L\'Oreal Case Summary PDF

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Founded 1907 in Clichy, France Focus on creating products for more subtle and lasting hair color for clients & bringing skincare “class to mass” L’Oreal’s strategy for the mass market: “We sell product in the department store and specialty store channels. The research and development we do in support of those brands like Lancome and Biotherm can be leveraged into mass market outlets as well.” ○ “Trickle down and fire up” - trickle the tech down to mass markets to get high volumes and use money to fund more R&D Also need strong advertising, merchandising and promotions - because products are self-service type outlets ○ Have been successful with this in hair colorings (particularly via Preference) which has become a market leader ○ Hoping the same for Plentitude skincare Plentitude: includes cleansers and moisturizers and has been successful in the French skincare market following 1982 intro and introduced in US in 1988 ○ Led by Carol Hamilton SVP of Marketing ○ Plentitude had strong intro in US becoming #2 only behind Oil of Olay ○ Able to upscale the skincare business and bring new people into mass channels from department stores ○ Problem is not making money (plateaued in sales) Plentitude keys: ○ Improve top-line - break sales plateau and get more product moving off the shelf ○ Get bottom-line moving too - too many losses on the brand ($12.5M loss in 1995) ○ Need U.S. to be a major contributor to the L’Oreal’s position globally ○ Suitable skincare products for the U.S. customer and make sure they fit with L’Oreal’s tech portfolio Talked about some other shit about combination and questions to think about

● L’Oreal ● Plentitude sold in mass channels competing against Nivea (strongest competitor throughout Europe), P&G’s Oil of Olay (U.S. market leader) and others Plentitude ● One of the first ventures beyond the haircare and cosmetics arena ● 1982 launch in France - positioning as high end, superior performance but also accessible ○ Many French women were sophisticated in skin care use - lots of high end brands as a result ○ In the mass market, there were only a few significant (all Germany-based leaders: Nivea in the “big blue jar” and Kehnkel’s Diadermine - with P&G in U.S. ● Introduction via class of the mass strategy with a single product developed specifically for the French market “Creme Quotidienne de Soin” - general purpose moisturizer was introduced at a 30% price premium over incumbents ○ Creative positioning “I am a modern women, who uses only premium quality, technologically advanced products”

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Initially used a lot of print to match practice of the prestige brands and Used upscale packaging and merchandising 1984 to 1987 French line had many special purpose products (Dry Skin Night Creme, Anti-Wrinkle Creme) - 2 different product types: moisturizers & cleansers) ○ 1986 introduction of a cleanser product & advertising shift to TV to reach users with same modern woman message ■ But cleansers don’t offer as much product differentiation through tech as moisturizers ■ L’Oreal delayed the introduction until the moisturizers had helped establish the Plentitude by L’Oreal technologically advanced image ■ 1987, the line was only sold in France where it took over unit share leadership in moisturizers despite price premium (19.6% vs. 13.0% for Henkel and 8.8% for Nivea) ○ France success of Plenitude validated the “class to mass” strategy according to L’Oreal execs and sought to expand ○ Also introduced Action Liposomes product three times the price of a basic moisturizer in France - patented tech introduced to market L’Oreals prestige Lancome line as well to foster product sales and boost equity of Plenitude by L’Oreal brand umbrella ● L’Oreal’s formula for success in mass skin care: ○ Have technologically superior products ○ Concentrate resources and support on newest “star product” to pull the entire line ○ Follow the “golden rules” of advertising: feature star product, provide technological superiority evidence, depict an executive woman who is up-to-date and assertive (I live with the times) The United Launch and Early Results ● Plentitude first test marketed in Atlanta and Dallas in 1988 but advertising research showed that a change in advertising positioning from “delays the signs of aging” to “reduces the signs of aging” would be beneficial in the U.S. market ○ Decided to launch brand after 14% market reach in the test markets and good supporting, diagnostic data ● U.S. strategy was to introduce the entire line as it had been developed in France, specially 14 SKUs were introduced covering three categories (basic moisturizers, treatment moisturizers and cleansers) ● Had to establish new relationships with different buyers because skincare is in health and beauty aids section rather than the cosmetics section ○ Skincare players and cosmetics players didn’t overlap as much (80% of HBA was Olay, Ponds, Neutrogena and Nivea with Revlon and Almay as some players) ● Not selling a product so much as trying to create a department store environment at mass accounts ○ Americans didn’t know as much about skin care as European women - proposed educating them at point of purchase

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Different women have different needs so need to be able to map products to people in the store based on skin types and problems BUT without a person because this isn’t in a department store (5A exhibit shows desired presentation of L’Oreal Plenitude Skincare Center at retail and 5B shows packaging and merchandising) ○ Also wanted to be eye-level next to Oil of Olay ● Use of L’Oreal name to selling the concept because L’Oreal had a reputation with everyone in the trade - living up to their commitments & products historically were good profit generators for the trade ○ All existing customers signed up largely because of the L’Oreal brand ○ Year 1 spent $32.5M on advertising and did 10,000 store events with demonstrators, samples - like department stores = hit sales targets ● Some products adjusted to U.S. consumers’ preference for a lighter in texture, less heavily perfumed than ones sold in France ○ But core elements of the French success formula were followed ● French advertising executions were basically translated into English and the “I live with the times” image sought ○ Followed star system for advertising with most of money spent on newest, most tech advanced product ● Ad spending order: (look at Exhibit 7 for market size) ○ 1989: full plenitude product line ○ 1990: action liposomes introduction ○ 1991: eye defense creme intro ○ 1992-93: hydra renewal intro, wrinkle defense creme upgrade to “advanced” ○ 1994: excell-a3 intro ○ 1995: revitalift face intro ● Statement about losses and revenues and cogs Researching the Market and Plenitude’s Position ● Lots of success in latest product, Revitalift ● Gathered marketplace data to understand Plenitude situation and planning process for accomplishing Hamilton’s three goals of: top-line growth, bottom line improvement and influence global brand strategy ● Dollar shares of mass channels and ad spending for 1995 ● Also report on % moisturizer sold for daily vs. treatment for manufacturers differed as to proportion of unit sales ● Exhibit 8 gives Plenitude and competitive pricing info showing size of the product, cost to the trade and approximate everyday retail price ● Also did many custom market research studies Facial Skin Care Market Study (September 1995) ● A large scale quantitative telephone and mail survey of over” 3500 women age 16-69 who used one or more moisturizers or treatment creams at least once a week ● Found that consumers could be divided into 5 “benefit” segments: ○ Unconcerned (25%) - purchase based on price

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Ingredient apathetic (17%) - concerned with reducing signs of aging; but not so concerned about gentleness or specific ingredients ○ Price Conscious Socializers (22%) - worried about looking better but price/value is a concern ○ Stressed out (22%) - not concerned about price and want effective product that reinvigorates skin and reduces signs of aging ○ Age focused (18%) - similar to “stressed out” but with more attention to price and natural ingredients ○ Plenitude’s consumers were disproportionately stressed out and age focused (54%) vs. oil of olay which was only 36% ■ Alpha Hydrox with 62% stressed out and aged focused ● Also has a perceptual mapping exercise (results in 9 and 10) - also look at Appendix 1 ○ From people aware of the brand ○ Exhibit 9 = maps out people’s perceptions of the brands ○ Exhibit 10 = maps people’s perceptions of users of the brands ○ Brands close together compete closely with one another whereas those farther apart are seen as quite different by consumers ● Also looks at brand awareness, trial and current use rates (exhibit 11) ○ Plenitude has room to grow but must establish a more secure place among skin care consumers Qualitative Research Among “Acceptors and Rejectors” of Plenitude (April and May 1996) ● 2 qualitative acceptor/rejector studies were done ○ First one with people who had used Plenitude with Acceptors being those still using the brand and Rejectors who stopped ○ Second one with acceptors/rejectors of key competitors (Oil of Olay and Ponds) ● Plenitude acceptor/rejector study consisted of four 2-hour long focus groups - two in Boston and two in Dallas ● For each area discussed, the research company’s summary is provided with selected verbatims from respondents ● Motivation for Trial of Plenitude: ○ L’Oreal brand name cited by many as primary motivator (know its good quality and expect higher price to be better quality) while Plenitude meant little to people ○ Loreal by Plenitude seen as a department store quality in mass outlets practically the same as Estee Lauder but at supermarket price and allows you to pick out things you want because department stores are annoying and try to sell you everything ● Response to Product Formulas: ○ Young rejectors of the brand found it too heavy or greasy ● Perception of Plenitude as Full Product Line: ○ Uniformly people saw the plenitude line as having a lot of products (for some a plus, others a minus) - moreso seems like a bad thing

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Names of individual products could be more helpful in sorting through the line (ex. Excell A, doesn’t say moisturizer outright, too much description without clear statement of what it is) ● Response to Plenitude Packaging ○ Generally attractive but seemed overworked to some (reading the packaging is confusing) ● Perceived Target Consumer ○ Some felt plenitude was specifically targeted to older women (because it reduces aging) ● Second acceptor/rejector study consisted of 6 focus groups - three in Chicago and three in Baltimore, all screened for feeling facial skin care was very important and shopping for these products in self-service outlets ○ Motivation for Trial ■ Oil of olay was generated for many mechanisms (grandma’s advice, friend’s advice, Seventeen magazine, welcome box package) ■ Pond’s seen as a staple of life (everyone using it, inexpensive) ○ Product satisfaction sources ■ Acceptors saw Oil of Olay as light and reasonably priced ■ Acceptors saw Pond’s as reliable, accessible and reasonably priced ○ Brand Imagery ■ Oil of Olay was seen as the traditional, generational brand ■ Pond’s brand imagery was older, down-to each (no glamour and glitz, for everyday people) ○ Perceptions of Plenitude Line and Packaging (when respondent shown a picture of Plenitude) ■ Seen as overwhelming (lots of products, takes a lot of work to find your product) Plenitude Shelf Shopping Study (May 1996) ● Actual mock-up of a typical in-store shelf arrangement was created with Plenitude and competitive products shown ● 10 groups of 5 people each exposed to shelving and asked to evaluate the Plenitude line and packaging on its shopability ● Overall Category Shopping experience ○ Pros: fun to see what products are new, able to take time and look at different products, always something new ○ Cons: overwhelming amount of products, leads to frustrating and confusing experience Brand Images of Major Competitors ● Oil of Olay - always the same, a bit old fashioned (same old same old), sophisticated look and been around awhile - works well and packaging is nice ● Ponds - around forever, old ladies, heavy and unpleasant L’Oreal Product Line Presentation ● Cons: packaging is chaotic/complicated, too many words

● Pros: tell you a lot about the product and more than others, good summary on the front Developing the Plenitude Plan ● Newest product, Revitalift, known within L’Oreal as facelift in a jar, was introduced September 1995 and was doing really well ○ Double performance: anti-wrinkle and firming care ○ Came to represent 20% of sales ○ $5M in TV advertising and heavy support through 1996 ● Revitalift helped bring many new users to Plenitude as 40% of Revitalift buyers had not previously purchased any Plenitude ● “Reduces signs of aging” marketing showed perception of an older person’s brand but they don’t want that perception despite sales - they view it as more of a treatment product for people who have a problem ● New R&D product that helps the eyes the same way Revitalift helps the face ○ Can either follow up on the Revitalift success (get the new eye product to market as quickly as possible like Revitalift-eye) and put lots of ad support behind it ○ Could also bring out the product but not make it a “star” - focus on Olay’s competition with daily moisturizer as Olay looks to attack the treatment franchise ■ But the treatment products are where Plenitude stands out, establishes the “class” part of the proposition and technological superiority of L’Oreal ■ Cleansers and other current products are really only parity products ■ This will attract a younger franchise potentially - improving value prop for cleansers and daily moisturizers ● For attracting the younger franchise: maintain premium pricing to reinforce quality and performance (change to this pricing philosophy) ○ Argued for an overall product line pricing adjustment to reflect the degree of differentiation L’Oreal held - across the board price cuts in cleansers and moisturizers to make them competitive ○ Simplify the overall pricing structure (look at Exhibit 8) to smaller number of price points, but can make it difficult to sell any appreciable price increases to the trade and may lead to overall price cuts ● Majority of people find information on Plenitude boxes overwhelming - migth reduce number of SKU’s offered or amount of info provided ● Trickle down and fire up philosophy...