L’Oreal is the organization that operates in beauty and cosmetics industry for many years already and remains competitive due to its innovative products that appeal to the world’s population. The company is going to launch a new hair color that will be known as “Empathy” because being on henna, this organic hair coloring has an ability to adjust to different types of hair, making them look natural and alive.
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With the help of this product, L’Oreal can effectively compete with other organizations that produce hair colors. “Empathy” is likely to attract customers’ attention due to its advantageous features, such as natural ingredients that care for hair, special organic compound that allows to dye gray hair without keeping hair color on the hair for too long, natural color array that is in trend today, and empathy to problems of different hair types. The company is targeting a diverse market that includes the general public from 130 countries and professionals who work in hair salons. Mainly the customers are expected to be females over 30, as this hair color meets the majority of their needs.
L’Oreal is the organization that operates for more than 100 years already. It is the largest cosmetics company in the world that works with a huge amount of brands and consists of numerous divisions. The organization is known for its high-quality hair color, hair care, skin care, make-up, etc. The company is the leader in sales in its industry with “€22.98 billion in sales in 2013, 28 international brands, a presence in 130 countries, 77,400 employees” (“L’Oreal” para. 2).
L’Oreal faces intense competition, as cosmetics industry expands quickly and a lot of similar products enter the market every year. Still, with the help of innovation, price strategies, high quality of the products, and advertising, the company wins customers attention and satisfies them. L’Oreal realizes that it is expected to meet the needs of the diverse population, that is why it does its best to make its products appropriate for everyone.
In order to achieve success while operating in such dynamic environment, L’Oreal should consider the situation, in which it occurred, emphasizing the market peculiarities, the capability to serve it and the competition. “Empathy” is moderately priced, it makes all types of hair look putty and effervescent, effectively dyes gray hair and can be found in 25 natural shades.
The primary marketing objective is to remain the world’s leader in hair color sales. The primary financial objective is to achieve the revenue of $510 million during the first year of sales and, at least, to remain on the current level.
The L’Oreal Group is the company that became the leader in beauty and cosmetic and spread in about 130 countries all over the world. It is located in Clichy in France, which makes the Group even more popular, as French cosmetic is highly valued all over the world because the public believes it to be of the highest quality.
The Group is targeted at a wide market and offers products for both the general public and professionals in the beauty industry. L’Oreal Paris tend to reach teenagers and adults of both genders who want to receive excellent products for everyday use. Still, of course, female population constitutes the largest part of the market, as women are more interested in such kind of products. L’Oreal Professional provides the products for hair salons mainly, which gives them an opportunity to influence the customers by their gravitas.
L’Oreal emphasize that it provides quality products that are made to meet the needs of the diverse population. In this way, one and the same product is designed in several variants so that the customers can choose the one that is appropriate for their type of hair or skin. Thus, individuals from approximately 15 years old to older than 55 are approached. Still, the products are mainly brought by students and working adults who have medium income and want to use well-known and functional cosmetics. Exhibit 1 shows that the company’s new hair color meets the basic needs of the market in a cost-effective manner. The company constantly improves its products trying to make them more effective and less costly. It uses existing technologies and materials to innovate and attract new customers.
|Targeted Segment||Customer Need||Corresponding Feature|
|Professionals||Use functional and effective product||“Empathy” allows to make all types of hair putty and effervescent; dyes gray hair|
|The general public||Price & quality||Moderately priced|
|Many functions||Cares for hair and colors it|
|Express individuality||Many shades|
Exh. 1 Needs and Corresponding Features.
L’Oreal has several strengths that can bring benefit to the company, but the new hair color has a limited color array. The major opportunity is market extension even though the threat of increased competition is faced.
- Unique product – “Empathy” is a unique hair color that cares about the hair making it stronger. It is also designed to make normal different types of hair.
- Innovation – the company goes outside regular product categories, which attracts clients, as they receive an opportunity to try something brand new.
- A well-segmented portfolio – the products presented by L’Oreal are made to meet the needs of people with different income, which means that when they buy “Empathy”, they do not pay for the brand but for the chosen product.
- Brand awareness – L’Oreal has an established brand that makes the company recognizable.
- Limited color array – “Empathy” was created to make hair look more natural that is why only natural hair tones exist.
- Advertising – the products are advertised mainly on the Internet, which reduces the number of prevents potential.
- New customers – people who do not dye their hair because of negative effects of the hair color.
- Sophistication of hair care – the general public are likely to become more interested in hair care.
- Competition – beauty and cosmetic industry is very competitive.
- Possibility of substitute creation – competitors are likely to create new products with similar characteristics.
The competition in the industry is enormous. The company has numerous competitors in both local and global markets. Its main competitors are Nivea, Avon, Johnson & Johnson, Procter & Gamble, and Revlon. Exhibit 2 reveals their similarities and differences.
The company is able to gain recognition among the targeted market due to the peculiarities of its products. Except for that, the fact that L’Oreal is occupied in research activity makes the customers prefer it. They can be sure that the products totally meet their description, as they all were tested. Except for that, the organization provides a chance to try something that was not previously present in the market.
|L’Oreal||Nivea||Avon||Johnson & Johnson||Procter & Gamble||Revlon|
|Revenue (2013/2014)||$22 billion||$7 billion||$9 billion||$74 billion||$83 billion||$2 billion|
|Products||Hair care, hair color, make-up, skin care||Skin care||Make-up, hair and skin care, jewelry and fragrances||“Medical devices, pharmaceutical and consumer packaged goods” (“Johnson & Johnson” para. 1).||“Pet food, personal care products, cleaning supplies, and food products” (“Procter and Gamble” para. 1).||Make-up, hair color, skin care, fragrance|
|Additional||Active in research. Run Garnier, Maybelline, NYX, and other brands.||Is a part of Beiersdorf||Door-to-door sales||Run many popular brands||A great variety of diverse products||How-to videos|
Exh. 2. Competition.
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L’Oreal is a company that runs numerous brands, which presupposes that it deals with an enormous amount of various products. Still, mainly the company is known for its lipstick, skin care, hairspray, hair care and styling, hair colors and make-up items.
L’Oreal’s hair color “Empathy” is a unique product that has such advantageous characteristics as:
- Natural ingredients that care for hair: being based on henna, this hair coloring makes hair soft and sparkling. It prevents the appearance of split ends, creating a kind of armor with the help of its enveloping agents.
- Special organic compound allows to dye gray hair without keeping hair color on the hair for too long. As a result, there are no adverse effects of usual chemical compounds.
- Natural color array: “Empathy” is presented in 25 shades of brown, red and black hair, which allows people from all over the world find the one that perfectly fits them.
- Empathy to problems: this hair color is able to distinguish the main issues with hair so that its active components cope with them and with the course of time dry and greasy hair can become normal.
- Trends in fashion: nowadays stylists tend to do their best to reveal the natural beauty of their clients. “Empathy” is the best hair color that can help with this as it can adjust to one’s hair making it look attractive and alive.
L’Oreal is going to sell “Empathy” for $8.50 each, which is a medium price for such innovative products of high-quality. The main revenue is expected to be gained during the first- and second-year sales because new products in the beauty and cosmetic industry are created rather often. Taking this into account, L’Oreal does not stop researching and is going to improve the product to meet customer needs. Selling, hair colors, the company wishes to reach the revenue of $510 million and to excel its previous earnings.
L’Oreal Group is on the leading positions in the industry in the international market due to several reasons, among which is its distribution strategy. As a rule, all companies in this industry represent one of three types of players: “the ‘pure players’, present only on the beauty/ hygiene market with limited distribution chains, diverse businesses with industrial presence across various sectors, and who prioritize large scale distribution, and luxury businesses” (Braizaz para. 7).
Still, L’Oreal is unique in this perspective, as it does not limit itself with such market splits. The thing is that the company uses all possible distribution channels, which enhances its opportunities to gain more. For example, L’Oreal products can be found in “pharmacies, supermarkets, hypermarkets, independent stores, and hair salons”, they are present on personal websites and retailers such as Amazon (Braizaz para. 8).
The company successfully utilizes trail retail opportunities. It sells various products in duty-free areas and other areas where travelers can buy products. In this channel, the offerings of the beauty companies are best-selling, which proves that L’Oreal made a right decision when expanded in this way. Exhibit 3 shows the way the products are allocated (“Travel Retail, L’Oréal’s Sixth Continent” para. 1).
Except for that, the products can be found in 130 countries all over the world, which proves that L’Oreal is able to reach an enormous number of clients.
Revenue is critical for every organization and L’Oreal is not an exception. The company constantly improves its performance to achieve its basic goals of increasing revenue and being competitive. Thus, L’Oreal follows previously designed the marketing strategy that is aimed to determine short-term and long-term activities. It considers marketing peculiarities by analyzing the situation, in which the company occurred, designing and evaluating strategies meant to attract customers and increase revenue and considering how marketing objectives can be met.
“Empathy” is expected to bring benefit to the organization during the first year of sales due to the effective and efficient advertising campaign. The product is likely to interest various clients but is mainly targeted at women over 30, as it is positioned as a unique product that can restore their hair and make it look natural.
L’Oreal has set achievable objectives that should be reached during the first and second years after the product enters the market.
First-Year Objectives. From the very beginning the company advertises “Empathy” in all countries they can be bought (ads can be placed in the Interned to reduce expenditures). Then, 95% of hair salons that are L’Oreal’s regular buyers are expected to purchase this hair color. The product should be distributed in all shops so that the revenue of $510 million will be achieved.
Second-Year Objectives. The company should not only achieve break-even but also become the leader in hair color sales. Then a new product should enter the market.
L’Oreal believes that its mission is to supply all women and men with high-quality cosmetics. The company emphasized that diversity is the thing that makes them unique that is why it should be ensured and supported by the offered products. “Empathy” is mainly made for female population that is interested in taking care for hair and is willing to make it look natural. These are mainly women who are older than 30, as they do not expedient with their appearance anymore and are willing to make their hair as attractive as it was when they were 20. They should be mainly the representatives of the middle- and upper-income classes.
Except for that, women of this age are likely to dye their hair because of greyness. The second segment includes hair salons. Professionals work with the diverse population, and they are to meet the needs of various people. In this way, the product can be also used by both males and females who are looking for luxurious services. Finally, L’Oreal expects to sell “Empathy” to teenagers who experimented with the color of their hair and are willing to return to the natural shades or/and have dry or greasy hair.
In this way, the company is mainly targeted at individual buyers who do not purchase the products by wholesale and prefer retail. Still, hair salons will buy “Empathy” by lots, which will ensure that L’Oreal will be able to end with the break-even at least.
“Empathy” will be positioned as the most unique hair color that not only dyes hair in any of 25 natural shades but also cares for it and normalizes. It will be emphasized that “Empathy” is appropriate for both professional and personal use and does not have adverse effects on hair due to the natural ingredients.
In order to be sure that the new product will bring benefit to the company, L’Oreal designs a range of marketing strategies that are expected to serve as a guideline for future marketing actions. In this way, the company considers peculiarities of product sales, pricing, distribution and interaction with clients. L’Oreal emphasizes that being used together, they will provide an opportunity to deliver value to customers and satisfy them, which will have a positive effect on the revenue.
Product. The hair color “Empathy” will be actively sold during the first year after entering the market due to the peculiarities of the industry. It will attract customers so that they continue looking for innovative products with our company. A new product is going to be introduced during the following year to show that L’Oreal does its best to meet all the needs of its targeted audience but “Empathy” will be still sold. Product differentiation will give an opportunity to attract clients even though a huge number of competitors exist.
Pricing. “Empathy” will be introduced at a $9.50 retail price per unit and a $8.50 wholesale price. We consider that the product can also be sold at discounted price several times during the next year so that the clients’ attention and loyalty will not be lost. There may be inflation-driven increases on the second product, but mainly the company adheres to the particular price policy. As a result, the company will attract channel partners and improve its competitiveness. A low-price strategy is used mainly with skin care products in order to improve sales outlook.
Distribution. L’Oreal’s distribution strategy is already well-established. The company will refer to the channel partners it works with for several years already. The products will be available in more than 100 countries in “pharmacies, supermarkets, hypermarkets, independent stores, and hair salons”, and on the websites (Braizaz para. 8). The possibility of adding new channel partners is considered, but even the current situation is good enough to expect L’Oreal to become a leader in sales. In support of channel partners, the company may reduce prices and arrange special payment terms.
Advertising. L’Oreal pays much attention to the advertising and refers to various types of media to reach the most distinct populations. Mostly, the product will be advertised during its introduction. Then it will serve as a reminder for the customers. The company is willing to put in great efforts for online advertising because today the majority of the customers who are in search of new cosmetic do online research before purchase (Whitehouse para. 2).
Thus, L’Oreal considers that its products should be advertised on various websites including official company’s website and social media. In this way, it is critical to let the general public comment the product and allow women to share their experiences, as positive feedback from a satisfied client is the main thing that attracts other customers and makes them sure that the product is worthy.
Education. When L’Oreal offers new products, it tends to make sure that all customers can use it appropriately and are aware of all peculiarities of a particular product. In this way, the company makes a step to educate the public. Again, the company refers to the digital world and social media. It offers how-to videos and DIY to inform the clients and promote themselves at the same time. Taking into account the fact that education is a great opportunity to attract more customers, L’Oreal asks professional to describe its product and teach people how they can use it being at home.
Empowerment. L’Oreal emphasizes that it is not just a company that deals with beauty and cosmetics but an organization that can provide clients with the products that are able to make them more confident and strong. During the advertising campaign, the company asks celebrities to share their experiences and point out how its products helped them to achieve desired goals.
Aspiration. L’Oreal supports various events, including fashion shows in order to position itself as a company the can provide its clients with the products that can help one to become better and achieve goals for health and beauty (Comings para. 3). The company shows that the secrets of beauty lies in such details as hair color, skin, etc., and then it offers products that are claimed to help in making these parts perfect.
The hair color “Empathy” will be introduced in January. Such action programs will be used during the first 6 months to achieve our stated objectives:
- December: L’Oreal will start with the promotion of a new product. As a rule, the company spends about $9 billion in total. The campaign for “Empathy” is expected to cost $300,000. During this month, L’Oreal will actively participate in various shows and will be a sponsor of other events. The campaign will be mostly targeted and channel partners. The retail sales personnel will be educated on the peculiarities of the new product.
- January: As the product will become available, L’Oreal will start a new wave of advertising (TV, print, Internet) to reach wholesale and retail customers. The campaign will underline the unique character of the product and its advantages. A point-of-sale display promotion will be used along with online one.
- February: The multimedia advertising will continue, and the promotion will be supported by how-to videos and DIY. L’Oreal will attract customers to the product that is already available, in this way. The video will be made by the professionals who describe the way the hair should be dyed, how the hair color should be chosen, how different shades can be combined, etc. They will be found on company’s website and on YouTube.
- March: New point-of-purchase advertising displaces will be used to attract more clients and emphasize the novelty of the product. The company will communicate with its clients closely and will give them an opportunity to share their impressions on the website. Customer sales promotion will begin. The clients will upload their before/after photos share their experiences.
- April: A new advertising campaign will start. Celebrities who use L’Oreal will share their positive experiences with the general public. The videos will be posted on the company’s website and YouTube. The links to them will be also available on social networks.
- May: L’Oreal will participate in fashion shows, and professionals will share their impressions of using “Empathy” to make models look appropriately. Except for that, the company will conduct a customer satisfaction research to find out their attitudes towards the product and plan future actions.
With the help of marketing research, the company is going to receive more information about its clients and their preferences. L’Oreal will find out what specific features of the hair color its customers value the most. It will also identify what the targeted audience wishes to have, but it is not available yet. In this way, the company will get to know what it should put in great efforts and what innovations should be made.
Moreover, marketing research is expected to help L’Oreal identify the benefits its customers are willing to receive and if they are interested in discounts, contests or rebates. The information will be gained with the help of market tests and surveys.
Customer feedback will provide L’Oreal with the opportunity to prepare and adjust a new product to the clients’ expectations. It will be also advantageous to conduct a brand awareness research to find out the effectiveness of advertising campaign. Customer satisfaction research will provide the company with the reaction of the general public on a new product. This information will show if it should be sold further.
L’Oreal expects to receive total revenue at $510 million for the hair color. The average wholesale price is expected to be of $8.5 per unit. The variable cost per unit should be $4.5. The unit sales volume should be of 60 million. Being the leader of hair color sales, L’Oreal does not expect any critical loss. With the help of break-even calculations, the company came up to the conclusion that the profit will be gained after the sales volume exceeds 127.5 million units, which should be achieved during the product’s first year. The company believes that its per-unit wholesale revenue will be of $8.5 per unit. The variable cost will be of $4.5. The estimated fixed costs of $510 million are assumed for the first year of sale. Taking these expectations into consideration, the break-even calculation is:
8.5-4.5 = 127,500,000 units.
In order to make sure that the company is reaching success with new a product, controls are established. They are used to help management in the assessment of results. As a result, L’Oreal will be able to find out what its main problems are and will be able to improve them through particular corrective actions.
L’Oreal is concerned about the quality of its products. That is why the company is going to utilize control measures that will provide an opportunity to control it and improve customer satisfaction. The feedback will be also assessed so that the company will get an opportunity to solve possible problems that occur. Except for that, L’Oreal will do researchers to make sure that it meets the plan in accordance to estimated sales and expenses. In this way, the organization will be able to start improving the situation before it turns out to be critical, as the first early warning signals will be noticed. L’Oreal will consider both monthly sales by segment and by channel as it will have a chance to examine the situation in depth and point out all drawbacks.
L’Oreal has a complicated organization structure that is based not only on the divisions but also on the functions that each of them performs. As L’Oreal Group consists of numerous divisions (such as Garnier, L’Oreal Paris, etc.), it tends to separate them to reduce mishmashes. Still, the fact that organization is rather extended makes it consider organizational hierarchy in relation to the functions particular employees perform.
L’Oreal Group is a very extended company that operates in numerous countries. Its Director Strategic Marketing Department, MARC Menesguen, controls the majority of global marketing operations. Each brand that belongs to the Group has several Chief Marketing Officers, who work in the countries where the company’s products can be found. They are supported by Marketing Directors who are also is in charge of making vital for the organization decisions.
L’Oreal is divided into offices that control various types of marketing, such as digital marketing. Except for that, the company has Marketing Managers who coordinate the work of smaller groups. Marketing Assistants and Marketing are in charge of day-to-day tasks. Hey also receive help from Marketing trainees. Before the task related to the marketing activities are checked by the senior manager, they are evaluated by Marketing Controller, whose task is to work with the brand team and monitor inventories.
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Comings, Kristen. 3 Keys to L’Oreal’s Content Marketing Strategy, 2013. Web.
Johnson & Johnson 2016. Web.
L’Oreal 2016. Web.
Procter and Gamble 2016. Web.
Travel Retail, L’Oréal’s Sixth Continent 2015. Web.
Whitehouse, Lucy. L’Oreal on Digital Marketing: ‘70% of Consumers Now Research Online Before Purchase‘. 2014. Web.