Bringing “Class to Mass” with Plénitude

Channin Campbell
Samantha Chan
Sabrina Minaya
Erica Ryan
Rose San Juan
Itael Toibman
L’Oréal’s BACKGROUND
 Founded in 1907 by French chemist, Eugene Schiller

 World-wide presence (1995)

◦ 2000 products
◦ 500 brand names
◦ In over 150 countries

 L’Oréal’s Strategy :
◦ “Quality, innovation and geographic expansion”
L’Oréal’s BACKGROUND
QUICK FACTS

 Sales of 53.4 billion French Francs ($10.9 billion US

Dollars) (1995)

 Cosmetics represented 81% of revenues (1995)

◦ Cosmetics included hair care and skincare lines

 $300 million spent on research and 300 new patents

worldwide (1994)
 L’Oréal U.S.A.
 L’Oréal U.S.A. became a wholly owned subsidiary
(operating under the name Cosmair) (1994)

 US sales - $1.5 billion (1995)

 Acquired Maybelline, a leader in color cosmetics to

broaden participation in the mass market (1996)

 Combined L’Oréal Haircare Division and Cosmetics and

Fragrance Division to form the L’Oréal Retail Division
headed by Joseph Campinell
L’Oréal’s MARKETING STRATEGIES
 “Trickle Down and Fire Up”
◦ Revenue from mass market products fund R&D for next
generation products (high-end products)
◦ “Maintain premium pricing to reinforce quality and
performance”

 Concentrate resources and support “star product”

to pull entire line

 Follow the “Golden Rules” of Advertising

◦ Feature star product
◦ Provide technological superiority
◦ Depict an executive, up-to-date and assertive
executive woman
PLÉNITUDE by L’Oréal
 Launched the Plénitude brand in 1982, France

 Introduced a single product initially, a general purpose

moisturizer

 France advertising positioning:

◦ “high end, superior performance but accessible”
◦ “class of the mass” (“class to mass”)
◦ “Delays Signs of Aging”

 Strong performance in France 1982 – 1987

PLÉNITUDE by L’oréal

L’Oréal delayed Share of French Mass Moisturizer Market

introduction of cleansers
until it established a
L’Oréal Henkel’s Nivea
concrete position in the
Diadermine
French mass moisturizer
market
19.6 % 13.0% 8.8%
PLÉNITUDE U.S.A. LAUNCH
 Test launch in Atlanta & Dallas (1988)

 US advertising positioning:
◦ “high end, superior performance but accessible”
◦ “class of the mass” (“class to mass”)
◦ “Reduces Signs of Aging”

 Introduced entire line (as developed in France)

nationwide after US test markets showed a 14% share in
the moisturizer
PLÉNITUDE U.S.A. Retail Presentation of Entire Line
 14 SKU’s introduced covering 3 categories
◦ Basic moisturizers
◦ Treatments moisturizers
◦ cleansers
PLÉNITUDE U.S.A.
 Advertising resource allocation followed the
“star products” system

1989 Full Plénitude product line

1990 Action Liposomes
1991 Eye Defense Cream
1992-93 Hydra Renewal/Wrinkle Defense Crème
updated to “Advanced”
1994 Excell-A-3
1995 Revitalift Face
PLÉNITUDE U.S.A. – Early Results
 Strong US performance hitting sales targets
1989 – 1995, but have failed to generate profits
the 8-9 years after it was first introduced hitting
a four-year sales plateau

1990 1995
Sales $31.7MM Approx. $63.4MM

Advertising and $35.5MM $38.3MM

promotion

Pre-tax loss -$25.4MM -$12.5MM

 5C Framework
Company •L’Oréal known as a luxury brand in the beauty industry
•L’Oréal known for its superior technological innovation
•Plénitude brand very successful in France
Competitors United States
•Oil of Olay, Ponds, Nivea
Worldwide
•Estee Lauder, Clinique, Christian Dior, Chanel
Context •Youth market can’t afford L’Oréal’s premium prices

Consumer •Younger franchise

•Working, successful and the career woman
•Men
Collaborators •Department stores
•Drug stores
•Beauty salons
 SWOT Analysis
Strengths Weaknesses

•Innovative technology •No differentiation in daily

•L’Oréal brand recognition moisturizer/cleanser market
•Product potential with Revitalift line •High advertising costs
•Mature skin market segment •Lack of profitability
•Superior research & development •Consumer behavior in US unknown
department •Unattractive product cover
•Experience in consumer cosmetic •No awareness in US market
products
Opportunities Threats

•Large US market •Competition with Olay’s similar product

•Opportunity to tap into younger •Consumer loyalty to competitor
consumer segment product
•Many channels for L’Oréal product •Expensive product image
•Revise pricing/marketing strategy to •Lack of acceptance from younger
increase consumer appeal market
•Opportunity to develop mature market •Domestic products more widely known
with Revitalift product
Problem Analysis
“Will luxury companies in the next century, which do not
have the mass market base, have the resources
necessary to do the research to compete?
I think the answer is no.”
How L’Oréal’s Lindsay Owen-Jones, Chairman and CEO of L’Oréal, saw the “trickle
down and fire up” philosophy.

L’Oréal’s unsuccessful attempt to bring the “class to mass”

strategy to the US skincare market resulted in a four-year
sales plateau. They were unable to market to the
varying skincare needs of US consumers, which may
lead to more years of unprofitability in the US and may
delay the introduction of the Plénitude brand globally
and may even hurt L’Oréal’s superior reputation,
supported by its technological innovation, in the
skincare industry.
Problem Analysis
 The main problem in the case is how to increase
profitability and sales, and how to improving its
position in the market in the United States for the
Plenitude line of products.

◦ Are aspects of the strategy "too French" for the U.S

market?
◦ When doing such do they try to establish the "class" part
of a value proposition by focusing more on their
moisturizers and cleansers?
◦ Or do they continue with the promoting "Revitalift-Eye" as
a "star product" where they would put all money and
marketing support towards that one product?
Assumptions and Missing Information
Assumptions:
 The Plénitude product line  The major issue in the
has been unprofitable since Plénitude case is branding
its U.S. introduction in 1988. and consumer perception.
 L’Oréal is willing to consider  L’Oréal wants to continue
changing its premium selling the Plénitude line in
pricing strategy. the U.S.
 The main problems with the  Plénitude’s global success is
Plénitude brand are pricing dependent upon its
and packaging. That is success in the U.S. market.
consumers perceive the
 L’Oréal is basing it’s U.S.
line to be too complicated,
marketing strategy on it’s
due to the amount of
French strategy, without
information on the
properly adjusting for
packaging, and too
cultural differences.
expensive.
Assumptions and Missing Information (cont.)
Missing Information:

 What do U.S. consumers look for in facial skin care products?

 Is technology an important factor in over-the-counter
cleaners and moisturizers?
 Are American women as educated French women when it
comes to skin care?
 How would U.S. consumers prefer to receive product
information if not on the packaging?
 Sales figures for each of the products in the Plénitude line.
For example, what are the least popular products? Which
are the “stars”?
 Consumer demographics (not just the five identified
“benefit” segments).
Strategic Alternatives
Alternative #1: Focus on differentiation and target niche market

Description Advantages Disadvantages

Differentiate L’Oréal by Continues L’Oréal's success Lose potential market in
focusing on innovations in on innovation younger customers
specialty products.
Target niche market who Keep premium pricing Customers perceive L’Oréal
will value innovations in strategy to earn more brand for older women or for
skin care. The stressed out women with problems.
and age focused groups
Use niche market to build
brand equity
Strategic Alternatives (cont.)
Alternative #2: Simplify product line

Description Advantages Disadvantages

Reduce the number of SKU's May reduce confusion among Eliminates consumers'
offered to consumers consumers who do not know opportunity to make choices
how to purchase L’Oréal
products
Some consumers may be
more willing to try L’Oréal
Strategic Alternatives (cont.)
Alternative #3: Simplify pricing structure

Description Advantages Disadvantages

Reduce the current number Simpler price structure could Could alter perception of
of price points reduce make product line easier to L’Oréal products as less
average price for cleansers shop valuable
and moisturizers
Enter competitive pricing Could win over some younger Lower prices may not be
strategy consumers with lower prices competitive enough against
Pond's and Olay
Current structure is 2 price Consumers would be more Negatively affect financial
points for cleansers, 3 for likely to try and convert to performance
moisturizers, and 3 for L’Oréal
treatment moisturizers
Strategic Alternatives (cont.)
Alternative #4: Divide product line to target younger and older
users

Description Advantages Disadvantages

Target younger customers Larger potential market if Financially challenging to
with cleansers and L’Oréal markets to younger split marketing resources
moisturizers and older and older women
women with the specialty
products
Offer different pricing Can gain brand equity from
strategies for the two all generations
product lines
Younger women will consider
staying loyal to L’Oréal
products when they're older
Strategic Alternatives (cont.)
Alternative #5: Differentiate brand by educating consumers
about skin care

Description Advantages Disadvantages

Educate American consumers Create a value for L’Oréal Financially costly to educate
on how French women take brand because L’Oréal also women about skin care
care of skin teaches consumers about
skin care
Target women who are Reduce confusion about the Not addressing a consumer
interested in skin care product and use problem or concern, but
trying to create a problem to
solve
Abandon star program of
focusing advertising on one
product
 Evaluation of Alternatives
Alternative #1: Focus on differentiation and target niche market

 By making sure that the product is differentiated, it allows

L’Oréal to stand out in a market saturated by competition. The
current issue to address includes improving Plénitude's
operations in the US as well as introducing a Revitalift-Eye into
existing product line.

 Further, this alternative will capitalize on the strongest strength

that L’Oréal has which is its brand name. One of the likely
consequences of this is the possibility of losing customers not
included in the targeted niche market, such as the younger
group.
 Evaluation of Alternatives (cont.)
Alternative #2: Simplify product line

 This alternative directly improves Plénitude's current operations

since the issues that were mentioned in the surveys included
people being confused about too many options.

 The issue with simplifying is that it may reduce the amount of

choices people have when making a decision about the
products they have, but on the other hand it is an opportunity to
market to the segment that does not necessarily need all the
information to begin with and may be intimidated by too much.

 With this alternative one thing to watch out for is not taking too
much information out so that everyone is confused.
 Evaluation of Alternatives (cont.)
Alternative #3: Simplify pricing structure

 Simplifying the price structure could potentially attract new

customers.

 At the same time, it would also possibly hurt L’Oréal financially

as some people might see it as a decline in value.
 Evaluation of Alternatives (cont.)
Alternative #4: Divide product line to target younger and older
users

 Dividing the product line is an alternative that is in a slightly

different direction than the others. While the first three
alternatives focused on simplifying, this alternative is focused on
specifying the product line to target younger customers with
cleansers and moisturizers, while at the same time targeting
advertisements of specialty products to older women.

 The opportunity lies in the ability to use L’Oréal brand to reach

a larger potential market, however the challenge lies in the fact
that they don’t have unlimited resources to spend on
marketing.
 Evaluation of Alternatives (cont.)
Alternative #5: Differentiate brand by educating consumers
about skin care

 L’Oréal drives sales with product technology, but the

department-store-gone-self-serve is a challenge to their
sales. Therefore, L’Oréal can stand out by educating consumers
about skin care.

 Many of the consumers already know and appreciate L’Oréal to

be a higher quality product, so providing education instead of
just product information they can promote use among the
younger generation who doesn’t necessarily have the history of
the commercials or advertising.
Recommendation
Our recommendation is to use a combination of
Alternative 1 and Alternative 2:

We believe that the best approach is to focus

on product differentiation and targeting niche
markets, while at the same time simplifying the
product line.
Marketing Objective: Target Niche Market
1. L’Oréal should target women with beauty concerns
or issues, such as signs of aging or dry skin.

1. The company should target women 30 and older

seeking a product to reduce a specific sign of aging
or a product to reduce signs of aging in general.
◦ This strategy would focus on women 30 and over in the
previously identified “Stressed Out” and “Age Focused”
benefit segments.
◦ Example: L’Oréal’s successful product, Revitalift, helps
consumers solve a specific beauty problem.
Marketing Strategy: Target Niche Market
 Using one of L’Oréal’s greatest asset, its brand name,
we can increase awareness of the line by sending
out targeted messages to customers age 30 or over.

 Specifically, targeting the ads to American women

so that the products aren’t seen as too French.
Possible suggestions include general slogans like,
“Keep your skin hydrated during BBQ season!” or
“Avoid sun-spots from cheering for the Ravens from
the bleachers!” to get women to identify with the
product and increase awareness.
Marketing Objective: Simplify Product Line
 Plénitude sells more moisturizers than cleansers. More
specifically, Plénitude sells more treatment moisturizers
than daily moisturizers; and therefore, should focus its
product line around treatment moisturizers which
capitalize it’s greatest asset – technology.
◦ Technology is a greater asset in selling treatment moisturizers instead of
daily moisturizers. Many of its competitors were much stronger in the
daily segment.
◦ In general, the moisturizers are more profitable than cleansers for
Plénitude in general.
◦ The Plénitude Line is among the top 3 in market size and brand shares
for moisturizers.
◦ Specifics shown in next slide

 Further, they can simplify the product line by simplifying

the packaging so that it’s not as intimidating to women
who do not want or need too much information to make
a decision.
Marketing Strategy: Simplify Product Line

Moisturizers - Market Size and Brand Shares (Dollar Basis - All Mass Outlets)

1991 1992 1993 1994 1995

Dollar Volume (Retail $) $309MM $338MM $375MM $440MM $471MM
Plénitude 11.7 13.6 14.1 13.8 14.0
Olay 38.3 36.1 32.3 29.7 28.2
Almay 5.4 6.0 5.6 4.4 4.6
Nivea 4.8 5.5 6.0 6.2 6.2
Ponds 5.0 4.6 9.1 13.9 15.1
Alpha-Hydrox - 1.0 3.8 5.7 5.4
Neutrogena 7.0 6.5 5.7 4.8 5.2
Marketing Strategy: Simplify Product Line
1995 Dollar Shares (ACNielsen data)
3
Moisturizers Cleansers 1995 Ad Spending

Plénitude 14.0 3.4 $29.2MM

Olay 28.2 7.9 48.1MM
Pond's 15.1 11.2 18.1MM
Alpha Hydrox 5.4 - 11.9MM
Nivea 6.2 - 12.8MM
Neutrogena 5.2 6.2 13.3MM
Revlon 4.3 -
Almay 4.6 4.1
Noxzema - 21.6 11.5MM
Sea Breeze - 8.9
Clean & Clear - 6.7 10.0MM
$ Size Category (Retail) $471MM $328MM

Moisturizer Units Sold

% Daily % Treatment
1. Alpha-Hydrox 11% 89%
2. Plénitude 35% 65%
3. Pond's 51% 49%
4. Nivea 73% 27%
5. Neutrogena 78% 22%
6. Olay 88% 12%
Marketing Strategy: Simplify Product Line
Focus on its “star” products and profitable treatment moisturizers.
Financial Implications
 L’Oréal is spending too much on advertising and
promotion, and not generating enough sales to turn a
profit. If L’Oréal narrows its focus and simplifies its product
line, marketing costs would change significantly. Here is
how these strategies will affect marketing expenditures:

◦ L’Oréal spends $29.2MM on advertising its cleansers and

moisturizers; it could easily cut its spending by 20%* ($5.84MM) by
simplifying its product line and eliminating cleansers, for which it
only has a 3.4 dollar share in 1995, the lowest among all of its
competitors. Those savings alone would reduce the pre-tax loss (for
1995 the pre-tax loss was 12.5MM) by 50%.

◦ We estimate that segmenting markets and focusing marketing

efforts, in addition to simplifying the product line, will result in
additional cost savings (for which we do not have solid numbers as
the case is missing financial data).

*This is an estimate based on our interpretation of the financial and case information
available.
Discussion Questions:
1. Do you agree with the recommendation
provided?

2. Are there any other strategic alternatives

you would have suggested?

3. What are other issues or concerns L’Oréal

should consider?