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Marketing
Marketing
Branding Strategy of L'Oreal has enabled the company to spread its' business
not only in Europe and America but also in Asia. L'Oreal Branding Strategy
has achieved success throughout the world. Now-a-days the company is
successfully producing and selling different cosmetic products, hair care and
skincare products in almost over 150 countries of the world. This has been
possible because of the well established Brand Name andBrand Image of
L'Oreal. L'Oreal has been successful in promoting a worldwide Brand Identity
only because of the company's powerful and efficient Branding Strategy. This
successful Global Branding Strategy of L'Oreal helped the company to increase
its significant levels of revenue.
INTRODUCTION:
A decade ago, about 75% of the company's $5.5 billion annual sales were from
Europe, the bulk of it in France. In 2004, 85 % of L'Oreal's consolidated sales
were in markets outside France.
In the late 1990s and early 2000s, when the Asian and the Latin American
economies were considered too risky, and several international companies
performed poorly, L'Oreal had surged ahead.
As an analyst put it, "L'Oreal is the only real global leader in every segment of
the industry."2Whether it was selling Italian elegance, New York street smarts,
or French beauty through its brands, L'Oreal had reached out to a wide range of
customers across incomes and cultures. Under Lindsey Owen-Jones (Owen-
Jones), L'Oreal's CEO for 17 years, L'Oreal had fine-tuned its global branding
strategy.
He sold his patented hair dyes to local hairdressers and beauty salons in Paris.
The company's name was adapted from Schueller's first brand, L'Aureole,
which meant 'halo', in French.
Sensing a threat from France's left-wing politicians who were advocating state
control of the nation's top companies, Dalle decided to internationalize L'Oreal's
ownership structure. In 1973, Dalle persuaded Liliane Bettencourt, Schueller's
daughter and L'Oreal's main shareholder, to dilute her majority stake. Under a
complex deal, Swiss food-products giant Nestle took a 49% stake in a holding
company--with Bettencourt owning the remaining 51%.
The holding company in turn acquired a little over 50% of L'Oreal's stock. In
1972, L' Oreal launched the legendary campaign "Because I am worth it," to
promote the 'Preference' line of hair color. The emotional pitch "Because I am
worth it," made the consumer feel good about paying higher prices for L'Oreal
products.
Over the next few years, the company's business expanded considerably. It
started distributing its products through agents and consignments to the US,
South America, Russia and the Far East. The next phase of L'Oreal's growth
started under Lindsey Owen-Jones who had joined L'Oreal in 1969, fresh out of
Oxford and the Insead business school in Fontainebleau (France).
Brand Management
L'Oreal had built a dozen or so mega brands rooted in the local culture and
appealing to different segments of the global market. Instead of homogenizing
the various brands and making them palatable in myriad cultures, Owen-Jones
decided to embody their (the brands') country of origin, turning what many
marketing gurus considered a narrowing factor into a marketing virtue. As a
senior L'Oreal manager put it, "You have to be local and as strong as the best
locals but backed by an international image and strategy. We have made a
conscious effort to diversify the cultural origins of our brands."...
Brand Extensions
L"Oreal realized the need for caution in case of brand extensions. The company
extended its brands after doing a thorough research. When L'Oreal decided to
enter the kids shampoo category in 1998, it debated whether to launch a new
brand or go for an extension. The company realized the L'Oreal name, long
associated with women's hair care, would capture instant credibility with moms.
But Kids was really a child-oriented product. When L'Oreal first unveiled its
L'Oreal Kids shampoo line early 1998, retailers were skeptical. "Retailers say
the value isn't there. We say it is, that the child establishes value. We were
pretty tenacious." - mentioned Carol Hamilton, 45, senior VP-marketing for the
L'Oreal retail division of Cosmair...
L'Oreal backed its product innovations with the twelfth-largest media budget in
the world. In the late 1980s and early 1990s, "external charges", which included
L'Oreal's advertising and promotions expenditure jumped from 37% to 47% of
sales. L'Oreal increased its global ad spending to $1.25 billion in 1998, putting
it almost on par with Coca-Cola. L'Oreal had a unique promotion policy for all
its brands. A brand, which sold in mass-market outlets, advertised and promoted
itself in a way similar to brands sold in department stores...
Corporate Structure
L'Oreal was organized as a clutch of small profit centers, some with as few as
ten employees. The company's work culture encouraged audits and budget
meetings to focus less on the spilled milk of the past, and more on leading
indicators of how things would look at year-end.
Competition
Future Outlook
Few of the women in the admiring crowd realize that the trendy ''New York''
Maybelline brand belongs to French cosmetics giant L'Oreal. In the battle for
global beauty markets, $12.4 billion L'Oreal has developed a winning formula:
a growing portfolio of international brands that has transformed the French
company into the United Nations of beauty. Blink an eye, and L'Oreal has just
sold 85 products around the world, from Redken hair care and Ralph Lauren
perfumes to Helena Rubinstein cosmetics and Vichy skin care.
L'Oreal's success is proof that when done right, global branding can speed
growth in mature consumer-products companies even when global markets
themselves are shaky. Asia's economy is a mess, Latin America is tottery. Other
worldwide marketers, such as Procter & Gamble Co., are suffering partly as a
result. But L'Oreal is surging in markets stretching from China to Mexico. Its
secret: conveying the allure of different cultures through its many products.
Whether it's selling Italian elegance, New York street smarts, or French beauty
through its brands, L'Oreal is reaching out to more people across a bigger range
of incomes and cultures than just about any other beauty-products company in
the world. That sets L'Oreal apart from one-note marketers such as Coca-Cola
Co., which has just one brand to sell globally.
L'Oreal's strategy positions it beautifully to profit even further when the middle
class begins to grow again in emerging markets. Says Veronique Adam, analyst
at J.P. Morgan Securities Inc. in Paris: ''L'Oreal is the only real global leader in
every segment of the industry.''
For Owen-Jones, the trick will be staying ahead in the game as his powerful
rivals seek to play the global branding game. From giant P&G to niche players
such as Los Angeles-based cosmetics maker Stila, L'Oreal's competitors are
hustling to catch up. ''We want to become more of a global company like
L'Oreal,'' says Yoshikuni Miyakawa, a general manager of the cosmetics-
marketing division of Shiseido Co., Japan's No. 1 cosmetics company. Already,
Shiseido is dominant at home and now expanding around the world.
Meanwhile, the French company is No. 10 in Japan, trailing rivals such as
Clinique and Estee Lauder.
That healthy doubt is just one of the ways L'Oreal's chief has kept his company
on top. Known by his rivals as a marketing whiz, he loves to prowl the aisles of
department stores, quizzing customers and salespeople alike on every aspect of
the beauty business. On his latest visit to China, he stopped two women on the
street and asked whether they used L'Oreal products to color their hair. When
the women said they had their hair done in a salon, Owen-Jones escorted them
to the nearest store selling L'Oreal products and offered them hair-color kits for
free.
The knowledge he gains in the street helps him keep his executives sharp.
Owen-Jones is known for raking his managers over the coals in meetings,
hammering them with skepticism. ''He tries to destabilize you to see if you are
capable of defending your ideas,'' says a senior L'Oreal executive.
That philosophy has proved key to L'Oreal's success. While many companies
seek to homogenize their brands to make them palatable in myriad cultures,
Owen-Jones has taken L'Oreal's products in the opposite direction. He wants
them to embody their country of origin. So he has turned what many marketing
gurus consider a narrowing factor into a marketing virtue.
The makeover was a hit. Maybelline's share of the nail-enamel market in the
U.S. has climbed from 3% to 15% since 1996. Altogether, over the past three
years, Owen-Jones has almost doubled Maybelline's sales, from $320 million to
$600 million, and pushed the brand into more than 70 countries. Sales outside
the U.S. market now make up 50% of total revenues.
Maybelline's success exemplifies the L'Oreal blueprint. The company has
pursued the same basic approach with Ralph Lauren fragrances and Redken hair
care. ''It's a cross-fertilization,'' says Guy Peyrelongue, head of Cosmair Inc., the
U.S. division that oversees Maybelline.
The two creative hubs tap into the same fundamental research but compete in
marketing. Although he admits it's a recipe for tension, ''a charged atmosphere
is exactly what I'm looking for,'' he says. One example: L'Oreal is preparing a
rollout of hair care products by Redken, a U.S.-based brand it acquired last year,
into the French market, even though Redken will directly compete with the
long-established L'Oreal Preference line. Most CEOs would be afraid of
cannibalizing their established brands by introducing newcomers. But Owen-
Jones says the competition will inspire both the Redken and Preference
marketing teams.
The pressure is on L'Oreal to keep reaching higher as the company faces attacks
from rivals big and small. ''Global branding is something we are all interested
in, we are all pursuing,'' says Revlon CEO George Fellows. Revlon has had
little in the way of worldwide efforts until recently--and it's not the only
cosmetics maker ramping up globally. Germany's Beiersdorf, which owns the
well-known Nivea skin care and cosmetics brand, is betting on a new anti-aging
cream to help build its presence even more both in Europe and the U.S. ''This is
war,'' declares Rolf Kunisch, chief executive of the Hamburg-based cosmetics
company.
L'Oreal is also taking greater risks with its in-house projects, partly to be sure
each of its brands stands out with its own image. ''That's a big challenge for this
company--to add brands, yet keep the differentiation,'' says Marlene Eskin,
publisher of Market View research reports on the cosmetics industry. The most
radical experiment is the relaunch of the 96-year-old Helena Rubinstein skin
care and cosmetics brand as a hot product providing for the 21st century. The
target is 20- to 30-year-old women in urban centers such as New York, Paris,
London, and Tokyo who want wild colors. ''We've made it the coolest of luxury
brands,'' says Owen-Jones.
To sell the new Helena Rubinstein line, L'Oreal has opened a New York spa--
the first time L'Oreal has tried to run a retail operation. And the target market is
younger and trendier than L'Oreal's typical luxury customers. It's not clear how
well the company will be able to manage its ever-growing stable of upscale
beauty brands while mixing it with street-wise new products. But that's the thrill
of being in the beauty business--what's hot is always changing, and only the
savviest of sellers can keep up with the trends. In this fickle business, Owen-
Jones is trusting that his instincts won't lead him astray.
By Gail Edmondson in Paris, with Ellen Neuborne in New York, Amy Louise
Kazmin in Shanghai, Emily Thornton in Tokyo, Karen Nickel Anhalt in
Hamburg, and bureau reports
L'Oreal Group, the 17-billion euros global leader in cosmetics, is charting out a
long-term growth strategy for its wholly-owned subsidiary L’Oreal India. To
start with, L’Oreal India is planning to extend its distribution network and
product portfolio to sustain its competitive edge in the beauty business.
On the company’s growth plan, Dinesh Dayal, chief operating officer, L’oreal
India, said, “Our strategy is to recruit more faithful customers to our brands
through innovative products and categories. Our objective is that each of our
brands attains and maintains their leadership positions in each of the segments.”
He said that the company has appointed Sonam Kapoor as an additional L’Oreal
Paris spokesperson for the Indian Market alone. “She will complement our
international brand ambassador Aishwarya Rai,” he explained.
Meanwhile, L’Oreal’s arch rival HUL, has announced that its board has
approved the licensing of Lakme and Lever Ayush brands to a separate
subsidiary company, Lakme Lever Private Limited. This company will evaluate
options towards developing a uniquely different, new business model for this
opportunity, with singularity of purpose and dedicated focus.
It has appointed Sonam Kapoor as its brand ambassador for Indian markets
The co’s major brands include Garnier, L’Oreal Paris and Maybelline in the
consumer products sector.