SZ-02/2017 Principles of Marketing
- What are the major channel member functions? Differentiate between a zero-level channel and three-level channel, discuss using an example.
There are numerous functions performed by channel members. All of this function utilizes scarce resources of the organization. Furthermore, these functions can be better performed through specialization in the function or through expertise of the function. And on top of it each function can be transferred within the various channel members.
Main functions of channel members in channel distribution are
Risk taking – Assuming the risk connected with carrying out channel work or being a part of a channel. If the distributor or channel member is buying a product, it does not sell, or the distributor suffers bad debts or any untoward thing happens, then these are risks which the channel member has to take and it is the function of channel member.
Financing – Most companies deal in advance payments or a credit limit. However, it is not necessary that the channel member is getting the payments from customers within that period of time. A company might take advance payment for product X but maybe that product sold after 40 days. So till 40 days, the financial burden of that product was on the channel member. Channel member should be ready for such financing.
Physical distribution of goods – Look at any channel driven company and you will find that there are different modes to reach the end customer. The company is responsible for delivering the product to channel member. But it is the function of channel members to ensure that the goods are distributed to end customer at the earliest and in optimum condition.
Negotiations – All negotiations with the end customers is done by channel members and the company does not take part. Once a product has been purchased by the channel member, it belongs to the channel member, and the sale of the same depends on the channel member as well.
Inventory management – The distributor or dealer has to match the inventory which is in demand in the market, and which is in his stock. He should not uselessly order material which is not being sold in the market because this will block the dealer’s inventory and finances.
Contacts – Maintaining contacts with existing customers as well establishing contacts with potential customers and sharing the same with the company is the work of channel dealers. Good companies also enable their dealers to maintain a CRM and use it for better customer retention.
Promotions -Promotions are not only done at the company level or brand level, but they are done quite a bit on the channel level as well. Whenever a dealer or distributor wants to create more brand awareness and let customers know about the buying point for the brand, at that time he uses marketing and promotions to attract customers to him. This is in fact an inherent function of channel members – to increase sales in their locality.
Information – Gathering information about potential customers, competition as well as tracking the environmental factors is a function of channel member. He is intricately involved in making marketing strategies for the company, because without information from the channel member, the company cannot move in the right direction
Channel levels consist of consumer marketing channels or the industrial marketing channels. A factor common among both channel levels is that both include the producer as well as the end customer.
Zero Level channel / Direct Marketing Channel – Consists of a manufacturer directly selling to the end consumer. This might mean door to door sales, direct mails or telemarketing. Dell online sales are a perfect example of zero level channel marketing.
Three level channels – Again observed in both the FMCG and the consumer durables industry, the three level channel can combine the roles of a distributor on top of a dealer and a retailer. The distributor stocks the most and spreads it to dealers who in turn give it to retailers.
In the three level channels, the example can be taken of Ice cream market. Because of the manufacturing levels required, Ice cream markets have C&F agents who stock the ice cream in refrigerated cold rooms. These ice creams are then transported to local distributors who also have refrigerated cold rooms. The distributors then transport to local dealers who will have 10-12 small freezers. And finally it is transported to the retailer who will have 1-2 freezer of each company.
2. Discuss the purpose and content of a marketing plan? Using examples, discuss the importance of the marketing environment to the marketing planning process.
A marketing plan is a business document outlining your marketing strategy and tactics. It´s often focused on a specific period of time (i.e. over the next 12 months) and covers a variety of marketing-related details, such as costs, goals, and action steps.
Purpose of a Marketing Plan
Many business owners create a marketing plan and then set it aside. However, your marketing plan is a road map providing you with direction toward reaching your business objectives. It needs to be referred to and assessed for results frequently.
While some small business owners include their marketing plan as part of their overall business plan, because marketing is crucial to success, having a comprehensive, detailed marketing plan on its own is recommended. If you don´t want to make a mini-plan as part of your business plan, you can attach your full marketing plan to the business plan as an appendix to the business plan.
The importance of planning
The preparation of marketing plans can be viewed as a welcome distraction from the everyday running of a business, providing the opportunity to put in some solid thinking about where the business needs to be going. Alternatively it may be seen as a necessary evil, a time-consuming process producing a report that rapidly dates and is soon forgotten.
‘Yet plan we must. The process of planning may be more important than the plans that emerge. The planning occasion requires managers to schedule “thinking time”. Managers must think about what has happened, what is happening, and what might happen. Managers must set goals and get agreement. The goals must be communicated to everyone. Progress towards the goals must be measured. A business firm has to make various marketing decisions. These decisions actually emerge from the complex interaction of a large number of persons carrying out diverse responsibilities in the marketing organisation. Being part and parcel of the over-all management, the marketing executives are deeply involved in the process of planning. Marketing planning defines the role and responsibilities of marketing executives in such a way as to achieve the goals of the firm.
It lays emphasis on the allocation of marketing resources in the best and most economical way. It gives an intelligent direction of marketing operations. Marketing planning involves the preparation of policies, programmes, budgets etc., in advance for carrying out the various activities and functions of marketing to attain the marketing goals. Planning precedes activity in any purposeful endeavour. Business firms naturally undertake a good deal of planning. Business firms have to master the environment and score over their competitors. Thus in the case of a business firm, planning is always strategic in character. A firm cannot afford to travel in a haphazard manner; it has to travel with the support of a route map.
3. Why is target marketing so important to the contemporary marketer, and what are the criteria for effective segmentation?
Market segmentation is an important basis of many successful marketing strategies. Carefully chosen segments allow tailoring the marketing mix to more individual customer needs. Thus, they help to invest marketing spending more effectively.
This article explains what market segmentation is, it discusses why it is important and what advantages it yields. Finally, the article provides a basic framework on how to apply market segmentation. Market segmentation is necessary because in most cases buyers of a product or a service are no homogenous group. Actually, every buyer has individual needs, preferences, resources and behaviours. Since it is virtually impossible to cater for every customer’s individual characteristics, marketers group customers to market segments by variables they have in common. These common characteristics allow developing a standardized marketing mix for all customers in this segment.
There are following criteria for an effective segmentation:
- Measurable and Obtainable:
The size, profile and other relevant characteristics of the segment must be measurable and obtainable in terms of data.
It has to be possible to determine the values of the variables used for segmentation with justifiable efforts. This is important especially for demographic and geographic variables. For an organisation with direct sales (without intermediaries), the own customer database could deliver valuable information on buying behaviour (frequency, volume, product groups, mode of payment etc).
The size and profit potential of a market segment have to be large enough to economically justify separate marketing activities for this segment. If a segment is small in size then the cost of marketing activities cannot be justified.
The segment has to be accessible and servable for the organisation. That means, the customer segments may be decided considering that they can be accessed through various target-group specific advertising media such as magazines or websites the target audience likes to use.
The segments should be substantial to generate required returns. Activities with small segments will give a biased result or negative results.
This means the extent to which the base is directly associated with the differences in needs and wants between the different segments. Given that the segmentation is essentially concerned with identifying groups with different needs and wants, it is vital that the segmentation base is meaningful and that different preferences or needs show clear variations in market behaviour and response to individually designed marketing mixes.
- Unique or Distinguishable or Differentiable:
The market segments have to be that diverse that they show different reactions to different marketing mixes. If not then there would have been no use to break them up in segments.
The segments must be appropriate to the organisation’s objectives and resources.
The segments must be stable so that its behaviour in the future can be predicted with a sufficient degree of confidence.
4. What is Product portfolio? Discuss the product line stretching strategy.
:- A product portfolio is the collection of all the products or services offered by a company. Product portfolio analysis can provide nuanced views on stock type, company growth prospects, profit margin drivers, income contributions, market leadership and operational risk.
This is essential for investors conducting equity research by investors or analysts supporting internal corporate financial planning. Mature companies often have diversified product portfolios. Internal product development and acquisitions contribute to portfolio size over time, and larger enterprises have the infrastructure to support the marketing of a broader offering. Geographic expansion can also augment a product portfolio, with products varying in popularity among cities or countries. Diversification tends to limit growth potential while reducing downside risk, so mature firms tend to exhibit less operational volatility. This reduces the amount of speculation in equity valuation. The Proctor & Gamble Company is an example of such a company, with 65 different, well-known personal and household goods brands including Bounty, Crest and Tide.
The various components of a portfolio also face different market dynamics and can contribute inconsistently to the bottom line. A firm´s market share can vary among the parts of its offering, with more dominant products generally requiring different strategies than high-growth portions of the portfolio that are managed to gain share. Shifting sales mix can have significant consequences for the bottom line when margins vary across the portfolio.
The product line length within a company keeps changing. Generally, there are three price bands which exists in any market – Lower priced products, middle priced products and premium products. One brand concentrates on one price brand.
But the larger brands have the deep pockets to start multiple product lines which can target multiple customer segments, premium or otherwise. Based on this target market, and the type of product lines that the organization wants to introduce, the organization takes part in product line stretching.
A product line consists of variants of the same type of product. So if Audi has a Q series of vehicle, it will have multiple products within the Q series but this is just one product line. Audi will have multiple such series and therefore multiple product lines.
P&G and HUL for example, are present in soaps, detergents, bathing soaps, and numerous other product lines wherein the target market is huge. And these brands keep observing new opportunities opening up. As the same product cannot target the complete market, the product line is extended which is known as product line length extension. This can happen by two ways – Product line stretching and Product line filling. This article mainly deals with product line stretching which is of three types
5. What is green marketing revolution? Discuss the companies using this concept for value creation.
Green marketing consists of marketing products and services based on environmental factors or awareness. Companies involved in green marketing make decisions relating to the entire process of the company´s products, such as methods of processing, packaging and distribution. Green marketing companies seek to go above and beyond traditional marketing by promoting environmental core values in the hope that consumers will associate these values with their company or brand. Engaging in these sustainable activities can lead to creating a new product line that caters to a new target market.
Green marketing is concept and terminology which is being used to preserve or protect our environment. Green marketing offers products and even services which are more environmentally preferable to other. It is true that now days the concept has attained a significant place in the society because it touches every human life. In this informative age where information travel in lightning speed people are now becoming aware with natural environment and surrounding business have also found an opportunity which they can explore. Some companies have already shown their concern in this regard. They have modified their behaviour to address the new demand. For example McDonalds they have sensed that public is shifting towards green living which has sent a clear signal that if they want their business to flourish then they have to more sensitive over environmental issues. Instead of ravaging the natural habitats of animals the retail giant works in close collaboration with PETA on systematically reforming its business practices to be more human and friendly to the environment in which they operates. It is not that every company have shown their inclination towards green issue just because of attaining market share but some businesses are even find that practicing green issues will make them more socially responsible and accountable. For example GE since 2006, the company has sold over 12 billion dollar of its eco imagination products including solar panels. DuPont is another company that has drawn the ire of green advocates for many years. They have drastically lowered emission of airborne carcinogen. DuPont has even appointed green peace head as an adviser to the board and company is successful enough to reduce the level of harmful gasses during 90 by 63%. Many economies around the globe have appreciated these efforts because they are trying hard enough to convert their economy into green economy.
6. What is an integrated marketing communications program? Outline the key steps in the planning of integrated marketing communications strategies.
:- Integrated Marketing Communication - Let us now understand what does integrated marketing communication mean?
Integrated marketing communication refers to integrating all the methods of brand promotion to promote a particular product or service among target customers. In integrated marketing communication, all aspects of marketing communication work together for increased sales and maximum cost effectiveness.
Let us go through various components of Integrated Marketing Communication:
The Foundation - As the name suggests, foundation stage involves detailed analysis of both the product as well as target market. It is essential for marketers to understand the brand, its offerings and end-users. You need to know the needs, attitudes and expectations of the target customers. Keep a close watch on competitor’s activities.
The Corporate Culture - The features of products and services ought to be in line with the work culture of the organization. Every organization has a vision and it’s important for the marketers to keep in mind the same before designing products and services. Let us understand it with the help of an example.
Organization A‘s vision is to promote green and clean world. Naturally its products need to be eco-friendly and biodegradable, in lines with the vision of the organization.
Brand Focus - Brand Focus represents the corporate identity of the brand.
Consumer Experience - Marketers need to focus on consumer experience which refers to what the customers feel about the product. A consumer is likely to pick up a product which has good packaging and looks attractive. Products need to meet and exceed customer expectations.
Communication Tools - Communication tools include various modes of promoting a particular brand such as advertising, direct selling, promoting through social media such as facebook, twitter, orkut and so on.
Promotional Tools - Brands are promoted through various promotional tools such as trade promotions, personal selling and so on. Organizations need to strengthen their relationship with customers and external clients.
Integration Tools - Organizations need to keep a regular track on customer feedbacks and reviews. You need to have specific software like customer relationship management (CRM) which helps in measuring the effectiveness of various integrated marketing communications tools.
Sales/Promotions - With hotels that have restaurants, it becomes easy to do gift certificate room/dinner stays in exchange for radio or TV airtime. Make sure that with any trades you decide to do, the amounts and rules are clear and understood by both parties, otherwise it can become an accounting nightmare. Radio and TV are a great way to reach the local public and build awareness, and it is also good for immediate promotions, such as short-term holiday packages, or last minute deals.
Marketing - The traditional marketing mix has evolved over time and changes from industry to industry. With hotels it has to do with maintaining a good relationship with your guests. Talk to them. Send them an e-newsletter every now and then. Send them a thank you promotion for a free breakfast or a discount at the spa on their next visit. Offer them cookies over the holidays and send them a greeting card. Don´t charge them for wi-fi or extra shampoo. Keeping things simple and creative should be your marketing motto.
Consistency - IMC´s success relies on the consistency of the campaign. You can´t have ad running with a new logo, while your press releases go out with the one you used five years ago. Make sure all your stationary, marketing materials, press kits, and website have the same feel. Your text should also flow in the same language that speaks to the guest. They should recognize your hotel by the first glance of an e-newsletter or an advertisement and understand the message clearly.
Measurability - As with any effective strategy, measuring results is crucial. Evaluate the campaign, and see what works, what could have been done better, or should not have been done at all. Calculate web hits, public relations impressions, advertising references, and newsletter statistics. You may be surprised with your findings or maybe not. But, if your campaign is well thought out, it will be successful in the long-term
7. Critically discuss the various stages of product life cycle. Your product is at maturity stage; discuss strategies to extend this stage. Use an example to justify.
The product life cycle has 4 very clearly defined stages, each with its own characteristics that mean different things for business that are trying to manage the life cycle of their particular products.
Introduction Stage – This stage of the cycle could be the most expensive for a company launching a new product. The size of the market for the product is small, which means sales are low, although they will be increasing. On the other hand, the cost of things like research and development, consumer testing, and the marketing needed to launch the product can be very high, especially if it’s a competitive sector.
Growth Stage – The growth stage is typically characterized by a strong growth in sales and profits, and because the company can start to benefit from economies of scale in production, the profit margins, as well as the overall amount of profit, will increase. This makes it possible for businesses to invest more money in the promotional activity to maximize the potential of this growth stage.
Maturity Stage – During the maturity stage, the product is established and the aim for the manufacturer is now to maintain the market share they have built up. This is probably the most competitive time for most products and businesses need to invest wisely in any marketing they undertake. They also need to consider any product modifications or improvements to the production process which might give them a competitive advantage.
Decline Stage – Eventually, the market for a product will start to shrink, and this is what’s known as the decline stage. This shrinkage could be due to the market becoming saturated (i.e. all the customers who will buy the product have already purchased it), or because the consumers are switching to a different type of product. While this decline may be inevitable, it may still be possible for companies to make some profit by switching to less-expensive production methods and cheaper markets.
The Maturity stage of the product life cycle presents manufacturers with a wide range of challenges. With sales reaching their peak and the market becoming saturated, it can be very difficult for companies to maintain their profits, let alone continue trying to increase them, especially in the face of what is usually fairly intense competition. During this stage, it is organizations that look for innovative ways to make their product more appealing to the consumer that will maintain, and perhaps even increase, their market share.
Many competitors characterize the maturity stage. With the large number of firms producing products, the competition for customers becomes quite intense, and profits decline. The strategy for firms during the maturity stage becomes one of survival, as many competitors will eventually withdraw from the market.
With many companies offering several models of the product, the number of products on the market becomes tremendous. The original company must continue differentiating their models so that the market is aware of the differences in the company´s products and the competitors´ products. The customers are going to ask why they should buy a particular company´s product; just because the product was the first on the market is not going to persuade the customers to continue buying the product. Quality, styling, and product features are a few of the means of differentiating the product from the competition.
During the maturity stage, the need to inform the public has long since passed. Now, the promotion strategy focus is on continuing the persuasion tactics started during the growth stage. The purpose of persuasion is to position the product to the market, which involves creating an image for a product. The image should not be an advertiser´s creation, but based on the reality of the product.
The differentiation methods of quality, styling, and features are excellent means of positioning a product. For example, a Chevrolet Corvette and Porsche Boxster are both sports cars, but consumers see the different positions of the cars. The company differentiates its products and uses promotion to create the different position image. Each company hopes that its position is preferred by the consumers.
With the intense competition, management keeps the price of the product to its lowest possible level. For example, the competition for entry-level personal computers has now shifted to offering the lowest price. All of the companies in a mature market must now watch costs carefully.
Every aspect from development through production through marketing is designed to offer the lowest cost possible. A cost and a price advantage over competitors in this stage are significant competitive advantages. Consumers are aware of prices and will reward the company with the lower price, all else being equal. The firm that does not have a significant cost advantage risks losing customers and going out of business.
The absence of a company´s product in a particular location may result in lost sales during the maturity period. Widespread distribution is essential. If the company´s product is not in a particular location, one or more of the competitors´ products are likely to be there. The firm cannot risk losing sales simply because their products were not available.
8. Why is pricing such a dynamic element of marketing? Some feel that “customer value-based pricing is the only way to set prices”. Do you agree with the statement, If yes, discuss how will you set the pricing? If No, discuss the alternative methods of pricing.
The Price is element of marketing mix, which traditionally, has operated as one of the major determinants of buyer choice. Moreover, Kotler (2009) found that the setting by company price should meet the perceived value proposition. Therefore the company does not set only a single price, but provide pricing strategy, which included geographical differences of markets, customer´s segmentation, purchase timing, delivery frequency, guarantees and warranties, service contracts, and others (Kotler et al, 2009). Thus, Kotler (2009) outlined that a company should provide price - adaptation strategies such as geographical pricing, price and discounts and allowances, promotional pricing and discriminatory pricing.
Some feel that “customer value-based pricing is the only way to set prices”.
Value-based price (also value optimized pricing) is a pricing strategy which sets prices primarily, but not exclusively, according to the perceived or estimated value of a product or service to the customer rather than according to the cost of the product or historical prices. Where it is successfully used, it will improve profitability through generating higher prices without impacting greatly on sales volumes.
The approach is most successful when products are sold based on emotions (fashion), in niche markets, in shortages (e.g. drinks at open air festival on a hot summer day) or for complementary products (e.g. printer cartridges, headsets for cell phones). Goods which are very intensely traded (e.g. oil and other commodities), or which are sold to highly sophisticated customers in large markets (e.g. automotive industry) are usually sold using cost-plus pricing.
Value-based pricing in its literal sense implies basing pricing on the product benefits perceived by the customer instead of on the exact cost of developing the product. For example, a painting may be priced as much more than the price of canvas and paints: the price in fact depends a lot on who the painter is. Painting prices also reflect factors such as age, cultural significance, and, most importantly, how much benefit the buyer is deriving. Owning an original Dali or Picasso painting elevates the self-esteem of the buyer and hence elevates the perceived benefits of ownership.
Good pricing strategy helps you determine the price point at which you can maximize profits on sales of your products or services. When setting prices, a business owner needs to consider a wide range of factors including production and distribution costs, competitor offerings, positioning strategies and the business’ target customer base.
While customers won’t purchase goods that are priced too high, your company won’t succeed if it prices goods too low to cover all of the business’ costs. Along with product, place and promotion, price can have a profound effect on the success of your small business.
Here are some of the various strategies
- Pricing at a Premium
With premium pricing, businesses set costs higher than their competitors. Premium pricing is often most effective in the early days of a product’s life cycle, and ideal for small businesses that sell unique goods.
Because customers need to perceive products as being worth the higher price tag, a business must work hard to create a value perception.
- Pricing for Market Penetration
Penetration strategies aim to attract buyers by offering lower prices on goods and services. While many new companies use this technique to draw attention away from their competition, penetration pricing does tend to result in an initial loss of income for the business.
- Economy Pricing
Used by a wide range of businesses including generic food suppliers and discount retailers, economy pricing aims to attract the most price-conscious of consumers. With this strategy, businesses minimize the costs associated with marketing and production in order to keep product prices down.
- Price Skimming
Designed to help businesses maximize sales on new products and services, price skimming involves setting rates high during the introductory phase. The company then lowers prices gradually as competitor goods appear on the market.
When it comes to globalizing beauty, no one does it better than L’Oréal. The company was founded in Paris over 100 years ago by a young chemist, Eugene Schueller, who sold his patented hair dyes to local hairdressers and salons. By the 1930s, Schueller had invented beauty products like suntan oil and the first mass-marketed shampoo. Today, the company has evolved into the world’s largest beauty and cosmetics company, with distribution in 130 countries, 23 global brands, and over €17.5 billion in sales. Much of the company’s international expansion and success is credited to Sir Lindsay Owen-Jones, who transformed L’Oréal from a small French business to an international cosmetics phenomenon with strategic vision and precise brand management. During his almost 20 years as CEO and chairman, Owen-Jones divested weak brands, invested heavily in product innovation, acquired ethnically diverse brands, and expanded into markets no one had dreamed of, including China, South America, and the former Soviet Union. His quest: to achieve diversity, “meet the needs of men and women around the globe, and make beauty products available to as many people as possible.” Today, L’Oréal focuses on its five areas of expertise: skin care, hair care, makeup, hair coloring, and perfume. Its brands fall into four different groups: (1) Consumer Products (52 percent of L’Oréal’s portfolio, including mass-marketed Maybelline and high-technology products sold at competitive prices through mass-market retailing chains), (2) Luxury Products (prestigious brands like Ralph Lauren perfume offered only in premium stores, department stores, or specialty stores), (3) Professional Products (brands such as Redken designed specifically for professional hair salons), and (4) Active (dermo-cosmetic products sold at pharmacies). L’Oréal believes precise target marketing—hitting the right audience with the right product at the right place—is crucial to its global success. Owen-Jones explained, “Each brand is positioned on a very precise [market] segment, which overlaps as little as possible with the others.” The company has built its portfolio primarily by purchasing local beauty companies all over the world, revamping them with strategic direction, and expanding the brand into new areas through its powerful marketing arm. For example, L’Oréal instantly became a player (with 20 percent market share) in the growing ethnic hair care industry when it purchased and merged the U.S. companies Soft Sheen Products in 1998 and Carson Products in 2000. L’Oréal believed the competition had overlooked this category because it was previously fragmented and misunderstood. SoftSheen-Carson now derives approximately 30 percent of its annual revenues from South Africa. L’Oréal also invests money and time in innovating at 14 research centers around the world, spending 3 percent of annual sales on R&D, more than one percentage point above the industry average. Understanding the unique beauty routines and needs of different cultures, countries, and consumers are critical to L’Oréal’s global success. Hair and skin greatly differ from one part of the world to another, so L’Oréal scientists study, consumers in laboratory bathrooms and in their own homes, sometimes achieving scientific beauty milestones. In Japan, for example, L’Oréal developed Wonderful mascara specially formulated to curl Asian woman’s eyelashes, which are usually short and straight. The result: within three months it had become Japan’s number-one selling mascara, and girls excitedly lined up in front of stores to buy it. L’Oréal continued to research the market and developed nail polish, blush, and other cosmetics aimed at this new generation of Asian girls. Well known for its 1973 advertising tagline—“Because I’m Worth It”—L’Oréal is now a leader in beauty products around the world. As Gilles Weil, L’Oréal’s head of luxury products, explained, “You have to be local and as strong as the best locals, but backed by an international image and strategy.”
QUESTION 1 Review L’Oréal’s brand portfolio. What role have target marketing, smart acquisitions, and R&D played in growing those brands?
:- L’Oreal’s brand portfolio is divided into four Divisions, which develop a specific vision for each consumption universe and distribution channel. The strength and diversity of each brand – whether international or regional in scope – enable the group to meet all beauty aspirations all over the world. L’Oréal today maintains an admirable “house of brands” strategy in which some 20 brands are used to span the relatively narrow area of cosmetics and skin care in the US. There is a high level of clarity, differentiation and leverage. The portfolio is first divided into four groupings, with little overlap in customers and outlets.
Out of the 20 L’Oreal brands, four are “consumer products” and are distributed through drug and discount stores, 13 are “luxury products” distributed through department and specialty stores, four are “professional products” used by hairstylists, and four are “active cosmetics” sold to dermatologists and other specialists. Within each grouping the brands have very distinct positioning.
Consider these four consumer product brands:
Maybelline New York (Maybe she’s born with it, maybe its Maybelline) is trendy, innovative and infused with New York energy.
L’Oreal Paris (Because you’re worth it) is affordable luxury with excellence around the Parisian beauty Claudia Schiffer.
Garnier (Take care) is inspired by natural ingredients and dermatological science.
Softsheen & Carson (My style, my way) is focused on women of color who are looking for confidence, individuality and flair.
All are highly differentiated with strong positions that connect to their audience. In addition, L’Oreal Paris is aggressive with branding innovations such as Pro-Retinal A or Silk & Shimmer Conditioning Technology and is giving them legs. They have a host of sub-brands and endorsed brands such as L’Oreal’s Age Perfect, Couleur Experte, and Feria.
Finally, the firm also generates descriptive umbrella brands such as Eye Studio, Instant Age, and “Can I help you?” the L’Oreal Paris’ community site. Each brand has a role and the portfolio as a whole has energy and coherence. Consider, in contrast, Shiseido, much more of a branded house, which spans a wide quality/price spectrum and struggles to resonate in segments targeted by L’Oreal, especially in the US and Europe. There is too little attention paid to the brand portfolio and how each brand needs a role and reason d’être. In part this is due to decentralized organizations that fail to coordinate brands and in part this is because portfolio strategy is simply neglected.
The company has built its portfolio primarily by purchasing local beauty companies all over the world, revamping them with strategic direction, and expanding the brand into new areas through its powerful marketing arm. For example, L’Oréal instantly became a player (with 20 percent market share) in the growing ethnic hair care industry when it purchased and merged the U.S. companies Soft Sheen Products in 1998 and Carson Products in 2000. L’Oréal believed the competition had overlooked this category because it was previously fragmented and misunderstood. Soft Sheen-Carson now derives approximately 30 percent of its annual revenues from South Africa. L’Oréal also invests money and time in innovating at 14 research centers around the world, spending 3 percent of annual sales on R&D, more than one percentage point above the industry average. Understanding the unique beauty routines and needs of different cultures, countries, and consumers is critical to L’Oréal’s global success. Hair and skin greatly differ from one part of the world to another, so L’Oréal scientists study consumers in laboratory bathrooms and in their own homes, sometimes achieving scientific beauty milestones. In Japan, for example, L’Oréal developed Wondercurl mascara specially formulated to curl Asian women’s eyelashes, which are usually short and straight. The result: within three months it had become Japan’s number-one selling mascara, and girls excitedly lined up in front of stores to buy it. L’Oréal continued to research the market and developed nail polish, blush, and other cosmetics aimed at this new generation of Asian girls. Well known for its 1973 advertising tagline—“Because I’m Worth It”—L’Oréal is now a leader in beauty products around the world. As Gilles Weil, L’Oréal’s head of luxury products, explained, “You have to be local and as strong as the best locals, but backed by an international image and strategy.”
- Review L’Oréal’s brand portfolio. What role have target marketing, smart acquisitions, and R&D played in growing those brands?
- Who are L’Oréal’s greatest competitors? Local, global, or both? Why?
- What has been the key to successful local product launches such as Maybelline’s Wondercurl in Japan?
- What’s next for L’Oréal on a global level? If you were CEO, how would you sustain the company’s global leadership?
QUESTION 2 Who are L’Oréal’s greatest competitors? Local, global, or both? Why?
Ans::- L’Oreal’s success is built on a strong foundation. The world´s largest beauty products company, it creates cosmetics, perfume, and hair and skin care items for the mass-market (its L’Oreal Paris and Maybelline brands), the luxury market (Lancôme), and for the retail and salon sectors (Red ken and Soft Sheen/Carson). L’Oreal, which owns Skin Cuticles, also conducts cosmetology and dermatology research. L’Oreal generates about two-thirds of sales outside Europe, and in 2015 China surpassed France as its second-biggest market, behind the United States. Target marketing has always played an important role in growing L´Oreal´s brand portfolio. For example, professional brands such as Redken, Matrix, and Kerastase are targeted at professionals. Similarly, L´Oreal Paris, Garnier, Maybelline are targeted at the users. The premium segment has been targeted with Biotherm, Yves Saint Laurent, and Gorgio Armani. Its smart acquisitions have been Paravision properties in 1994.To gain a foothold in the pharmaceutical field it acquired Synthélabo. In March 2006, L´Oreal´s acquired The Body Shop, a cosmetics company. In 2008, L´Oreal´s acquired the Le Club des Créateurs de Beauté. Also, in 2014 L´Oreal´s acquired Magic Holdings which is an important Chinese beauty brand. In 2014 it acquired NYX Cosmetics.L’Oreal also owns the UK-based natural cosmetics retailer The Body Shop International, which numbers some 2,500 stores in over 60 markets worldwide.
QUESTION 3 What has been the key to successful local product launches such as Maybelline’s Wondercurl in Japan?
:- In Japan, for example, L’Oréal developed Wonderful mascara specially formulated to curl Asian woman’s eyelashes, which are usually short and straight. The result: within three months it had become Japan’s number-one selling mascara, and girls excitedly lined up in front of stores to buy it. L’Oréal continued to research the market and developed nail polish, blush, and other cosmetics aimed at this new generation of Asian girls. Well known for its 1973 advertising tagline—“Because I’m Worth It”—L’Oréal is now a leader in beauty products around the world. As Gilles Weil, L’Oréal’s head of luxury products, explained, “You have to be local and as strong as the best locals, but backed by an international image and strategy.”
The key to successful local product launches such, as Maybelline´s Wonderful in Japan are that it created Geo cosmetics to study the needs, the world so that local habits and needs can be studied closely. In addition, L´Oreal has set up evaluation centres around the world these study the local needs, fashion, and habits and develop product meant for local population. The local teams change and modify the L’Oreal’s products to suit the local tastes and requirements.
Which of the following statements is correct?
- Marketing is the term used to refer only to the sales function within a firm
- Marketing managers usually don´t get involved in production or distribution decisions
- "Marketing is an activity that considers only the needs of the organization, not the needs of society as a whole"
- "Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large"
The term marketing refers to:
- New product concepts and improvements
- Advertising and promotion activities
- A philosophy that stresses customer value and satisfaction
- Planning sales campaigns
In the relationship marketing firms focus on__________ relationships with__________.
- Short term; customers and suppliers
- Long term; customers and suppliers
- Short term; customers
- Long term; customers
The Coca Cola organization is an official sponsor of the Olympics. The firm is engaging in:
- Place marketing
- Event marketing
- Person marketing
- Organization marketing
Which of the following is NOT an element of the marketing mix?
- Target market
"The term ""marketing mix"" describes: "
- A composite analysis of all environmental factors inside and outside the firm
- A series of business decisions that aid in selling a product
- The relationship between a firm´s marketing strengths and its business weaknesses
- A blending of four strategic elements to satisfy specific target markets
Diversification is best described as which of the following?
- Existing products in new markets
- Existing products in existing markets
- New products for new markets
- New products for existing markets
Market expansion is usually achieved by:
- More effective use of distribution
- More effective use of advertising
- By cutting prices
- All of the above are suitable tactics
A market with which of the following characteristics would generally be less competitive?
- High barriers to entry
- Lots of potential substitutes exist
- Strong bargaining power among buyers
- Strong bargaining power among suppliers
"Marketing decision makers in a firm must constantly monitor competitors´ activities-their products, prices, distribution, and promotional efforts-because”
- The competitors may be violating the law and can be reported to the authorities
- The actions of competitors may threaten the monopoly position of the firm in its industry
- The actions of competitors may create an oligopoly within an industry
- New product offerings by a competitor with the resulting competitive variations may require adjustments to one or more components of the firm´s marketing mix
"When looking at consumer income, marketers are most interested in"
- Discretionary income
- Deferred income
- Inflationary income
- Disposable income
Today´s marketers need---
- Neither creativity nor critical thinking skills
- Both creativity and critical thinking skills
- Critical thinking skills but not creativity
- Creativity but not critical thinking skills
Political campaigns are generally examples of---
- Cause marketing
- Organization marketing
- Event marketing
- Person marketing
"Newsletters, catalogues, and invitations to organization-sponsored events are most closely associated with the marketing mix activity of--- "
- Product development
"_____ is the collection and interpretation of information about forces, events, and relationships that may affect the organization."
- Environmental scanning
- Stakeholder analysis
- Market sampling
- Opportunity analysis
Assume you are in charge of the politically-mandated process of converting the economy of a developing African nation from state-controlled to market-driven business ventures. Your ability to control_____ will most likely determine the future success of the country and its government.
- The culture
- Competitive environment
Which of the following is typically NOT a result of recognizing the importance of ethnic groups by marketers?
- Use of an undifferentiated one-size-fits-all marketing strategy
- Different pricing strategies for different groups
- Variations in product offerings to suit the wants of a particular group
- Study of ethnic buying habits to isolate market segments
Early adopters of which opinion leaders are largely comprised of and tend to be--- &n