2. 1. History
2. P&G's goal for SK-II in China
3. Challenges
.
*Discussion*
.
4. P&G’s entry strategy
5. Scandal
6. Initial Response
.
*Discussion*
.
7. Recovery
3.
4. SK-II Background
• Launched in Japan in
1980
• Originally a cream
product under Max
Factor
Famous Japanese
cosmetic brand
• Compared with
Shiseido:
- Greater market share in
Japan
- Much less in the world
5.
6.
7. Globalization of SK-II
• Make SK-II a global brand
• Starts from Hong Kong and
Taiwan
• Huge Success:
- In 1999, 45% of SK-II total sales
- In 2005, SK-II ranked the top in
Hong Kong’s skin-care market and
the second in Taiwan
• Gained confidence for
Mainland China
8. SK-II in China
• Entered in 1999
• China – huge potential market
- Chinese women spend
US$100/month on beauty &
cosmetics
• Target market: affluent consumers
in more wealthy cities (e.g. Beijing,
Shanghai)
• Goal: Maintain Olay as mass
market product; Introduce SK-II as
premium brand
9.
10. Organization 2005 (O2005)
• Organizational disruption and management
distraction
• Profit responsibility shifted to Global
Business Units
• Caused complexity in working relationships
and responsibilities
13. Chinese Market Challenges
• Targeting high income groups with niche
products: conflict with company’s goal
• Counterfeits and cheaper versions of SKII by
local companies
• Low Average Income in China: $2,400USD/year
15. 1) How should P&G effectively enter the
Chinese market? What are some
characteristics to consider?
2) How can P&G make sure SK II sales
won’t heavily cannibalize Olay sales?
16.
17. Execution
• Promotion: Hired local beauty
counselors
– Educate consumers
• Understand the market
– Favor and welcome western
products
– Western celebrity to represent
SK-II
– Preferred whiter skin and less
wrinkles
– Later used Asian celebrity
endorsers
• Counter design
• Product: new formulas
• New technology for skin care
• Place: Within malls
• Price: High
21. The Scandal
• Mid-Sept 2006: Guangdong
Center for Inspection and
Quarantine
- chromium and neodymium
• Angry Chinese consumers
- refund, returned products
- sued celebrity endorsers
- Boycotts
- Violence
22.
23. Inappropriate response
• Stopped selling all products
• Was “unavailable” to discuss
product quality
• Refused to admit products
were toxic
• Poor management of refunds
- Long lines
- Delayed cash refund
- Waiver
24. 1) What lesson can be learnt from the scandal?
How could P&G better handle the scandal?
2) How can P&G repair the SK II brand image in
China? What marketing techniques would
be involved? (4 P’s)
25.
26. Later response and current status
• Re-tested products with individual dermatologists
• October 2006: Ministry of Health in China said P&G products were safe
• 3 stage recovery process: remove misperceptions, brand recovery, and
brand rejuvenation
• Total sales increased by 89% after process
• Prestigious image restored
Editor's Notes
P&G
Founded in 1837
Small shop selling candles Multinational Corporation
More than 300 products
Over 40 brands (e.g. Crest, Oral-B, Tide)
In 140 countries
3 categories: Household Care, Health & Well-Being, Beauty & Grooming
First stepped into Chinese market in 1988
This graph shows that Asia has a HUGE prestige market- 25%; thus, entry into China is a must for P&G in order for SK-II to gain global fame.
By 1999, had 1000 beauty counters in China (within department stores)
O2005
6-year company wide reconstruction plan
Increase competitiveness and profitability
Retrenchment of 15,000 jobs
Shut down 10 plants worldwide
4 geographic business units 7 global business units (GBUs) based on product categories
Speed up product cycle
Company’s goal: to be a mainstream Chinese company (SK-II higher end)
-technology shown: air touch foundation
- Facial cleanser = 400RMB ($60)
Other Chinese celebrities:
Taiwan celebrity endorser: used Taiwanese model Lin Chi-ling
HK and China celebrity endorser: Carina Lau
Chromium is a dangerous substance that can actually cause a skin irritation called eczema; and neodymium causes lungs and liver damage if inhaled.
-Picture of angry customers breaking down P&G Shanghai office glass doors
extremely slow and inappropriate.
Although they immediately stopped selling some of their “defected” products, they claimed it was because of security issues between consumers and SK II employees. They refused to admit that they had toxic chemicals in their products.
-They not only had to wait in line for hours and wait another month to receive their cash refund, but also sign a waiver to say that they believed there was nothing wrong with the product.
- When the media wanted to interview P&G executives about the scandal, they declined and refrained from making any public apologies. Instead, P&G kept quiet and waited for the scandal to calm down.
Chemicals naturally formed in products (not hazardous) – also found in competitor’s products and other things from water to vitamins
-REMOVE: P&G executives: spoke at media briefings about the safety of their products; engaged in marketing campaigns that showed SK II was a reliable and safe brand
-RECOVER: invited journalists to dermatological conferences that were held by the China Medical Association to listen about the benefits of SK II.
-REJUVENATE: Various events, like in-store roadshows and SK II’s 25th anniversary celebration with local and global celebrities, caught consumers’ attention and generated media buzz.
-SK II sales gradually climbed and the total sales increased by 89% between the start of the scandal and the end of their three-stage marketing process.
- By the end of 2006, the brand’s prestigious image was restored.
