Loreal in China: Strategies for the Yue Sai Brand
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Loreal in China: Strategies for the Yue Sai Brand
- 1. L'ORÉAL IN CHINA: MARKETING STRATEGIES FOR YUE SAI’S TURNAROUND GROUP D7 AISHWARYA USGAONKAR ALANKRITA MISHRA JOSHUA DESOUZA SHOBHINI RAI SHUBHAM GHOSH ANKIT SEN
- 2. OVERVIEW OF CHINESE MARKETS CULTURAL AND SOCIAL IMPACTS ON CONSUME R BEHAVIOR GENERA- TIONAL ACCEPT- ANCE PARADOX HIGHER CONSUME R FOCUS ON SKINCARE THAN MAKEUP SIGNIFI- CANCE OF NEED RECOGN- ITION IMPACT OF DISTRI- BUTION CHANNELS A MYRIAD OF MARKET PLAYERS – MULTINATIO -NALS AND LOCAL BRANDS A HIGH PROSPECTIV E, RAPID GROWING ECONOMIC MARKET HIGH INVOLV- EMENT IN DECISION MAKING PROCESS
- 4. Brand Positioning: Lifestyle or Luxury or Affordable Uncertain Business Model and Ineffective Target Markets Blemishing L'Oréal's reputation for successfully acquiring and integrating brands Reduced Visibility and Exposure of the Brand Decisions pertaining to Celebrity Endorsements and New distribution channels Lack of interest and motivation among the employees in L'Oréal CRITICAL ISSUES AND CHALLEN- GES
- 5. Strategic •A need to associate L'Oréal with Yue Sai in order to increase visibility and exposure of the brand (Brand Conditioning) •Exhibit 15 shows an increase in brand awareness of L'Oréal at about 62% (2009) while about 20% (decrease from 25% in 2007) for Yue Sai. Marketing Mix •Incorporating the values of Traditional Chinese Medicine (TCM) in their promotions and advertisements. (Functional Appeal) •More brand promotion through Weibo, WeChat & Yuoku. •Age segmentation in celebrity endorsement. (Emotional Appeal) Other Solutions •Internally strengthening and motivating employees to inculcate a sense of belongingness to the brand Yue Sai. •A ‘push strategy’ through incentives given to beauty assistants at the various departmental stores. Better deals with distributors. •Exploring new markets like Men’s skincare products. OVERVIEW
- 6. Brand Positioning: LPD yet addition of value proposition through amalgamation of ideas like ‘meant for the modern women’ yet ‘preserving the national heritage’ Business Model: While positioning Yue Sai in LPD, L'Oréal must associate its name with the brand in order to increase customer acceptance, perception and conditioning.
- 7. Yue Sai already has an extensive product line to cater to skincare, makeup and anti-aging segments. Product line extension not recommended due to the already existing varieties in their product range However, association with the brand ‘L'Oréal’ highly recommended Considering the positioning of Yue Sai in LPD, the prices should be higher than the L'Oréal Paris product line. The actual decline in the sales volume is resulting in low sales revenue growth Closely related to the pricing of the products, distribution of Yue Sai’s product line would play a big role in its resurgence as a premium brand. High focus on Tier I cities due to the high disposable incomes. Age specific differentiation in celebrity endorsements. Incorporate the values of TCM in the advertisements. Better deals with the distributors to increase visibility of the brand in the departmental stores. Wider penetration by promotion through social networks like Weibo Marketing Mix Solutions PRODUCT PRICE PLACE PROMOTION
- 8. THANK YOU
- 9. REFERENCES • https://www.youtube.com/watch?v=52UOsVLg8Aw • http://cosmeticschinaagency.com/wp- content/uploads/2014/10/LOreal-pub.jpg • http://www.beautologies.net/wp- content/uploads/2015/06/loreal-cosmetics-7.jpg • http://www.federicorestrepo.com/wp- content/uploads/2015/11/Chcedo.makeup.ideas1_.jpg • Loreal in China: Marketing Strategies to turnaround luxury cosmetic brand Yue Sai, Yang H. et. al., INSEAD Case Studies.
Notes de l'éditeur
- China is a rapid growing economy, 2nd largest in terms of GDP (Soon to surpass United States of America). With a rapid increase in disposable incomes of the Chinese population, there is a surge of demand for premium beauty and skincare products. Due to the high disposable incomes of the population, Chinese market was the perfect battleground for global cosmetic brands like P&G, Unilever, Shiseido and L’Oreal and growing Local brands such as Shanghai Jahwa and Jala. In a 18 billion Euro market, MNCs accounted for 40% of the total share. Also, the local brands enjoyed an upper hand in a wider distribution network – the products were available both in the departmental stores as well as smaller cosmetic stores. Sales based commissions were given to the departmental stores in addition to rent. Mass market brands employed specialized beauty assistants to promote their brands. Recent years had also seen a rise in internet based promotions. As early as 1992, Brands like Yue Sai focussed more on educating the masses about the benefits of beauty products. In this way they tried to increase their significance amongst the population. Yue Sai banked on the ‘Need Recognition’ of the Chinese consumers and in a way promoted their product awareness amongst the population. Chinese women found use of makeup as redundant. Hence only 10-15% of the products sold in Chinese markets were catering to this segment; remaining focussed more on skincare. Chinese consumer markets had two different generational segmentation. The young adult population were more receptive towards the use of cosmetic products. However, this difference of thought was limited to a small age gap, i.e. around 10 years or simply not digressing from the heritage, cultures and values with which they were raised. But the scenario was slowing changing. Cultural implications on consumer’s likes and dislikes were gradually taking a centre stage. Impact of the use of Traditional Chinese Medicines (TCM) on the beauty products was increasing. On the other hand, factors such as increasing pollution in the rapidly urbanizing economy had impact on the demand for more westernized beauty products. In the 1990s and 2000s, there was a surge in the demand for more westernized beauty products. Consumers in the Chinese markets were cautious buyers, especially when it came to buying beauty products. A common notion back in the 1990s was the perceived risk of the products (harmful effects). Hence a lot of decision making process was involved before buying a beauty product, considering the perceived risks and also mostly to avoid Cognitive dissonance.
- With various competitive players in the Chinese markets, L'Oréal still managed to be a top player in the luxury segment of the cosmetics market. Yue Sai, on the other hand, was once a premium brand, focussing and educating the large consumer masses on the benefits of skincare products. Yet, even after enjoying an initial customer acceptance and loyalty, over the years, due to a series of faulty marketing strategies, lost the loyalty it had initially received from the consumers. This eventually led to its takeover by initially COTY, and later on, by L'Oréal. Another reason for the decline in the market share of Yue Sai was the infiltration of other local brands and multinational firms who were functionally and emotionally appeal to the acceptance of their respective products through efficient marketing strategies.
- Yue Sai, once acquired by L'Oréal, had been put into the Consumer Product Division (CPD) in 2004. Later on in 2006, on account of poor sales performance, was shifted to the Luxury Product Division (LPD) resulting in lower quantity of goods sold maintaining a marginal increase in revenue on a year on year basis. The constant shifting of the target markets and positioning of the brand within the CPD, LPD and TCM (Traditional Chinese Medicine) markets led to an ineffective brand perception by the consumers across various categories which eventually did not profit much to L'Oréal. L'Oréal which was traditionally known for acquiring multiple brand in similar industry and integrating their goals and objectives to its own goals successfully acquired Yue Sai with similar intentions, however, in this case it failed to identify the right strategies to synchronise both their value propositions which was a blemish on the reputation of L'Oréal. On account of the erratic strategies and ineffective segmentation, targeting and positioning of the brand Yue Sai, consumer perception about the brand gradually declined, further resulting in declining interest in the brand. Also, this led to the relegation of the products of Yue Sai to the background in various departmental stores, thereby further reducing its visibility. A major dilemma faced by the strategists at L'Oréal was whether to continue with the same celebrity that they had hired over the years or incorporate other celebrities for their brand promotion. Recent trends had shown that the impact of celebrity endorsements in other Chinese products was overwhelming as the consumers identified the value added of the products more when endorsed by them. Internally, L'Oréal faced a challenge amongst its employees involved in branding and promoting the brand Yue Sai, as it was an old brand. Employees were focussing more on other brands marketed by L'Oréal and there was an urgent need for encouragement and motivation to promote Yue Sai as a brand with high value proposition.
- As the term suggests, spontaneous recall refers to the respondents identifying the brand name spontaneously as and when the product is mentioned to the consumer. According to the exhibit 15, spontaneous brand awareness is 65% in the case of L'Oréal and 20% in the case of Yue Sai in 2010.So if Yue Sai is repositioned as L’Oreal Yue Sai, we believe it sales would increase dramatically. As stated in the case ,Yue Sai spent 80% of its communication budget on skincare and only 20% of on make-up. Since Chinese consumers were already well aware and focused more on the skincare products, the company could utilize its financial resources focussing more on the make up products. Since Chinese men were more open to skincare products, L'Oréal Yue Sai could target this customer segment.