = 680,000
£
Profits from Gel - 3*(42,500) = 127,500
£
Promotion Cost - (0.93)*552,500 =
513,825 £

29. Strategy Summary:
• 50 p coupon on all products redeemable
during current store visit.
• Heavy promotions by other brands of the same
type.
• Sales increase to 150% of non-promotional
sales and 50% of these would have come from
customers who wouldn’t have purchased a
Boots hair-product otherwise.
0 50000 100000 150000 200000 250000 300000 350000
Pre-Promotional Sales
Promotion Sales
Chart Title
Gel Conditioner Shampoo

30. Strategy Payoff
Profits from Shampoo - (1.8)*(150,000) =
270,000 £
Profits from Conditioner - (2)*(300000) = 600,000
£
Profits from Gel - (3)*(37500) = 112,500
£
Promotion Costs - (487,500)*(0.5) =
243,750 £

31. 0
200000
400000
600000
800000
1000000
1200000
No Promotion 3 For 2 GWP On-Pack Coupon
Final Sales
Shampoo Conditioner Gel Total

32. 0
100000
200000
300000
400000
500000
600000
700000
800000
No Promotion 3 For 2 GWP On-Pack Coupon
Final Profits after accounting for Promotional Costs
Shampoo Conditioner Gel Total

33. 0
225000 220800
243750
325000
375000
552500
487500
0
100000
200000
300000
400000
500000
600000
No Promotion 3 For 2 GWP On-Pack Coupon
Customers Attracted
New Customers Attracted Total Customers

34. The GWP strategy attracts more customers and
the On-Pack coupon strategy attracts more new,
possibly one time users whereas the 3 for 2
strategy generates the highest absolute amount
of sales.
Short term profit wise, On-Pack coupon is
the most profitable followed by 3 for 2.
Long term equity is built more by the 3 for 2

35.  Secure market leadership
 Ensure profitable promotions
 Maintain and enhance the professional hair care
brands.
‘3 for 2’ satisfies all the above requirements
whereas 50p coupon may dilute the brand equity
and GWP cannot sell as many products as to
secure market leadership. So I would employ the
‘3 for 2’ strategy as a promotion strategy

38. DISCLAIMER
Created by Aasish Gudi as a part of a marketing
internship under Professor Sameer Mathur,
Indian Institute of Management Lucknow.