Poor brand image
L’ Oreal Group is faced with a challenge in the introduction of two products in Netherlands. The two products include Belle Couleur and Synergie. L’Oreal Group sales have been on an upward trend as a result of the large size of market for cosmetic products. In France, its domestic market, the firm has witnessed a 10.2% growth in sales which is equivalent to 9.67 billion Euros (Mann 2010, 6).
In its quest to attain its profit maximization objective, the firm’s management team has made a decision to venture the Dutch market. Introduction of the new product was to be undertaken by Laboratories Garnier which was its major competitor.
Despite Laboratories Garnier being recognized in France prior to its acquisition, very few Dutch customers knew of the firm’s products. This arises from the fact that Laboratories Garnier had not established a strong brand image in Netherlands. The low brand image in the market limits the probability of the two products succeeding.
In its decision to expand its operations within Netherlands, L’Oreal Group management team should conduct a comprehensive evaluation of the two products in order to determine the probability of success.
The management team should undertake this by only introducing products with identifiable differential advantage in the market. L’Oreal Group management team is faced with a challenge on how to ensure that the product penetrate the market.
Key issue
The key issue facing the firm is lack of awareness of Garnier’s products through which the firm intends to introduce its products. In addition, the two products are facing stiff competition from other established competitors. The firm is faced with a challenge of attracting customers to purchase the new product.
This arises from the fact that customers in the Dutch market feel attached to their traditional brands which makes them reluctant to try new beauty products. Competitors in the Dutch skin care market have a well established customer loyalty. The loyalty resulted from the effective distribution strategy adopted.
Personalized service is one of the ways through which firms in the beauty industry can create customer loyalty. In addition, some of the players in the industry are multinational and regional companies which are widely recognized in the market.
In comparison to these firms, L’Oreal Group has a relatively low competitive advantage. According to Jones (2010, 359), the beauty industry is very competitive as a result of the high rate of innovation resulting from increased research and development. Lack of an effective market penetration and promotion strategy poses a threat in the introduction of the two products.
Evaluation
If the firm does not formulate an effective market penetration strategy for its products, there is a high probability that the firm will perform poorly in terms of sales. The resultant effect is that its long term survival will be threatened. The Dutch market is feasible for the firm to introduce its products. One of the key factors which are enhancing the market feasibility is the demographic characteristics of the population.
Aging is one of the factors which have contributed to an increment in the rate of consumption for anti-aging products (Patzer 2006, 47). A significant proportion of Dutch women are aging.
There are projections that this trend will continue into the future. By 2020, it is estimated that the number of individuals aged 65 years and above of the total population will increase to 18% from its 2010 projection level of 14.9% (Schroots, Ballesteros and Rudinger1999, 83).
Introduction of Synergie and Belle Couleur beauty products stands a high probability of success considering that they are anti-aging skin and hair products. This means that the two products are in line with the customer requirement. In addition, successful introduction of the two products in the Dutch market is paramount considering the shift in role amongst the female gender.
Females are venturing in various careers leading into an increment in their disposable income. Increase in consumers’ disposable income results into an increment in consumer purchasing power (Lamb, Hair and McDaniel 2008, 365). Due to an upward shift in their disposable income, the Dutch women have increased their daily consumption for beauty products.
This represents a significant shift in consumers purchasing behavior considering the fact that the Dutch women used to purchase beauty products such as facial creams two times a year on average. Whilst the market feasibility for L’ Oreal Group in Netherlands is high, it is vital for the firm’s management team to consider the most effective way of introducing the two products in the market and also create market awareness effectively.
Possible considerations
Promotion plays an important role in the operation of a firm (Botha, Strydom and Brink 2005, 135). As a result, promotion strategy has been integrated as one of the key components of strategic marketing by firms in various economic sectors in their quest to attain their profit maximization objective.
Through a well formulated promotional strategy, a firm is able to create awareness of its products and services to its prospective customers. Considering the reluctant nature of Dutch women to try new beauty products, developing an effective promotional strategy is paramount.
This arises from the fact that increased awareness of the products characteristics and benefits will play a significant role in creating customer confidence. There is a high probability of the products succeeding amongst the Dutch women considering the increment in demand for beauty products which have “natural” characteristics.
Considering the fact that Laboratories Garnier does not have a well developed brand image in Netherlands, it is vital for L’Oreal Group to consider developing a promotional strategy will enhance its product awareness. According to Strydom and Brink (2005, 135), product awareness is very important in the customers’ decision making process (Mills and Law 2005, 29).
Product and service awareness plays a significant role in the consumers purchasing pattern. The more the consumers are aware of a product, the high the probability of them making a purchase.
With regard to beauty products in Netherlands, their success in the market is directly related to their brand image. Therefore, if the brand image is low, there is a high probability that the product will not succeed. The fact that most Dutch women are not conversant with the product description of French beauty products underscores the importance of creating product awareness.
Apart from development of a product awareness strategy, it is also important for the firm’s management team to consider improving customer product loyalty. Customer loyalty will play a significant role in ensuring repeat purchase behavior of the customers.
To create customer loyalty, it is vital for the firm’s management team to ensure that the research and development being undertaken results into development of beauty products which meet the market demand.
Increment in the intensity of competitiveness within the retail environment presents a challenge to firms (Ranchhord and Maradi 2007, 77). This arises from the fact that competition leads into a reduction in customer switching cost (Egan and Thomas 1998, 68).
Ranchhord and Maradi are of the opinion that customer loyalty is a fundamental issue in such a case. Considering the competitive nature of the beauty industry in Netherlands due to existence of other multinational companies such as Procter and Gamble Company, creation of customer loyalty is vital in the firm’s effort to position itself effectively in the market.
The resultant effect is that the firm will be able to develop a high competitive advantage for it to survive in the market.
Alternatives
A number of alternatives could be considered to address the key issue: That L’Oreal Group faces a challenge in introducing its two beauty products (Synergie and Belle Colourie) as a result of poor brand image of Garnier.
Considering the market feasibility in Netherlands beauty industry, L’Oreal Group should ensure that it capitalizes on the market opportunities presented and introduce the two products. In order to effectively penetrate the market, the firm’s management team should consider the following alternatives.
- The firm should not introduce the two products via Laboratories Garnier considering its low brand image in Netherlands.
- Alternatively, L’Oreal Group’s management team should consider outsourcing the services of well established marketing agencies in Netherlands. This will increase the probability of the customers accepting the product.
Assessment
Undertaking product introduction process by itself is a wise decision for the firm to consider in is effort to penetrate the new market niche. This is due to the fact that the firm will develop an upper-edge in understanding the market dynamics. On the other hand, distributing the products via intermediaries will also be of benefit to the firm. This is due to the fact that the local agents will be conversant with the market.
A comprehensive criterion should be used in selecting the intermediary to carry a firm’s product in the foreign market. According to Perner (2008, 3) selection of the firm to carry a firms product in its introduction phase is a key determinant in the product’s success or failure. Perner asserts that if the product is not amongst the firm’s preferred products, chances of the product succeeding are limited.
Recommendations
To ensure that introduction of the two products is successful; L’Oreal Group’s management team should consider a number of issues.
The firm should consider incorporating the concept of Integrated Marketing Communication (IMC) in an effort to create sustainable market awareness. Integrated marketing communication will ensure that there is effective and efficient creation of market awareness. This arises from the fact that both traditional and emerging market communication models are integrated (Kitchen and Pelsmacker 2004, 45).
As a result, a considerable number of individual customers will be aware of the product’s market existence. Incorporation of IMC will ensure the customers access sufficient product information. Considering the fact that the product can be consumed by both the young and elderly consumers, integration of IMC will be effective in ensuring that the customers access the product information.
Sufficient product information will enable the firm to dispel any fears which the customers may have regarding its products. The resultant effect is that there will be increment in the customers’ level of confidence to enable them incorporate the new product in the process of making decisions regarding consumption of beauty products.
In order to develop a repeat purchase behavior amongst the customers, L’Oreal Group management team should consider implementing Customer Relationship Management (CRM) in its operation.
This will ensure that that all its operations are focused at ensuring that the customers attain a high level of satisfaction. The effect is that the firm will be able to attain customer inertia. This means that the probability of customers switching to other products will be minimized.
To ensure maximization of the benefits associated with the CRM strategy, L’Oreal Group management team should consider implementing the CRM software. The software should be linked to the internet so as to enable it access customers’ feedback efficiently.
CRM software will act as a link between the customers and the firm’s marketing team. This means that there is a high probability of marketing team understanding changes in customer product requirement. Depending on market feedback, it will be possible for the firm to conduct product innovations effectively to suite the customer’s requirements.
Reference List
Botha, Johan, Strydom, Johan and Brink, Annekie. 2005. Introduction to marketing. Chicago: Juta and Company Limited.
Egan, Colin and Thomas, Michael. 1998. The CIM handbook of strategic marketing. New Jersey: Butterworth Heinemann.
Jones, Geoffrey. 2010. Beauty imagined: A history of the global beauty industry. Oxford: Oxford University Press.
Kitchen, Paul and Pelsmacker, Peter. 2004. Integrated marketing communication: a primer. London: Routledge.
Lamb, Charles, Hair, Jones. and McDaniel, Collins. 2008. Essentials of marketing. New York: Cengage Learning.
Mann, Rebecca. 2010. The L’Oreal Group reports solid first-half sales. Web.
Mills, Juline and Law, Rob. 2005. Handbook of consumer behavior: tourism and the internet. London: Routledge.
Patzer, Gordon. 2006. The power and paradox of physical attractiveness. London: Universal-Publishers.
Perners, Lars. 2010. Introduction to marketing. Los Angeles: University of South California.
Ranchod, Ashk and Marandi, Ebi. 2007. CIM coursebook 07/08 strategic marketing in practice. New Jersey: Butterworth-Heinemann.
Schroots, James, Ballesteros, Francis and Rudinger, Gerrad. 1999. Aging in Europe. Oxford: IOS Press.