Case study on L'Oreal for International Marketing

1. TEAM International Swaggers
Because you’re worth it

2. Executive Summary
The strategic problem is L‟Oréal could not fully penetrate the USA
market because they were utilizing a global strategy that worked
in France while not adapting to the local USA market.
Strategic Alternatives:
• Reducing the number of SKUs
• New external marketing strategy for intended market segment
• Concentrating on technologically advance products
Recommendation:
By focusing on the moisturizer category and reducing prices on
all products by 20%, will obtain profits of $24M by the fourth
year.

3. L‟Oréal benefits from a strong competitive position in Europe.
With L‟Oréal‟s strong brand name and its “reputation of
living up to its commitment”, it can shoot up its sales of
new products
With L‟Oréal‟s strong brand name and its “reputation of living
up to its commitment”, it can shoot up its sales of new
products.
S
• Technologically
superior product
• Strong brand value
O
• The market growth
potential has
increase by 52.5%
• Market development
index

4. The position is vulnerable in US as they are experiencing pressure
from other strong brands.
Their „class to mass‟ strategy backfired when they introduced
14 SKU‟s at the same time in US.
W• Packaging was not aim
towards US consumers
• Product was not design for
the US segment
• High price compare to
competitors
• 30% customer retention
rate
T
• Increase
competition/intensity
of rivalry
• Last mover
disadvantage in US

5. 78% of the US market knew of the product, 7% used it and retention
rate of 30% from 1991 to 1995.
L‟Oreal has 57% market potential, especially with the their
specialties
W
• Leverage their products using
„class to mass‟ and „tickle
down and fire up‟
B
• Upscale skincare business
• Top line improvement
• Make US major contributor to
brand‟s global position
M
• Competitors increase market
share
• Huge sales force against
L‟Oreal
• No global-local approach
H
• Good reputation and
commitments
• Product education
• Department store environment

6. The 4 biggest players cater almost 65% of the moisturizer market
which increases the barrier of new entry.
High level of risk due to intense competition can be mitigated
by increasing brand value to informational advertisement and
lowering price.
Power of
Supplier
Power of
Buyer
Threat of new
entrant
Threat of
Substitute
Intensity of
Rivalry
 Competitive price
 Brand perception
 Intro of new SKU
[Plenitude]
 Price sensitive
 Lack of product
info
 Existing strong
positions
 Low vertical
competition
 Low switching cost

8. Potential to capture 3 significant target segments: Stressed
Out, Aged Focused and Price Conscious Socializers, totaling
57% of the market.
Plénitude gives the most customer value for Stressed Out and Aged
Focused segments, which comprises 40% of the market.
Segment Name Unconcerned Ingredient
Apathetic
Price Conscious
Socializers
Stressed Out Aged Focused
Core Need Skin Hydration Skin Hydration Skin Hydration Skin Hydration Skin Hydration
Differentiating
Benefit
Value Reducing Signs
of Aging
Better Look Effectiveness Natural
Ingredients
Segment Size 25% 17% 17% 22% 18%
Kay Demographic Teens 30 - 40 Collage
Students/Young
Adults
Successful
Businesswoman
Working Mums
Price Paid Low Medium Medium High High/Medium
Sample Product Ponds Nivea Oil Olay Plénitude Alpha Hydrox

9. Market
Penetration
Product
Development
DiversificationMarket
Development
ExistingNew
New
(treatment)
Existing
(daily)
Markets
Products
There is still more potential growth in these market segments.
Plénitude holds 37% of market share in moisturizer for treatment and 13% in
moisturizer for daily product, $42.9 USD million and $23.1 million respectively, in
1995.

10. Reduce the
number of SKUs
New marketing
strategy
Focus on
technologically
advance products
Lose 22.3%
market share
Gain 21% market
share
Gain 17% market
share
Recommendation:
Reduce number of SKUs, devise new marketing strategy and
price reduction by 20% in order to increase profits to $24M
A change in marketing strategy will lead to a 21% increase of market share

11. Product
Leadership
Operational
Excellence
Customer
Intimacy
Recommendation:
Reduce number of SKUs, devise new marketing strategy and
price reduction by 20% in order to increase profits to $24M
Taking Product Leadership approach, there will be an increase of moisturizer treatment
and moisturizer daily market share to 38% and 14% respectively.

12. Yearly sales objective increase of 57%.
The marketing plan will gain $24M in revenue by 1999.
• Strategic goal: gain
market share of
16.19% by 1999
– Product
standardization
– Price reduction of
20%
– Advertisement
budget
rearrangement
• Tactical plan:
Quarterly sales of
$8.8M
• Total annual sales of
$26.5M
-100,000,000
-50,000,000
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
95 96 97 98 99 00 01
Plénitude 5 Year Forecast
Total Sales Profit
Marketing Plan

13. Plénitude Product Selection of Marketing Segments, Double Star product selection among Primary
Marketing Segment (Moisturizer – Treatment)
Moisturizers - Daily Size (oz) Everyday Average Retail Price $
H, Hydra – Renewal Jar 1.7 10.17
M, Active Daily Moisturizer – SPF 15 ★ 4 7.21
L à Active Daily Moisturizer 4 7.11
Moisturizers - Treatment
H, Eye Defense ★ 0.5 12.07
H, Firming Facial Serum 1 15.19
M à Revitaliff ★ 1.7 12.31
M, Advanced Overnight Replenisher 1.4 12.26
M, Excel Cream 1.4 11.36
L, Advanced Wrinkle Defense Crème -
Tube
1.2 10.3
Cleansers
M, Hydrating Cleasing Cream ★ 6 7.07
However, in the long run, we will adapt to the standardized need of
the market thus increasing our long run sales per product by 17%
Reducing SKUs will decrease $5.8 in sales assuming that we lose those specific
customers that previously purchase the discontinued products.
SKU Decrease
• Moisturizers would
have at least 3
products with one
“Star”
• Treatment moisturizer
would have two
“Star”, one high and
one medium

14. We will obtain a yearly increase of 19% in volume of
sales.
Price reduction of 20% on all products.
8.14
5.77 5.69
9.66
12.15
9.85 9.81
9.09
8.24
5.66
10.17
7.21 7.11
12.07
15.19
12.31 12.26
11.36
10.3
7.07
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
Hydra –
Renewal Jar
Active Daily
Moisturizer
– SPF 15 ★
Active Daily
Moisturizer
Moisturizers
- Treatment
Eye Defense
★
Firming
Facial Serum
Revitaliff ★ Advanced
Overnight
Replenisher
Excell Cream Advanced
Wrinkle
Defense
Crème -
Tube
Cleansers Hydrating
Cleasing
Cream ★
Plénitude Future Pricing Decisions
New Average Retail Price $
Everyday Average Retail Price $

15. 12.5
10
7.5
7.5
1.5
Planned Budget on Year 6 in
Millions
M , Active Daily
Moisturizer – SPF 15
M, Revitaliff
H, Eye Defense
M, Hydrating Cleasing
Cream
Marketing Reaearch
Increase sales by 21% yearly per “Star” product.
The marketing plan will gain $24M in revenue by 1999.
• Separate market
segment:
– Star product:
• Moisturizer daily
• Moisturizer
treatment (main
focus) two star
products
• Cleanser
– Market Research
• Adapt for
continuous market
change (different
product needs)
Budget Plan

16. L‟Oreal will be the leader in moisturizing category by 2001 with
35.37% market share.
With the new marketing plan, L‟Oreal will have a total market share of 23.89% in
2000.
14%
16%
13%
13%
14%
14%
15%
15%
16%
16%
17%
Moutirizer %
Plenitude Moisturizer Market Share
1995 vs 1999
1995
1999
36.86%
12.89%
38%
14%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
Treatment -Moisturizer Daily-Moisturizer
Plenitude Inner Markets Share 1995
vs 1999
1995
1999

17. THANK YOU

18. Exhibit 1 GE/McKinsey
HIGH MEDIUM LOW
HIGH
MEDIUM
LOW
BUSINESS UNIT STRENGTH
MARKETATTRACTIVENESS
Plénitude
Pond’s
Alpha-
Hydrox
Olay

19. Exhibit 2 Income Statement
Plenitude Income Statement for USA -- Amounts in millions
1990 1995
Sales 31.7 63.4
COGS 7.925 15.85
Gross Profit 23.775 47.55
Operating expenses
Adv and promotion Costs 35.5 38.3
Total operating expenses 35.5 38.3
Non-Operating Expense
Pre-Tax loss 25.4 12.5
Total Non-Operating Expense 25.4 12.5
Net Income/Loss -37.125 -3.25
L'Oreal was losing 3 million dollars in 1995 rather than 37 million dollars
in 1990. In 5 years they deacreased the loss ny 34 million dollars

20. Exhibit Market Loss
Plenitud Product $ Volume Product Market Segment Total Sales Plenitud
Excell Lotion 1232140MT 25807235
Eye Makeup Remover 644700N/A
Clarify A3 Mask 638049C
Active Daily Moustarizer Lotion Oil Free 622619MD
Hydrating Floral Toner 593784C
Wrinkle Defense Cream Tube 546502MT
Hydra-Renewal Cream Tube 513212MD
Deep Cleansing Gel Tube 467872C
Clarify A3 - Cleanser 447221C
Clarifying Toner 692416C
Product Market Segment $ Volume # Products decrease % decrease of Total Sales
Mousturizer - Treatment 1778642 2 6.89%
Mousturizer - Daily 1135831 2 4.40%
Cleanser 2839342 5 11.00%
Total Decrease $ 5,753,815.00 9 22.30%

21. Exhibit Marketing Share Ownership
42.86
15.94
34.85
22.6423.08
116.88
36.27
2.80
Plenitud Olay Pond's Alpha-Hydrox
Treatment -Moisturizer
Daily-Moisturizer

22. Exhibit Competition
Ponds Oil of Olay Alpha-Hydrox
Moisturizers -
Daily
Size (oz)
Everyday Average
Retail Price $
Moisturizers -
Daily
Size (oz)
Everyday Average
Retail Price $
Moisturizers -
Daily
Size (oz)
Everyday Average
Retail Price $
Dry Skin Cream 11 8.19
H --> U/V
Protectant Beuty
Fluid
5.25 9.6
H à AHA Souffle
Soothing Anti-
Wrinkle
15.26
Moisturizers - Treatment
M à Sensitive
Skin Beuty Fluid
4 6.66
M à Night
Replenishing
Cream
9.7
H à Prevent and
correct cream
2.5 15.2
L à Original Beuty
Fluid
4 6.59
L à Foaming Face
Wash
7.65
M à Prevent and
Correct Lotion
4.25 14.94 Moisturizers - Treatment Moisturizers - Treatment
L à Age defying
Lotion
3 10.99
H à Age Defying
Protective
Renewal Cream
2 7.31
H à Sheer Sikl
Moisturizer SPF
15
15.26
Cleansers M à Night of Olay 2 6.45
M à AHA
Enhanced Lotion
★
11.33
H àSelf Foaming
Cleaner
4 7.44
L à Repleninshing
Cream (4 SKU's
by type)
2 8.73
L à Spot Light
Targeted Skin
Lightener
10.99
M à Cold Cream 3.5 4.09 Cleansers Cleansers
L à Refreshing
Toner
7 5.6
H à Age Defying
Daily Renewal
6.78 4.76 Toner Astringent 7.99
M à Refrenishing
Toner
6.78 4.56
L à Age Defying
Daily Renewal
7.2 3.98

23. Exhibit Forecast 1996
Total Sales Goal
Moisturizers -
Daily
New Average Retail
Price $
Selling
Volume
Increase from Price
Decrease
Increase Advertisement
"Star'"
Increase from Standarization
of Products
New Total
Sales($)
Hydra – Renewal
Jar
8.136 170,000 202300 244783 286396 2,330,119
Active Daily
Moisturizer – SPF
15 ★
5.768 149,734 178183 215602 252254 1,455,003
Active Daily
Moisturizer
5.688 136,079 161934 195940 229250 1,303,974
Moisturizers -
Treatment
Eye Defense ★ 9.656 211,237 251372 304160 355867 3,436,255
Firming Facial
Serum
12.152 56,408 67126 81222 95030 1,154,800
Revitaliff ★ 9.848 513,824 611451 739855 865631 8,524,730
Advanced
Overnight
Replenisher
9.808 125,698 149581 180993 211761 2,076,955
Excell Cream 9.088 151,525 180315 218181 255272 2,319,908
Advanced Wrinkle
Defense Crème -
Tube
8.24 202,831 241369 292056 341706 2,815,657
Cleansers
Hydrating
Cleasing Cream
★
5.656 110,573 131582 159214 186280 1,053,602
Total Volume
Increase 1,827,909 347,303 456,794 447,441 $26,471,002

24. Market Growth
95 96 97 98 99 0 1
Market Growth 471,000,000 511,500,000 552,000,000 592,500,000 633,000,000 673,500,000 714,000,000
Total Sales 65,940,000 26,478,482 41,571,216 65,266,810 102,468,891 160,876,159 252,575,570
Market Share Ownership 14.00% 5.18% 7.53% 11.02% 16.19% 23.89% 35.37%
Exhibit Market Growth

25. Future Tactical Objectives
Periods 96 97 98 99 00 01
Targeted Sales 26,478,482 41,571,216 65,266,810 102,468,891 160,876,159 252,575,570
Quarterly Objectives 8,826,161 13,857,072 21,755,603 34,156,297 53,625,386 84,191,857
Exhibit Future Tactical Objectives