This presentation deals with the challenge of selecting one of three promotional alternatives — get three for the price of two (“3 for 2”), receive a gift with purchase (“GWP”), and an on-pack coupon worth 50p — for the Christmas season. The primary objective of the promotion is to drive sales volume and trade-up consumers from lower-value brands, while retaining or building brand equity.

1. Harvard Business School Case

2. What
is
‘Boots’?!!

3. o Boots is one of the best-known and respected retail names
in the United Kingdom which provides health and beauty
products and advice that enhances personal wellbeing.
o The company owned global differentiated brands in the
self-medication market such as Nurofen, Strepsils and
Clearasil.
o It employed around 75,000 people and operated in some
130 countries worldwide in 2004.
o Besides retailing, Boots had international sales and
marketing operations and also developed and
manufactured its own products.

4. o In 1849,Boot a local farm labour opened ‘The British and
American Botanic Establishment’ in Nottingham, hoping to
provide physical comfort to the needy as well as a reasonable
living for his family.
o In 1883, Boots was established as a private company ‘Boot
and Company Limited,’ Additionally, the company adopted its
own logo (see picture).

5. o In 1884,the company began to expand with more stores in
Nottingham, Boots opened its first store outside Nottingham
in Sheffield. It wanted to be the ‘Largest, Best and Cheapest’
o By 1913, sales in the 560 Boots stores across the United
Kingdom amounted to over £2.5 million a year.

6. A program of factory development in Nottingham begun
following the war, the major part being completed by 1953.
This included a new power house, printing works, and, in
1959, a new pharmaceutical research building. In 1949,
a factory for the manufacture of cosmetics was opened at
Airdrie in Scotland. The company adopted a new black and white
logo,
(see picture).

7. Boots
continued
to develop
product
ranges,
many of
which
became
household
names.
Boots developed ‘17’ cosmetics, aimed at the teenage
market, was launched in 1968.
In 1969, the analgesic Ibuprofen was introduced and was
launched as the OTC brand, Nurofen, in 1983.
Boots also introduced new services. Boots Opticians, formed
in 1987, became one of the Uk’s leading chain of opticians.
Insurance services ,dentistry, chiropody, ‘Boots for Men’
stores and ‘Internet Services’ were introduced in 1999.
Boots Healthcare International (formed in 1991),exported healthcare
products to more than 130 countries round the world. Boots Health
and Beauty stores were established in Ireland, Thailand and Taiwan.

8. What is the
situation?

9. A sales promotion of professional hair-care line, with three promotional
options.
Time — Christmas season.
None of the brands has more than 9 per cent market share. The overall market was
expected to grow by between 1 per cent to 3 per cent per year for the next 5 years.

10. Type Of Industry -> One of the most respected retail
names in UK with 2500 stores in
the country.
Boots Store

11. THE MAJOR COMPETITORS
Procter & Gamble
ALBERTO-CULVER (UNITED KINGDOM)
L’ORÉAL
Hair-care Product Retailers

12. Who are the

13. 1

14. o Over 60 years, beginning in 1955, Alberto Culver grew into
a multibillion-dollar company.
o Alberto-Culver’s acquisition of Sally Beauty Company in
1969, led to the growth from a handful of franchised stores
to over 2,000 store locations today in United States, United
Kingdom (150), Canada, Germany and Japan.
o Some of its top brands include: St. Ives, VO5, Consort hair care
for men, and FDS etc.
o Alberto-Culver’s hair-care range offers a broad assortment
of shampoos, conditioners and styling agents.

15. 2

16. o Procter & Gamble’s Pantene became the best-selling
hair-care brand in the world by 1995 with a line-up that
included shampoos, conditioners and styling products.
o Consumer awareness for Pantene is very high, and the
brand is widely available. It held a 8.4 per cent share of
the U.K. hair care market in 2001.
o Apart from Pantene, P&G offers other hair-care brands
including Clairol, Head & Shoulders, Daily Defense,
PERT plus, and Herbal Essences.

17. 3

18. o L’Oréal began in 1907 when a young French Chemist, Eugene
Schuler, developed an innovative hair-colour formula. Today the
group is present worldwide through its subsidiaries and agents.
o The group markets over 500 brands and more than 2,000 products in all
sectors of the beauty business: hair colour, permanents, styling aids,
body and skincare, cleansers, and fragrances. These products were
found in all distribution channels, from hair salons and perfumeries, to
hyper-super markets, health/beauty outlets.
o It held a 5 per cent share of the U.K. hair care market in 2001.

19. 4

20. A second major hair-care competitor is Superdrug with almost 700 stores in the UK.
The company’s value offering was that of a value retailer with a wide assortment of
around 10,000 products, ranging from essentials to premium products.
Morrison's has 400 stores and prided itself on providing quality products at
the same low price across all of its U.K. stores.
Sainsbury is the second largest with 700 stores.
Tesco is the largest supermarket chain in the UK with
more than 1,800 stores and 45,000 employees.

21. What are the
Main
the promotion?

22. 1
2
3
4
Objectives...

23. What are the

24. 1
“3 for 2”

25. o This offer enables consumers to buy two hair-care items at
regular price and receive one free.
o Customers can combine any three items they like (e.g.,
shampoo, conditioner, and styling gel, etc.), but the three
items has to be of the same brand. The free item will be the one
that is the least expensive of the three items selected by the
shopper.

26. Approximately 60 per cent of these sales would be due to
customers who would not otherwise have purchased a haircare
product from Boots during the promotional period.
It is estimated that sales per day would increase to 300 per cent
(including the free bottles).
An interesting aspect of this promotion is that most competitors
do not yet have the technology at point of sale to imitate this
promotion.
Advantages Of This Promotion

27. 2
“GWP”
Gift With Purchase

28. o A GWP is an offer in which customers are given a product
sample along with a regular purchase. For example, a sample size
of conditioner will be packaged with a regular bottle of
shampoo.

29. Its estimated that 40 per cent of sales would be due to
Boots shoppers that would not have otherwise
purchased a hair-care product from Boots during the
promotional period.
It is expected that sales during the promotional period
would be 170 per cent of sales that would have
occurred without the promotion.
Advantages Of This Promotion

30. 3
“On-Pack
Coupon”

31. o The 50p off option on products is a more conservative
approach to promoting the brands.
o All customers will be able to redeem the coupon during their
current store visit.

32. 50 per cent of sales would come from Boots
customers who would not have otherwise purchased a
hair-care product within the promotional period.
It is estimated that sales would increase to
150 per cent of non-promotion sales (comparatively
less) because December would be a heavy promotional
period for mass market brands.
Advantages Of This Promotion

35. Continued….

36. Continued….

38. * All products are normally available in 250 ml sizes. Their smaller a Take-Away
versions are normally 75 ml.
** All prices are in British pounds and per 100 ml unless otherwise stated. These
prices are only applicable at Boots stores. Within a product category the prices vary
because of their formulations.

40. o Average bottle size (shampoo/conditioner) is 250 millilitres (ml) — with an
average pre-promotional price of £3.99.
o Industry average retail margins on premium brands averaged 40 per cent.
o Mass-market brands had an average retail price of £2, with retailer margins
of approximately 25 per cent.
[ let, average retail price of premium brands be ‘t’ then;
Or, ‘t’=2* £3.99 - £2= £5.98].
o The manufacturer’s typical margin was between 8 per cent
to 12 per cent on their cost for both types of products.
[ Average Retail Margin% for manufacturers= (8%+12%)/2= 10%.]

41. o Let the manufacturing price be ‘x1’ for premium brands.
=> ‘x1’= £5.98*(1-0.1)*(1-0.4).
=> ‘x1’= £3.23.
o Let the manufacturing price be ‘x2’ for mass market brands .
=> ‘x2’= £2*(1-0.1)*(1-0.25).
=> ‘x2’= £1.35.
o Average cost of manufacturing (per unit) = (‘x1’+’x2’)/2.
= £2.29.
o Average cost incurred by retailers, here Boots(per unit)
=£2.54.
[ Average retail margin % of the manufacturer= 10% therefore;
Cost of buying each item from them= £2.29/(1-0.1)= £2.54. ]

42. o Promotional selling price (per unit) for this option = £2.66.
[Pre-promotional average selling price of three units= £3.99*3= £11.97.
Promotional average selling price of three units= £3.99*2= £7.98.
Promotional average selling price (per unit)= £7.98/3= £2.66.]
o Profit (per unit) = £2.66- £2.54= £0.12.
o If ‘y’ quantity of products were sold before promotion, then as
per data 3’y’ products will be sold during promotion.
o Total Profit= £0.12*3’y’= £0.48’y’.
Option 1
“3 for 2”

43. o Average cost incurred by retailers, here Boots(per unit)= £2.932.
o Promotional avg. selling price (p.u.)= £3.99-(90p+3p)= £3.06.
[ £1 = 100 pence (p), Adding the sample would cost approximately 90p per unit for
the product plus 3p per unit to secure the sample to the featured product].
o Profit (per unit) = £3.06- £2.54= £0.52.
o If ‘y’ quantity of products were sold before promotion, then as per
data 1.7’y’ products will be sold during promotion.
o Total Profit= £0.52*1.7’y’= £ 0.884’y’.
Option 2
“GWP”

44. o Average cost incurred by retailers, here Boots(per unit)= £2.932.
o Promotional avg. selling price (per unit)= £3.99-50p= £3.45.
[ £1 = 100 pence (p), 50p off on all products ].
o Profit (per unit) = £3.45- £2.54= £0.91.
o If ‘y’ quantity of products were sold before promotion, then as
per data 1.5’y’ products will be sold during promotion.
o Total Profit= £0.91*1.5’y’= £ 1.365’y’.
Option 3
“On-Pack Coupon”

45. Conclusion…
“On-Pack Coupon” is
the best choice, as one
gets maximum profit in
this promotion.

46. Created by : Tirthankar Mittra (Jadavpur University)
Under Prof. Sameer Mathur(IIM Lucknow)