Flare Fragrances Company Inc Case Study

Introduction

The purpose of this report is to discuss marketing challenges, current situation, strengths, weaknesses, opportunities, threats, and marketing mix of Flare Fragrances Company Inc. In addition, this report focuses on the alternative solutions to recommend the company to sustain in the market in the recessionary economy.

Statement of the Marketing Challenge

Flare Fragrances Company is a women’s perfume manufacturer in the US market, which encounters with primary marketing challenge to prove its sustainability for achieving declined growth due to global financial crisis in 2008.

There are varieties of challenges for the marketing of FFCI¹, but the foremost challenge is how the marketing strategy would enable to work under the difficult economic environment and keep its revenue growth rate stable.

Following the global financial crisis and its consequential recessionary economy, the marketers would find difficult situation and the marketing successes and failures would depend on the patterns of consumers’ shifting behavior under the recession and the marketing strategies of the company to respond to the downturn.

In the economic downturn, the companies necessitate to identify with the changing consumption patterns of the customers and restructure the marketing strategies accordingly while consumers limit their spending based on priorities.

Due to job cut and increasing unemployment, the customers drop their spending for consumption of luxurious goods, but emphasis on necessary items. At the same time, the companies strive with dropping sales, forced to cut costs, trim down prices, and reschedule their new investments while marketing expenditures are also under pressure to reduce unsystematic cost.

In the given case study, under a recessionary economic condition, the CEO of FFCI Ms. Patterson has thrown the challenge to the marketing team of the company to increase revenue by target at least US$ 7.5 million in 2009 to turn around declining sales trend in 2008 and to do so she has presented two points of strategic implication.

Patterson pointed out that it is the discretion of the marketing team how they would take the challenge of gaining growth target under the recessionary market, but the two suggested point is either to emphasis on drugstore channel or to introduce a new perfume brand.

Thus, the marketing team of FFCI would evaluate the overall situation to identify their exact marketing strategy that can mitigate the primary marketing challenge of gaining target growth either by implication of drugstore distribution channel with brand extension strategy or by any other means.

At this context, the marketing team of FFCI has to take into account of a wide variety of factors including the company’s brand management, customer’s demography, pricing, and product-positioning map, and brand extension for new product launch along with the SWOT analysis of the company.

At the same time, this analysis would provide the marketing team more insights to explore multiple factors that could contribute to stronger growth with an entrenched consumer base in the US women’s fragrances market and to develop systematic evaluation of multiple growth opportunities for Flare Fragrances Company Inc.

Analysis of the Current Situation of FFCI

Strengths

• Long Experience: FFCI started its journey in 1955 as a small perfume producer, but it has placed itself at the fourth position in the U.S. women’s fragrances market (Quelch and Lisa 1);
• Brand awareness: Strong brand image of the company in the US market is one of the most strong point for FFCI;
• Popular Brands: FFCI owned at least six most popular brands in the US market like Loveliest, Awash, Summit, Essential, Swept Away, and Natural;
• Market Trends: The company has succeeded to becoming the trusted one to both matured women and younger demographics of the US market concerned with health and green trends;
• Customer Base: Around 74% of the matured women and 75% of teenage girls are loyal customer of FFCI (Quelch and Lisa 2);
• In addition, FFCI evidenced its most powerful presence in sales of fragrances all the way through mass channels, predominantly the US market of “prestige” brands;
• Distribution Channel: For the long-time, the company has strong distribution channel at the US premium and mid-tier department stores along with discount department stores and chain pharmacies;
• To meet the needs of all classes of customers, the company classified its brands as premium brands ranging from US$ 70 per ounce spray bottle, mid-tier brands ranging from US$ 30 per ounce spray bottle and mass brands at very affordable price and available at mass merchandisers and discount stores;
• Sales Projection: The sales projection of the company evidenced its strength of marketing;
• Other: Other strong points are corporate governance, corporate social responsibility, supply chain management system, leadership style, human resource management, financial capabilities of the company, and so on.

Weaknesses

• High Costs of Production: FFCI has limited its operation the United States, and it is avoiding to enter the international markets due to its very high costs of production;
• Decreasing profits: The company evidenced a 3% overall annual decline because of global financial crisis;
• Less Popular Products: Rather than the Fragrances, FFCI has a variety of product line like bath soap, body lotion and shower gels which are sold only through department store channels, but the brands of such products are not enough familiar in the market;
• Budget: Lack of additional investment for marketing research;
• Budget for advertising: The budget for advertising is not homogeneous, 70–80% of advertising budget allocated for umbrella brand Loveliest, but the other five brands sanctioned 20% to 30% (Quelch and Lisa 5);
• The company evidenced high price of product line and it has also decided to further increase and waiting to settle the financial crisis;
• Other: Price of raw materials and high operating costs are also key problems for this company.

Opportunities

• Expansion: The retail perfume market of US has evidenced the overall customers spending of US$ 5.7 billion, where FFCI serves 9.5% at the women’s segment and the company has opportunity to expand its business at men’s segment;
• Target new customer: Although the company has strong customer base at the matured women segment, it has opportunities to address new customer segment at 18 – 24 year females;
• The consulting group of Arlmont Associates demonstrated that the prestige image fragrances would be the best performers for the company;
• The company has the opportunity to introduce new brands with its innovation and originality;
• Strengthening the relationships with department store channels, it has scope to focus on drugstore expansion;
• The company has huge scope to increase its profit by strengthening its media plan;

Threats

• Economic Downturn: The impact of global financial crisis in the US economy is a dangerous threat for FFCI as the purchasing power of the customer has decreased dramatically;
• Long-term Crisis: The bailout and recessionary package could not settle the recessionary economy if the crisis prolongs for the long-term that would be another hazard for the company;
• Reducing sales at the high-end department stores carried enough threat for the company;
• Postponement of launching new brands is another threat for the company;
• Existing Competitors: Strong competitors like Depuis, Suzanne Weber, and Aromatique, those hold market shares ranging from 11.5% to 15.6% is another threat for FFCI;
• Advertising Budget: The competitors have more advertising budget and suitable strategies than the FFCI;
• New Entrant: There are also threats of new entrant in the market because Chinese and Japanese companies have enough opportunities to enter the US market and capture large market share.

Analysis of the Marketing Mix

Product

The product mix of Flare Fragrance Company is the combination of product lines that the company individual offerings to its target market, as an experienced player of the US women’s perfume market, the company organized its product mix to address the actual needs of its customers. FFCI is the fourth largest manufacturer of women’s perfume with a huge variety of product lines that consist of six familiar brands along with bath soap, body lotion and shower gels, the products mix of FFCI is as follows-

• Loveliest: – Loveliest is the umbrella brand of FFCI introduced in the market in 1975, with a thirty-five years life cycle it has gained strong demand among the US women over 35 years as their classic perfume linked with prestige, stylishness, elegance, and personality.
• Awash: – The brand Awash had introduced 1996 as a real endeavor of FFCI to enter in the US fragrances market segment of younger demography paying keen attention to the health and green trends; in addition, the packaging of this brand has leveled the umbrella brand name ‘Loveliest’.
• Summit, Essential and Swept Away: – The Summit came into the market in 1998 as a new product of FFCI while ‘Essential’ and ‘Swept Away’ were introduced in 2000 and 2003 respectively to meet the needs of beauty and health conscious women, this three brands also carries the sign of leveled the umbrella brand name ‘Loveliest’.
• Natural: – this brand came in the market in 2006 to meet the needs the demand of environmentally conscious people; in addition, natural is the latest innovation of FFCI has special appeal to the younger demographic with remarkable success.
• Other individual fragrances: – The Company has some other individual fragrances like soaps and shower gels those are packaged as gift box and this product persists with a stable customer base and contributes 7% of the annual revenue.

Price

Although FFCI classified its products into three classes based on price, but it has evidenced that the overall price of FFCI is enough high, nevertheless the research of Arlmont Associates confirmed that the prestige image fragrances would be the best performers for the company.

The premium brands are sold at US$ 70 per ounce bottle spray, the mid tire brands are priced at US$ 30 to 70 and the mass brands are sold at affordable price while the umbrella brand Loveliest is priced at US$ 32. It has evidenced that 93% of FFCI’s aggregate sales come from six premium brands and rest 7% revenue generates from other individual fragrances.

Place

Rather than overseas expansion FFCI emphasis, its operation in the home country United States and the company uses distribution channel like department stores, food, drug, and mass merchandisers and discount shops along with factory sales.

Premium Brands are available at majority of prestige department stores, gift stores, and the mid tire brands are distributed through mass, and discount department stores while the mass brands are sold through food, drug, and mass merchandisers.

The department stores like Saks, Macy’s, J.C. Penney and, later, Target, Wal-Mart, and Kohl’s are the remarkable points of sales where most of the fragrances of FFCI are available for retailing, at the same time the company has notable factory sales for different product lines.

For new product’s introduction, the company makes them available at the prestige department stores and following market respond, it supplies in the other channels; in this context, Arlmont report has suggested to make available its product line at drug stores.

Promotion

The company invests its promotional budget 70% to 80% for the Loveliest and 20% to 30% for other brands while the media focus is on television, print media, web, and other promotional activities.

Most of its advertising materials communicate with the different age segment of females touching their prestige, personality, and emotion, which is very effective to reach at the target segments of the society- women from 18 to 64 years old generate their greater willingness to purchase FFCI products.

The promotional budget of FFCI pointed to 19% of its aggregate sales revenue, while the competitors remarkably spends 23% of their sales revenue for promotion and the company has emergence to increase its spending in this regards.

Alternative Solutions

Explanation of Scale: Each criterion was evaluated and given a score between one and five, with one being very unfavorable and five being highly favorable

Alternative Solutions: Restructuring Pricing Strategy and reducing operating costs

Alternative Solutions: Multimedia Marketing Campaign

Alternative Solution: Develop new product line

Recommendation

This report suggested that alternative solution one is the best solution considering the evaluation criteria, advantages and disadvantages to choosing this strategy; however, this solution would help Flare Fragrances Company to increase profit margin in global financial crisis.

Alternative solution two would help create short-term growth and alternative solution three would cause financial challenge, but first solution would be the most prominent strategy to increase sales revenue and become market leader in the US market within very short period.

Works Cited

Quelch, John and Lisa Donovan. 2010, Flare Fragrances Company Inc.: Analyzing Growth Opportunities. PDF file. 23 April 2012. <https://hbsp.harvard.edu/home/>.