Case L'Oreal - 'Synergie and Belle Couleur'

Thèmes abordés

L'oreal, Strategic marketing, analysis, marketing-mix

Résumé du document

The company L'Oreal describes the story of a French family business which has become the world's number one cosmetics manufacturer. It is a multinational, which continues to remain the market leader by investing in research and development to offer innovative products and recovers its investment through the introduction of new products on the market. L'Oreal uses modern marketing techniques, which it uses to diversify its products, to make profits and increase its market share.

Problem Statement
In the market of cosmetics and toiletries, L'Oreal has to decide whether to introduce the Synergie skin care line and Belle Couleur permanent hair colorants. Both products had successfully been introduced in France. The real question for L'Oreal is whether or not to introduce one new product line or two new product lines. Regardless of the decision taken, the introduction of the new product(s) should not affect the sales, and market share of the current product lines of L'Oreal.

Performance analysis
In 1992, the L'Oreal Group was the largest cosmetics manufacturer in the world. Its sales, in 1992, were $6.8 billion and net profits were 417 million dollars. France, in which L'Oreal is headquartered (Paris), contributed 24 percent of total worldwide sales. Due to the belief that innovation was a critical success factor, L'Oreal invested heavily in research and development. The company recovered its investment through global introduction of its new products. L'Oreal aims to introduce one or two new products each year as brand life cycles for cosmetics could be very short.

Extraits

[...] Because we have seen previously that women prefer to know the content of their product before buying, because of allergic reactions that may develop. Regarding public relations, we find advertisements in women's magazines that match our target (young working women) as Glamour, Cosmopolitan and so on, customers will find information on the content of the product and a coupon. An advertisement will be made with the Dutch muse: Dotzen Kroes, the spot should be simple and will be broadcast during prime time. In our communication, it will be very important to emphasize the natural ingredients of our product. [...]

[...] The percentage that would certainly buy our product is also high. Because of the high advertising expenditures which are needed for suitable introduction it is important to target the right segment with our advertising. We should target the potential loyal customers at the age of 25 -34. Their brand loyalty at that age is low medium so it is important for L'Oreal to focus on them and to make them loyal customers as soon as possible. The 4Ps analysis Take care of yourself, with Garnier. [...]

[...] It appears then as being quite limited market, all the more that women's frequency for colouring their hair is quite low: almost the half of Dutch women did it every 2 or 3 months. This market is dominated by permanent hair colouring products, which represent almost 75% of total sales. However, it is important to notice a new trend driven by fashion motivations which is using semi permanent colorants. This submarket is becoming more and more interesting since it represents about 1/4 of sales but still increase. In the Dutch market, only 4 brands represented 80% of the total hair colouring market. [...]

[...] Among these women used permanent colorant but more and more of them turned towards semi permanent hair colouring products. However, if they are used to colour their hair, concerning the frequency of use, we can say that Dutch women do not do it quite often. Indeed, L'Oreal's research shows us that almost 1 Dutch woman out of 2 tends to space her hair colouring from 2 to 3 months whereas only a quarter of them do it every 6 weeks at least. [...]

[...] But the threat of product substitution exists; because of the emergence of alternative technologies and because of the tendency of natural or organic products. The threat can become important. Threat of potential entrants To penetrate the market, as we saw earlier, it is necessary to invest in the advertising budget, so it involves a capital investment. This is necessary for new entrants. The entrance fee is relatively important because it is necessary to have the skill and method, but also meet the standards of health in Europe. [...]