1. Describe the Product Portfolio of L'Oreal
The challenge at L'Oreal was to leverage its position and innovation capabilities to transfer the Plenitude product line to the United States market and achieve both bottom and top line growth. In 1988, the L'Oreal 'Plenitude' line was launched in the U.S. market consisting of a 14 SKU (Stock keeping units) line-up that was sub-divided under cleansers and moisturizers (both daily and treatment). By early 1995, the line had extended to 19 separate products. Each segment was further categorised according to criteria such as skin type and time of usage. The packaging of each product was captivating and informative and there was a very unique purpose for the information provided on the packaging as the strategy of L'Oreal was to push such products in retail outlets without dedicated sales staff which entailed that the consumer was to be educated via instructional packaging.
To give a brief overview of the company, it was founded in 1907, in Clichy, France, by the chemist Eugene Schueller to provide advanced hair care products for customers of French hairdressers. Under the guidance and control of Schueller's family the company had evolved to provide cosmetic, skin and hair care products with the principle strategy of 'quality, innovation and geographic expansion'. Later the holding company 'Gesparal' and Nestle became major shareholders of the company which provided deep-pockets for it's innovation philosophy and geographic expansion plan. Within the context of L'Oreal, Plenitude existed to target consumers of skincare products via the mass market retail channels. Other ranges focused on hair care and 'Lancome' for cosmetic markets.
The company's collaboration with channel partners was vital for the products distribution across markets. Relationships were essential with retail partners that ranged from high-class department stores (e.g. Les Galeries Lafayette) to small boutique hair and beauty salons which it's Redken, Professionelle and Salon Classics ranges targeted. In the U.S. this extended to operators such as K-mart and Wal-Mart. The branding and communications of the product portfolio was also a critical success factor at L'Oreal and cooperation with agencies including 'Publicis' was imperative to convey the message of each sub-brand within markets. Other essential collaborators in the launch and maintenance of its product portfolio included market research agencies like 'AC Nielsen' that tracked both quantitative and qualitative aspects of target markets (especially in the United States). Another form of collaborator included its U.S. licensee, Cosmair, which marketed its salon based product lines.
In order to fully describe the company's product portfolio it is also necessary to understand the consumers of such products and the benefits which were derived or needs fulfilled. However, distinguishing such factors in light of both French and American markets is perhaps a key component of the problem that existed at L'Oreal. The needs that each product fulfilled were beyond basic physiological needs and extended to 'belonging' and 'esteem' factors which contributed to an individual's sense of intimacy, self-worth and need for respect from others (e.g. peer's, loved ones etc.).This can also be related to the reasoning behind the companies advertising campaigns that launched a call to action entitled 'because you're worth it'. The nature of such products transcended functional values and the emotional attachment that consumers felt was also important to distinguish and create 'star' products. This is alluded to in the 'Customer Value Hierarchy' which identifies core, basic, expect and augmented product values. In the case of L'Oreal, the Plenitude line is clearly competing on an augmented level which attempts to exceed customer's expectations through high quality and innovation.
Within the context of the U.S. industry, the Plenitude range was positioned within a highly competitive sector that was dominated by large operators such as Proctor & Gamble and Ponds (Exhibit 11 and 12 highlights the various players in both the moisturizing and cleansing sectors in a graphical BCG and depicts the amount of growth with volume; from this analysis the leaders in moisturizing and cleansing are 'Olay' and 'Noxzema' respectively). Another feature of the industry which is pertinent to describe is the industry point of view regarding the products which they sell. The former CEO of Revlon Inc., Charles Revson, alluded to this sentiment with the quote – "In the factory, we make cosmetics. In the store, we sell hope" which indicates the high-level of consumer need which the industry clearly understands and is appealing to.
2. What explains the lack of success of Plenitude in the U.S.? How is this different from the situation in France?
Both markets are comprised of varying demographic and cultural differences. In the U.S., the market is considerably less informed about the use of L'Oreal's product line whereas the French population are more sophisticated regarding the use of these products. Within the context of both countries a reciprocal relationship exists between indigenous brands and their sense of tradition and established position which has been facilitated by a generation-based system wherein family and peer groups play a huge role in marketing the products. This is true in the situation of both Pond's and Oil of Olay within the U.S. and with L'Oreal in France.
The lack of success in the U.S. was evident in the fluctuating positions that Plenitude maintained regarding market share between Oil of Olay and Pond's and for the 8-9 years that the product line existed without generating profits. Factors which affected L'Oreal's performance included the firm's relatively recent entry into a very competitive marketplace which would be depicted according to Porter's 5 Forces model as demonstrating a high level of rivalry. Rivals such as Pond's and Oil of Olay benefitted from established positions in terms of branding, channel management and the amount of intimate knowledge of consumers and the competitive landscape. Additionally the strategy of L'Oreal involved licensing the company's Technique Professionelle, Salon Classics and Redken divisions to Cosmair. The separation of these identities gave the corporate brand less controlling influence over the entire business initially.
The plenitude range was originally launched in France circa 1982 with phenomenal results and in total,the French market for cosmetics was larger than that in the U.S. with contributions to revenue of 23% and 20% respectively. The positioning of the line was "high-end, superior performance yet accessible" and the environment was competitive yet the mass-market offered only a handful of significant players. In light of this opportunity, management launched their so-called "class of the mass" strategy which positioned high-tech products at a premium of 30% over rival brands such as Nivea and Diadermine.
The French success saw the rise of a 'star' strategy which involved investing heavily in advertising and promotion of product s such as basic moisturizers which contained 'action liposimes'. However, the pricing for such offerings was placed at a significant premium and financed R&D efforts to maintain innovative products which would become the future stars of L'Oreal's product portfolio. Another important element of the overall French marketing strategy was the incremental basis with which each product was launched and advertised. For example, initially only a moisturizing range was built as innovation in the cleansing segment was deemed to be difficult to achieve. Furthermore, awareness was created by a print campaign which then evolved to incorporate television ad spots. However the big question amongst executives was how to transfer this proven success formula and strategy to the United States?
The smooth roll-out of the Plenitude line was quite the opposite in the United States where management seemed to adopt a 'blast' type strategy that launched 14 SKU's immediately within 3 categories upon the market. This seemed contrary to the original 'trickle down, fire-up' philosophy and reaction from the U.S. marketplace was mixed with many customers feeling confused and over-whelmed by the product's communication strategy. Therefore the lack of understanding of U.S. customers was initially a huge stumbling block for the company. Furthermore, if the strategy of L'Oreal is considered within the context of Ansoff's Matrix it is quite clear that in France, the Plenitude product line comprised of relatively new products in a market where L'Oreal already existed in 1982 which is quite different to the strategy applied to entry in the United States. This involved entering a new market with an existing set of products and entailed little diversification. The disregard, of this seemingly pure 'market development' approach, for products that were adapted for the market was a major weakness of Plenitudes launch in the United States and contributed significantly to L'Oreal's trailing position. The basis for success would have been provided by developing a diversification strategy that aligned products with the diverse wants and needs of the American market. The feedback gained from focus groups and research could have provided the means for applying such market intelligence to the Plenitude portfolio.
3. Develop a marketing strategy including product positioning, pricing, packaging, product line length & width, and new product development.
Positioning the L'Oreal Plenitude line in the most effective manner can be addressed by understanding the current perception of the line in the U.S. market. Focus groups have identified some key issues concerning the complicated nature of the Plenitude brand and the confusion with which potential buyers face in the buying process. Yet buyers credit the brand with high-quality given its association with parent brand L'Oreal. The strength of L'Oreal to transmit connotations of high-quality and innovative features is marginally offset by the brands diametrically opposed weakness in being associated with high-price; yet positioning the brand to convince and assure target segments of the benefits is a good strategy for both value creation and appropriation.
Within the brand relationship spectrum, the positioning would best fit under a Sub-brand strategy that places the L'Oreal master brand as a key driver. This rationale is in-line with the findings of focus groups that have identified the strengths of the L'Oreal brand in its appeal to the 'masses' yet find the sub-brand 'Plenitude' somewhat lacking in stature and credibility. It is also a brand which "doesn't really mean anything" to some focus group members therefore it's ability as a co-driver in a master-brand strategy is significantly impaired and relegated to providing distinction as L'Oreal's retail brand. Such a scenario maintains high-value for the end-user but also allows L'Oreal to prevent instances of channel conflict with its high-end and professional product lines.
An underlying tenet of L'Oreal's strategy to provide quality, innovation and achieve geographic expansion in the U.S. market was consumer education at the point of purchase. Traditionally, the brand was distributed in a department store environment similar to 'Les Galeries Lafayette' in France with the benefit of highly trained sales staff however through the retail channels in the U.S. market, this variable was not available in the HBA (Health and Beauty Aids) section of discount retailers. Despite consumer awareness of the L'Oreal brand and exposure to lipstick, nail-polish and hair care products, the subtle nuances of L'Oreal's skincare range depended on the effectiveness of the products packaging to generate sufficient awareness, interest, desire and action in the buying process.
Thus, a reliance on captivating and informative packaging in addition with a strong merchandising effort were critical to the success of Plenitude in lieu of dedicated sales support and in 1988, $32,5 million was budgeted for the advertising and trade promotion of the line. A unique feature of such in-store efforts was the presentation of packages in a 'Skincare Centre' format which assembled each product together to illustrate the comprehensive set of product solutions L'Oreal marketed for skincare. At the product micro-level, each package communicated precisely the benefits, application guidelines and brand promise with which management relied upon to 'educate' the target segment. The front of each package contained the Masterbrand, sub brand and product name (e.g. L'Oreal, Plenitude, Revitalift) in heavy typeset with the active ingredients and functional attributes beneath.
However, the overwhelming feeling that some consumers experienced in the buying process suggests that a slightly modified approach to the packaging of the Plenitude range is required. Therefore, an enhanced approach to this delicate issue of 'educating vs. overwhelming' target segments involves deemphasizing complicated and cluttered package facades with simplistic names indicative of product functionality combined with appealing imagery and emphasis on the Masterbrand. The rear of the package will include concise information for the engaged consumer.
In the process of creating a coherent marketing strategy for the plenitude line, pricing is also critical. A 1995 market study which identifies five benefit segments indicates that the "Unconcerned", "Price Conscious Socialisers" and "Age Focused" groups are all concerned and influenced by price. From a channel point of view, the exposure and bargaining power of L'Oreal with retail partners is also quite important as higher margins will permit greater control for category managers of merchandising and positioning of bottom and top-line products amongst competitors in the channel. At the product range level, the 'Plenitude' brand offers the fourth highest margin to retailers amongst the top 5 competitor brands in skincare with its cleanser range reducing the average margin significantly. However, the product range of Olay commands the highest market share in the industry yet provides the least amount of margin for retailers, which suggests that a possible strategy for L'Oreal is to decrease prices of its 'Daily Moisturizing' range to increase share against Olay which would complement the company's goal of top-line growth. Furthermore, the average retail margin for 'Daily Moisturizers' is 58,2% which suggests that L'Oreal are in a healthy position to offer value pricing to customers and thus gaining market share against Olay and Noxzema in their respective segments.
From the outset, extending the product line length could be perceived by management at L'Oreal to be a low-risk, low-cost exercise that will increase profits of the range by more precise customer segmentation. Yet this is a somewhat myopic approach to increasing sales, lowering inventory and allaying competitive intensity and includes assuming the risks of lowering brand equity and loyalty, diminishing relationships with trade partners and may ultimately fail in acting as a demand catalyst. However, management could chose to stretch the line downward to attract price sensitive segments or upwards in order to maintain a price premium across the product range. L'Oreal could also decide to extend its product width in the introduction of new lines, which would prove costly without clearly established innovations and segments or provide greater product depth in terms of the total number of SKU's available in the market. However, such an approach would undoubtedly add to the confusion that current shoppers experience during an encounter with the Plenitude range.
New product innovation and the 'star' system is another key element which has served to facilitate product innovation through high growth and profitable products, yet success in the U.S. market will not be sustainable based on the premise that one successful product determines the outcome of the product line, this is too risky. L'Oreal's situation in 1995 is depicted by the launch of 'Revitalift Face' which requires a high investment to launch and the return on investment (ROI) is not easily quantifiable. Thus, the use of high technology products and innovation should be equally distributed across the product portfolio to achieve a mix of high value with high performance while focusing on the moisturizing and daily cleansing segments. This scenario decreases the dependency of the portfolio on one product while reinforcing the strength of the master brand based on the innovation of the product groups. This strategy also provides consistency across the range.
Finally, the implementation of the marketing strategy should take into account the theory and framework behind creating blue ocean strategy's. A strategy canvas identifies the key competing variables of the industry and attempts to create value by adjusting these criteria in order to create a form of 'uncontested market space' . In the case of L'Oreal Plenitude, U.S. market entry depends on maintaining the core elements of the product's high-tech nature, the emphasis on advertising plus promotion and the inclusion of aspirational role-models to drive the brands image.
While there are many obvious and logical reasons for leveraging the power of the corporate brand, this facet needs to be approached with conservatism and prudence in light of the potential risks posed to the parent in the event of instances which may contaminate the L'Oreal Masterbrand. Therefore a de-emphasis of relying on the corporate brand is also recommended. Additionally, a blue-ocean value curve will be achieved by lowering the complicated nature of the packaging (while keeping instructions on the back) and creating an element of simplicity for U.S. consumers that otherwise find the product range 'overwhelming' and 'complicated' according to focus groups. For example, customer testimonials indicate motivation to purchase 'eye defence' products based on clarity and self-descriptive titles which is the opposite of products such as 'Excell A' which add to the busyness and confusion of the products. Building on such changes to the tradition industry value curve, will be a reduction in prices for the cleanser and daily moisturizer segments in order to become more competitive as mentioned previously yet the treatment product line should maintain its premium pricing strategy while extending the special purpose of products within this category.
Exhibit 1: Retail Margin per Category
Average Retail Margin per Category | |||
Brand | Cleansers | Daily Moisturizers | Treatment Moisturizers |
Nivea | na | 48,86% | 49,08% |
Ponds | 47,65% | 48,91% | 40,99% |
Neutrogena | 45,18% | 39,07% | 40,67% |
Olay | 48,35% | 16,41% | 67,13% |
Plenitude | 28,67% | 50,82% | 39,12% |
Exhibit 2: Margin per Brand
Brand | Average Margin per Brand |
Ponds | 44,83% |
Olay | 34,34% |
Plenitude | 38,90% |
Neutrogena | 43,06% |
Nivea | 48,97% |
Exhibit 3: Size of Product Lines
Average Size of Product LineBrand | # of Products |
Ponds | 9 |
Olay | 14 |
Plenitude | 19 |
Neutrogena | 5 |
Nivea | 4 |
Exhibit 4: Retail Margins for Ponds Products
Pond's Product Categories & Trade/Retail Margins | |||||
Product Category | Product Name | Trade Price | Retail Price | $ Margin | % Retail Margin |
Moisturizers (Daily) | Dry Skin Cream | 5,5 | 8,19 | 2,69 | 48,91% |
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Moisturizers (Treatment) | Age Defying Lotion (Regular or Delicate skin) 3 oz | 7,8 | 10,99 | 3,19 | 40,90% |
| Age Defying Lotion (Regular or Delicate skin) 2 oz | 7,8 | 11,23 | 3,43 | 43,97% |
| Prevent & Correct Lotion | 10,8 | 14,94 | 4,14 | 38,33% |
| Prevent & Correct Cream | 10,8 | 15,2 | 4,4 | 40,74% |
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Cleansers | Cold Cream | 2,78 | 4,09 | 1,31 | 47,12% |
| Self-Foaming Cleanser | 5,03 | 7,44 | 2,41 | 47,91% |
| 2 in 1 Cleanser - Tube | 2,79 | 4,22 | 1,43 | 51,25% |
| 2 in 1 Cleanser - Pump | 3,88 | 5,6 | 1,72 | 44,33% |
Exhibit 5: Retail Margins for Plenitude Products
Plenitude's Product Categories & Trade/Retail Margins | |||||
Product Category | Product Name | Trade Price | Retail Price | $ Margin | % Retail Margin |
Active Daily Moisturizer - Regular | 4,72 | 7,11 | 2,39 | 50,64% | |
| Active Daily Moisturizer - Oil-Free | 4,72 | 7,17 | 2,45 | 51,91% |
| Active Daily Moisturizer - SPF15 | 4,72 | 7,21 | 2,49 | 52,75% |
| Hydra - Renewal Jar | 6,83 | 10,17 | 3,34 | 48,90% |
| Hydra - Renewal Tube | 6,09 | 9,13 | 3,04 | 49,92% |
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Moisturizers (Treatment) | Advanced Wrinke Defense Cream - Jar | 8,87 | 12,15 | 3,28 | 36,98% |
| Advanced Wrinke Defense Cream - Tube | 7,07 | 10,3 | 3,23 | 45,69% |
| Advanced Overnight | 8,87 | 12,26 | 3,39 | 38,22% |
| Eye Defense | 8,87 | 12,07 | 3,2 | 36,08% |
| Excell Cream | 8,42 | 11,36 | 2,94 | 34,92% |
| Excell Lotion | 8,42 | 11,51 | 3,09 | 36,70% |
| Serum | 10,43 | 15,19 | 4,76 | 45,64% |
| Revitalift - Face | 8,87 | 12,31 | 3,44 | 38,78% |
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Cleansers | Deep Cleansing Gel | 5,5 | 6,97 | 1,47 | 26,73% |
| Hydrating Cleansing Cream | 5,5 | 7,07 | 1,57 | 28,55% |
| Hydrating Floral Toner | 5,5 | 6,94 | 1,44 | 26,18% |
| Clarifying Foaming Gel | 6,25 | 8,06 | 1,81 | 28,96% |
| Clarifying Mask | 6,25 | 8,09 | 1,84 | 29,44% |
| Clarifying Toner | 6,25 | 8,26 | 2,01 | 32,16% |
Exhibit 6: Retail Margins for Neutrogena Products
Neutrogena Product Categories & Trade/Retail Margins | |||||
Product Category | Product Name | Trade Price | Retail Price | $ Margin | % Retail Margin |
Moisturizers (Daily) | Combination Skin | 7,5 | 10,43 | 2,93 | 39,07% |
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Moisturizers (Treatment) | Healthy Skin Oil-Free Bottle | 7,5 | 10,55 | 3,05 | 40,67% |
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Cleansers | Facial Cleanser | 5,91 | 8,33 | 2,42 | 40,95% |
| Deep Clean | 4,1 | 6,07 | 1,97 | 48,05% |
| Deep Pore | 5,5 | 8,06 | 2,56 | 46,55% |
Exhibit 7: Retail Margins for Oil of Olay Products
Oil of Olay Product Categories & Trade/Retail Margins | |||||
Product Category | Product Name | Trade Price | Retail Price | $ Margin | % Retail Margin |
Moisturizers (Daily) | Original Beauty Fluid | 5,86 | 6,59 | 0,73 | 12,46% |
| Oil Free Beauty Fluid | 5,86 | 6,65 | 0,79 | 13,48% |
| Sensitive Skin Beauty Fluid | 5,86 | 6,66 | 0,8 | 13,65% |
| UV Protectant Beauty Fluid | 5,86 | 6,74 | 0,88 | 15,02% |
| Original Beauty Fluid (Large) | 7,53 | 8,76 | 1,23 | 16,33% |
| UV Protectant Beauty Fluid (Large) | 7,53 | 9,6 | 2,07 | 27,49% |
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Moisturizers (Treatment) | Night of Olay | 4,49 | 6,45 | 1,96 | 43,65% |
| Replenishing Cream (4 SKU's by type) | 4,58 | 8,73 | 4,15 | 90,61% |
| Age Defying Protective Renewal Cream | na | 7,31 | na | na |
| Age Defying Protective Renewal Lotion | na | 7,36 | na | na |
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Cleansers | Foaming Face Wash | 2,12 | 3,17 | 1,05 | 49,53% |
| Facial Cleansing Lotion | 3,09 | 4,56 | 1,47 | 47,57% |
| Refreshing Toner | 2,69 | 3,98 | 1,29 | 47,96% |
| Age Defying Daily Renewal | na | 4,76 | na | na |
Exhibit 8: Retail Margins for Nivea Products
Nivea Product Categories & Trade/Retail Margins | |||||
Product Category | Product Name | Trade Price | Retail Price | $ Margin | % Retail Margin |
Moisturizers (Daily) | Shine Control Mattifying Fluid | 4,84 | 7,15 | 2,31 | 47,73% |
| Facial Nourishing Lotion | 4,58 | 6,87 | 2,29 | 50,00% |
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Moisturizers (Treatment) | Anti-Wrinkle Cream | 6,13 | 9,22 | 3,09 | 50,41% |
| Optimale | 7,12 | 10,52 | 3,4 | 47,75% |
Exhibit 9: BCG Matrix of Plenitude Product Line (Dollar Share)
Exhibit 10: BCG Matrix of Plenitude Product Line (Unit Share)
Exhibit 11: BCG Matrix Representation of Moisturizer Market
Exhibit 12: BCG Matrix Representation of Cleanser Market
Exhibit 13: Ansoff's Matrix (French Market)
French Skincare Industry | ||
| Existing Products | New Products |
Existing Markets | Market Penetration | Product Development |
| L'Oreal Plenitude | |
New Markets | Market Development | Diversification |
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Exhibit 14: Ansoff's Matrix (U.S. Market)
U.S. Skincare Industry | ||
| Existing Products | New Products |
Existing Markets | Market Penetration | Product Development |
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New Markets | Market Development | Diversification |
| L'Oreal Plenitude |
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Exhibit 15: Four Actions Framework
4 Actions Framework | |
Reduce | Raise |
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Corporate Brand Emphasis | Width of Product Line |
Packaging Detail |
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Pricing |
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Frenchness |
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Special Purpose |
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Focus on Star-product |
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Create | Eliminate |
Simplicity | - |
Exhibit 16: Blue Ocean Strategy Canvas (United States)
