Boots: Hair-Care Sales

Promotion
Prashant Kumar
160103099
Section D

About Boots

Globally
differentiate
d brand

Player in the
selfmedication
market

Advise for
well being

75,000
employees

Spread across
130 countries

Health and
Beauty
Products

Well-known
retail name

BOOTS

Product
categories
:
Shampoos
condition
Styling
Products

Objective

To drive sales volume

To trade-up consumers
from lower-value brands
Retain and build the
brand equity

Timeline of events
1849

John Boots established The British and American Botanic

Establishments

1860

Wife Mary take over after the death of John

1877

Jesse, son of Jon and Mary, takes over the company

1883

Established as Boot and Company Limited

1884

1st store setup outside Nottingham

1913

Sales=2.5 million per year in 560 stores

1953

Factory development with new power house and printing

works

1959

New pharmaceutical research building

1968

17 cosmetics was launched for teenage market

1969

Introduction of Ibuprofen as OTC brand

1987

New services-Boots Opticians

1999

Insurance services and initiatives in dentistry , Chiropody,

Boots for Men stores, Internet Services

U.K. Hair Care Market

Highly Fragmented with 60 major brands

None of the brands has more than 9% market share

Severe price competition

Volume growth more than value

Significant price discounting through promotional

activity

Sales was directly proportional to Advertisement

Expenditure

Market Growth was 1-3 % per year

Ranges at Boots
Existing
products
were
launched
through a
beneficial
supplier and
retailer
partnership

2.

1.

Developed
and launched
in
partnership

MAJOR COMPETITORS
P&G

Alberto-Culver

LOreal
Hair Care
product Retailers

8.4% Market Share

High brand awareness
Leading Brand Pantene
Broad assortment of shampoos,
conditioners and styling agents
Top brands: St. Ives, VO5, FDS
5% market share
More than 500 brands & more than
2000 products
Tesco, Sainsbury & Morrisons Major
retail players
Super drug is direct competitor

Consumer Behaviour
Changing
buying
behaviour
changing
preferences

Difficulty in
differentiation
because of lot
of variants

Changed
shampoo
brands for good
hair

Less brand
Loyalty

Consumer

Target Segment
Fashion conscious

20-35 years Women

Affluent Buyers

Basic (husband and children) + Premium

(Herself)

Basic (Everyday use) + Premium (Special

occasions as weekends and outings)

PROMOTIONAL ALTERNATIVES
3 for 2

Item with minimum price in the purchase of 3 items would be

free
Competitors dont have the technology at POS to imitate the
promotion: Could be a differentiating factor

A product sample free along with a regular purchase (usually 75

ml)
Gift with Existing sample product would be used to avoid the need to
purchase design and produce additional packaging

50 pence off on the product

More conservative approach
On-Pack
Easily redeemable
Coupon

3 FOR 2

Pros

Cons

Consumer would get 3 items for a

regular price buy of two.
Consumers could combine any three
items
Competitors did not have the
technology at the point of sale to
imitate this promotion.
Expected that sales would increase
to 300 % of pre-promotion sales
60 % new buyers

Profit margins reduce substantially

Brand equity may dilute

GIFT WITH PURCHASE

Pros

Cons

Product sample would be given free

along with a regular purchase.
Additional packing would be used to
pack the free sample along with the
existing one.
Estimated sales would increase by
170% of the pre-promotional sales.
40 % new customers

Additional cost of 93 pence for

bundling the sample with the product
Common strategy, competitors can
easily imitate.

ON-PACK COUPON

Pros

Cons

Customers would be able to redeem

their coupons during their current
store visit.
Sales are estimated to increase by
150% of the pre-promotional sales.
50 % of the customers would be just
promotional buyers.
Coupons would enable multiple visits
for a single customer.

Brand dilution
Common strategy, competitors can
easily imitate.

Shampoos

Average Average
Price
Price (250
(100ml) ml)

Min price Max Price

(100ml)
(100ml)
Charles
Worthington

1.7

2.2

1.95

4.875

3.48

3.17

1.71

1.5

1.75

4.375

3.13

2.84

1.53

3.57

3.25

1.75

Lee Stafford

1.6

1.6

1.6

2.86

2.60

1.40

John Freida

1.4

2.5

1.95

4.875

3.48

3.17

1.71

Nicky Clarke

1.6

1.6

1.6

2.86

2.60

1.40

Umberto Giannini

1.6

1.6

1.6

2.86

2.60

1.40

4.45

3.18

2.89

1.56

Only Boots Toni & Guy

Trevor Sorbie

Widely
Available

Average Values
Competitors

CP to
Manufacture
r (8% to
12%
CP to
Margin)Avg
retailer(40 Assume
Profit
% margin) 10%
per unit

Pantene
L'Oreal

0.5

0.5

0.5

1.25

0.89

0.81

0.44

Conditioners

Min price
(100ml))
Charles
Worthington

CP to
retailer(40%
Average Price Avg Price(250 ml) margin)

Max Price
(100ml)

CP to Manufacturer Avg
(8% to 12% Margin)- Profit
Assume 10%
per unit

1.7

3.3

2.5

6.25

4.46

4.06

2.19

Only Toni & Guy

Boots
Trevor
Sorbie

3.57

3.25

1.75

3.57

3.25

1.75

Lee Stafford

1.6

1.6

1.6

2.86

2.60

1.40

1.7

2.5

2.1

5.25

3.75

3.41

1.84

1.8

1.8

1.8

4.5

3.21

2.92

1.58

1.8

1.8

1.8

4.5

3.21

2.92

1.58

4.93

3.52

3.20

1.73

John Freida
Widely
Availabl Nicky Clarke
e
Umberto
Giannini
Average
Values
Competi Pantene
tors
L'Oreal

0.5

0.5

0.5

1.25

0.89

0.81

0.44

Gels

Min price (100ml))

Charles
Worthingto
n
Toni &
Only Boots Guy
Trevor
Sorbie

Max Price (100ml)

Average Price

Avg Price(250 ml)

CP to
Manufactu
rer (8% to
12%
CP to
Margin)retailer(40 Assume Avg Profit
% margin) 10%
per unit

3.3

3.3

3.3

8.25

5.89

5.36

2.89

3.33

3.33

3.33

8.325

5.95

5.41

2.92

1.7

2.5

2.1

5.25

3.75

3.41

1.84

1.8

1.8

1.8

4.5

3.21

2.92

1.58

1.8

1.8

1.8

4.5

3.21

2.92

1.58

1.86

6.17
4.65

4.40
3.32

4.00
3.02

2.16
1.63

Lee
Stafford
John
Freida
Nicky
Widely Clarke
Available
Umberto
Giannini
Average
Values
Competitor Pantene
s
L'Oreal

1.86
-

1.86
-

Further Analysis

Total average price for (Shampoo + Conditioner + Gel) =

(4.45+6.17+ 4.93 )/3 = 5.184

Total average cost for manufacturing (Shampoo +

Conditioner + Gel) = (2.89+3.2+4)/3= 3.36

60% new customers

Sale post scheme= 300 units
3:2 Promotion Scheme
Total profit without scheme (100 units)

100*1.56

156

Total Profit with scheme (300 units)

(200*5.184) - (300*2.89)

Break Even point

170

156/(170/3)*100 = 276 units

40% new customers

Sale post scheme= 170 units
GWP (93 pence - additional cost)
Total profit without scheme

100*1.56 = 156

New Avg. Profit per unit after scheme (avg.

profit per unit -0.93)
1.56-0.93 = 0.63
Total Profit with scheme

170*0.63 = 107.1

Break Even point

156/((107.1/170)*100)*100=248 units

50% new customers

Sale post scheme= 150 units
Coupon (50 pence off)
Total profit without scheme

100*1.56 = 156

Total Profit with scheme

150*(1.56-.5) = 159

Break Even point

156/((159/150)*100) *100= 148 units

Conclusion
170

Maximum Profit is by the scheme: 3 for 2 @

Whereas GWP has profit= 107.1 and On-pack coupon

has profit = 159

The deal of 3 for 2 appeals more as compared to the

other two

It is difficult to copy and hence can prove to be a

competitive advantage

It also involves 60% of the non-users and hence, helps in

building brand equity

Current Promotional Scheme