CHAPTER 9 | Developing New Products and Managing the Product Life Cycle 293

9.2 Managing L’Oréal’s Product Life Cycle: More

Real Marketing
Than Just Makeup
Founded in 1909, L’Oréal has de- rivals. By tradition, the brand was particularly when it comes to the younger generation,
voted itself to one business over strong when it comes to foundation and mas- who claim that L’Oréal did not offer the right
the century: beauty. Headquartered cara products but has been increasingly chal- shades. All findings were analyzed in-depth
in Clichy near Paris, the company lenged by the fashionable segment of color in order to determine the right strategy with
has become the largest cosmetics variety and selection. respect to competition and the marketing
company worldwide, operating in Yann Joffredo, Global Vice-President environment while still hewing close to the
140 countries with 32 international Cosmetics L’Oréal Paris, emphasized that company’s culture and values.
brands. Its mother brand, L’Oréal Paris, is the the traditional market had shifted and that L’Oréal decided to choose a different posi-
no. 1 beauty brand in the world. today’s women shop “looks” rather than tioning from the low-cost brands. Without the
In the increasingly dynamic environment products. As a result, conventional chan- cost structure that L’Oréal has, with a team
of the cosmetic industry, L’Oréal has to en- nels are no longer the only key in this of over 3,800 researchers, the latter would
sure a continuous and sophisticated man- new era of internet sales, cross-channel always win the battle of inexpensiveness.
agement of the life cycle of its products purchasers and connected beauty. Instead Consequently, the idea was to learn from the
and services to bring new value and appeal of pursuing an exit strategy and dropping makeup artist brands’ success by reposition-
to its customers. By tradition, the makeup out of the makeup market like Nivea did in ing the brand and developing an innovative
market has long been driven by classic mass 2011, L’Oréal wanted to continue building its color statement that appealed to young con-
marketing brands such as Maybelline New makeup brand and avoid the decline stage. sumers. L’Oréal Paris established a new strat-
York and Max Factor. In addition, competi- In order to achieve this target, the com- egy platform, moving from a generalist brand
tion is intensified by brands selling directly to pany looked into various market research to a multi-specialist one. In 2014, the name
customers, such as Avon, and, in particular, reports and conducted a battery of tests. of the brand was changed to L’Oréal Makeup
low-cost brands such as Essence and Kiko. One study carried out in Europe showed Designer Paris.
While competition is fierce and challenging, that L’Oréal Paris was seen as a trustworthy The value proposition is that the products
the makeup market is growing fast. To a brand whose products were highly effec- are developed and endorsed by the great-
large extent this growth is driven by so-called tive and innovative, enhancing beauty in an est makeup artists and spokespeople. The
makeup artist brands, which are product elegant manner while bringing self-esteem to brand is positioned on three pillars: L’Art du
lines initially used by professionals or named women. However, the study also discovered Regard (The Art of Looks), L’Architecture du
after famous makeup artists such as MAC, that the brand was not seen as the most dy- Teint (The Architecture of Complexion), and
Benefit, and Bobby Brown. There are also namic and trendy in the industry, particularly L’Obsession de la Couleur (Color Obsession).
many makeup brands that wear the names
of perfume or luxury ready-to-wear brands,
such as Shiseido, Chanel, or Yves Saint
Laurent.
L’Oréal’s makeup brand L’Oréal Paris has
a long tradition of 30 years in the market, and
it currently ranks no. 2 in the global market af-
ter Maybelline New York. The makeup market
encountered a strong growth of 50 percent in
the 10 years between 2003 and 2012. Even
though L’Oréal’s makeup brand performed
better than the market with a significant mar-
ket share increase, it was outperformed by
the makeup artist brands. With respect to
the product life cycle, the L’Oréal makeup
brand was close to the maturity phase, as
the competition was fierce, profits were slow-
ing down, and the brand’s customers were
aging. An initial analysis of the market and
its competitors indicated that the two fast-
est growing types of brands—makeup artist
brands and low-cost brands—had something
in common: a very large variety of colors that
appealed to customers. Although L’Oréal’s
makeup brand was still performing, the com- L’Oréal had to contend with the perception that it was not trendy enough for
pany realized that this might not be sustain- the younger generation.
able enough in the future to compete with its ACORN 1/Alamy Stock Photo
294 |
PART 3 Designing a Customer Value–Driven Strategy and Mix

In order to evolve from proposing products relationships through social media platforms. app in the world and has been downloaded
to offering an experience, the brand needed The campaign kicked off on three conti- over 10 million times since May 2014. Since
to create an interactive relationship with its nents, starting in France, the United States, then, the company has started to see a
audience at all customer touchpoints, offline and China in May 2014 and then rolled out strong acceleration of its sales.
and particularly online. Therefore, the new to 20 countries. Cyril Chapuy, L’Oréal Paris In all, L’Oréal has successfully repositioned
positioning and strategy was primarily driven International General Manager, stated that the and relaunched its makeup brand by manag-
by the creation of the revolutionary Makeup strategy successfully positioned the company ing the product life cycle in a sophisticated
Genius App, an easy-to-use smartphone IOS at the vanguard of creativity and fashion. As way. By entering a new era of digital beauty
application that gives customers the ability to a result, L’Oréal has grown its followers ten- through its Makeup Genius App, L’Oréal suc-
“shop” their look instantly. fold at the global level in the past 2 years. Its cessfully lives up to its ambition of creating
Thanks to head and expression tracking Makeup Genius has become the first beauty tomorrow’s beauty services.
features as well as face texture 3D analysis,
this application enabled users to be the de-
signers of their own looks through a real-time
Sources: “Euromonitor Makeup Sell-in CA Net 2012 vs 2003,” http://www.euromonitor.com; “Worldwide Value
interactive mirror. In addition, L’Oréal Paris Market Shares Full Year 2014,” http://www.euromonitor.com; http://www.loreal.com/, accessed October 2015;
developed a fully integrated digital approach L’Oréal website, “Key Figures,” http://www.loreal.com/group/our-activities/key-figures, accessed April 1, 2017; the
in order to bring valuable services to con- authors would like to thank Moïra Taillefer and the L’Oréal Paris International Development Makeup team for their
sumers, inspiring conversations and building contribution to this case.

Introduction Stage
Introduction stage The introduction stage starts when a new product is first launched. Introduction takes
The PLC stage in which a new product time, and sales growth is apt to be slow. Well-known products such as frozen foods and
is first distributed and made available for HDTVs lingered for many years before they entered a stage of more rapid growth.
purchase. In this stage, as compared to other stages, profits are negative or low because of the low
sales and high distribution and promotion expenses. Much money is needed to attract distrib-
utors and build their inventories. Promotion spending is relatively high to inform consumers
of the new product and get them to try it. Because the market is not generally ready for prod-
uct refinements at this stage, the company and its few competitors produce basic versions of
the product. These firms focus their selling on those buyers who are the most ready to buy.
A company, especially the market pioneer, must choose a launch strategy that is consis-
tent with the intended product positioning. It should realize that the initial strategy is just
the first step in a grander marketing plan for the product’s entire life cycle. If the pioneer
chooses its launch strategy to make a “killing,” it may be sacrificing long-run revenue for
the sake of short-run gain. The pioneer has the best chance of building and retaining mar-
ket leadership if it plays its cards correctly from the start.

Growth Stage
Growth stage If the new product satisfies the market, it will enter a growth stage in which sales will
The PLC stage in which a product’s sales start climbing quickly. The early adopters will continue to buy, and later buyers will start
start climbing quickly. following their lead, especially if they hear favorable word of mouth. Attracted by the
opportunities for profit, new competitors will enter the market. They will introduce new
product features, and the market will expand. The increase in competitors leads to an
increase in the number of distribution outlets, and sales jump just to build reseller invento-
ries. Prices remain where they are or decrease only slightly. Companies keep their promo-
tion spending at the same or a slightly higher level. Educating the market remains a goal,
but now the company must also meet the competition.
Profits increase during the growth stage as promotion costs are spread over a large
volume and as unit manufacturing costs decrease. The firm uses several strategies to sus-
tain rapid market growth as long as possible. It improves product quality and adds new
product features and models. It enters new market segments and new distribution chan-
nels. It shifts some advertising from building product awareness to building product con-
viction and purchase, and it lowers prices at the right time to attract more buyers.
In the growth stage, the firm faces a trade-off between high market share and high
current profit. By spending a lot of money on product improvement, promotion, and dis-
tribution, the company can capture a dominant position. In doing so, however, it gives up
maximum current profit, which it hopes to make up in the next stage.