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Transcript of Siddiq Iddrisu Maximiliano Olivares Mariana Pinos Kadidiatou Wague.
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Beauty IndustrySiddiq Iddrisu
Maximiliano OlivaresMariana Pinos
Kadidiatou Wague
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Introduction Industry Analysis Advertising Strategies Raw Data Analysis Recommendations
Agenda
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Introduction
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• Worth over 55 billion dollars• Easy to enter but difficult to excel in • Many players in this industry • Strategic price and Brand Management is KEY
Beauty Industry
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Society stresses the importance of
beauty as seen in social media Homogenization of beauty standards
and the idea that this beauty is something tangible and attainable for all through cosmetics
Relevant to College Students Profitable Industry Changing Demographics and Trends Because it’s the leading edge of YouTube
Why the Beauty Industry
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“A product used for cleansing, beautifying, promoting
attractiveness or altering the appearance.”
Cosmetics
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VS.
Ad Comparison
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Industry Analysis
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Products:
Hair Care….24% Skin Care…23.7% Cosmetics…14.6% Other…14.1% Perfume and Colognes…
9.5% Deodorants,
Antiperspirants and feminine products.. 8.5%
Oral Hygiene…5.6%
The Beauty Industry
0%
10%
20%
30%
Market Share
Market Share
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• Industry is heavily based on R&D• Companies and their investors finance production and R&D costs • People of all ages use beauty products• The old generation is the age group that use the most beauty
products. • Products go through R&D, manufacturing, and are sent to retail
stores for consumers to purchase.• Most products are sent to Huge chain-stores for purchase such
as Macy’s, Target, etc. • Trend toward direct Manufacturer to consumer purchases
Background
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L’Oréal has the largest Research and Innovation team in the cosmetics
industry with 3,782 researchers and a budget representing 3.4% of its sales. The R&D budget was over $1 billion in 2014, up by 1.6% as compared to the previous year.
Estee Lauder’s research and development costs totaled $157.9 million in fiscal 2014 (ended in June 2014), which reflected a 7.5% year-on-year growth. Estee Lauder employed around 700 employees for research and development activities during the same period. [5]
P&G on the other hand, needs to distribute its R&D resources across its diverse product portfolio comprising of consumer goods, beauty, household goods and so on. Hence, unlike L’Oreal and Estee Lauder, beauty product innovations are not the topmost priority for the company.
Research and Development
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Overall highly competitive industry Trend: number of firms has been increasing every year Rivalry is not very common in this industry in terms of
(comparative) advertising. Advertising is more information geared as opposed to combative. Government regulation
FD&C Act FPLA Act
Distribution channels/retailers The fight for shelf-space
Products are differentiated by: quality, and appearance
Competition
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• Procter & Gamble
Company• L’Oreal USA Inc.• Estee Lauder Inc. • Unilever USA • 64% of the market is
smaller beauty companies
The Beauty Industry Major Players
6.30%
6.90%
10.30%
12.50%64.00%
Market Share
Unilever USAEstee Lauder Inc.L'Oreal USAThe Procter & Gamble CompanyOther
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Cosmetic companies have targeted the female audience based on the product
itself. New markets for cosmetic companies are younger females and men. In 1976 Estee Lauder was the first women’s cosmetic company to create a line
specifically designed for men. It was called “skin supplies for men” Each of these companies sell products through department stores, drug
stores, etc. It is also important to note that most cosmetic companies are divisions of
large corporations. Ex: Although P&G own Max Factor and Cover Girl, Max Factor and Cover Girl
are not necessarily competing against one another. Max Factor and Cover Girl are targeted towards different audiences, allowing P&G
to cash in on all markets
Product Differentiation/Innovation
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Beauty brands are expected to target different groups of customers
with customized product options. For example, L’Oreal’s Urban Decay or Estee Lauder’s Mac are very
popular among the younger consumers. L’Oreal’s Age Perfect and Estee Lauder’s Revitalizing Supreme lotions resonate well with its mature clientele.
In comparison, all P&G did was add Fresh Effects line to sell its existing Olay brand (initially targeted for mature women) to the younger clientele
P&G has not evolved with the changing times, as compared to the core beauty players, and hence is getting left behind.
Differentiation Based on Customer Segments
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Monopolistic competition
Large number of firms with a few major competitors that dominate the market.
All have slightly differentiated products Major firms have strong control over pricing
Global Industry
Organization
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With tight margins and strong US competition,
manufacturers are looking outside the US for growth opportunities.
Most international companies are looking at developing countries such as China for significant growth opportunities.
Rising income levels in developing countries create more consumers willing to spend on personal care products, an "affordable luxury
Global Distribution
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• Limited distribution channels
to maintain the high-quality reputation.
• Targets upscale retailers, authorized online retailers and specialty shops such as fragrance boutiques, on-board cruise shops and duty free stores.
• The market share Estee Lauder is 6.9%
• Brands under Estee Lauder are Clinique, Origins, Aveda, M*A*C, Bumble and bumble.
Estee Lauder
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• Has over 20 different brands under
it. • It makes 25 % of its annual sales in
2014 in Beauty Products. • 12.5% of the market. • Brands that under P&G are Head &
Shoulders, Olay, Pantene, Herbal Essences, CoverGirl, Old Spice.
Procter and Gamble
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• Canada and the United States
account for 25.0% of the company's global cosmetic sales and 22.4% of the company's cosmetics manufacturing, with seven major industrial sites located within the United States.
• The company employs more than 72,600 people worldwide,
• With about 22.3% of these employees located in the United States.
• Brands under them are Maybelline and L’Oreal, Lancome .
L’Oreal
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Advertising Strategies
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Products and their packaging are increasingly
designed to minimize waste and environmental alterations.
Recycled paper is now used to box many cosmetics.
Major player Procter & Gamble introduced an eco-friendly initiative in 2010 which spans all major aspects of production, including packaging and plant emissions.
While the Food and Drug Administration does not have a definition for organic cosmetics or beauty products, brands market their products as such.
Product Packaging
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High-quality items (or those
perceived as such) carry a price premium, which boosts company revenue and profit.
Premium packaging, such as metallization (i.e. metal packaging that is considered luxurious), is an indicator of product quality.
Product Quality
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This includes the use
advertisements to show the benefit of purchasing a combination of makeup products instead of a single item.
Link-Selling
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Giving consumers free samples of new
products lets them experience the products firsthand.
When creating a makeup advertisement, companies use words or phrases that will cause a consumer to favor a product.
These keywords describe features or benefits of makeup that consumers seek, which may not be apparent with just a picture of a model.
Experience Goods
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Sales per customer were far greater when the brand’s
messaging focused on what the woman wanted to hear. Instead, brands have to use data they gather from consumers
to target them uniquely. Targeted emails
Lack of control over data. Loyalty Programs
Consumer First
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Omni-channel approach to both commerce and marketing
Website Redesign Online Shopping Widgets
Paths to Purchase
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Millennial Brand Loyalty
Blue- DisagreeBlack- NeitherGrey-Agree
“It is important for me to find brands that I am loyal to”
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There are two main ways that
celebrities can positively affect a brand’s image. Creating “borrowed equity” Celebrities as Spokespeople
Celebrities personify products to sway consumers into choosing one product over another.
Celebrity Endorsement
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Kate Moss Endorsed Rimmel Make-up When she was found to be a drug user
many companies reviewed their contracts with the star..
Chanel decided not to renew Kate Moss's £750,000-a-year contract as the face of Coco Mademoiselle perfume
Celebrity Endorsement Ex.
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The beauty industry leads in social video sharing, content creation,
engagement, and curation. The Youtube audience is looking for a different brand experience. Brands and their agencies are failing to understand this medium. Why should modern marketers care about YouTube and the
beauty industry? Because it is revealing the future of marketing. Data-driven video, video marketing, and social video as part of an integrated marketing strategy tie into a very different—yet highly targeted—advertising economy
Digital Advertising – YouTube Study
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YouTube
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YouTube
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Recent studies show that both the emotional and utility aspect of
cosmetic brands have a significant impact on consumer satisfaction, but that the emotional component has a greater effect
Some of the main positive emotions aroused by beauty products include “the sensation of well-being gained from eliminating or reducing feelings of worry and guilt, which is the factor with the greatest impact.
The results showed that “consumer satisfaction is greatest when the cosmetics brand helps to strengthen positive emotions through the perception of ‘caring for oneself’ and removing feelings of worry and guilt about not taking care of one’s appearance
Emotional Advertising
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Marketing firms have
encourage a strategy that crosses the line from merely targeted to outright predatory, explicitly advising brands to seize on the times of the day and week when women feel the most insecure about their bodies and overall appearance in order to sell beauty products and other goods
Targeting Ads – Emotional Advertising
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Targeting
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As indicated by Estee Lauder's recent decision to establish a
business segment dedicated to men's skin care, the male consumer will likely continue to be an important market focus for industry manufacturers during the five years to 2020.
Male Adoption
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Over 40% of Estee Lauder’s revenues comes from the skincare
segment. In Q1 2015, the company witnessed a decline in skincare growth in its most important region, the U.S.
A major reason for this was that the US consumers expect innovative products, across newer skincare categories.
Estee Lauder realized that innovation must be extended beyond the traditional skincare formulations like moisturizers and serums to newer concoctions such as masks and oils
Picking Up Market Cues
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Beauty trendsetters are pushing a very particular look for spring: the bare face. And much to makeup companies’ relief, it takes new products to achieve it.
Social media helped spread that look, with product-laden video tutorials on YouTube drawing millions of views.
Cosmetics brands are responding with lighter foundations, sheerer lip glosses and new products to accentuate cheekbones and brows, two features that are especially important with the bare look.
“No Make-up Look”
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2010 2011 2012 2013 2014Total assets $3,121,000 $3,686,500 $3,855,100 $4,297,200 $4,825,200WACC 10% $312,100 $368,650 $385,510 $429,720 $482,520
Net income $482,400 $703,800 $856,500 $1,019,800 $1,204,100
Economic Value Added EVA) $170,300 $335,150 $470,990 $590,080 $721,580RBI (Brand Earnings) 40% $68,120.00 $134,060.00 $188,396.00 $236,032.00 $288,632.00
Discount rate 8%Discount factor 1.08 1.1664 1.259712 1.36048896 1.469328077
Discounted Earnings $63,074 $114,935 $149,555 $173,491 $196,438
Value until the year 2014 $697,492
Net present value of the Brand $3,971,461
Value of the ESTEE LAUDER brand: ~ 3.97 billion dollars
Terminal value (growth rate=2%) = (Discounted earnings in 2014)/(discount rate - growth rate) $3,273,968
Brand Equity – Estee Lauder
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2010 2011 2012 2013 2014Total assets $6,673,900 $7,842,300 $8,626,700 $9,216,200 $10,522,000WACC 10% $667,390 $784,230 $862,670 $921,620 $1,052,200
Net income $1,794,900 $2,242,000 $2,440,900 $2,870,400 $2,961,400
Economic Value Added EVA) $1,127,510 $1,457,770 $1,578,230 $1,948,780 $1,909,200RBI (Brand Earnings) 40% $451,004 $583,108 $631,292 $779,512 $763,680
Discount rate 8%Discount factor 1.08 1.1664 1.259712 1.36048896 1.469328077
Discounted Earnings $417,596.30 $499,921 $501,140 $572,965 $519,747.78
Value until the year 2014 $2,511,370
Net present value of the Brand $11,173,833
Value of the L'Oreal brand: ~ 11.17 billion dollars
Terminal value (growth rate=2%) = (Discounted earnings in 2014)/(discount rate - growth rate) $8,662,463
Brand Equity – L’Oreal
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2010 2011 2012 2013 2014Total assets $18,782,000 $21,970,000 $21,910,000 $23,990,000 $31,617,000WACC 10% $1,878,200 $2,197,000 $2,191,000 $2,399,000 $3,161,700
Net income $12,736,000 $11,797,000 $9,317,000 $11,402,000 $11,785,000
Economic Value Added EVA) $10,857,800 $9,600,000 $7,126,000 $9,003,000 $8,623,300RBI (Brand Earnings) 40% $4,343,120 $3,840,000 $2,850,400 $3,601,200 $3,449,320
Discount rate 8%Discount factor 1.08 1.1664 1.259712 1.36048896 1.469328077
Discounted Earnings $4,021,407.41 $3,292,181 $2,262,739 $2,646,990 $2,347,549.23
Value until the year 2014 $14,570,867
Net present value of the Brand $53,696,687
Value of the P&G brand: ~ 53.7 billion dollars
Terminal value (growth rate=2%) = (Discounted earnings in 2014)/(discount rate - growth rate) $39,125,821
Brand Equity – P&G
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Raw Data Analysis
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Estee Lauder Clinique Covergirl L'Oreal Maybelline Olay0
100
200
300
400
500
600
700
5377
346
453
576
629
Brand
Num
ber
of
Advert
isem
ents
Number of Ads per Brand
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Estee Lauder Clinique Covergirl L'Oreal Maybelline Olay
$6,756,200 $7,821,700
$24,529,400
$28,101,600 $28,230,100
$37,737,100
Brand
Expendit
ure
Am
ount
Advertisement Expenditure
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Maybelline Olay L'Oreal Covergirl Clinique Estee Lauder $-
$20,000.00
$40,000.00
$60,000.00
$80,000.00
$100,000.00
$120,000.00
$140,000.00
$49,010.59
$59,995.39 $62,034.44 $70,894.22
$101,580.52
$127,475.47
Brand
Avera
ge E
xpendit
ure
Am
ount
Average expenditure per ad
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Maybelline L'Oreal Olay Covergirl Estee Lauder Clinique0
5
10
15
20
25
30
35
16.614517.6269 18.3865
20.462
30 30
Brand
Avera
ge A
dvert
isem
ent
Tim
e
(seco
nds)
Average Advertisement Time
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Maybelline Olay Clinique Covergirl L'Oreal Estee Lauder $-
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
$3,500.00
$4,000.00
$4,500.00
$2,949.87 $3,263.01 $3,386.02 $3,464.68 $3,519.30
$4,249.18
Brand
Avera
ge E
xpendit
ure
per
Seco
nd
Average Expenditure per Second
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• Your best beautiful• Taking care of what you’ve been given• Glow from the inside• Sharktank, NCIS, Hell’s Kitchen, Dateline• Bachelor- women compete for the love of a man• For busy women who need a simple beauty regimen
“Love the Skin you’re in”- Olay
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• #GirlsCan for women’s empowerment• Youthful• Challenging/Rebelling• Katy Perry• ANTM, Originals, Supernatural, Beauty and the Beast• ANTM- Young people compete for a modelling contract• Beauty portrayed as an asset that is tangible
“Easy, breezy, beautiful”-Covergirl
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• Established in France • Halo• Emphasis on richness of products• perfection• America’s Got Talent, Bachelor, Vampire Diaries, Revenge• Vampire Diaries- Teenage girl stuck in a love triangle• Beauty brings infatuation and love
“You’re worth it”-L’oreal
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• Unique formula• Full effect• Bringing out natural beauty• American Idol, America’s Got Talent, ANTM, Arrow, Originals,
Vampire Diaries• American Idol- Showcases amazing voices• Natural talent comes from within, but can be enhanced
“Maybe she’s born with it”-Maybelline
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• Kendall Jenner• Supreme• Experts/ Breakthroughs• Look younger• Elitism • American Idol, Glee, Voice• Voice- judges ONLY turn around for phenomenal voices• Only provide the best
“Bringing the best to everything we touch”-Estee Lauder
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• Smart• Repair• Breakthrough• Elitism• Chicago Fire, Unforgettable, Voice
“Allergy tested, 100% fragrance free”-Clinique
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• Party• Fun• Active • Standing Out
“Makeup for all. All ages, all races, all sexes”-M*A*C
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Videos
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Recommendations
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Recommendation (Entire Industry)
Utilize the consumers watching tutorials on YouTube in the morning by having advertisements on YouTube in the morning, go to where the consumers are (internet)
Have advertisements on the internet where consumers go and watch their shows (i.e. scandal, empire, how to get away with murder.
Having more advertisements for men. Estee Laude are the only ones using this.
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Recommendation
P&G Use more money on R&D. They have low-quality products so spending
money on R&D could benefit their products quality in the long run. Estee Laude Spend money on other innovative ways to attract consumers to spend
money on skin care. Utilizing their money; their spending their money irrationally Be more of a presence on social media (i.e. YouTube twitter, instagram) L’OREAL They should utilize more celebrity advertisements. Currently, there in
the middle of the pack so getting more notable faces would help greatly uplift their band name
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Recommendation Advertising Strategy
Having more advertisements throughout the morning and late at night. Woman are feeling least attractive around 5am-7am so utilizing that by having advertisements pertaining to how beautiful they can become with a companies product.
Being to advertise more on Sunday and Monday where woman feel the least attractive during the week.
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Thank You
Questions?