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MARKETING MINI PROJECT

THE COSMETIC INDUSTRY – AN ASSESSMENT
OF THEIR MARKETING STRATEGY

By

Iswarya Ramesh 3511210448

Vijay Shankar 3511210449

Sonia Jacob 3511210455

Savadh P 3511210477

Janaki Raman 3511210492

Apoorva Singh 3511210494

Shyam Srinivasan 3511210503

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What are cosmetics?

Cosmetics are any substances which are used to cleanse, change or enhance the
appearance of the skin, hair, nails or teeth. Cosmetics are of two kinds namely:

a) Beauty preparations like make-up, perfume, skin cream, nail polish and
b) Grooming aids like soaps, shampoos, shaving creams and deodorants.

Certain products which have cosmetic value are considered under a different
category because of certain effects or constituents that they possess.

 Products that claim to have a therapeutic effect or that contain certain active
ingredients not allowed in cosmetics are considered to be drugs, for example,
topical antibiotic creams while those containing natural active ingredients are
considered to be natural health products.
 Insect repellent lotions and sprays are pesticides and not cosmetics.

Cosmetic market

Cosmetic Industry is a part of the FMCG (Fast Moving Consumer Goods) industry
and forms a part of personal care which constitutes about 20% of the total FMCG
market.

FMCG market

Personal
care
20%

Other FMCG
Categories
80%

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Cosmetic Market in India – A Glance

Global cosmetic giants are attracted to India’s favorable demographics. The urban
Indian women are becoming increasingly conscious about their style and looks,
with great emphasis on lightening of skin tone. Skin care and color cosmetics have
witnessed solid growth for the last few years. Lip products form a majority of the
color cosmetics market.

Hindustan Unilever is India’s largest cosmetics company, followed by L’Oreal

Skin care and cosmetics account for more than Rs.18.5-billion market size while
the hair care market is worth more than Rs.80 billion.

Among the entire range of products that fall within the territory of the Indian
cosmetic and toiletries market, the most popular items are color cosmetics(for
women) of which nail varnish, lipsticks and lip glosses account for the maximum
sales. Skin care cosmetics (for both men and women) such as anti-wrinkle creams,
cleansers and toners are not as popular as facial creams, moisturizers and fairness
creams in this genre.

The emergence of a young urban elite population with increasing disposable

income in cities, an increase in the number of working women, changing lifestyles,
increased affordability of lifestyle-oriented and luxury products, mounting
aspirations, influx of satellite TV, increasing appetite for Western goods, and
greater product choice and availability are the main drivers of demand for imported
cosmetic products.

Target market

The target market in India has been mainly women in the past few decades. But
during the last decade there has been a substantial increase in the use of cosmetic
products by men. In 2005, Emami created history by launching Fair and
Handsome, a fairness cream for men, which dominates the market with close to
70% market share. Followed by Hindustan Unilever, L’Oreal (Garnier) and
Beiersdorf (Nivea) have introduced products specifically for the male grooming
sector.
Hair grooming and styling is the latest growth in the country. Brylcream, Paras
Pharma (Set Wet) and Gatsby are some of the emerging brands that are market
players in this segment.

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Players in the global market

The most dominant players in the market are

RANK BRAND VALUE
NAME LOGO
(2012) (USD $ MILLIONS)
1 Olay 1175611,756
2 Avon 79017,901
3 L’oreal 77447,744
4 Neutrogena 62486,248
5 Nivea 55745,574

The Indian Market

The Indian cosmetics market, which had a few few major players like Lakme and
Pond’s, has a lot of foreign entrants within the last few years like Avon, Burberry,
Calvin Klein, Cartier, Christian Dior, Estée Lauder, Elizabeth Arden, Lancôme,
Chambor, Coty, L’Oréal, Oriflame, Revlon, Yardley, Wella, Schwarzkopf, Escada,
Nina Ricci, Rochas, Yves St. Laurent, Tommy Hilfiger, Max Factor, Max Mara,
and Shiseido have entered the Indian market and prove to be a tough competition
for the local brands.

India allows entry of imported cosmetics without any restrictions. India’s import of
cosmetics and beauty products and intermediate raw materials such as essential oils
is currently around $400 million and mainly from France, Germany, the UK and
the U.S.

Foreign products have seen extensive growth in the Indian market because Indians
consider foreign products to be of superior quality. According to industry sources,
the total size of the Indian retail beauty and cosmetics market is currently estimated
at $5.8 billion, with fragrance comprising the largest component.

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Personal care
Cosmetics Fragerance Hair Care Skin Care Beauty Services Herbal Products Others

7% 14%
9%

13%
21%

17%
19%

.
Market capitalization

The total Indian beauty and cosmetic market size currently stands at US$950
million and showing growth between 15-20% per annum and the overall beauty
and wellness market that includes beauty services stands at about US$2,680
million ( Confederation of Indian Industries (CII)).

Market Segmentation

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Market Size for Decorative Cosmetics Sector

The decorative cosmetics can be further dived into sub sectors namely: Facial
make-up, Eye make-up, Lip products and Nail products. . According to industry
sources, the total size of the Indian retail beauty and cosmetics market is currently
estimated at $5.8 billion.

Facial Make-Up

Face make-up holds the largest value of share among the decorative cosmetics
ranges; it has increases from 40% in 2008 to 42 % in 2009 over all. The growth
rate was at constant increase. The growth in facial cosmetics continues to be driven
by innovations in formulations and constant customer support, particularly those
promising anti-ageing properties and facial moisturizers has brought revolutionary
changes in the cosmetics sectors.

Eye Make-Up

Eye make-up includes mascaras, eye shadows, pencils, kohls, and eye shades. The
sales of eye make –up products have increased compared to the previous year.
Mascara is the largest subsector in the eye- make-up cosmetics, the sale in which
accounts more than half of the value of retail sales of eye make-up.

Lip Products

Lip Products includes lipsticks, glosses and lip shades, etc. The retail sales value of
lip products had increased since 2010, however, the growth of lip products was at a
slower rate than other categories of decorative cosmetics such as face and eye
make-ups. However, they do contribute only to a smaller percentage to the total.

Nail Products

Nail products in India is one of the important subsector in decorative cosmetics.

This product subsector regularly suffers adverse publicity due to health hazards
from ingredients commonly found in nail polish and polish remover, which may
affect volume sales and individual’s health. However the consumers are not
influenced by these reports in spite of complaints.

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Marketing mix

The acute distinction between the premium and mass-market facial care is often
determined by its nature of the product. The majority of the value of retail sales
comes from products perceived as premium or sub-standard by their price, brand
image, promotion and method of distribution. The 4Ps of the cosmetic industry
which constitute to the marketing mix are as follows

Product
Cosmetic products are well known among all the classes of women and men.
Cosmetic companies have been offering specialized products and opting for online
retailing to attract new customers. Cosmeceuticals and Nutricosmetics are one of
the few emerging trends in the Indian cosmetics market.

Product Categories

 Consumer products: Products given to the consumers at competitive prices

through mass market retailing channels ranging from hair care, skin and nail care,
make up and perfume products that meet the demands of these consumers.
 Professional products: Products designed, especially for salon and parlor
professionals with products ranging from hair colorants, hair treatment and styling
products, facial kits, skin and nail care formulas.
 Luxury Products: Providing specialized products by providing personalized
advice at the time of sale and available at selective retail outlets.
 Active cosmetics: Dermo cosmetics are available at certain retail outlets and
pharmacies which offer consumers proven safety and used under the advice of a
pharmacist or dermatologist.

Image: The product categories for

Loreal brand

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Price

Indian consumers always want high quality of goods but may not be willing to pay
high prices. Understanding the attitudes, preferences and aspirations of the
different segments of India’s consuming class is very crucial to achieving success
in the Indian market.

Given the price-sensitivity of the Indian consumers, many cosmetic and toiletries
companies have re-launched their products in smaller pack sizes to make them
more affordable. Revlon went to the extent of introducing a small-range of 8ml
nail polishes and lipsticks, and was soon followed in its strategy by many Indian
companies as well. Small pack sizes have proved to be very popular in the Indian
market as they offer consumers a lower purchase cost that they can afford and, at
the same time, the opportunity to try new products.

Place

The cosmetic industry follows both direct and indirect distribution.

Direct sellers expand their reach by deepening their networks of distributors across
second-tier and third-tier cities. Direct selling companies such as Avon, Oriflame
and Modicare continue to build greater awareness by introducing brand new offers
each month. Due to their continued efforts to connect with consumers and launch
products at every price point, these companies strongly increased their value sales.

The cosmetics are also sold through retailers and also available in supermarkets,
malls and departmental stores. Cosmetics are also sold through specialized stalls
within large markets with personalized consultation while selling.

Cosmetics that are popular having high level of brand awareness, sell their
products through specialist websites, for e.g. Mac.com. Subsequently, these
websites are often interfaced which other networking sites such as Face book and
Twitters. Not only do these sites offer products for sale, but some also offer
consultations with experts, advice and gossip at a discount rate. This combines a
shopping trip to a beauty shop with reading an online `magazine’

Promotion

Promotion represents all of the ways a company communicates with a customer. It

includes advertising, selling, public relations, trade shows, direct mail, and other
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communication techniques. Successful promotions are intended to change beliefs

or increase awareness, knowledge, and purchase intent among potential buyers.
Some advertising techniques used are Aspirational Advertising, Celebrity
endorsement, socially responsible advertising, unique selling points, scientific
evidence, fear, advert composition and advertising to minority markets.

Marketing strategy

The marketing strategy that is very specific for the cosmetic industry is internal
marketing which is important for the salesperson to represent a brand. The
enthusiasm, product knowledge and attitude toward the products will be conveyed
to potential customers during interaction with such sales personnel. Having
employees who use and love the brand that they are marketing and have a good
attitude toward the company are as important as external marketing. They will help
spread the word about the products not only at work, but off the job to friends and
family as well.

Factors affecting consumer decisions

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There are many factors affecting the consumer’s decision while buying a product.

Culture

One major factor significantly influencing the consumer behavior of an individual

is culture. European markets being the home market for L’Oreal there is a vast
difference between Indian market in terms of history, cultures and level of
development. Cosmetics meet the esteem needs of people as cosmetic assist them
in improving their image to gain acceptance, or to gain social status or social
recognition. Esteems needs being high up in the hierarchy of needs, the Indian
culture has a huge impact on psychology and consumer purchase decision making
process at all levels.

Personal Factors

Changing Demographics

India has a young and rapidly growing population with most of the population
below 35 years of age unlike many countries where the aging population exceeds
the young population creating high dependency ratio. It is expected that this new
generation will result in an overall increase of 70% of Indian GDP. Since
increasing number of women in the age group 22 to 45are becoming independent
and joining the work force instead being house wives there is more demand for
cosmetic products. These women have the disposable income and the decision
making power to buy what they want. This has resulted in high demand for
cosmetics in India. With the increasing literacy rate, Indian consumers are
becoming more conscious about personal grooming and the demand for high-
quality cosmetic products has increased rapidly. Hence, there is a huge demand for
world-renowned brands of cosmetic products in India

Demand for Luxury Cosmetic Brands

With the rapidly increasing number of millionaires in India, the market for luxury
brands is growing annually at a compound average growth rate (CAGR) 35%
especially since the emerging young urban populations of India, combined with
high disposable income are increasingly looking for lifestyle-oriented and luxury
products with an internationally recognized brand. India has the 3 rd highest brand
conscious population in the world. L’Oreal being an internationally recognized

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cosmetic brand has introduced luxury product lines such as Lancôme, Bodyshop
and active cosmetics such as Vichy to India.

Perceptions

Color Selection

The culture has an impact on people’s perception of shapes, colors and space.
People interpret different colors based on their job, age, gender, status or even
religious beliefs. For an example red is considered to be a color of celebration
for Indians where black is considered to be color of mourning. When producing
color cosmetics these perceptions are taken in to account as it drives the consumer
demand. L’Oreal has large range of color pallets to suite specific Indian
consumer preferences. For an example introduction of gold, jade, Indian
pink, turquoise, orange and browns for Indian cosmetic markets.

Fair Skin Syndrome

Almost all cultures around the world have a preference towards fair skin tone. The
desire for pale skin amongst Indians is emerging from the history because of the
cast system. In addition to this history colonization by lighter-skinned invaders
from the west for 200 years, the concept of fairness being superior is embedded
deep within the Indian psyche. Skin lightening creams are by far the most
popular categories in India skin-care market and valued at $318M.L'Oréal has
identified this huge market potential and has entered this specific market 1st
with“Garnier” and next with their super high end line “Vichy”. However, L’Oréal
products so far have a small market share. The major players in this segment are
Lakme, Ponds, Fair & Lovely followed by players such as Nivea, Godrej and
Revlon.

Beliefs and Attitudes

Harmful chemicals in cosmetics

Customer possesses specific belief and attitude towards various products mostly
driven by cultural norms. These beliefs and attitudes makeup brand image and
affect consumer buying behavior. Even though cosmetic products are regulated and
tested prior to be made available in the markets consumers are still afraid of
chemical substances present in them. Since consumer protection regulations with

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regards to cosmetic product are not present in India, Indian consumers are
much more reluctant to accept safety of cosmetic products.
.
Social Factors

Boom in Salon Care

The out-look towards personal grooming and beauty is changing in the Indian
society. Beauty is no longer for the rich and famous. With the boom in the salon
and spa industry there is large demand for salon and spa care products in India.
L’Oreal salon care products lead in this industry because they were the trend
setters where they opened up the L’Oreal Hair & Beauty Academy to train salon
professionals. Today, L'Oreal markets its range of specialized hair care products
exclusively through salons and beauty parlors.

Bollywood Influence on Cosmetic Industry

Indian film industry “Bollywood” has a tremendous influence on the growth of

the cosmetic industry in India. Actors and actresses are considered as style icons of
youth of India. Brand Ambassadors of these cosmetic industries like Sonam
Kapoor or Aishwarya Rai who promote Loreal are also idols and hence increase
sales for the particular brand.

Trends

Trends are long lasting because they emerge from collective needs of consumers
that are part of their culture. With the popularity of satellite Television and a wide
variety of television channels as well as Internet, more and more Indian consumers
are constantly exposed to wide variety of global cosmetic brands creating more
brand awareness which often translates to sales. They are linked to consumers’
behavior and psychological patterns that reflect their unique culture.

Hair Care and styling

Dark Eyes, long black hair are two things that are considered as attraction in the
Indian culture. At present 85% of Indian women have long hair. Most young girls
are encouraged to wear their hair from young age. When maintaining long to
medium long hair, hair fall and breakage are main issues faced by Indian women.
In the past hair care meant oil massage and shampoo, now more and more users
have started adding conditioners to their hair care list. They do like to use
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hair serums as a way to tame frizz and improve shine. L’Oreal has introduced
“Total Repair 5”shampoo and conditioner to meet these specific consumer
demands. Due to increase in awareness, with more available global fashion trends,
Indian consumers are more open to styling their hair by, perming, colouring,
straightening ,re-bonding or even using hair spray, gels and hair crèmes.

Brand Loyalty
Hard Core Loyal - who buy the brand all the time.
Soft Core Loyal - loyal to two or three brands.
Shifting Loyal - moving from one brand to another.
Switchers - with no loyalty (possibly `deal-prone', constantly looking for bargains
or `vanity prone', looking for something different)
The factors affecting brand loyalty are Brand name, Product Quality, Price,
Design, Store Environment, Promotion and service quality.

SWOT Analysis of the industry

STRENGTHS:

 Operative communication: Diverse use of cosmetic has increased the

communication globally and mitigates the local market risks. For e.g. Avon
is a global player in cosmetic industry.
 Innovation: The new inventories in cosmetics has increased its demand, like
recently lakme launched a new kajal which is eye conic and non smudging
for 10hours, is a new way to attract the customer and off course a new
innovation.
 High R&D: R&D helps to better test the products before launching it into
the market. It also protects the company from law suits and it also helps
them to make and create better products for the consumer by being tested for
various factors.
 Strong Brand Equity: Strong brand equity help to dominate the market and
help to gain customer trust for the brand , it also protect the company from
any major drops in stock exchanges and help to trade around the globe.

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 The cosmetic industry has gained momentum over the years hence there is a
high demand for products.

WEAKNESS

 Marketing: They market their product at first as a superior product for

women with extraordinary qualities but when tried, it proves otherwise, so
they gain negative trust and low customer appreciation.
 Finance: Finance for R&D is needed in large amounts and hence is difficult
to obtain.
 Animal Testing: Many products are tested on animals and this is not
supported by animal lovers and hence these brands may lose customers.
 The industry is no longer recession-proof and is now bound for depressions
and declinations.
 Another setback of the industry is the demand-price ratio. Within the past
five years, the prices were invariable and steady but promotion budgets were
growing and getting greater than ever.

OPPORTUNITY

 Emerging market is a great way to increase the production of different

products and launching them in market.
 Inventing of some new product which is different from the product which is
already there in market.
 To expand their product in the global market so that their sales of product
increase and more people can know their product and tried to use them.
 The expansion of product and services is also a great opportunity for
cosmetic industry. By expanding their services they increase their
availability.
 The senior citizen population is increasing day by day so it is also the
segment to increase the growth of market as for e.g. the launching of anti
ageing cream in market is one of them.
 As far as India is concerned the future generations is still at an average of 35
years and hence have lots of disposable income.

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 Women at the age of 22 to 40 are more and hence more demand for
cosmetics.
 Smaller companies survive by producing products of specific niche thus
avoiding major players and concentrate on market segmentation.

THREATS

 A threat is also the growing competition within the field of cosmetic brands.
 Most products are within the reach of the citizens of developed countries
only and not reaching out even to the average people from the under
developed countries.
 While a company may be producing the best of its line, people may find
that their products are not of their basic needs and would skip buying
products.
 Scary stories regularly appear in the media about side effects of cosmetic
ingredients.
 Discounting premium cosmetics can damage the very exclusivity and image
that the consumer is buying into.
 Young consumers are generally the biggest users of cosmetics; thus an
ageing population may prove disadvantageous
 Price wars.
 Large number of market players

Possible market segments

1. Geographic
Area: Metropolitan cities and towns
2. Behavioral:
Occasions: those who go to school, college& office.
User Status: Regular usage for better results
Attitude towards the product: conscious about personal care.
3. Demographics:
Age: 15+, the target customers are teenagers and working men and women
who are conscious about their looks and self presentation.
Education: Students or Graduates

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Sex: Unisex
Occupation: Students and office goers are mainly targeted by this
industry.
Lifecycle: single and married male and female
Social Class: Most of the cosmetic brands target Middle and Upper class
people.

Target market strategies

There are several different target-market strategies that are being followed in the
industry. Targeting strategies usually can be categorized as one of the following:

 Single-segment
 Selective specialization
 Product specialization
 Market specialization
 Full market coverage

Product life cycle

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Components of a business

Conclusion
The cosmetic industry is a blooming industry as far as India is concerned. This
industry has a large scope in the near future as the number of people with
disposable income are rising in number and thus increasing the purchasing
capacity. This industry has a wide space for innovations and developments and his
is expected to thrive well in the coming years.

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