boots hair care sales promotion
TRANSCRIPT
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5
Hair Care Sales Promotion
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MARKET LEADER IN HAIR CARE SEGMENT
BOOTSPharmacy-led health
and beauty group Helps customers
look and feel better
Close to 2,500 storesFantastic products and services cared for by
expert, friendly people
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THE BOOTS STORY
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POST WAR REGENERATION AND NEWDEVELOPMENT (1968)
•Program of factory development in Nottingham including a new power house, printing works, and a new pharmaceutical research building.•A Cosmetic manufacture factory was also opened.
EARLY DAYS (1913)•Initially established as providing herbal remedies to the needy as well as poor by JOHN BOOTS in 1849.
•But as his Son JESSE BOOTS took over he established ‘THE BOOTS AND COMPANY LIMITED’ and wanted to become the LARGEST, BEST and CHEAPEST’
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MODERN ERA
Developed a range of products and became a household name.
Main Products:•Cosmetics aimed at teenage market•Analgesic Ibuprofen and Nurofren introduced.
New Services:•Boots Opticians : Became leading optician in UK•Insurance Services and initiatives in Dentistry,Chiropody, and Internet Services also in 1999.
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•In UK with more than 2500 Stores •It started exporting its health care products to more than 130 countries.•Boots health and Beauty stores were established in Ireland, Taiwan and Thailand.
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HAIR CARE MARKET ANAYSIS
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In 2000 over 60 major brands of hair care products were there in UK market.
None of the brands had more than 9% market share.
The overall market was expected to grow by BETWEEN 1% and 3% per year for the NEXT 5 YEARS.
.
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SEVERE PRICE COMPETITION MEANS THAT VOLUME WOULD GROW MORE QUICKLY THAN
VALUE•The use of PRICE PROMOTIONS to secure volume would see an overall decline in prices of approximately one percent.
•Significant PRICE DISCOUNTING through promotional activity and COMPETITION FROM LOW COST private label alternatives were expected to continue into foreseeable future.
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In the times of severe competition BOOTS Primary Objectives were:
1.Drive Sales volume UP.2.Trade up Consumers from Low value Brands3.Retaining and Building Brand Equity.
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HOW TOACHIEVE THE PRIMARY OBJECTIVESOF BOOTS SALESPROMOTION?
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In SEVERE COMPETITION times Every company needs to CRAFT ITS POSITIONING IN THE MARKET WELL.
BOOTS took a step which was UNIQUE and carved its own NICHE.
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• Boots began to cultivate relationships , beginning 1996 with well established hair dressers in UK.• They desired to build a new market by using
celebrity endorsements to create AWARNESS and create an EMOTIONAL ATTACHMENT between
consumers and brand.
This ensured:HIGH CONSUMER AWARENESSPREMIUM POSITIONING OF BRAND.
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PARTENERED BRAND DESCRIPTION
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RESULT•The relationship with BOOTS was lucrative for the hairdressers because it gave them access to a large percentage of U.K consumers through1300 Boot’s stores.
•Research indicated that over 85% of female adults in the United Kingdom visited a Boots store within past week.
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HOW CAN BOOTS DRIVE ITS SALES
VOLUME UP?
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3Ways in which Boots Can change its course
MARKET MODIFICATION
PRODUCT MODIFICATION
MARKET PROGRAM MODIFICATION
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MARKET MODIFICATIONA company might try to expand its mature
brand by working With 2 Factors:
VOLUME= (NUMBER OF BRAND
USERS)*(USAGE RATE PER USER)
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EXPAND THE NUMBER OF
USERS
INCREASE THE USAGE RATES AMONG USERS
CONVERT NON USERS HAVE CUSTOMERS USE THE PRODUCT ON MORE OCCASION
ENTER NEW MARKET SEGMENTS HAVE CONSUMERS USE MORE OF THE PRODUCT ON EACH OCCASION
ATTRACT COMPETITORS CUSTOMERS
HAVE CONSUMERS USE THE PRODUCT IN NEW WAYS
ALTERNATE WAYS TO INCREASE SALES VOLUMES
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PRODUCT MODIFICATIONManagers also try to stimulate sales by improvingQualityFeaturesStyle
Quality improvement :Increases functional performance by launching a new and improved product.
:Feature ImprovementAdds size, weight,material,supplements and accessories that expands products performance ,versatality,safety or convenience.
Style Improvement:Increases the products aesthetic appeal. Any of these can attract consumer attention.
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Styling Products in Female Category
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Styling Products in Men’s Category
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MARKETING PROGRAM MODIFICATION
Finally brand managers might also try to stimulate sales by modifying non product elements—
PRICEDISTRIBUTIONCOMMUNICATION
They should also assess the likely success of any changes in terms of effects on new and existing customers.
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Let’s feel goodIs the Brand Mantra of
The company
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LIMITATIONSDue to efficiency considerations and ongoing management of stock, boots was not considering any variation in product-sizes because of the added cost and complexity involved.
No media advertising budget was allocated for this promotion, although it would be highlighted in flyers distributed by the store
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Alternatives
“3 for 2” Gift with
Purchase On-Pack Coupon(50p off)
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CURRENT BOOTS CONSUMERS AND EXISTING PURCHASERS OF MASS-MARKET BRANDS ARE THE PRIMARY TARGET FOR THE PROMOTION.
DURATION 1 MONTH
AVERAGE BOTTLE SIZE 250 ML
PRICE £4 AND £2 FOR MASS MARKET PRODUCT
MANUFACTURER’S MARGIN : 8-12%
RETAIL MARGIN 40% AND 25 % FOR MASS MARKET PRODUCT
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It has been observed that same customer buys both premium and basic products and to take advantage of promotion customer will try to buy premium product ,also Christmas and new year is approaching so customer are more likely to but premium product increasing its sale
Hence it is assumed for the next month premium and basic product sale will be at par, so an average can be assumed for all quantities
ASSUMPTIONS UNDERTAKEN
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GIVEN DATA
PRICE £3.99
RETAIL MARGIN 40%
MANUFACTURERS MARGIN 8%-12%
RETAILER’S COST=SELLING PRICE*(100-MARGIN%)
=3.99*0.6=2.394 POUNDS.
ACTUAL COST PER BOTTLE= 2.176
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1st
3 for 2
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CONDITION:CONSUMERS WOULD GET 3 AT PRICE OF 2 CUSTOMERS COULD COMBINE ANY THREE ITEMS THEY LIKED (E.G., SHAMPOO, CONDITIONER, AND STYLING GEL, ETC. ] AND THE LEAST EXPENSIVE ITEM WOULD BE FREE.THEY COULD IMPLEMENT ONLY A 3-FOR-2 OFFER WHEN THE PRICES FOR THE THREE ITEMS WERE THE SAME. SALES WILL INCREASE TO 300%.
THE PROBLEM: 60% OF CONSUMERS WILL BE JUST PROMOTIONAL BUYERS. THIS WILL DILUTE BRAND EQUITY OF PREMIUM PRODUCTS CELEBRITY HAIRDRESSERS WHO ARE PRODUCT PARTNERS MAY NOT LIKE ITAND IT MAY WEAKEN RELATIONSHIP BETWEEN THEM AND COMPANY.
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CALCULATIONS:Selling Price of 3 items=3.99*2=7.98 pounds
Actual Cost of 3 items=2.176*3=6.528
Thus, profits= 0.484 Pound/unit
Now we knowThe sales was 3 times more in promotional period.
Thus, Profit during promotional period=3*0.484
=1.452 Pounds/unit
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CONDITION: A GWP WAS AN OFFER IN WHICH CUSTOMERS WERE GIVEN A PRODUCT SAMPLE ALONG WITH REGULAR PURCHASE. AN EXISTING SAMPLE PRODUCT WOULD BE USED TO AVOID THE NEED TO DESIGN AND PRODUCE ADDITIONAL PACKAGING. SALES WILL INCREASE TO 170%
PROBLEM:40% WILL BE JUST PROMOTIONAL BUYERS A COMMON STRATEGY AND CAN BE EASILY IMITATED ADDITIONAL COSTS
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Selling Price =3.99 PoundsCost /item =(2.176+0.93)=3.106 PoundsHenceProfit/item= 0.884 Pounds
During the promotional period the sales were 1.7 times more
Profit during promotional period= 1.7*0.884=1.502 Pounds/item
Calculations
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ON PACK COUPON
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CONDITION:ON-PACK COUPON (50P OFF) CUSTOMERS WOULD BE ABLE TO REDEEM THE COUPON DURING THEIR CURRENT STORE VISIT. ESTIMATED THAT SALES WOULD INCREASE TO 150 % CUSTOMERS WILL VISIT STORE MULTIPLE TIMES
PROBLEMS: A CONSERVATIVE APPROACH QUITE COMMON AND CAN BE EASILY IMITATED INCREASE IN SALES IS NOT TOO MUCH IN CASE IF CUSTOMER FAILS TO REDEEM COUPON BY HUMAN TENDENCY HE IS MOST LIKELY TO BLAME BRAND AFFECTING BRAND LOYALTY
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Selling Price of an item= 3.99 poundsCost per item= (2.176+0.5)=2.676Hence Profit=1.314 Pounds/unit
We know Sale was 1.5 times more in the Promotional Period.HenceProfit during promotional period= 1.5*1.314=1.971 Pounds/unit
CALCULATIONS:
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PROMOTIONAL SCHEME
SALES REPORT
PROFIT PER UNIT
REMARKS
3 FOR 2 300% 1.452 COMPANY’S INCREASED SALES VOLUME CAN BE BEST ACHIEVED BY THIS.ITS REACHING OUT TO MORE NEW CUSTOMERS.AND THIS POLICY MOREOVER CANNOT BE IMMITATED BY COMPETITORS.
FREE GIFT WITH PURCHASE
170% 1.502 ALONG WITH REACHING OUT TO NEW CUSTOMERS IT ALSO GIVES A REASONABLE PROFIT PERCENTAGE.IT GIVES THE USERS TO USE THE PRODUCT IN MORE NUMBER OF WAYS.THUS CREATING MORE AWARNESS.
GIFT COUPON FREE WORTH 50P
150% 1.971 IT FAIRLY REACHES OUT TO NEW CUSTOMERS BUT HELPS TO ENSURE THAT THEY COME AGAIN.THE HIGHEST PROFIT PERCENTAGE AS NO ADDITIONAL COST IS INVOLVED.
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Keeping in mind the primary objective of the company
The company should go for:“Free Gift Coupon” Promotional scheme.
Because The Company remains in profit with a much greater margin than the other two.
Also It ensures customers come again and again to its stores and use its products more and in a variety of ways. Thus increasing the sales volume.
It attracts the customers of the low value brands not just within the promotional period but can help build a loyal customer base.
This scheme helps to maintain its Brand Equity.
It also doesn’t involve any additional expenses.
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DISCLAIMER
Created by Shivani Mishra, CET-Bhubaneshwar under a marketing internship by Proff Sameer Mathur,IIM Lucknow.