MET STUDENTS

L’Oreal was founded in the year 1909 by Eugene Schueller, a French chemist who developed an innovative hair color formula. Today, the L’Oreal Group is the world's largest cosmetics and beauty company and it’s headquarter is in the Paris suburb of Clichy, France. It got its start from the hair color business but soon it developed activities in the field of cosmetics, concentrating on skin care, sun protection, make up, perfumes and hair care. L’Oreal main branches are Cosmetics, The Body Shop and Dermatology. L'Oreal is active in the dermatological and pharmaceutical fields, however Cosmetics is the key revenue generator. It is also the top nanotechnology patent-holder in the United States. L’Oreal famous advertising slogan is "Because I’m worth it". It has recently been replaced by "Because you're worth it". Its portfolio of brands includes the cosmetics range of L'Oreal Paris and Maybelline NY, shampoo range Garnier, luxury products such as Lancome and active cosmetics such as Vichy. Its closest global competitor in the premium make-up segment is Revlon.

INTRODUCTION

FOCUSED STRATEGY TO BECOME GLOBAL BRAND

Hair color Skin care Hair care

Fragrances Cosmetics

CONSUMPTION PATTERN

• Age remains important factor in consumption, especially in beauty product • Younger generation is more open in consumption of cosmetic products rather than the older

generations • It targets the age group of 18-35 years knowing this age group needs to look attractive • 65 % of the older women population has started using cosmetics as they don't want their

illusion of being a youth disappear • China saw a surprising growth in the industry as they had only one child to pamper. Growth

was significantly higher and reached up to 65 – 70 % of the population

# Place of Purchase Percentage

1 Cosmetic Store 41

2 Pharmacy 32

3 Departmental Store 18

4 Internet 9

According to a survey conducted in India 2015 below are the preferred purchasing location:

EVALUATION OF ALTERNATIVES1. Competitors Brand - Revlon, Avon, Proctor & Gamble, Estée Lauder, are the competitors

and have got alternative products

2. Natural Products - Oils, Egg white, Shikakai, Ritha, lime Juice, Curd

3. Ayurvedic Products – Patanjali

Groups individuals according to the occasions when they purchase, use or think of buying a product.

Occasions

Groups individuals according to the benefits they seek from the product.

Benefits Sought

Groups individuals according to the level of usage they make of the product, be it Heavy, Medium or Light usage.

Usage Rate

Groups individuals according to whether they are non-users, p potential users, first-time users, regular users, or ex-users.

User Status

Groups individuals according to their level of loyalty to the product. ‘• Hard core loyals' always purchase the product • Whilst 'Soft core loyals' will sometimes purchase another

brand• Switchers' will not specifically seek out a particular brand,

but rather purchase the brand available to them.

Loyalty Status

BEHAVIOURAL SEGMENTATION

• High quality conscious• They shop cautiously

Perfectionist

• Price Equals Quality consumers• Prefer products coming from well know stores

Brand conscious

• Like to seek products which give them pleasure & enthusiasm

• They are usually less price sensitive

Novelty - Fashion conscious

• Shop for fun & leisureRecreational

conscious

• Best Value for money spentPrice conscious

• Unworried about the expensesCareless Buyer

• Always buy the same brandBrand Loyal

• Confused about the choices of the products & stores

Confused

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L’OREAL HAIR CARE SEGMENTATION

SEGMENTATION

When it First Entered the Market

• Gender Segmentation: L’Oreal first segmented the population into the different sexes as they thought their products’ “combination of low price and natural ingredients would fit India’s market, where women use plants and herbs as part of their beauty culture”. Their product specifically catered to the women of India, though later our group discusses how it should carve a niche market for itself in the Men’s sector as well.

• Income Segmentation: L’Oreal segmented the market into 2 main segments:

1)the poorer masses2)the rest.

PROBLEM – • Presence of home brands • Cheaper products • Strong sense of loyalty

SEGMENTATION1. Income Segmentation: This time L’Oreal separated a new segment from the original 2 segments

• The quickly rising middle class

2. Psychographic Segmentation: L’Oreal segmented India into different groups based on their thinking and behavior from the older, more conservative Indians and the younger more impressionable generation who had developed a very different and westernized view on spending and culture.

3. Age Segmentation

4. Benefits Segmentation: L’Oreal further segmented the market on a benefits basis when it introduced Excellence Crème. Being in crème form, it [was gentler on hair] compared to the natural ingredients such as ammonia which damaged and dried up women’s hair.

This was a crucial form of segmentation for L’Oreal as it underlined the core concept of its marketing strategy to promise superior products with additional benefits to consumers when choosing between L’Oreal and Home brands, and subsequently has led to the immense success.

The “L’Oreal Makeover”After a poor start, L’Oreal approached the market with a different concept.

ROLE OF INFLUENCERS

Demographics: The demographic shifts really influence a company’s products with the recent trends whereby ageing population, aspiring consumers in emerging markets and other trends

Competition: Rivals such as Procter & Gamble (P&G) , Estee Lauder and Unilever have always had a fierce and cut-throat competition in the industry and it certainly did with L’Oreal grabbing the most opportunities and winning over consumers hearts with new and innovative products.

Political: Government rules and regulations always come into the picture and tend to change bring about a lot of changes and as well as in the 1970s where the French government wanted to control Frances top companies and because of this Gesparal was formed as holding company otherwise L’Oreal could have add problems because sometimes state run companies are lack inefficiency as well as innovation.

Customer Preferences : Customers are seen as ever changing until they find one product which they prefer and become loyal to the same applies in the beauty industry where consumers will jockey between brands.

• Social Influences: With the new trends and urban flairs changing around lifestyle plays a key role as well as the question of only celebrities are used in advertisements and so cannot relate to an ordinary woman in society keeps on posing s serious question.

• Economic: Cosmetics are normally considered as a luxury product well during times of a dismal economy L’Oreal could face the problem of lack of consumer demand and so try to look into other countries plans and policies to try lifted the country out of recession.

• Technological :Business operates in a world of rapid technology and so L’Oreal has to keep up with the pace otherwise could lose its market position. Advances in technological methods has had a positive intake from the companies as it allows them to reduce product obsoleteness and so advances in production methods have created products with longer life spans.eg the creation of the express finish fast dry nail enamel really became popular having huge amounts of sale everywhere Globalization –Has been the major driving factor to many of the external influences as it has allowed the spreading of production, communication and technologies.

• Other Factors: Globalisation is seen as a stretching of social, political and economic activities across political frontiers and therefore all this factors have to be included in the policies and decision making of L’Oreal.

EXCERPTS FROM THE CEO’S INTERVIEW TO FORBES MAGAZINE

There has been optimism among global companies since a new government took charge in India. L’Oreal has said that the country will be among its top five markets by 2017. Are you on your way to achieving that?We have always been very optimistic about India. The Indian people, too, are upbeat and it is fantastic because economic development is linked to optimism. India is the most important reservoir of people for L’Oreal. I don’t know if India will be among the top five markets by 2017, but it will definitely happen. The objective of the team here is Rs 7,000 crore in revenue by 2019. India’s long-term potential is the most important thing for us.

Several companies have now begun to shift their best talent and R&D to this part of the world. Is L’Oreal doing that too?Yes. We have redefined our main objective as ‘Beauty for All’. So, we now serve both men and women. And we redefined our strategy as ‘universalisation’—a strange word that I invented. We defined this to mean globalisation while respecting the differences and desires of consumers around the world. Beauty is very different from detergents and other categories: It is diverse because of the skin people have, the climate they live in and also as a result of their tradition and culture. Purchase decisions

Jean-Paul Agon, chairman and CEO of L'Oreal

EXCERPTS FROM THE CEO’S INTERVIEW TO FORBES MAGAZINE-

contd Will L’Oreal move more manufacturing operations to India given the recent ‘Make in India’ campaign?

It could, but at the moment, it is mainly ‘Make in India’. Eventually, the investment that we make in India can be used to serve other countries.

Have you decentralised decision-making to ensure that the best decisions are taken by people on the ground and not by those sitting in your headquarters?Absolutely. This is part of our ‘Make in India’ strategy. People who are here should be able to decide what works here. In India, we have our own laboratories, marketing teams and factories, and it is in their hands to ensure we are successful. For instance, we are the number one make-up manufacturer in the world. But when we started in India, we did not think that the make-up market here was an opportunity for us. It was the decision of our team here to ensure that make-up is one of our priorities in India. It decided to invent products that are innovative and relevant to Indian consumers. And so, they came up with the Colossal Kajal, which is under a

Consumers in this part of the world are very fashion conscious… Not fashion conscious, but beauty conscious, especially people from India, China and Brazil. Which is why I believe the best is yet to come. The second thing is that consumers in India are very demanding. They have this beauty tradition and they know how to recognise good quality. At the same time, since the average income is low, they have to make sure that the product they buy is the best.

French cosmetics group L'Oreal Paris has four celeb brand ambassadors in India: Aishwarya Rai Bachchan, Sonam Kapoor, Freida Pinto and most recently Katrina Kaif.

"Our ambassadors in India are distinguished personalities in their own right and are well known across the country. Aishwarya is synonymous with L'Oreal Paris, and this is because she has been with us for more than 10 years," says Manashi Guha, general manager, L'Oreal Paris, India.

BRAND AMBASSADORS- BIGGEST FACTOR IN PURCHASE DECISION

BRAND LOYALTYBrand loyalty is a measure of the attachment that a consumer has to a brand and reflects how likely that consumer will be to switch to another brand, especially when that brand makes a change either in price or in product features L'Oreal Paris is a trusted brand. The company boasts high brand loyalty and terrific repeat business. Once a female consumer finds a makeup or beauty product that she likes, she tends to stick with it. This opens L'Oreal Paris up to a whole host of content marketing opportunities around education. How-to videos, DIY, and providing facts to consumers are essential ways the brand promotes itself to its customers, all while providing useful information and attracting new fans.

As we know the brand loyalty of L’Oreal is very high and hence L’Oreal follows a pull strategy. Customers of L’Oreal go directly to the outlets and buy the products. Garnier being an important brand of L’Oreal in both hair care and skin care is available all round the globe easily. In Indian market the hair care products of garnier like “garnier fructis”, “ultra doux” etc is available in both organised and unorganized retail shops in India.

To popularize its product line L’Oreal has occupied brand corners in many big malls and retail outlets in which garnier products get a major chunk. L’Oreal has tie ups with many big beauty salons and parlors who can promote and sell its products. Over the past decade the company has trained more than 30,000 hairdressers in India in the use of its products. And it has helped to establish about 300 salons in the past five years.

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