LOreal of Paris:

17/10/2011 Group No : 12 Section B

Bringing Class to Mass with Plenitude

Achin Agarwal - 11111084 Devendra Chandraban Aher 1111099 Kathryn Tabitha B -1111115 Praveen P Abraham 1111132 Subhashish Das - 1111148

Executive Summary LOreal was founded in 1907, in Clichy, France, by the chemist Eugene Schueller to provide advanced hair care products for customers of French hairdressers. Under the guidance and control of Schueller's family the company had evolved to provide cosmetic, skin and hair care products with the principle strategy of 'quality and innovation. They also focussed on geographic expansion over the period of time. Within the context of L'Oreal, Plenitude existed to target consumers of skincare products via the mass market retail channels. Other ranges focused on hair care and 'Lancome' for cosmetic markets. The huge success of L'Oreal Plenitude in France as the premium skin product with "class to mass" strategy was the primary reason for L'Oreal to expand the product to US market. The company started to enter the US market skin care in 1989 through mass channel by introducing the entire product line (14 SKU's) that had been developed in France, instead of launching the products one by one. Before Plenitude entered the US market, L'Oreal had had good reputation for its cosmetic and hair product, so the name was critical to sell the products. The company used the same formula "star" system in advertising as in France by putting bulk of dollars on the newest, most technologically advanced product. Even though Plenitude had a very strong introduction in the US by becoming the #2 brand in the market, the brand performance had been rather disappointing. In 1995, they had lost an approximate $12.5 million on the brand, and lost the #2 position to Pond's.

In 1995 and 1996, the company conducted three market research studies. From those studies, the company found out that the value proposition for Plenitude's daily cleanser and moisturizer was not that well established because of the "star" system. The studies also proved that American women had differences in pace of life, they just didn't have time to read a label about their skin products. They thought that the skincare line was too complicated and in particular the boxes and the labels would take too long to read. Many consumers thought that because of the product message "Reduces Signs of Aging", Plenitude was targeting older women. The company needs to decide how to improve further

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upon Plenitude's current position in the US, in terms of promotion, product offerings and packaging so the consumers would see it as a premium, effective, easy-to-choose brand at every age. Another important decision to be made is how to introduce the new product (Revitalift-eye) into the product line. 5C ANALYSIS

1. Customer LOreal is focused on mature skin segment and has daily moisturizers and cleansers segment. 2. Company Skills The L'Oreal Group is the world's largest cosmetics and beauty company founded in 1907. The firms consistent strategy has been delivering quality, innovation & geographic expansion. It has 500 brand names over 150 countries & 81% revenue from cosmetics 20 % from US & Canada. Its consolidated sales were 53.4 billion French Franc in 1995 from over 2,000 products. 3. Competition LOreal faces stiff competition from primarily the following players: P&G (Olay) Unilever (Ponds) Nivea

4. Collaborators The company uses mass marketing and hence works together with various department store, speciality store, mass merchant, drugstore & grocery store. 5. Context

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It introduced Plenitude Skincare Line using Class for the Mass in US following success of 1982 launch in France & in 1987 became market leader in France. In France It positioned as high end, superior performance, but accessible (class to mass strategy). It then decided to export class to mass formula to U.S. & its positioning was to reduces the Signs of aging. It covered 3 products - Basic moisturizers, Treatment moisturizers, Cleansers. But response from US consumer wasnt similar to French and hence LOreal didnt do much success as compared to France. SWOT ANALYSIS Strengths LOreal has competitive Edge in market. It has a very good brand recognition Revitalift posseses a very product potential LOreal also has products in mature skin market segment It has expertise in R&D department,Innovative technology

Weaknesses LOreal is unaware about consumer behavior in US It incures high advertising costs & hence the lack of profitability LOrealhas not differentiated in daily moisturizer/cleanser market

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Opportunities LOrealshould try to gain mass market share via Revitalift product to capture the big market in US Youth felt local product is old fashioned It can further develop mature skin segment with Revitalift Eye LOrealshould revise pricing strategy and reduce advertising costs to make better use of US maker has many channel for LOreal product Threats It has a expensive product Image Competition from Olay in mature skin segment and lack of acceptance from youthful customers Also consumers loyalty to competitor product.

Question 1 Why has Plenitude been less successful in the US than in France?

The reasons behind Plenitude lesser success in US as compared to France are mainly related to the difference in culture and demographics in both the countries and the lack of understanding of the US customer. Plenitudes new line of products was launched in France, where LOreal was already famous and the product range was well suited to the local taste. However, the same product range was launched in the US without any tweaking of the product or communication which would have suited the local US markets diverse wants and needs. The local US consumer found the moisturiser way to greasy for her liking. Also, the advertising campaign for Plenitude reducing signs of ageing was perceived to 5|Page

be targeting older consumers, so the younger generation felt that the product was not for them. It was also costlier than the existing brands. LOreal entered the US market at a time when the marketplace was very competitive with players like Ponds and Olay. The competitors had the home advantage, i.e. they had lots of knowledge on the local consumers, better branding and distribution network. Plenitude was launched in France one product at a time, and advertisements focused on that very product; whereas in the US market, 14 SKUs were launched immediately within 3 categories. As a result, the customers were confused and over-whelmed. Question 2 What do you infer from the market research studies?

The company adopted the following three market research studies: Facial Skin Care Market Study Market research performed by the company indicates that it is a price sensitive market. Plenitude prices its products at a premium, hence the price sensitive customers might be driven away due to the fact that there are other products in the market priced more conservatively, providing a more value to them in net terms. The study brings to front the fact that approximately 40% of the respondents really bother about the benefits that the moisturizers and cleansers have to offer such as reducing the signs of aging or delaying the signs of aging. Such consumers are indeed concerned about the ingredients and the superior technology of LOreal. Thus 60% of the buyers are not really concerned with the ingredients details, etc. This provides a possible segmentation in terms of the amount of information that can be provided on

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the packaging. Thus the company can avoid providing detailed information on its packaging for daily moisturizers and cleansers, while continue to provide such information in treatment products. Acceptor/Rejector Studies People in general are not fully aware of the entire range of Plenitude products and that the entire offering is from LOreal. The pricing has also not been well-thought out. The company prices its products at a premium while trying to reach the mass buyers who are in general price-sensitive, hence the pricing does not go well with the objectives of the company. The market research also serves to point out the differences between average French and a US consumer. The French buyer is more educated and makes a well-informed purchase decision after considering all options on offer. The American buyer, on the other hand, is confused by the diversity of products on offer and is not as well-informed as the French counterpart. There are also concerns with the company changing its tagline from Delays the signs of aging to Reduces the signs of aging since the latter inherently implies that the product is for elderly women who already exhibit the signs of aging and want to reduce them rather than delay them, thus taking an entire range of young women out of the consideration set. Shelf Shopping Study The in-store shelf arrangement study yielded the following insights: Some of the customers tend to be delighted by the multitude range of products on offer in a shelf, which gives them variety to choose from and explore new options. The same proliferation of products on a shelf can confuse some other shoppers by overwhelming them with the variety of products on offer, a number of them serving similar purposes. Customers carried set perceptions about certain brands which determined their shopping behavior.

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For instance, Oil of Olay carried the perception of being an old proven brand in some sense. Some people thought that Oil of Olay hadnt improved much in all these years, whereas others thought that they had been performing well and had no reason to change.

Ponds had an overall unacceptable perception in that people were mostly unsatisfied with the brand.

LOreal had the image of an expensive, premium brand. Some of the shoppers chose to ignore LOreal brands largely because of such notions.

There was mixed review as regards the packaging of LOreal products. Some shoppers were repelled by the over-dose of information on LOreal product packets, whereas others thought this to be a good thing in that it provided them details of all they had to know.

Problem Identification Need for a strategy to improve LOreals profitability and sales in the US mass-market skincare line Plenitude that is also replicable globally. List of possible Alternatives 1. Positioning Plenitude as purely a treatment franchise targeting the older market segment 2. Capture the youth market segment through daily moisturisers and cleansers 3. Product differentiation between treatment and youth segment(Discontinuing single star product system and rallying instead behind a product in each segment)

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Evaluation of alternatives CRITERIA(Weight) Option 1Plenitude as Option 2 Option 3

a Plenitude as a youth Plenitude separate market segment Poor(1) Poor(1) Poor(1) 24 youth and treatment High(3) Medium(2) Medium(2) 33

treatment franchise Sales volume (7) Profitability (4) Medium(2) High(3)

Competitor product High(3) differentiation(2) Total 32

Based on the above evaluation, the existing Plenitude brand should be split between the youth and treatment segments Implementation 1. Create 2 well differentiated product lines for the youth and the treatment segments 2. In the youth segment , a) Adopt one of the daily use moisturisers as a star product b) Exit the cleansers market 3. In the treatment segment, a) Continue putting marketing weight behind the Revitalift brand b) Come up with a wider range of offerings using LOreals tech skills 4. Arrange the numerous products that the Plenitude line has according to product groups and segments. (Youth/moisturiser, Treatment/moisturiser etc ) 5. More information about the product from the front cover to the back cover 6. Give out free samples in stores to increase the low tried ratio 9|Page

APPENDIX Question 3 What should Carol Hamilton do now? What results do you expect?

In order to for the trickle down fire up approach to succeed the sales volume of the Plenitude brand needs to grow. This can happen only if the entire market of women using skin care products is captured. However because of the current methodology of putting weight behind one star product, the focus is on the treatment market segment. This creates a perception of the brand being for older women. In order to combat this, the plenitude line should be properly differentiated between the treatment and the youth segment. Adopt a 2 star product strategy : one for each segment. Also, the cleanser products that Plenitude sells have no advantage over competitors because of the nature of the cleanser market. This market cant be scaled to the desired level. So in order to save on costs, the cleanser line should be dropped. On the other hand, in the moisturiser market LOreals tech skills enable it to achieve the differentiation over competitors that can drive sales. Change in the pricing in the daily use/youth segment coupled with the brand value that LOreal commands can help achieve sales increase. This is evident from the sales increase that Ponds achieved due to the low priced products.

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PROJECTED MOISTURISER MARKET

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1991 1992 1993 1994 1995 1996 1997 1998 Neutrogena Alpha Hydrox Ponds Nivea Almay Olay Plenitude

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