L’Oreal Is a world famous French company that engages In the production and marketing of a range of beauty products sold under well-known brands. Their brands are generally categorized by their target markers, such as the mass, professional, luxury and active cosmetics markets, and Just some of their famous brands include L’Oreal Paris, Grainier and Unnamable. While the case mentions L’Oreal earlier struggles in China and India, it explains how L’Oreal has worked hard to combat these issues and are now running very successful and profitable in these countries.
However, the case highlights that Brazil is an Important market for the global cosmetic giants; that on per-capita, Brazilian women spend more on beauty products than their counterparts elsewhere and that overall, Brazil is the third-largest global cosmetics market, after the united States and Japan. No wonder why cosmetic giants such as L’Oreal are moving quickly to take advantage of this opportunity. After some further background research of the external environment, we found reasons attributing to Brazier’s increase in booming market.
Approximately 40 million Brazilian have Joined the middle class In the past decade, with one news source eying that “as Brazilian get richer, so do their tastes. That is certainly true for their consumption of beauty products. ” In addition to more and more Brazilian consumers ascending to the middle class and higher buying power, the growth of the country’s Infrastructure also Is helping Brazier’s economy. For example, the government has invested $3 billion in its airports ahead of the 2016 Olympic Games in ROI De Jeannie.
This will not only streamline product distribution, but also provide more opportunity for sales of cosmetics at duty-free shops. New shopping malls have also sprouted, tit 16 openings In 2010, 25 In 2011, and 30 planned this year. In contrast, the European market is suffering from weak consumer spending. The European debt crisis added more downward pressure to the growth prospects within the cosmetics industry. The European economy grew by 1. 6% in 2011 and estimates show that It grew Just by 0. 6% In 2012.
In addition, the European market has witnessed high rates of unemployment. L’Oreal recorded a sales increase of only 2. 3% in Western Europe in the first quarter of FYI 2012 as compared to 14. 1% in ‘OFF crisis and global economic slowdown. Therefore, any further deterioration in Rupee’s economic condition be very harmful to the company. According to the ‘lipstick effect theory, when facing an economic crisis consumers will be more willing to buy less costly luxury goods. This is particularly problematic for companies that solely sell luxury products.
Moreover, growth in disposable income generates incremental increases in per capita consumption of beauty and personal care items – this is the current situation in Brazil. Therefore, as an unsaturated market, with high demand, there is a huge potential for growth in Brazil. Since the case has been written, L’Oreal has reported in its first quarter of 2013 sales that they started the year with an increase in sales of +11. 8% like-for-like and +5. 8% based on reported figures. Additionally, L’Oreal reports that Brazil is accelerating with continuous strong growth, driven by market share gains in hair care.
So this all sounds very promising for L’Oreal, however, there are a few issues that are present in their goal to build their presence in Brazil, which will now be discussed by Grace and Kiwi. 2) Problem / Issue evidence Brazil (Culture and segmentation) Fact: L’Oreal has more than 50% of sales come from makeup and skincare products and these categories represented only 15% of sales in Brazier’s market. This shows that Brazilian women are willing to spend more on hair care beauty products more than make-up and skin care. However, the focus has been on hair-care products over the decades.
Traditionally, Brazilian women buy their cosmetics from sales representatives who work door-to-door. As a result, to build its presence in makeup and skin care, L’Oreal has hired personal beauty advisors to offer shoppers in store consultation to build its presence in makeup and skin care. ) Main areas of concern (the applied theories) Segmentation theory and Local consumer culture theory (www& www) Brazilian consumer’s culture has more preference in hair care product and accustomed to purchase cosmetics via sales representatives who work door-to-door instead of purchase in retail stores.
However, in order to develop the product market, L’Oreal has adopt to learn what the marketplace wants that developed a plan to extend its cosmetics market by building presence in makeup and skin care. The sales tactics is to hire personal beauty advisors to offer shoppers in -store consultations about Amiability and other brands; the concept is “The more the market develops, the less important direct sales will be. ” This has strongly refers to ‘Product Orientation’ where L’Oreal is focusing on getting people to buy things they are looking for through professional sales person’s explanations in consultations.
Nonetheless, L’Oreal has neglected the importance of consumer focus, because having a great product does not mean it is what customers want. Making a great product can be expensive, but customers might not see the same value as they get from competitors if it is having a n approach to extend its product line, this segmentation is inadequate in Brazil. The negligence of consumer focus has highlighted the needs for L’Oreal to also concentrate on cryptographic and behavior segmentations which will represents as a multi-segmentation in terms of foreign consumer culture positioning.
However, L’Oreal has neglected the foreign consumer culture positioning strategy in terms of Brazilian consumer’s attitudes, values and lifestyles, which have missed a chance to convey local shoppers to linger around the products. Hence, the overall problem of L’Oreal was the negligence of adapting the local culture-specific needs of different national markets and that can significantly influence on consumer’s consumption and purchasing. 4) Alternatives courses of action (Define each of them) The first suggested action is a consumer focus strategy, which we called Market oriented strategy.
It focuses first on discovering what customers want and make products to satisfy their needs, the purpose of business is to create satisfied customers. However, the cryptographic and behavior segmentation are suggested to be form as multi-segmentation with the gender segmentation that L’Oreal has errantly applied. Cryptographic Segmentation is where involves grouping people in terms of their attitude, values and lifestyle habits of customers, applying this segmentation helps L’Oreal to decide their marketing strategy so they can accurately predict the response from consumers.
Behavior segmentation is to focuses on whether people buy and use a product, as well as how often and how much they use or consume. Due to the global consumer cultures are emerging, these segmentations are to support where the company can understand the specific mode personally or socially and learn the tendency of a country, in order for the product to be accepted successfully. This strategy recommends L’Oreal to conduct marketing research in order to meet Brazilian consumer’s needs and expectation of brand. Hence this action can stimulate a higher satisfaction and loyalty rate for a higher sales volume.
While the company conducts the culture research of Brazilian women’s purchase habits, lifestyle, it is suggested to apply Foreign Consumer Culture Positioning as to associate itself to the brand users, use occasions, or production origins with Brazil ND Brazil culture, this positioning strategy is used in conjunction with cryptographic and behavior segmentations, where it helps L’Oreal to have a better manage in detecting Brazilian’ needs before the general market is aware of them. Extend Product oriented strategy Product oriented is the strategy where L’Oreal currently applied in Brazil.
It focuses on the product itself rather than on the consumer’s need. Over the decades, L’Oreal was focusing on building its presence in makeup and skin care with offering friendly service rather than hair-care goods where Brazilian women have spent more over the time. However, their adoption towards product orientation has present L’Oreal itself with well-trained sales people for shoppers in-store consultation, where all the salesperson have well knowledge of products and provide the best service and advices to clients.
However it is suggested to L’Oreal to continually adapt this current plan with develop the makeup, skin care product line and keep on expending the product line of hair-care goods. The second suggestion of this strategy is to stronger this approach with the expansion of gender segmentation towards demographic factors like age, gender, income and social class.. Etc. This type of segmentation helps the business to easily categorize the needs and wants of the consumers on the basis of demographic factors.
Therefore instead of only focusing on gender, it is recommended to L’Oreal to also focus on local’s income, so it can easily establish a reasonable price for consumers on the basis of their income level or further demographic components that can build a higher sales volume and satisfaction proportion. 5) Evaluation of alternatives – Advantages The advantage of market oriented is to improve sales through consumer satisfaction, loyalty and retention.
The feedback is one of the benefits of this strategy, where the company can adjust its marketing or sales approach regarding to the responses then achieve consumer’s expectation, as well as building customer relationship in terms of higher loyalty rates. The regular market research of consumer culture, lifestyle, fashion trends and purchase habits helps a company to follow up the updates with upgrading products and advanced technology. On the other hand, Product orientation is most effective when customers want the latest technologies and most advanced product features.
More importantly, it works best when you can actually develop a product that is superior to competitors. The more in-demand the superior benefits the more capable the company are of selling them. Market orientated Satisfy 0 loyalty 0 retention 0 improve sales Product oriented Effectiveness of customer feedback supports for future improvement Superior product quality and service Customer relationship for higher loyalty and retention Competitive advantage: Differentiation Follow up the trends for staying as the top of the competitive market Beneficial when the demand of superior benefits are strong
Disadvantages The potential disadvantages of market orientation strategy are constant change, investment in research and less product differentiation. Constant change is where the strategy requires a business to keep up with the changing demands of their customers that it will needs to abandon the product or service for which it has been spent much time and money developed.
Investment in research is where the strategy requires a heavy investment in market research Just so the company can understand and anticipate the changing needs of customers, some small companies doesn’t have n-house expertise, so it will have to hire the services of an independent market research firm while this might pay in the long run. Lastly, less product differentiation is due to the more time spending on customer interaction and research can detract form fine-tuning the product features, and it is also where the product orientated company take advantage of in the market.
However, the big limitation of a product process. Just because a company has a great product doesn’t mean it is what customers want. Making a great product can be expensive and the customers might to see the same value they get from competitors if you have a higher price point. Constant change of needs Consideration of production process Heavy investment in research Great product may be expensive, customers might not see it Less product differentiation If company does not develop a brand with a benefits message or clear image, it might be limited as to what you can sell. Narrow Branding) 6) Selection of a course of action 0 Market oriented strategy The selection of course of action is market oriented strategy by meeting customers’ needs and wants for increasing the sales by using market oriented strategy as because product oriented has to wait customers aware the products instead of pushing product to customers which is not sufficient in this competitive marketplace.
Reason of selection In this case, L’Oreal has missed the cryptographic and behavioral segmentation; in terms of customer purchase behavior, usage of product and lifestyle that has caused a great loss of customer satisfaction and re-purchase intention, as well as the negligence towards the Foreign Consumer Culture Positioning can be meaning by placing the company itself with a weak competitive advantage in the local market.
Therefore, by applying the product oriented strategy is not recommended to L’Oreal for Brazil cosmetic market. Moreover, the concentration towards cryptographic and behavioral of consumers can support companies to provide suitable marketing strategies and adoptable products to Brazil. For example, in order to satisfy Brazilian’ culture and desire, L’Oreal has to do the market research first.
After understanding their needs and wants of products as well as investigation of their purchase habits and attitudes, L’Oreal can provide suitable strategies accordingly to he certain market, such as hired some sales representative to sell product through door-to-door; put more effort to certain product promotions or service. If the market research and customer feedback are well developed, L’Oreal can create a superior experience for Brazilian. Likewise, L’Oreal is a successful cosmetics company in the world that has a competitive advantage for supporting marketing research and decisions. ) Plans for implementing the course of action (follow up with your idea when you were still awake last night or whatever that you think is creative and helpful for this art and finalize this part PIZZA) Transform corporate culture to Market Oriented culture actions with the most efficient and effective means available, thereby maintaining a high level of firm performance (Nearer & Slater 1990). In this case, L’Oreal neglected Brazilian’ culture which is hard to attract them to consume.
Therefore, by using the cryptographic and behavioral segmentation with market orientation strategy is to adopt particular marketing decisions based on Brazilian’ culture (norms, values, artifacts), then it’s easier to attract and gain Brazilian’ interest than before. Finally maintain company performance and create higher level of customer value. Customer Relationship Management focus Fashion trend is changing so rapidly apparel retailers are trying to understand and respond quickly to changing customer needs.
Provide customer relationship management for customers’ give feedback 8) Identification of possible follow- up problems (Future possible threats) As the fashion industry is renowned to be an ever changing industry, this means that consumers’ changing purchase attitudes and beliefs and trends would affect L’Oreal . Thus, L’Oreal will need to continuously have regular update of the consumer market research, in order to follow up the newest information of their markets needs and ants.
Furthermore, as Brazil is an emerging middle class that has shown great, promising growth over the past decade, L’Oreal also needs to consider that Brazilian economy is becoming richer; and it can be assumed that an increasing number of consumers will have more access to technology such as televisions and TV, computers and internet, and thus their marketing channels should reflect this change, to become more sophisticated and modern. It is important that L’Oreal stays on top of these trends such as these so they remain successful in their marketing efforts and build market share in Brazil.
