Case study analysis- L’Oreal Nederland B.V.
L’Oreal is the largest cosmetic manufacturer in the world since 1992 and contributes sales to more than 100 countries. L’Oreal invested heavily in research and development with the faith: innovation was the critical success factor. L’Oreal was at a stage of making critical decision to introduce Synergie skin care line and Belle Couleur permanent hair colorants which were successfully marketed in France, to Nederland market. These two products were under the family brand name, Laboratories Garnie, the largest provision of L’Oreal. Their introductions to the market were under pressure as Garnie was not very well known in Nederland. The failure of market these products will cause potential problems for future Garnie product introductions. To be market successfully in Nederland, the products have to offer unique, desire, and identifiable differential advantages to Dutch consumers.
Dutch is a small but very potential market. With 15 millions of small population, there were significant increases of women working outside the home, delaying of childbirth and rising of income. As a result, women in Nederland had more disposable income and more of them using it to buy cosmetic for use on a daily basis. In European Union, the Nederland ranked fourth in per capita income, however, only 6th in per capita was spent on cosmetics and toiletries. The main customers were those under 25 years old. However, the fastest-growing population segments were the 25 or older groups.
Synergie product line is a facial skin care’s products made with natural ingredients. Synergie product positioned as reliably providing natural colors with the advertising line “Natural Colours, covers all gray”. L’Oreal goal for developing new products was to introduce only product that had differential advantage with evidence of consumer acceptance. It did not want to gain distribution with excessive reliance on trade deals or high than normal retail gross margins. L’Oreal was perceived as offering high-quality, innovative products, supportive with good in-store merchandising.
Bella Couleur is a line of permanent hair colouring products. The three quarters of Dutch Woman coloured their hair by using permanent colorant. For Dutch women, colouring has become more a fashion statement then just to cover gray. As there were more and more women working outside home, home colouring would increase since it is more convenient.
Problems of entering Nederland Market:
1. Competition of medium price products:
Dutch woman shopped for values of products. Synergie products are expensive and they only being sold through personal service perfumeries (custom sale).
The main competitors, Guhl’s and Anderson increase market share in1986-1989. In late 1980’s Guhl changed its distribution strategy and started selling the brand on drug chains. As a result, Guhl become aggressive in its marketing through large independents.
3. Customers’ buying behavior:
• Dutch women tend to be loyal to their current brands to avoid problems might cause by new product. As a result of consumers’ loyalty, it increases the resistance of switching to new product. Dutch woman typically purchase a facial cream only once or twice a year and have an increasing interests in products with “natural” ingredients. • Dutch woman are not as familiar with technical product description like the French. They perceived as a technical product and believed its use was very risky.
• Considering the new brands, first and current customers carefully read package information and ask personal advice.
The higher spending of advertisement was necessary to develop brand awareness, ideally brand preference.
Analysis of problems:
- L’Oreal was...