Case 3 - L\'Oreal - Case Study PDF

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L’Oreal/Garnier Marketing Strategy In order to achieve L’Oreal’s stated goal of double digit market share in the United States, Garnier’s primary objective should be to either increase sales or increase volume. With the current shift in market demands towards natural hair care products with unique benefits, simply reinvigorating the Fructis line may not be enough. By expanding its American product mix to include the Ultra Doux line of shampoos, Garnier will be able increase its volume and capture a market segment currently unfulfilled by its competitors. There is a risk that launching the new product line will cannibalize sales from the existing Fructis product line. However, given Garnier’s competitive advantage of higher quality products and a broad market focus, an appropriate differentiation strategy would help mitigate the risk of product cannibalization. Garnier’s Fructis currently leads the Consumer Emotional Perspective in the Vibrancy category with a market share of 5.8% compared to Herbal Essence at 5.5% and Aussie at 2.7%. Fructis also leads the second largest segment of Hair Care Benefits (Smoothing/Straightening). Relaunching Fructis without a significant alteration of the target market segment is unlikely to achieve the 10% US market share target. Furthermore, Fructis is no longer unique in its marketing strategy with Herbal Essence also marketing to the same youthful consumers, a factor which has no doubt contributed to its falling market share. A major competitor P&G has three brands: Pantene, Herbal Essences, and Head & Shoulders which together occupy 23.9% of the hair care market, showing how additional brands can greatly increase a firm’s market share. Launching Ultra Doux in the US has the potential to capitalize on a consumer preference shift which is currently unrealized. The primary appeal of Ultra Doux is its occupation of the “Warmth and Simplicity” niche. The low switching costs would allow for customers to be attracted more easily than in other industries and the emotional connection of Ultra Doux facilitates brand loyalty, promoting customer retention. Some of the fastest growing segments of the US population are also the most prevalent hair care product consumers; 25-35 year olds and multicultural consumers are the most likely to try new products and would therefore respond better to promotional materials and the launch of Ultra Doux in the US. Market changes also are putting the Ultra Doux lunch in a position of strategic benefit; Pantene is being angled towards a more premium positioning leaving an opportunity to market more simple and straightforward products. In a time of nearly constant change Ultra Doux offers consumers a chance to return to more traditional products, which are also more resilient to fads. To effectively bring Ultra Doux to the American market, Garnier must develop a robust marketing mix. As a product, Ultra Doux occupies a unique segment as the only shampoo to offer “warmth and simplicity”. In terms of place, price and promotion, Garnier should be less concerned with profits than its goal of growth, and can therefore pursue more aggressive pricing and promotion strategies. In particular, Wal-Mart is a distribution channel typically oriented towards a large segment of price sensitive customers. Making gains in mass retail distribution channels will yield great returns for Garnier. It is imperative that Garnier prices Ultra Doux to directly compete with other industry leaders, such as Pantene Pro-V at $3.84 at Wal-Mart. By positioning Ultra Doux as a “middle-of-theroad” option between L’Oreal’s youthful Fructis and premium L’Oreal Paris offerings, Garnier is able to compete with industry leading brands as well as adequately differentiate its products to mitigate the risk of product cannibalization. Finally, given the figures in Exhibit 2, store flyers and manufacturer’s coupons are most effective in attracting customers towards products. These are all relatively inexpensive methods of promotion that produce great results. This is doubly true for price sensitive customers in a highly elastic hair product market. Given enough time, consumers will also recommend Garnier’s well-priced and unique product to friends and family....