L Oréal of Paris: Bringing Class to Mass with Plénitude

02/29/2012

8%) USA  1988: Positive results in test markets (Atlanta & Dallas) moisturizer s shares reaching 14%  1989: $32. built consumer franchise.2) of L Oréal s overall sales).607)  1995 (Moisturizer Units Sold): 35% of Plénitude sold units were daily care & 65% were treatment care (vs.1MM=.2MM/$48.7 million. representing 20% of Plénitude sales. continuing rise of high advertising and promotion costs to $38.6% dollar share vs. Olay held 28.S consumers (lighter in texture and less heavily perfumed)  Strategy: the same as in France  Distribution: same as in France but packages showed a lots of information & products were placed at the same aisle & eye-level next to Oil of Olay (strict regulations but enforceable by using L Oréal s reputation) Benefits through parent brand (L Oréal) that was famous.5 million didn t achieve the break-even-point or even operate in the black within 5 years after market entry  1995 (Dollar Shares): Plénitude only accounted for 14% dollar share in the moisturizers category. premium quality and technologically advanced products)  1987: Market leader with 19. superior performance and at the time same time accessibility class to mass : created high sale volumes that were invested in R&D to develop new & better products  Distribution: Plénitude established a new relationship with different buyers L Oréal created a department store environment at mass accounts by supporting it with strong advertising. successful. Consumer Franchise France  Market situation: many high end brands but few significant mass market brands (Nivea. Looking back. Oil of Olay)  Consumers: women were sophisticated in their use of skincare no need to educate at point-of-purchase  Cumulative image: L Oreál was well-known for many other products (2000 in 1995) and sub-brands (500 in 1995) in the beauty industry .5 billion sales in the US ( USA and Canada generated 16.2% (=.5 million) extremely high pre-tax loss of $25.1 1.5 million spent on advertising  1990 (first full year on the American market): sales were $31. brand equity. trust worthy and able to live up to its commitments (spending $30 MM in R&D.36 billion)  1996: high technology focus is shown by $300 million R&D expenses (with 300 new patents worldwide) France:  1983: sales of one million units with 30% price premium over incumbents (for upscale packaging.3 million still high pre-tax loss of $12.4 million  1995: $1. Financial Performance Overall:  Good financial back-up: 49% shares were held by Nestle and 51% by Liliane Bettencourt (founder s daughter)  1995: Sales of 53. merchandising and promotions USA  1989: after two market tests Plénitude entered the skin care market with the entire product line (14 SKU's) alongside with one-linear-foot merchandising unit that had been developed in France Some product adjustment to U.4 billion French Francs (around $11. high advertising and promotion costs ($35. Olay 88% daily care and 12% treatment care or Pond s 51% daily care and 49% treatment care)  September 1995: Revitalift quickly successful.1% Plénitude spent the most on ads proportional to its Dollar Shares but that was only 60. Diadermine. historically good profit generators for the trade. Diadermine (13%) and Nivea ((8. supported with 5million in TV advertising more than twice as successful as the second best Plénitude product b.7% of Olay s ad spending ($29. and good trade relations) c. Trade Franchise France  1982-87: launch of the first product that was a general purpose moisturizer (1982) followed by sequential line extensions by launching special purpose products & cleanser products  Strategy: brand represents high end. how has the brand done so far in terms of? a.2% and Pond s 15.81*.

behind Olay and sales grew well.S.2 USA  Market situation: several existing high (Estee Lauder.? (numbers) The smashing success of the Plénitude in France validated L Oréal decision to introduce the product in the U. market. was for people who have a problem and not for their planned target group ) applied market strategy based on those assumptions continuing to do so for a long period despite the bad results  French class to mass formula couldn t work the same way for the U. relationships and reputation with the retailers. Pond s.: American perception of beauty and high end/luxury products is completely different from the French perception Rich Americans couldn t imagine that high end products could be sold in retail stores and especially that cheap Average Americans (=mass) were pragmatic and more price sensitive and preferred traditional (Oil of Olay) and down-to-earth (Pond s) brands . What has L Oréal done right and wrong in the launch of Plénitude in the U.S market is essential to become a global brand. 9 years after introduction they were still not making money.S. success on the U. spending was higher than the revenue stream. Further. conversion. However. Nivea) brands (different competition than in France) higher competition than in Europe Plénitude saw Oil of Olay and Pond s as main competitors but the Facial Skin Care Market Study shows that Nivea is the #1 brand imagery competitor. at eye-to-eye level to Oil of Olay) and packaging with very detailed information about the product  Cumulative image: Facial skincare market study: Low brand awareness (78%) compared to Oil of Olay s 96% (trail. L Oréal reached a sales-plateau after 4 years and lost its #2 position. The introduction in 1988 was very strong and they quickly reached #2. and Clinique the #1 brand user imagery competitor  Consumers: did not know much about skincare need to educate them at point-of-purchase possible in department stores by salespersons but not in retail stores since they are self-service Plénitude s solution: good in-store presentation (all 14 SKU s. usage and retention rated lower as well) Facial skincare market study: shows that the Stressed Out (22%) and the Age Focused (18%) that belong to Plénitude s benefit segment similar to the competitor Alpha Hydrox Acceptor/Rejector Studies: L Oréal brand name is primary motivator for trial (especially for the good quality) All of the existing retail customers signed up and at least gave it a try 2. Right steps:  Did good research on consumers shopping and usage behavior  Knew that they needed more advertising. Clinique) end and low end (Olay.g. Revitalift. Nonetheless. merchandising and promotion if they sell the product through selfservice retails also knew that American women had to be educated on the P-o-P  Except for the extensive product information. a success. overall impression of good quality)  Introduction of Revitalift was a great success and the best performing product of Plénitude brought 40% new customers to the line Wrong steps:  From the launch date on too many different products under one line lead to costumer rejection/confusion smoother product launch like in France could have been more successful  Loaded packaging with lots of information apparently too much information for the majority of customers target group modern women didn t have time to study 14 different product descriptions  Distribution: Put high pressure on retail to take the whole product-line and place it next to Oil of Olay could also harm L Oréal s existing and future relationships with retailors  Usage of L Oréal brand name was good but very few people knew about the brand Plénitude & naming of the individual products (Excell A) was not guiding and even worse they were confusing  Made wrong assumptions of the target market (e.S. the packaging was appealing and looked expensive  Premium pricing = sense of exclusivity and high quality and they offered technologically superior products  Spending on star product helped to support the awareness and increase equity for the whole brand  Focus on the mass market generate money for R&D and next product generations  Used as many benefits through parent brand as they could (L Oréal s brand awareness by placing the name on Plénitude s products. one-linear-food merchandising .

and Clinique the #1 brand user imagery competitor Advertising: followed the French plan just translated the commercials ignoring the cultural differences even they knew about the American perception of beauty1 and high end/luxury products E. stay with the tickle down fire up-. 49). p. but worse in the daily category contributes to the fact that Plenitude did not have the mass-market appeal which it needed for the class of the mass strategy to work Wrong definition of competitors shows their misunderstanding of the whole American market: Plénitude saw Oil of Olay and Ponds as main competitors but the Facial Skin Care Market Study shows that Nivea is the #1 brand imagery competitor. product offerings as well as names and packaging that consumers see it as a premium and an easy-to-choose brand.g. the skin type etc. The Culture Code. in terms of promotion. yet) or follow both strategies simultaneously. G Clotaire Rapaille did a market research for L Oréal and uncovered the American Code/perceptions for beauty and seduction that was completely different from French perceptions (RAPAILLE.and the star .) Product:  Costumers are overwhelmed with the variety and no quick help take away some unsuccessful products such as Clarify A3 Cleanser and the Hydra-Renewal Cream Tube to make the choice easier  Products were heavy or greasy adopt the ingredients and the formulas more to the American liking Product names:  Costumers don t know what they mean and they are no help at the point-of-purchase descriptive/significant names can speed up the decision-making process that is obviously too long and not worth it for many costumers Advertising:  Brand awareness and the knowledge were not as good as the competitors need to continue with advertising also at the point-of-purchase  Adopt advertising to American perception of beauty and premium products Because I m worth it worked very well for L Oréal something similar could solve the problem slogan should target the right costumers (age range!) and show that an average person can afford luxuries products for everyday life  Star strategy seemed to work out in the past adapt the message to the different target markets  Use ads to educate the costumers about the products 1 Dr. the premium price. Strategy recommendations:  Stay with the tickle down fire up-. . the premium price.     3 Moisturizer Units Sold table: Plénitude is better than Olay in the treatment category. 3 possible strategies: Continue with the star strategy for Revitalift or develop a younger franchise by improving the position in the cleansing and moisturizing market (not strong.and the star .strategy for Revitalift and improve the top-line since already successful in the market (although Olay seems to attack the treatment sector soon)  Also. What is your recommendation for an action plan to make Plénitude profitable? The company needs to decide how to improve Plénitude's position in the US. as it seemed to be confusing provide the customers with help at point-of-purchase  Establish a quick guideline (brochure or leaflet) for which skin needs which product start with questions about the age.strategy for Plénitude but wisely target different costumer groups adopt the products and advertising define the competitors reasonably  I believe that Pleénitude and its Revitalift can succeed in the market and have large market shares by implementing the following changes/ideas Packaging: It s important to reduce the amount of information on the package. the slogan: Reduces Signs of Aging scared younger women off Product Ingredients: younger women found the product too heavy not satisfied with the quality L Oréal stuck to premium price and was equal or even more expensive than competitors ignoring the fact that many customers might not be willing to pay more for less perceived quality Generally: Plénitude was successful but the spending on advertising and promotion was too high and thus the line didn t manage to break-even for 9 years 3. helps the customer to quickly find the matching product  Nowadays: provide the retail stores with small tablets that are able to diagnose the skin type through a few questions and recommend the right products (Clinique has that and it takes 5 min max.

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