Historical analysis
Two cosmetic industry players; Frank Toskan, a makeup artist and Frank Angelo, a professional photographer started MAC in 1984. They made their products for professional make up artists who would apply them on photo shoot models or studio actors and actresses.
Therefore, the initial client base consisted of members from the entertainment industry. Through celebrity endorsements, the line grew rapidly and became a product for the high fashion industry.
The two founders used and expanded their business networks to grow their product lines. Many consumers appreciated the longevity and quality of their products. Because of this, MAC enjoyed more celebrity endorsements; artists, such as Pamela Anderson and Debbie Harry, promoted their products in the late 1980s.
In the subsequent decade, 1991, the company formally entered the US market by opening its first New York store. MAC also grew its market by establishing its first European store in Paris, five years later. The company has expanded in a number of other influential countries, including China.
MAC collaborated with various department stores in Canada and the US to distribute their products. However, the organization’s main distribution outlet was its retail stores. Currently, one can find their products in Macy’s or Nordstrom. In 1994, the company sold a substantial portion of its products to Estee Lauder.
In 1998, the latter firm became the full owner of MAC after both founding entrepreneurs left the business. Estee continued with the original product lines but kept diversifying its range. Now one can find MAC stores in various parts of the world. The firm has a niche among professional make-up artists, even though ordinary consumers are fond of their products, as well (Byron B3).
Industry analysis
Vertically integrated, multinational organizations currently dominate the US cosmetics industry. Most of them manufacture, distribute and sell their products independently. Acquisition and buy outs are commonplace in this industry. Several of them prefer to create new business lines and streamline their production processes in order to stay ahead.
The dominant players control a large market share because they have well established distribution channels. In fact, distribution is one of the biggest barriers to enter in the industry. A lot of government regulations exist for imported cosmetic products, so smaller firms that plan on going international may experience a lot of difficulties in penetrating new markets.
The cosmetics industry is highly competitive; therefore, new entrants must be willing to create new product lines in order to stay ahead. The need for frequent product endorsements may also hamper some individuals from doing business in the industry.
There is a high degree of rivalry in cosmetics production as evidenced through numerous imitation products. For instance, the natural-product boom started with one organization and spread to other organizations that had to keep up in order to stay ahead. The high number of small and medium-sized cosmetics companies causes larger players to up their stakes and continue innovating (Etsee Lauder 18).
Consumers are highly influential in this industry as their needs often drive product development or research trends. For instance, men no longer think that the application of makeup is unconventional or peculiar; consequently, this has led to the development of many male-oriented products.
Additionally, a number of consumers want to use natural products thus propelling cosmetics manufacturers to avoid synthetic products to meet their needs. Further, some buyers want to use few products on their skin; this has prompted cosmetics suppliers to create multifunctional products.
Suppliers do not have a lot of clout in cosmetics production as they are many. Cosmetics manufacturers rely on chemicals and products that can be found easily. This means that businesses such as MAC can negotiate the price of their products.
Consumer analysis
Brand loyalty is one of the principal factors that drive demand for MAC products or cosmetics’ in general. Some individuals may buy a certain brad of cosmetics merely because of the name. Buyers readily identify with MAC products and have maintained a strong relationship with the brand.
In fact, several blogs and websites exist for women who love MAC products. Many of them exclusively focus on MAC even when they have no reason for doing so. In fact, the firm has a cult like following of shoppers who buy all their weekly collections consistently.
On the flipside, this implies that when consumers prefer using a competitor’s brand, then chances are that they will not switch to MAC’s innovations even if they are worth a try (Ahearne, Bhattacharya & Gruen 247).
Product quality is a key determinant of demand in the industry. Makeup needs to come in the right scent, texture and color. People want to buy eye shadow or blush that matches their complexion, so it is imperative to have a large selection base.
The cosmetics industry has sidelined women of color for a long time, yet they have some of the most divergent skin tones. MAC is aware of these issues, and plenty of buyers stick with the brand because of its wide color selection. Members of various races have found a niche at the company because there is so much to choose.
Having a wide-shade-selection can make the difference between winning and losing one’s consumers to competitors. Additionally, individuals appreciate products that give them greater longevity. MAC makeup stays on their faces for a long time and can thus give them exceptional service.
Buyers care about the price of cosmetic products. Many of them will compare the cost of the same product across various firms. For instance, a lip gloss sold by L’Oreal goes for $12 while the one sold by MAC is $15. Buyers may choose the former over the latter in order to save up.
However, price only weighs in when individuals are considering products tailored for the same market segment (Oliver 38). High-end products can be costly, but this must be in comparison to lower-end brands.
Therefore, while MAC’s cosmetics cost more than drugstore brands, clients will still find they are significantly cheaper than Dior, Smashbox or other high-end store brands. In fact, MAC is one of the least expensive, high-end cosmetic brands.
The store layout is another factor that led to the rapid growth of consumers in this industry. Drug stores have a disadvantage because they do not have sales assistants who can help buyers with the products. For this reason, many of buyers will go for department stores like MAC. Consumers enjoy the aura and shopping experience at MAC stores as it is relatively easy to locate what they require.
They feel that the product-arrangements are thoughtful, and they often enjoy their shopping experiences tremendously. Most MAC stores can be found in malls across the country, and they often have the same format. Therefore, a MAC buyer would conveniently find stores without having to go out of their way to get to them.
Promotions work relatively well in this industry. Consumers are sensitive to in-store discounts and other additions that companies offer them when they purchase their commodities (Stokburger 351).
Furthermore, many of them are highly knowledgeable and will go for limited-edition products as soon as they arise. MAC has taken advantage of these promotional strategies by launching new products every week. Some customers object to such a policy because they can miss out on lucrative products if they delay.
MAC often creates a massive buzz for its products on the internet. The large fun-base will anticipate the introduction of a collection and respond overwhelmingly during the launch. Most of the time, demand will exceed supply for new products.
Competitor analysis
A SWOT analysis of the competition in the industry reveals that niche markets are a significant driver of demand in the industry. Customers prefer to buy products that they relate to a need. For instance, some may need organic or natural products. Alternatively, some users may simply look for the cheapest products in the market, while others may be high-fashion.
MAC’s key strength lies in its fashion-conscious market. Additionally, buyers may purchase products with a strong brand image. Firms such as L’Oreal and Channel have such a trait; nonetheless, MAC’s cult like following it also indicative of its strong brand image.
This attribute assisted the company in weathering the 2007 global economic downturn. Firms in the cosmetics industry have significant weaknesses. Their rate of introduction of new products affects how much money cosmetics firms put into research and development.
Sometimes revenue streams from new makeup collections do not offset the cost of investment. This is the case for MAC and firms like Avon which invest heavily in new products (Hoovers 27).
Opportunities exist in the development of products that would suit people from all sexes, races and ages. A lot more can be done in the development of products for men, as well. The key threats for firms in the cosmetics industry stem from high switching levels.
Some customers are starting to realize that few differences exist in the nature of products they purchase, so this undermines customer loyalty. Counterfeits are hurting the bottom-line for main brands like MAC and confusing previously loyal customers about product quality. This problem is especially prevalent in countries with low regulatory control.
Product development is a common phenomenon in this industry. Firms like Avon are always introducing new combinations of products. They usually market them aggressively and end up recording increases in sales across international markets.
Alternatively, the firms may do so through product diversification. An organization such as L’Oreal diversified into anti- aging skin care treatment and this assisted it in securing new market bases. Market penetration through acquisition of other chains explains why some of these organizations do so well.
Lastly, these companies also invest in market development by targeting their own market base and causing them to purchase more of their products. They often carry out promotional campaigns for such initiatives.
In light of the above competitor analysis, the purpose of marketing is to create brand awareness and change consumer beliefs or attitudes. It will occur in order to alter their purchase intent and encourage brand loyalty (Turley & Milliman 199).
Consumer needs
Maslow’s hierarchy of needs includes eight levels of needs, in order of precedence: biological, safety, love, esteem, cognitive, aesthetic, self actualization and transcendence needs. Maslow explained that a person’s primary needs ought to be met before trying to meet the other factors in the hierarchy.
Additionally, one should analyze consumer behavior so as to determine what needs the consumer is trying to meet. At first sight, one would imagine that cosmetics users are attempting to fulfill their esteem needs. Most of the time, this is quite true as cosmetics serve the same function as fancy cars, fashion clothes and furniture renovations. On the flipside, makeup may also be used to fulfill the need to belong and be loved.
Many cosmetics users belong to MAC online communities or are Channel enthusiasts. Some of them purchase the products in order to feel that they belong somewhere. Therefore, organizations need to think about how they can fulfill both esteem and the need to belong in their marketing strategies (Apaolaza-Ibañez et al. 795).
This marketing plan will attempt to strengthen positive emotions in buyers. Consumers will feel that they are caring for themselves by buying MAC cosmetics. However, to generate that positive emotional reaction, buyers must first feel inferior about themselves by comparing themselves with the models used.
The social comparison theory states that audiences will automatically compare themselves to extremely attractive models and feel negative about their looks. They will look to MAC products to increase their self esteem (Apaolaza-Ibañez et al. 578).
At the same time, this marketing campaign will also fulfill people’s need to attract members of the opposite sex. The emotional need to be attractive causes individuals to look for products that will achieve the same function. Therefore, the marketing strategy will attempt to meet that need through MAC products.
Product decision
The marketing strategy will focus on three distinctive features about MAC cosmetics. First, it will emphasize its striking and bold colors. The rich and dark eye shadows, lipsticks and eyeliners can make customers feel like superstars when they wear them, especially because the products were initially meant for photo shoots.
The second product feature will be how MAC eye shadow and powder glides on one’s skin. These aspects will emphasis the softness and compatibility of the makeup with other products in use. Additionally, the promotional campaign will also talk about the oil-free nature of MAC’s foundation. Customers often appreciate this quality when wearing the makeup for day-to-day functions.
The promotion will use two media outlets: the internet as well as television. It will take place through an advertisement that talks about these three key traits in an appealing way. The most sought-after high fashion model will star in the campaign, and will apply deep and dark MAC makeup in her first appearance.
She will then go to a party and dance with the make up. She will head to the ladies room in the third scene, where one lady will ask about the make up that she uses. The model will explain how MAC makeup glides over her skin and does not contain oil.
This advertisement will air across most television stations in the country. A parallel campaign will run on the internet through three internet banners of the same model, in three edgy looks. The pictures will appear as slides and will be on blogs or internet magazines that talk about beauty. Users can click on the image to get to the company website. The adverts will thus use emotional appeal to sell MAC products.
Pricing decisions
Competitors’ prices influence pricing decisions in the cosmetics industry; consumer’s purchasing abilities as well company investment in creating the product also alter the cost of a product. This approach will utilize skimming pricing for foundations, lipsticks, and eye shadows advertised on the company products.
The products are already high-prestige, so consumers would expect a relatively high cost for the commodity (Winniger 11). Additionally, the company will invest a lot of money in the promotion of the product, so it will need to recover those costs.
Several other environmental factors can explain why the price of MAC cosmetics in the marketing plan will be slightly higher than others. Government regulations in international markets heighten product costs. Inflationary pressures also lead to an increase in price.
Besides this, competitors are not overly concerned about reduction in production costs, so this will not put pressure on the company to offer its products at a lower price.
An average concealar or foundation would go for $50, such as the one from Cover FX, but after this promotion, it will cost $ 55 from MAC. Eyeliners will be available at $15, yet competitors like Marcelle are selling them for $12. Mascara will go for $15; a competitor like Maybelline is selling this product at the same price. Eye shadow will be $45; competitors like Anabelle are selling their at $25.
Blush will be $ 15, which is close to Cargo’s $14. Lipstick will go for $30; other firms like Rosebud sell theirs at around $20. The key products are foundation and concealer, lipstick, and eye shadow.
The rest of the products will sell at market prices. As mentioned earlier, skimming works when products are not price elastic, and a wide consumer base exists (Olsen 247). Buyers must be willing to pay expensively for a premium product, which is the case for MAC’s commodities.
Conclusion
The marketing strategy chosen is a proven strategy in the cosmetics industry because it works on emotional appeal. Furthermore, the media outlets selected for the campaign are highly relevant to the market base. Many cosmetics users, especially first time buyers, look to the internet to find advice. Therefore, finding banners about MAC’s signature look will work well for the firm.
The number of clicks on the banner advertisements in the internet will illustrate the degree of success of the marketing plan. If these clicks are higher than industry standards, then the marketing plan will be a success. On the other hand, the television advertisement should translate into higher sales returns especially in the first three months of the advert.
The main challenge in this marketing plan is getting customers to understand the exceptional nature of the commodity. Plenty of advertisements already exist on cosmetics, and buyers may not see the usefulness of those qualities immediately.
The main assumption in this advertising strategy is that customers depend on advertisements for cosmetics information. It could be that word of mouth or other marketing channels are believable. If this assumption is wrong, then the TV advert will not resonate with buyers, and they may not purchase the product.
Works Cited
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Byron, E. “Estee Lauder Profit Declines 30%.” Wall Street Journal. 2009: B3. Print.
Etsee Lauder. Annual Report. 2010. Web.
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Oliver, Richard. “Whence Consumer Loyalty.” Journal of marketing 63(1999): 33-44. Print.
Olsen, Svein, “Comparative Evaluation and the Relationship between Quality, Satisfaction and Repurchase Loyalty.” Journal of the Academy of Marketing Science 30.3(2002): 240-249. Print.
Stokburger, Saur. “Brand community: drivers and outcomes.” Psychology and Marketing 27.4(2010): 347-368. Print.
Turley, L & R Milliman. “Atmospheric Effect on Shopping Behavior: A Review of Experimental Evidence.” Journal of Business Research 49.2(2000): 193-211. Print.
Winniger, Thomas. Price Wars: How to Win the Battle for Your Customer. NY: St. Thomas Press, 1994. Print.