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Bringing Class to Mass with Plnitude

Channin Campbell
Samantha Chan
Sabrina Minaya
Erica Ryan
Rose San Juan
Itael Toibman

LOrals BACKGROUND

Founded in 1907 by French chemist, Eugene Schiller

World-wide presence (1995)


2000 products
500 brand names
In over 150 countries

LOrals Strategy :
Quality, innovation and geographic
expansion

LOrals BACKGROUND
QUICK FACTS

Sales of 53.4 billion French Francs ($10.9 billion US


Dollars) (1995)

Cosmetics represented 81% of revenues (1995)


Cosmetics included hair care and skincare lines

$300 million spent on research and 300 new patents


worldwide (1994)

LOral U.S.A.

LOral U.S.A. became a wholly owned subsidiary


(operating under the name Cosmair) (1994)

US sales - $1.5 billion (1995)

Acquired Maybelline, a leader in color cosmetics to


broaden participation in the mass market (1996)

Combined LOral Haircare Division and Cosmetics and


Fragrance Division to form the LOral Retail Division
headed by Joseph Campinell

LOrals MARKETING STRATEGIES


Trickle

Down and Fire Up

Revenue from mass market products fund R&D for next


generation products (high-end products)
Maintain premium pricing to reinforce quality and
performance
Concentrate

resources and support star product


to pull entire line

Follow

the Golden Rules of Advertising

Feature star product


Provide technological superiority
Depict an executive, up-to-date and assertive executive
woman

PLNITUDE by LOral

Launched the Plnitude brand in 1982, France

Introduced a single product initially, a general


purpose moisturizer

France advertising positioning:


high end, superior performance but accessible
class of the mass (class to mass)
Delays Signs of Aging

Strong performance in France 1982 1987

PLNITUDE by Loral
LOral delayed
introduction of
cleansers until it
established a concrete
position in the French
mass moisturizer
market

Share of French Mass Moisturizer


Market
LOral

Henkels
Diadermine

Nivea

19.6 %

13.0%

8.8%

PLNITUDE U.S.A. LAUNCH

Test launch in Atlanta & Dallas (1988)

US advertising positioning:
high end, superior performance but accessible
class of the mass (class to mass)
Reduces Signs of Aging

Introduced entire line (as developed in France)


nationwide after US test markets showed a 14%
share in the moisturizer

PLNITUDE U.S.A. Retail Presentation of Entire Line

14 SKUs introduced covering 3 categories


Basic moisturizers
Treatments moisturizers
cleansers

PLNITUDE U.S.A.
Advertising

resource allocation followed the


star products system

1989

Full Plnitude product line

1990

Action Liposomes

1991

Eye Defense Cream

1992-93

Hydra Renewal/Wrinkle Defense Crme


updated to Advanced

1994

Excell-A-3

1995

Revitalift Face

PLNITUDE U.S.A. Early Results


Strong

US performance hitting sales targets


1989 1995, but have failed to generate
profits the 8-9 years after it was first
introduced hitting a four-year sales plateau
1990

1995

Sales

$31.7MM

Approx. $63.4MM

Advertising and
promotion

$35.5MM

$38.3MM

Pre-tax loss

-$25.4MM

-$12.5MM

5C Framework
Company

LOral known as a luxury brand in the beauty industry


LOral known for its superior technological innovation
Plnitude brand very successful in France

Competitors

United States
Oil of Olay, Ponds, Nivea
Worldwide
Estee Lauder, Clinique, Christian Dior, Chanel

Context

Youth market cant afford LOrals premium prices

Consumer

Younger franchise
Working, successful and the career woman
Men

Collaborators

Department stores
Drug stores
Beauty salons

SWOT Analysis
Strengths
Innovative technology
LOral brand recognition
Product potential with Revitalift line
Mature skin market segment
Superior research & development
department
Experience in consumer cosmetic
products
Opportunities
Large US market
Opportunity to tap into younger
consumer segment
Many channels for LOral product
Revise pricing/marketing strategy to
increase consumer appeal
Opportunity to develop mature
market with Revitalift product

Weaknesses
No differentiation in daily
moisturizer/cleanser market
High advertising costs
Lack of profitability
Consumer behavior in US unknown
Unattractive product cover
No awareness in US market
Threats
Competition with Olays similar
product
Consumer loyalty to competitor
product
Expensive product image
Lack of acceptance from younger
market
Domestic products more widely
known

Problem Analysis
Will luxury companies in the next century, which
do not have the mass market base, have the
resources necessary to do the research to
compete?
I think the answer is no.
How LOrals Lindsay Owen-Jones, Chairman and CEO of LOral, saw the trickle
down and fire up philosophy.

LOrals unsuccessful attempt to bring the class to mass


strategy to the US skincare market resulted in a four-year
sales plateau. They were unable to market to the varying
skincare needs of US consumers, which may lead to more
years of unprofitability in the US and may delay the
introduction of the Plnitude brand globally and may even
hurt LOrals superior reputation, supported by its
technological innovation, in the skincare industry.

Problem Analysis

The main problem in the case is how to increase


profitability and sales, and how to improving its
position in the market in the United States for the
Plenitude line of products.
Are aspects of the strategy "too French" for the U.S
market?

When doing such do they try to establish the "class"


part of a value proposition by focusing more on their
moisturizers and cleansers?

Or do they continue with the promoting "Revitalift-Eye"


as a "star product" where they would put all money
and marketing support towards that one product?

Assumptions and Missing Information


Assumptions:
The

The

LOral

LOral

Plnitude product line has


been unprofitable since its
U.S. introduction in 1988.
is willing to consider
changing its premium pricing
strategy.

The

main problems with the


Plnitude brand are pricing
and packaging. That is
consumers perceive the line to
be too complicated, due to the
amount of information on the
packaging, and too expensive.

major issue in the Plnitude


case is branding and consumer
perception.
wants to continue
selling the Plnitude line in the
U.S.

Plnitudes

global success is
dependent upon its success in
the U.S. market.

LOral

is basing its U.S.


marketing strategy on its
French strategy, without
properly adjusting for cultural
differences.

Assumptions and Missing Information


(cont.)
Missing Information:
What do U.S. consumers look for in facial skin care
products?
Is technology an important factor in over-the-counter
cleaners and moisturizers?
Are American women as educated French women when it
comes to skin care?
How would U.S. consumers prefer to receive product
information if not on the packaging?
Sales figures for each of the products in the Plnitude line.
For example, what are the least popular products? Which
are the stars?
Consumer demographics (not just the five identified
benefit segments).

Strategic Alternatives
Alternative #1: Focus on differentiation and target niche market
Description

Advantages

Disadvantages

Differentiate LOral
by focusing on
innovations in
specialty products.

Continues LOral's
success on innovation

Lose potential market


in younger customers

Target niche market


who will value
innovations in skin
care. The stressed out
and age focused
groups

Keep premium pricing


strategy to earn more

Customers perceive
LOral brand for older
women or for women
with problems.

Use niche market to


build brand equity

Strategic Alternatives (cont.)


Alternative #2: Simplify product line
Description

Advantages

Disadvantages

Reduce the number of


SKU's offered to
consumers

May reduce confusion


among consumers who
do not know how to
purchase LOral
products

Eliminates consumers'
opportunity to make
choices

Some consumers may


be more willing to try
LOral

Strategic Alternatives (cont.)


Alternative #3: Simplify pricing structure
Description

Advantages

Disadvantages

Reduce the current


number of price points
reduce average price
for cleansers and
moisturizers

Simpler price structure


could make product line
easier to shop

Could alter perception


of LOral products as
less valuable

Enter competitive
pricing strategy

Could win over some


younger consumers
with lower prices

Lower prices may not


be competitive enough
against Pond's and Olay

Current structure is 2
price points for
cleansers, 3 for
moisturizers, and 3 for
treatment moisturizers

Consumers would be
more likely to try and
convert to LOral

Negatively affect
financial performance

Strategic Alternatives (cont.)


Alternative #4: Divide product line to target younger and older
users
Description

Advantages

Disadvantages

Target younger
customers with
cleansers and
moisturizers and older
women with the
specialty products

Larger potential market


if LOral markets to
younger and older
women

Financially challenging
to split marketing
resources

Offer different pricing


strategies for the two
product lines

Can gain brand equity


from all generations
Younger women will
consider staying loyal
to LOral products
when they're older

Strategic Alternatives (cont.)


Alternative #5: Differentiate brand by educating consumers
about skin care
Description

Advantages

Disadvantages

Educate American
consumers on how
French women take
care of skin

Create a value for


LOral brand because
LOral also teaches
consumers about skin
care

Financially costly to
educate women about
skin care

Target women who are


interested in skin care

Reduce confusion about


the product and use

Not addressing a
consumer problem or
concern, but trying to
create a problem to
solve

Abandon star program


of focusing advertising
on one product

Evaluation of Alternatives
Alternative #1: Focus on differentiation and target niche market

By making sure that the product is differentiated, it allows


LOral to stand out in a market saturated by competition.
The current issue to address includes improving Plnitude's
operations in the US as well as introducing a Revitalift-Eye
into existing product line.

Further, this alternative will capitalize on the strongest


strength that LOral has which is its brand name. One of
the likely consequences of this is the possibility of losing
customers not included in the targeted niche market, such
as the younger group.

Evaluation of Alternatives (cont.)


Alternative #2: Simplify product line

This alternative directly improves Plnitude's current operations


since the issues that were mentioned in the surveys included
people being confused about too many options.

The issue with simplifying is that it may reduce the amount of


choices people have when making a decision about the
products they have, but on the other hand it is an opportunity
to market to the segment that does not necessarily need all the
information to begin with and may be intimidated by too much.

With this alternative one thing to watch out for is not taking too
much information out so that everyone is confused.

Evaluation of Alternatives (cont.)


Alternative #3: Simplify pricing structure

Simplifying the price structure could potentially attract new


customers.

At the same time, it would also possibly hurt LOral


financially as some people might see it as a decline in value.

Evaluation of Alternatives (cont.)


Alternative #4: Divide product line to target younger and older
users

Dividing the product line is an alternative that is in a slightly


different direction than the others.While the first three
alternatives focused on simplifying, this alternative is
focused on specifying the product line to target younger
customers with cleansers and moisturizers, while at the
same time targeting advertisements of specialty products to
older women.

The opportunity lies in the ability to use LOral brand to


reach a larger potential market, however the challenge lies in
the fact that they dont have unlimited resources to spend on
marketing.

Evaluation of Alternatives (cont.)


Alternative #5: Differentiate brand by educating consumers
about skin care

LOral drives sales with product technology, but the


department-store-gone-self-serve is a challenge to their sales.
Therefore, LOral can stand out by educating consumers
about skin care.

Many of the consumers already know and appreciate LOral


to be a higher quality product, so providing education instead
of just product information they can promote use among the
younger generation who doesnt necessarily have the history
of the commercials or advertising.

Recommendation
Our recommendation is to use a combination of
Alternative 1 and Alternative 2:

We believe that the best approach is to


focus on product differentiation and
targeting niche markets, while at the same
time simplifying the product line.

Marketing Objective: Target Niche Market


1.

LOral should target women with beauty concerns


or issues, such as signs of aging or dry skin.

2.

The company should target women 30 and older


seeking a product to reduce a specific sign of aging
or a product to reduce signs of aging in general.
This strategy would focus on women 30 and over in the
previously identified Stressed Out and Age Focused
benefit segments.
Example: LOrals successful product, Revitalift, helps
consumers solve a specific beauty problem.

Marketing Strategy: Target Niche Market

Using one of LOrals greatest asset, its brand


name, we can increase awareness of the line by
sending out targeted messages to customers age
30 or over.

Specifically, targeting the ads to American women


so that the products arent seen as too French.
Possible suggestions include general slogans like,
Keep your skin hydrated during BBQ season! or
Avoid sun-spots from cheering for the Ravens from
the bleachers! to get women to identify with the
product and increase awareness.

Marketing Objective: Simplify Product Line

Plnitude sells more moisturizers than cleansers. More


specifically, Plnitude sells more treatment moisturizers
than daily moisturizers; and therefore, should focus its
product line around treatment moisturizers which capitalize
its greatest asset technology.
Technology is a greater asset in selling treatment moisturizers instead of
daily moisturizers. Many of its competitors were much stronger in the
daily segment.
In general, the moisturizers are more profitable than cleansers for
Plnitude in general.
The Plnitude Line is among the top 3 in market size and brand shares
for moisturizers.
Specifics shown in next slide

Further, they can simplify the product line by simplifying the


packaging so that its not as intimidating to women who do
not want or need too much information to make a decision.

Marketing Strategy: Simplify Product Line


Moisturizers - Market Size and Brand Shares (Dollar Basis - All Mass
Outlets)

1991

1992

1993

1994

1995

$309MM

$338MM

$375MM

$440MM

$471MM

Plnitude

11.7

13.6

14.1

13.8

14.0

Olay

38.3

36.1

32.3

29.7

28.2

Almay

5.4

6.0

5.6

4.4

4.6

Nivea

4.8

5.5

6.0

6.2

6.2

Ponds

5.0

4.6

9.1

13.9

15.1

1.0

3.8

5.7

5.4

7.0

6.5

5.7

4.8

5.2

Dollar Volume (Retail $)

Alpha-Hydrox
Neutrogena

Marketing Strategy: Simplify Product Line

1995 Dollar Shares (ACNielsen data)

Plnitude
Olay
Pond's
Alpha Hydrox
Nivea
Neutrogena
Revlon
Almay
Noxzema
Sea Breeze
Clean & Clear
$ Size Category (Retail)

Moisturizers

Cleansers

1995 Ad Spending3

14.0
28.2
15.1
5.4
6.2
5.2
4.3
4.6
$471MM

3.4
7.9
11.2
6.2
4.1
21.6
8.9
6.7
$328MM

$29.2MM
48.1MM
18.1MM
11.9MM
12.8MM
13.3MM

11.5MM

10.0MM

Moisturizer Units Sold


% Daily
1.
2.
3.
4.
5.
6.

Alpha-Hydrox
Plnitude
Pond's
Nivea
Neutrogena
Olay

11%
35%
51%
73%
78%
88%

% Treatment
89%
65%
49%
27%
22%
12%

Marketing Strategy: Simplify Product Line


Focus on its star products and profitable treatment
moisturizers.

Financial Implications

LOral is spending too much on advertising and promotion,


and not generating enough sales to turn a profit. If LOral
narrows its focus and simplifies its product line, marketing
costs would change significantly. Here is how these strategies
will affect marketing expenditures:
LOral spends $29.2MM on advertising its cleansers and moisturizers;
it could easily cut its spending by 20%* ($5.84MM) by simplifying its
product line and eliminating cleansers, for which it only has a 3.4 dollar
share in 1995, the lowest among all of its competitors. Those savings
alone would reduce the pre-tax loss (for 1995 the pre-tax loss was
12.5MM) by 50%.
We estimate that segmenting markets and focusing marketing efforts,
in addition to simplifying the product line, will result in additional cost
savings (for which we do not have solid numbers as the case is missing
financial data).
*This is an estimate based on our interpretation of the financial and case information
available.

Discussion Questions:
1.

Do you agree with the recommendation


provided?

2.

Are there any other strategic alternatives


you would have suggested?

3.

What are other issues or concerns LOral


should consider?