FLARE FRAGRANCES

Case Study- Group 8

Abhimit Ghosh

Anustha

Kanishk Sharma

Samruddhi Bhaid

Vaishakh Garg
 1. Should Flare Fragrance launch the new product vis-a-vis the new drug
store distribution? If so why?

Flare's current drugstore channel sales are 4.4 percent.

$7.5 million in targeted incremental factory sales

2.04 percent rise in the drugstore channel is required.

Assuming no cannibalization, this would necessitate tripling the present share.

If Flare wants to branch out into drugstore distribution, keep the following in mind:

• Why Women's scent sales at drugstores are not increasing.

• In comparison to other well-established distribution networks, drugstores have various expectations

from their product suppliers in terms of the degree and form of effective marketing: Instead of
carrying the whole product line, drugstores can stock only a few "faster moving" items.

• Drugstores demand regular trading opportunities and the option to purchase more than 10% of their
inventory on sale.

• It is costly to develop salesforce experience in the drugstore channel.

• Flare's established relationships with other retail accounts may suffer if drugstores began to
undercut their items (which is understandable given the 40% trade margin).

•On the other hand, using a drugstore chain as a distribution platform is a niche that is dependent on
how rapidly it grows and how well customers respond. The organisation should perform value
research because mass merchandisers and department stores collectively appeal to around 70% of
the target market.

Some Important Facts:

• Flare Fragrance Company has continued to launch new goods into the market over the years.

• In 1975, the company launched the "Loveliest" brand on the market. The corporation proceeded to
launch new items into the market every two to three years.

• As stated in the complaint, Natural, Loveliest, Essential, Summit, Awash, and Swept Away fragrance
brands accounted for nearly 93 percent of Flare's sales in 2007. The scented items based on the six
fragrances accounted for the remaining 7% of sales. The remaining 6% were only available as gift
bundles at department stores.

The new goods are being released under the following umbrella brand: Loveliest

Some benefits of launching the new product:

1. Established Brand Awareness- Since its introduction in 1975, the product 'Loveliest' has carved out
a position in the fragrance market. Launching a new product under the same umbrella name will have
little difficulty in establishing itself in people's minds.

2. Assured Quality- Because Loveliest has done well in the mainstream market, the other perfumes in
the range have benefited from the halo effort in terms of image and quality.

3. Market Reach and Distribution- The umbrella brand has a firm grip on its distribution channels and
retailers. With the launch of the new product, these established channels will be better utilised, and
logistical costs will be reduced.

4. Diversification- With six different fragrance lines already on the market, the introduction of a new
product will continue the trend of new product introduction and portfolio diversification.

5. Break the Stagnation- With the recent economic downturn, it's a fantastic time for Flare to step up
the pace and generate excitement with the launch of a new product. While its competitors may be
slacking and adopting a cautious strategy to confront the economic downturn, Flare can break the
stagnation by introducing a new product.

Disadvantages of launching a new product:

• Cost Increase- The introduction of a new product will result in a cash drain (already low post the
economic crisis and stunted growth)

• Brand Image Harm- In the event of a launch failure resulting in low consumer response, Flare's
(particularly Loveliest) brand image will be harmed. This is because, following the crisis, customers
may turn to more fundamentals rather than luxury items.

• Not Sustainably Released- If the product is launched without the umbrella brand, it may not be able
to compete on its own. Without the backing of a well-known brand, the target demographics may not
respond to the launch.

While the Flare experts believe it is time to break away from the Halo Effect and market the new
product as a standalone, we believe the new product should be introduced under the Umbrella Brand
- Loveliest. This is mostly due to the fact that the market is still recuperating from the economic
downturn and needs to better manage its money. It's ideal to debut a new product under the umbrella
of an established brand with a solid reputation, where the most traction may be expected. It will help
to lower the cost of advertising while also increasing the product's trustworthiness.

1. Evaluate the Savvy program and recommend the right branding strategy
In order to launch Savvy in the market one of the most important aspects that must be considered by
Flare is to determine the target market on the basis of their competitive advantage which is basically
expertise in Channel and thereby positioning Savvy accurately henceforth bolstering sales.

Let’s assess the two female segments mentioned in the case

Parameter Female Group 1 Female Group 2

Age 18-34 35-64
Key Differentiating Factor Elegance + Exclusivity Classic Fragrance
 Influencing Factor Word of mouth Brands familiar with
Brand Awareness High inclination towards High inclination towards luxury
premium and prestige fragrance brands
branding
Loyalty Low as they are continuously High; remain loyal to their
trying something new recommended signature brand
Market Penetration As mentioned in the case, the This segment is already
Capabilities segment consist of covered by Loveliest hence not
approximately 75% teenage much scope to venture in
girls who uses fragrance
products
Accessibility The product (Savvy) in this Owing to the strong loyalty this
segment can be marketed as segment is not much affected
the ‘New Fragrance’ across all by the marketing
the channels
Profitability Highly profitable as this May or may not be profitable.
segment isn’t much saturated Largely depends on how Savvy
by other brands leaving high is being positioned. Highly
scope of market capture saturated segment hence isn’t
worth pursuing

Based on the data present above it is a clear indication that Savvy must go for Female Age Group 18-
34. Next it is important to have a deep dive into target segment which is summarized in the below
table

Parameter Description
Segment Need Scent which makes them feel exclusive and yet elegant
Segment Nemesis Using a fragrance product that is not able to distinguish them from the
crowd
Key Insight Perfume as an expression of personality
Buying Channels Department Channels, Mass market channels and to some extent Drug
stores

Thus, we can apply THINK,FEEL,DO framework on the basis of above pointers –

Think: Savvy suits any activity any time of the day with any wardrobe

Feel: Savvy makes the segment feel unique from the crowd

Do: Use Savvy in order to be exclusive and unique

The below table summarizes the various marketing aspects involved with various channel

Parameters Mass Market Department Stores Drug Stores

Market Coverage Positive Somewhat Positive Negative
Flares presence in the Already being Requires a lot of focus
market allows them to explored by Flare and in order to exploit
expand further can be leveraged to further
explore further
Desired Brand Image Positive Somewhat Positive Negative
 Loveliest expertise in The plethora of Channel is already
this channel allows options available can conquered with
Flare to build the equip Flare to set them premium brands
image that Savvy is apart with Savvy
aiming for
Entry to barrier Extremely Low Extremely Low High
Since Flare already has Since Flare already has Due to congestion of
an established an established other designer or
Loveliest which opens Loveliest which opens premium brands
the gateway for Savvy the gateway for Savvy
Prospect of High High Low
Profitability By harnessing this Channels offers Difficult to crack due
channel Savvy can potential which can be to high loyalty of
bring in high profits extracted by Savvy existing customers
Customer Satisfaction Extremely High High Low
High untapped Channel drives a large Channel drives least
customer which allows amount of purchase purchases, thus offers
Flare to improve and provides Savvy less scope
customer credibility with high potential

Conclusion: Thus, based on the rationale provided above we can easily conclude that in order to
exploit the positioning for Savvy, Mass Market and Department Stores are the 2 channels which offers
maximum benefits by enhancing sales growth through leveraging the credibility of Loveliest and
simultaneously building Savvy’s own exclusive image which would eventually bolster profit.

Branding Strategy for Savvy

The target consumer segment for Savvy likes Chic products and is brand oriented. They’re mindful of
prestige and image. They value elegance and exclusivity. They largely believe in WoM and are ready
to try out new products (and in this context, fragrances).

• It's doubtful that Savvy will eat into Loveliest’ s market share (Exh 6)
• Savvy is priced more than the existing Loveliest’ s lines.
• Increased interest in Flare items at department stores may help.
• Savvy marketing will target a different audience than Loveliest’ s marketing- Women in their
twenties and thirties, who are less price sensitive, are the target demographic.
• Different appeal from the fantasy and imagination in "You're the love in Loveliest"
• Astute: the appeal will be more intriguing and stylish, but it will need a greater degree of expertise
and a significant amount of money to be spent on advertising
• Regardless of when Dulcet is released, Flare will gain nothing by waiting a year; the lifestyle will
remain same. So, it is best to launch right away and try to gain the first mover advantage, since
both brands have a distinct attraction.
• "Stylish, energetic, and sophisticated" describes Savvy (Case Exhibit 5)
• Teenagers and very young adults find Dulcet appealing, which means that in principle, the product
pull will be good. Thus, avoiding the baggage of Loveliest’ s brand image would be beneficial
• With a small promotional budget but smart IMC strategy, Savvy shall be able to garner high sales
and will create a new avenue
Criteria Standalone Loveliest
Brand Image Going solo, Savvy will be able to The brand image will be diluted
create a fresh positioning of Flare since Savvy is for the youth
among the younger generation
Market Reach Umbrella brand will buoy the Parent and Umbrella brand
promotion and brand awareness together will minimize the
promotional efforts
Pricing Savvy is supposed to be priced Won’t fit the price range
higher than Loveliest
Promotional Budget Slightly crammed budget in the Pre-existing presence of the
wake of exhausted budget by product line will minimize budget
Loveliest. requirement
Novelty New age group, new fragrance in Would be a new addition to the
new segment. Much needed to product line but the
stay relevant and because Flare communication would either dilute
has not launched any new product the product idea or the brand
in the past three years. image.

Conclusion

Flare should launch Savvy independently and not under Loveliest. The launch should be preponed to
gain a competitive edge over Aromatique’s Dulcet, and at a modestly higher price. (Ballpark of 3%
above Loveliest, to gain an added revenue to fuel promotional budget)

2. What advertising budget would you recommend for Savvy introduction?

According to the study below, implementing the $2.25 million "Minimum Media Plan" for Savvy is best
done with a media advertising production budget of $6.2 million to $6.6 million, plus a web and trade
marketing expenditure of $6.2 million to $6.6 million.
 2006 2007 2008 Budget
Media, advertising production costs, web & trade promotions b
Loveliest 1,54,38,399 1,64,41,611 1,67,70,443
Awash 1,46,336 1,66,497 1,69,827
Summit 24,14,536 26,63,957 27,17,236
Essential 13,75,554 14,98,476 14,43,532
Swept Away 5,12,174 4,95,330 5,09,482
Natural 20,92,598 24,01,724 27,55,447 Introductory cost %discount Proportion
Subtotal 2,19,79,598 2,36,67,594 2,43,65,968 Small 5.00% 60.00% Average discount 7.00%
Large 10.00% 40.00%
Co-op advertising 53,04,663 78,17,049 79,26,688
Sponsorships 32,15,723 24,76,648 22,33,229 Exhibit 7
Point-of-sale samples, display fixtures 48,80,290 63,68,523 64,57,682
Sales sheets, flyers, brochures 7,53,628 7,86,700 8,78,856 Plan 1 Plan 2 Plan 3
Gift-with-purchase, purchase-with-purchase promotions 1,68,286 2,49,746 2,97,198 Television $ 1,654,251 $ 3,308,502 $ 5,514,170
Public relations 2,81,696 2,58,071 2,97,198 Magazines $ 259,615 $ 519,231 $ 865,385
Subtotal 1,46,04,287 1,79,56,736 1,80,90,850 Digital 1,78,633 2,93,694 6,02,833
Production 1,57,500 2,10,522 2,50,000
Total communications budget 3,65,83,884 4,16,24,331 4,24,56,817 Reserve – 1,68,051 2,67,613
As % of sales (of owned brands) 18.90% 19.20% 19.20% Total 22,50,000 45,00,000 75,00,000
Total company sales $193,565,526 21,67,93,390 22,11,29,257 20,92,500 42,89,478 72,50,000

% change proposed based

2006 % change 2007 % change 2008 Budget 2009 Plan
on historical value
Media, advertising production costs, web & trade promotions b
Loveliest 1,54,38,399 6.50% 1,64,41,611 2.00% 1,67,70,443 2.00% 1,71,05,852
Awash 1,46,336 13.78% 1,66,497 2.00% 1,69,827 2.00% 1,73,224
Summit 24,14,536 10.33% 26,63,957 2.00% 27,17,236 2.00% 27,71,581
Essential 13,75,554 8.94% 14,98,476 -3.67% 14,43,532 -3.67% 13,90,603
Swept Away 5,12,174 -3.29% 4,95,330 2.86% 5,09,482 2.86% 5,24,038
Natural 20,92,598 14.77% 24,01,724 14.73% 27,55,447 14.73% 31,61,266 2006 2007 2008 Budget 2009 Plan
Subtotal 2,19,79,598 2,36,67,594 2,43,65,968 2,51,26,563 100.0% 100.0% 100.0% 100.0%

Co-op advertising 53,04,663 47.36% 78,17,049 1.40% 79,26,688 1.40% 80,37,865 24.1% 33.0% 32.5% 32.0%
Other promotionals cost as % of Media,
Sponsorship 32,15,723 -22.98% 24,76,648 -9.83% 22,33,229 -9.83% 20,13,735 14.6% 10.5% 9.2% 8.0% advertising production costs, web & trade
Point-of-sale samples, display fixtures 48,80,290 30.49% 63,68,523 1.40% 64,57,682 1.40% 65,48,089 22.2% 26.9% 26.5% 26.1% promotions
Sales sheets, flyers, brochures 7,53,628 4.39% 7,86,700 11.71% 8,78,856 11.71% 9,81,807 3.4% 3.3% 3.6% 3.9%
Gift-with-purchase, purchase-with-purchase promotions 1,68,286 48.41% 2,49,746 19.00% 2,97,198 19.00% 3,53,666 0.8% 1.1% 1.2% 1.4%
Public relations 2,81,696 -8.39% 2,58,071 15.16% 2,97,198 15.16% 3,42,257 1.3% 1.1% 1.2% 1.4%
Subtotal 1,46,04,287 1,79,56,736 1,80,90,850 1,82,77,419

Total communications budget 3,65,83,884 13.78% 4,16,24,331 2.00% 4,24,56,817 2.23% 4,34,03,982
As % of sales (of owned brands) 18.90% 19.20% 19.20% 18.98% 2009 Change in Sales by Savvy Introduction =
Total company sales 19,35,65,526 12.00% 21,67,93,390 2.00% 22,11,29,257 3.39% 22,86,29,257 75,00,000

Because of introduction of Savvy there is a change of 75,00,000

Total communications budget As % of sales (of owned brands) 19.20% 20.00% 21.00% 21.96% 22.16% 24.77% 25.03% 28.55% 28.87%
Balance Communications Budget left for Savvy 4,92,836 23,21,870 46,08,162 67,93,421 72,53,947 1,32,17,333 1,38,32,895 2,18,73,830 2,26,04,825
Balance Communications Budget left for Savvy as % of sales (Savvy) 6.57% 30.96% 61.44% 90.58% 96.72% 176.23% 184.44% 291.65% 301.40%
Increamental Marchandizing aids for Savvy 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000
Incremental Sampling cost 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000
Savvy Introductory cost (assume 60% small and 40% large prepack where 5% and 10% off-invoice
1,75,000 allowances on small- and large-size
1,75,000 prepacks, respectively)
1,75,000 = 7% discount on 1/3rd
1,75,000 of 7.5 mil
1,75,000 1,75,000 1,75,000 1,75,000 1,75,000
Net Balance left Savvy's Media, advertising production costs, web & trade promotionsb
-1,82,164 16,46,870 39,33,162 61,18,421 65,78,947 1,25,42,333 1,31,57,895 2,11,98,830 2,19,29,825

Television 73.50% -45,791 4,13,974 9,88,679 15,37,988 16,53,750 31,52,766 33,07,500 53,28,750 55,12,500
Magazine 11.50% -7,165 64,771 1,54,691 2,40,638 2,58,750 4,93,290 5,17,500 8,33,750 8,62,500
Radio 12.10% -7,538 68,151 1,62,762 2,53,193 2,72,250 5,19,027 5,44,500 8,77,250 9,07,500
Internet 2.80% -1,744 15,770 37,664 58,590 63,000 1,20,105 1,26,000 2,03,000 2,10,000
Reserve 0.10% -62 563 1,345 2,093 2,250 4,289 4,500 7,250 7,500
Measured Media budget 34.20% -62,300 5,63,229 13,45,141 20,92,500 22,50,000 42,89,478 45,00,000 72,50,000 75,00,000

Summary
Increase Total communications budget As % of sales (of
19.20% 21.96% 22.16% 24.77% 25.03% 28.55% 28.87%
owned brands) to
Balance Communications Budget left for Savvy 4,92,836 67,93,421 72,53,947 1,32,17,333 1,38,32,895 2,18,73,830 2,26,04,825
Balance Communications Budget left for Savvy as % of sales (Savvy) 6.57% 90.58% 96.72% 176.23% 184.44% 291.65% 301.40%
Increamental Marchandizing aids for Savvy 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000
Incremental Sampling cost 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000 4,00,000
Savvy Introductory cost 1,75,000 1,75,000 1,75,000 1,75,000 1,75,000 1,75,000 1,75,000
Net Balance left Savvy's Media, advertising production
-1,82,164 61,18,421 65,78,947 1,25,42,333 1,31,57,895 2,11,98,830 2,19,29,825
costs, web & trade promotions
Television -45,791 15,37,988 16,53,750 31,52,766 33,07,500 53,28,750 55,12,500
Magazine -7,165 2,40,638 2,58,750 4,93,290 5,17,500 8,33,750 8,62,500
Radio -7,538 2,53,193 2,72,250 5,19,027 5,44,500 8,77,250 9,07,500
Internet -1,744 58,590 63,000 1,20,105 1,26,000 2,03,000 2,10,000
Reserve -62 2,093 2,250 4,289 4,500 7,250 7,500
Measured Media budget (34.2% advertising and
-62,300 20,92,500 22,50,000 42,89,478 45,00,000 72,50,000 75,00,000
promotions budget)