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L'Oreal of Paris_Q1

L'Oreal of Paris_Q1

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Published by: rahul_jain_76 on Oct 17, 2011
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Introduction L’Oreal was founded by a French chemist to develop and market his new process for haircoloring.

The firm’s consistent strategy of “quality, innovation and geographic expansion” increased its sales. Cosmetics represented 81 % of revenues of the firm. It launched a product in moisturiser market of France with a name of Plenitude and it became a hug success. Plenitude was launched in U.S. in 1988 after its success in France. They concentrated all their advertisements on the product line under their ‘star’ system in which they concentrate all their resources and support on newest product to pull the entire line. During the year of launch they spent $32.5 million on advertisement and 10,000 store events with demonstrations as a result they achieved their sales target. Due to heavy promotion it became quickly No.2 brand in U.S. The sales grew pretty well through 1991, during this time they built consumer franchise, brand equity and good trade relations. By 1995 net sales doubled and spending on advertising and promotion increased from 35.5 million in 1990 to $38.3 million in 1995 as it regularly introduced new products which required support. The brand lost $12.5 MM pre tax for 1995.By 1996 it lost its 2nd position to ponds. They studied and conducted research in U.S. market to find out where they lacked. In late 1995, with some changes in their strategy they launched another product which performed fairly well and increased sales. Now the company was in dilemma whether to change their strategy, communication style or positioning Plenitude’s position in U.S. market in early 1996 Company was in loss in late 1995 due to failure of plenitude. After failure of plenitude they conducted surveys & FGDs to know where they lacked. They launched Revitalift known as “facelift in a jar” in September 1995 under Plenitude brand name by using simple words in advertisement which were familiar to Americans. They followed ‘star’ system and Revitalift quickly came to represent 20% of plenitude sales in first quarter of 1996.Product performed fairly well, studies showed that it brought many new users to plenitude franchise as 40% of Revitalift buyers had not previously purchased any plenitude product. After the success of Revitalift the company was facing a dilemma regarding their marketing strategies, as in whether they continue ‘star’ system or not, whether to improve the products offered in daily moisturiser and cleanser category? Or should they adjust tonality of their message? Why has it apparently been less successful in the U.S. than in France when the French “success formula” was used in the U.S.? Plenitude was launched in France as a “high end, superior performance but accessible” brand. It was a highly advanced product which was introduced under “class of the mass” strategy with a single product developed specially for French women. The positioning developed through advertisement and promotion was ‘I am a modern woman who uses only premium quality, technologically advanced product’. French women were sophisticated in their use of skin care products and competition was high in the high end market while there were few significant brands in mass market. Initially advertisement was through print ad but it shifted to TV with the addition of more products under the Product line. BY 1987, it became market leader (19.6% share) in moisturiser market.”Success formula” of France which was used in U.S. was: 1. Technologically superior products 2. Concentrate resources and support on newest ‘star product’ to pull the product line. 3. Follow the ‘golden rules’ of advertising:

They were not familiar with the terms used in the merchandising unit. facial cleansing lotion which were self explanatory. Acceptor / Rejector studies utilizing 10 “focus groups. Example of names of Plenitude products: Hydra renewal jar.a. customers got confused because of sudden arrival of so many products in market. besides it is easier to choose from 3 products than 14. Provide technologically superiority evidence c. clarifying Mask etc (From Exhibit 8A). B. They felt the products are oily and greasy and does not absorb in their skin unlike other products which get absorbed easily. culture. Feature star product b. they felt it was really complex. typically 8-10 in number are brought together for a discussion facilitated by a trained moderator. perception. group discussions ran about 2 hours each.  They launched all the 14 SKUs under the brand Plenitude at once.  They pushed all the 14 products to retailers and provided them with one linear foot merchandising unit to provide information to customers regarding products. They launched all three moisturiser.S.S. opinion. They changed certain words like ‘Delays sign of aging’ in advertisement to ‘Reduces sign of aging’ and they fared well in test market.” A “focus group” is qualitative research in which a group of people. They did not want to study a lot before buying a product. A mock-store study with 50 people who were each interviewed individually and then involved in a small focus group. Depict executive women who is up to date and assertive L’Oreal thought that same formula could lead to success in U. As noted in the case.  They thought that the price for the products offered was really high when they could get the same thing done at cheap rate. They were not able to connect the advertisements with ‘modern women’. society and lifestyle. market is different in terms of culture. Main reasons for the failure of plenitude which has been found out from various studies and research conducted by L’Oreal are:  They applied the same ‘success formula’ in U.S.  Name of products were really complicated and did not indicated the use of product because of which customers could not remember the product names and their benefits.  Their products were sophisticated and their advertisements were perceived by Americans as old fashioned and they thought the products are for women of old age (50+) since they had main products which were used to reduce aging signs. Excell lotion.  They could not recognize Plenitude as a brand. (10 groups and 5 people each). most of them think it just as a product of L’Oreal not a brand. . Research Conducted by L’Oreal to understand the Market Mainly three type of research have been conducted by L’Oreal to understand the US market : A.  American women do not know much about skin care compared to European women who like technologically advanced products. society of Americans differs from those of French. treatment moisturiser and cleanser at once with 14 SKUs under the product line with brand name Plenitude. The information provided was not easy to understand for Americans. C. A large scale quantitative survey with 3500 respondents using state-of-art research techniques. where as U. Whereas other competitors named their products in simple language like refreshing toner. also but they forgot that lifestyle.

2. but its targeting is a little flawed and it puts itself in competition with Olay which is wrong. Olay has a conversion ratio of 80%.5 and 46% from 1. Stressed out (22%)  Not concerned about price.5 as its target market is more towards 1. Both have different target market. Percentage of people who tried the product is 77% for Olay. Price conscious socialisers (17%)  Worried about looking better but price/value is a concern 4.2. While L’Oreal lies far behind at 78%.3 L’Oreal has 54% from 4. Qualitative Analysis  Match and Mismatch between the Quantitative and Qualitative findings  . Results of Facial Skincare market study which was a large scale telephone and mail survey of over 3500 Women of age 16 to 69 who used one or more Moisturizers at least once a week: According to it consumers were divided into 5 benefit segments: 1. While L’Oreal is at 30%. while L’Oreal again has least conversion ratio of 29% among the major players.5 so it should have more people from this group. 5. 52% for Ponds and 23% for L’Oreal.2. but not so concerned about gentleness or specific ingredients 3.3 but the products of L’Oreal mainly fall for the 4. while L’Oreal is as low as 7%. Ponds has 56% and Estee Lauder has 38%. Ingredient Apathetic (17%)  Considered with reducing signs of ages.3 and 34% from 4. of people who started using the product to those who initially tried it is highest for Olay which is 44.Quantitative Analysis      Percentage of awareness is highest in Olay which is 96% followed by Ponds 93% and Estee Lauder being 92%. Retention ratio which defines the no. Ponds is 16% and Estee Lauder is 11%. and 31% for Ponds and Estee Lauder. Unconcerned (25% of respondents)  Basically buy on price 2. Age Focused (18%)  Similar to stressed out group but with more attention to price and natural ingredients    Here Olay has 66% people from 1. Percentage of people who currently use Olay is 34%. The other competitions of L’Oreal who make similar products like Alpha hydrox have more people around 62% from 4. want effective product that reinvigorates skin and reduce signs of aging 5.

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