According to the case study, L'Oréal Netherlands marketing manager was considering introducing the new product lines of Garnier Family brand in skin care product lines called Synergie and in hair coloring product lines. These products lines were successfully introduced in France. However the target market, consumer behavior, perception and brand awareness towards the products in Netherlands were not quite the same with those France.
The problem is which one or both of them should be offered to Dutch consumers. However, L'Oreal Netherlands had currently products to satisfy the same needs of customers which are the Plentitude for skin care and Recital for hair color market. Plus, these existing products were facing a lot of competition.
Cosmetic consumers tend to be brand loyal in fear that they will have experience negative results when attempting to use a new or different brand. This is another obstacle Garnier must overcome in addition to launching a product line to a market with little brand awareness. Dutch consumers will continue to purchase products that they know, use and trust, because they have had positive outcomes after product usage. It is known that attachment to a certain product only becomes stronger with age, so it's imperative that a new product line reach the young consumer who will only grow increasingly loyal as they grow older. Cosmetic consumers research products to become familiar with the items that they want to buy, therefore, both product packaging and advertising of the new product lines needs to be informative, to ensure the cosmetic consumer understand that the Garnier brand will fulfil their wants and needs.
Dutch consumers have very little awareness of Garnier and they have not formed a brand image; this makes it very difficult to break into a market where consumers tend to be brand loyal. Although Dutch women have more disposable income, the fastest growing segment is women 25+ who shop for value and only purchase skin care products 1 to 2 times per year, making it very difficult to establish a new brand in the skin care market. The Dutch research department conducted research on the Synergie products and the results were fairly similar to competing brands including L'Oreal's current offering, Plentitude. An especially fast growing category consists of anti-aging creams and yet the research results declined after participants used the Synergie anti-aging cream. Dutch women are increasingly interested in products with natural ingredients, but they aren't familiar with technical product descriptions, which is part of the current position statement that Synergie provides (“The alliance of science and nature to prolong the youth of your skin”).
The trend over the past 4 years has been towards the semi-permanent colorant, yet nearly 73% of Dutch women us permanent hair colouring. There is a lot of potential in this market, but there are strong competitors. As mentioned, L'Oreal has an offering in this category and smaller brands have entered the market over the past few years as well. Currently none of the competitors have a clear positioning statement describing customer benefits; therefore Belle Couleur appears to have a competitive advantage with its current positioning as “natural colours, covers all gray.” But there are two major problems with the Belle Couleur line. First, the market research conducted revealed that after use participants who ‘probably would not' or ‘certainly would not' buy the product increased from 13% to 32%, with many women saying that their hair was too dark and the colour “didn't cover the gray.” Secondly, Dutch consumers tended to use naturally light colours, but the French manufactured Belle Couleur is formulated to give a classical dark blond look and it is L'Oreal's policy to not modify the product for a new market.
In terms of distribution, L'Oreal has a positive image with Dutch retailers and they need to make sure that any new products they offer provide high quality and innovative, while showing consumer acceptance. We do not think that either of the potential lines offers what distributors expect from L'Oreal. Therefore if they decide to launch the new line-ups there may be some risk of losing current L'Oreal distribution as the Garnier lines will be shipped with L'Oreal in order to gain distribution quickly.
L'Oreal headquarters wants to introduce more Garnier products in other areas including the Netherlands over the next few years. There is potential to move into both skin care and hair coloring markets as the annual volume growth rate is 12% and 15% respectively, but more work needs to be done to understand the target market and to come up with a concept and value that resonates with the Dutch consumer. In order to move into the skin care market, Garnier needs to position the Synergie line as a “natural moisturizer” that is sold at a reasonable price, and then they have to retest this concept and using a lower price to determine if there is a potential target market for a new brand line up. They also need to be prepared to spend a lot of money upfront on advertising in order to gain market share. To move into the hair care market Belle Couleur needs to modify its product to cover gray hair, they have a strong positioning statement that resonates with consumers who want color to cover gray hair. Either they need to re-formulate the product to cover the Dutch consumer's gray hair or they need to change the positioning statement and emphasize the lower price offered by Belle Couleur. It is critical that the Garnier product line launch is successful so that they can build a positive brand image, create consumer value and ensure future success of its products in the Netherlands.
Based on the current positioning statements and market research for each line-up, the data simply does not support strong consumer acceptance. Something would have to be done to improve the consumer perception of the brands, such as a stronger positioning statement, a focused marketing plan, or a better product in general. Also, since the subsidiary is responsible for the introduction of the product, there is a possibility that the L'Oreal sales force becomes overwhelmed by having to sell in both products at once, while maintain the current L'Oreal offerings. L'Oreal would also have to lobby for a lot of shelf space in both drugstores and supermarkets. They cannot rely on the retailers just handing them the shelf space, especially since they do not have an established brand name in the Netherlands.
Marketing Mix (4 P's)
Product: The differential advantage is natural ingredients
Price: It offer as the mid-price range. Synergie will be able to compete with the outside competitors. However, it has to compete within L'Oreal brands (Plenitude).
Place: distributed through independent drug stores, drug chain, and also food stores. L'Oreal might enlarge the market through distribute via supermarkets. In Dutch market, L'Oreal was perceived as the high quality, innovative products. I think I wouldn't create the negative image for the Synergie to be distributed through supermarket. It would probably perceived as convenience and have more differential advantages towards other competitors which usually distribute through the traditional distributors.
Promotion: As I mentioned earlier, the main problem is cannibalization. L'Oreal needs to concentrate on the positioning of each product. So, the Synergie should highly promote and stress advertises on the natural ingredients position. This helps to distinguish the target market who mainly interested in natural ingredients (Synergie) and who mainly interested in anti-aging (Plenitude)
Product: The problem is the majority of Dutch market love to have the brighter hair color. It sounds impossible for Belle Couleur will succeed in Netherlands if the product is not re modified. Even some people will love to buy Belle Couleur, those people are the Recital's buyers who love L'Oreal product and want to have it lower price. So, they satisfied with Belle Couleur. Thus, it is also the cannibalization problem. If the L'Oreal is willing to expand the market of the low price hair color product, they better reposition of the Belle Couleur by differentiate its quality or advantage from Recital. For example, let Belle Couleur offer the brighter shades of hair color to compete with other competitors and also satisfy the majority of Dutch market.
- Price: The mid-price range. There is no one offering this price range. It is quite competitive.
- Place: Same as Synergie, Belle Couleur was sold through the drug chains and independent drug stores. L'Oreal might distribute through supermarket also. In addition, the Belle Couleur required a lot of spaces; normally the supermarkets have a large amount of space than drugstores. It won't difficult as much to negotiate to launch the lines of products.
- Promotion: Right now the Recital faced the losing market shares. That's mean its need to spend more on promotion campaign. Thus, to introduce the new lines of hair color in this downturn of the industry. L'Oreal will have to carefully consider implementing the promotion of the introduction of Belle Couleur. Of course, the product is not strongly favorable in the Dutch market. And the France manufactures will not reformulate or customize the product for Dutch market.
If the Netherlands operation decide to introduce the Garnier lines of products, there are some issues that need to be considered too;
- Limited resources: there is a limited sales force. It is stated that Netherlands division will use the same sales force for both L'Oreal existing product and Garnier new product lines. This might lead to ineffective work. L'Oreal needs to come up with the solution such as the compensation, incentives, etc. to improve motivation.
- L'Oreal existing products: Due to less time and money to maintain the lines, this might lead to sales drop or ineffective management of the currently lines. Also, L'Oreal need to develop the defend strategy for the Plenitude and Recital to defend their position against the competition.
- Recital's losing market share: this line now requires attention from the managements.
In my perspectives, it mostly depends on the budget of the Netherlands division and also the market situation. If there is the budget enough, they might be able to promote the Synergie- skin care lines. They must evaluate the situation by comparing the cost-benefit analysis. Keep in mind that to develop the demand, L'Oreal needs to heavily promote Synergie in the natural ingredients themes in order to differentiate it from the Plenitude. This also helps protect from the competitors to launch the natural ingredients concern before L'Oreal. For Belle Couleur, they should not introduce it because it will create the negative image towards the Garnier brands because it is not customized for the Dutch market. It would loss reputation for the future of the Garnier family brands.
- The natural ingredient was becoming more awareness. It will be the good opportunity to take advantage with the new innovation product. It tended to be the high growth market.
- From the market research; it was revealed that Dutch women shopped for value in cosmetic and toiletries. Synergie will be introduced in the middle price range. Thus, in the low-cost preferred consumers mind, it will be the better choice, and it can compete with the upper end price range competitor such as Yvs Rocher, Estee Lauder.
- The results of the buying intention for Synergie products were a great support to introduce this line. From all participants and the price is known, 24% will certainly buy anti-aging cream, and 39% will certainly buy the moisturizing cream.
- Synergie was successfully introduced in France. It has a potential to success also the Dutch market. (New-Product Development Strategy)
- However, the cannibalization exists in the moisturizing cream, 52% of the Plenitude (currently L'Oreal line) users from the market testing will certainly buy Synergie's moisturizing cream.
- If choosing to introduce the Synergie, L'Oreal have to spend a lot of money promote and introduce Synergie, and also have to spend a lot of money to defend the existing products (Plentitude).
- Any innovative products could be quickly copied, it is very risky market.
- In order to build the brand awareness in Dutch market, Plenitude, the existing lines, spent heavily on advertising to develop the brand preference. Surely, Synergie have to spend a lot to create brand recognition with the new Garnier brand.
- The trend shown that women will increase working outside, so there will be more demand for the cosmetic and toiletries products. However, different segment might lead to different solution. There is no guarantee that Synergie which succeed in France will ultimately succeed in Netherlands as well. Due to factors such as smaller population one fourth of France, different consumer preferences, lifestyles. These factors might lead to failure and loss in the introduction.
- Belle Couleur had marketed successfully for two decades in France. It was classified as the market leader there. It is in the mature stage or cash cow stage. It is wisely way to relaunch this product in other markets to generate cash as long as possible.
- There is no direct competition exist in the mid-price range. In the market of hair colorant, there are just upper end and lower priced offer to the market. This is considered as the price advantage.
- The result of the market testing was somewhat unfavorable for the result of hair color. Most of the participants dissatisfied with the final color, they thought their hair was too dark and it didn't cover gray. The product didn't modify for the Dutch market. It is just like market what you produced, not produced the product that market want.
- Same as the Synergie, there is currently L'Oreal product in the hair color market in Netherlands. That is Recital. Thus, the cannibalization will exist. The new product will probably meet the expectation of these existing target markets. It is possible for the satisfied L'Oreal (Recital) users to shift to the lower price brand (Belle Couleur). In other words, Belle Couleur offers the same quality products to satisfy the same need of the same target of the Recital product with lower price.
- Belle Couleur required about 1.5 meters for the retail shelf space, which is quite large amount of space. It is not easy to negotiate with that much of space in the drugstores, or any retailers. In order to let them carry our lines, L'Oreal needs to have the evidence of consumer preference, and the rationale for product development which both are difficult criteria to meet for the Belle Couleur lines.
After considering both pros and cons of both product lines, the main problem that arises in the introduction of these new products is cannibalization. If the company decides to introduce any of these products, they might sacrifice their sales of the existing products (Plenitude and Recital). In other way, L'Oreal might have to repositioning the existing products. It is a must to clearly classify the products position. Currently, the Plenitude and Synergie are classified as the same quality and serve the same customers, and also compete in the same price range. L'Oreal might use repositioning strategy to clearly separate these two brands to reduce the cannibalization problems. They should have different target market and satisfy them independently.
One obvious benefit to launching both lines would be the saturation of the Garnier brand name into the Dutch market. By launching both product lines, Dutch consumers would become even more familiar with the Garnier brand name and potentially be more willing to try the product. If Garnier can get over the initial challenge of breaking consumer loyalty to their current products, by showing that they are offering a unique product that works well and appeals to their needs, then they should see success from launching both lines. L'Oreal has a policy of having subsidiaries financing their own product introductions and marketing plans. By launching both, L'Oreal would have a bigger budget to work with, thus increasing their ability to reach the Dutch consumers. There is clearly a lot of risk associated with launching both lines.