Case study analysis: L’Oreal Nederland
Marketing Management

Executive summary
During this report I will highlight and explain my reasoning behind choosing between L’Oreal’s Synergie skin care line and/or Belle Couleur hair colouring to be introduced into the Netherlands’ market.
After careful consideration, I decided that it would be most beneficial, profitable and valuable for L’Oreal to introduce only the Synergie skin care line to this market; after taking into account that only one Garnier product has previously been sold in the Netherlands it seems too risky to announce two products from the range simultaneously. According to the case study, ‘. For the past 5 quarters unit volume had been growing at a rate of 12 percent annually, and dollar sales at a rate of 16 percent.’ This data, as well as other evidence I have gathered from the case study (which I will discuss further during this report) confirms my initial opinion that Synergie would be more successful in the Netherlands as oppose to the Belle Couleur hair colouring products, for example particularly because, according to the case study, popularity of permanent hair colouring products was decreasing.

Current situation
As stated in the case study, in the 1980s, generally, women in the Netherlands delayed child birth and had a higher disposable income, and, as a result of this, demonstrating greater self-confidence and interest in purchasing toiletries and cosmetics. However, The Dutch per capita spending on toiletries was only 60 percent of the amount in France or Germany. Despite this, and the fact that the Netherlands only accounted for 4% of the EU’s total sales of toiletries and cosmetics, the skin care market was the 2nd largest sector of the Dutch cosmetics market. As well as this for the past 5 quarters, unit volume had been growing at a rate of 12% annually, and dollar sales at a rate of 16%. Dutch women, however even with a higher disposable income were still more interested in products of good value. In the EU, the Netherlands were ranked 4th per capita income but only 6th in per capita spending on toiletries and cosmetics. This leads me to believe that, although there was a demand for toiletries and cosmetics, those products that were mass-market would prove to be more profitable if penetrated into this market.
According to the case study, nearly 50% of the 5 million Dutch women aged between 16-65 used traditional skin care products, mostly being day cream and cleansing products (46 and 40%.) Anti-aging cream was the least popular, with only 3% of those who use skin care products using it. Chain drug stores were the most popular for sales of such products. (Mostly middle and lower priced brands). L’Oreal, according to their existing Plenitude product feedback, were considered as a high quality, high priced brand, however still mass-market, which would allow the implantation of any new products to be introduced into these chain drug stores.
Synergie, a collection of facial care products, consisted of moisturiser, anti-aging day cream, anti-wrinkle cream, cleansing milk, a mask and cleansing gel. According to the popularity of day cream and cleansing products in the Dutch market, it would be most beneficial for L’Oreal to initially introduce those select products from the range as oppose to attempting to introduce the whole range at once.
Introducing a new facial care product to the Dutch cosmetics and toiletries market would be difficult, because in reference to the case study, Dutch women generally only purchase facial creams once or twice a year, and the products rely heavily on brand image. However, consumers were becoming increasingly interested in products that used natural ingredients, which compliments the Synergie range. But, Dutch consumers were not as familiar with the terms as French consumers were, and this is something L’Oreal would have to consider.
Synergie had a positive reaction with potential consumers according to Mike Rourke’s internal research, which consisted of 200 women aged between 18-55 who used skin products 3 or more times a week. 55 of those were Plenitude users, 65 Dr. Vd Hoog users, and 80 were users of other brands. When considering buying intentions, out of a possible score of 7, Synergie scored 4.94 on a positive mean scale, which, when compared with Plenitude and Dr. Vd Hoog users which scored 4.97 and 4.88, was a very respectable result. However, the research also showed that there needs to be a decrease in the prices of the products; the buying intentions of those who did not know the price severely decreased when they were made aware of the price. For example, all users reacted positively to the moisturising cream with a score of 5.51 when they were not aware of the price. However after this was revealed, buying intentions decreased to 4.06, or 39%.

The case study showed evidence of numerous competitors for facial care products, particularly Oil Of Olaz/Oil Of Olay, whose products were offered by large multinational companies. Some brands offered a complete line, whereas Oil Of Olay offered one or two. This market is specifically competitive for new products particularly due to the consumers’ brand loyalty. Those brands which were introducing new products also had to spend the most on advertising to allow maximum exposure for their product; they needed to tempt consumers away from their existing habits and preferences.

Belle Couleur, a line of permanent hair colouring products, was the market leader in France, offering 22 different hair colours, with a slogan of ‘Natural hair colours, covers all grey’. 71 percent of Dutch women or 3 quarters who used hair dye used permanent colouring. However, in recent years, usage of semi-permanent colours increased from 12 to 27%. Unit volume for both permanent and semi-permanent grew 15 percent per annum. Majority of unit sales were in chain drug stores (57 %.) 40% was equally distributed between large and small independent drug stores and the remaining 3% was account for by food outlets. A research project was also undertaken with Belle Couleur products; it was found that after discovery of the price, consumers were more interested in buying the product. However, buying intention then decreased after actual use of the dye.
In the Netherlands 4 of 10 total brands already accounted for 80 percent of the sales of permanent hair colours. With this considered, it would appear that this market is already saturated. There is no demand or need for another permanent hair colouring product to be introduced. As well as these 9 alternative brands Belle Couleur would be competing with, they would have an additional indirect competitor- hair salons. (The leading brand is L’Oreal’s own, however, the popularity of permanent hair colouring in the Netherlands was decreasing.)
In addition to this, the slogan behind Belle Couleur used in France: ‘Natural colours, covers all grey’ would not prove to be nearly as popular in the Netherlands; nearly 60% of French consumers use the product to cover grey hairs, however, Dutch women saw using hair colouring products as more of a fashion statement. L’Oreal’s existing hair colouring product was also in decline despite being the most popular, and, it would seem incredibly risky for them to introduce an alternative product in conjunction with this, as it could be detrimental to their current established reputation.
For retailers, who had been gaining distribution power, the most important factors used to evaluate new potential products was evidence of consumer acceptance, as well as manufacturer advertising and promotion, introductory monetary allowances. When considering the results of the research of both the Synergie and Belle Couleur range, and the fact that it was highlighted in the case study that L’Oreal would not reformulate both the products just for the Dutch market, Synergie stands out as the range most likely to succeed in the Netherlands. These factors are also in line with L’Oreal’s own product requirements: they wanted to only introduce new products which showed evidence of differential advantage and consumer acceptance.

The macro environment includes the political, economic, social, technological, environmental, and technological factors that affect a business and its success. The factors are uncontrollable, and each factor affects one another and they are all related. However, businesses can predict future trends in the macro environment using the correct analytical marketing tools. Therefore, L’Oreal could attempt to predict which of these trends could be detrimental to the success of the launch of a new product.
The external factors of the political environment consist of laws and government agencies that can limit various organisations in society. It is the competing views about the type of society that we want to live in, and involve choices and decisions that affect the whole society. A ‘good society’ ranges from interests, opinions and values. Political decisions affect the economic environment as well as the social and cultural environment of a country. It is one of the less predictable elements in the business environments, and it is necessary for companies to pay close attention to this element, as ultimately, governmental actions have a big impact on businesses. For example, the government sets the legal framework, levies taxes on businesses, purchases goods and services, and generally manages the economy. Factors in government, changes in legislation and law and the regulatory system affects the way an organisation operates. In the last 30 years, organizations have been affected by employment legislation, minimum wages, and health and safety requirements, and new laws and enforcements are going to continue to increase in the future. It is incredibly important for companies to understand and abide by these laws and regulations. The main purposes of business legislation are to protect companies from each other, to protect consumers from unfair business practice, and to protect the interests of society. It is especially important for international businesses to understand and familiarise themselves with government legislation across the board because of the differences between each country.
The economic environment is mainly linked and compared to the political environment as it is influenced by the actions of the government. It affects consumer purchasing power and spending patterns. It includes factors such as interest and exchange rates, economic growth, inflation and recession. If an economy is going through a recession it is clear that business will generally not be booming. High rate in inflation leads to lower purchasing power and less need for goods and services, therefore leading to lower sales for businesses.
Other potential issues include: high level taxes. These lead to low disposable income and contraction of demand in the economy, making it difficult for businesses to attract customers. Tariffs are taxes on imported goods. If tariffs are low, the domestic market could be flooded with cheap imported products causing problems for local businesses. Another issue is high labour costs. They result in high production costs, and make a business’s product more expensive and consequently affecting its profits and sales. Unemployment issues are also detrimental to a business as people will not have sufficient funds to purchase the firm’s product.
The social environment consists of the attitudes, lifestyles and values of individuals. Changing attitudes have a big impact on business organizations. It consists of factors such as divorce rate and ethnic diversity.
It is especially important for businesses to understand the different values in different countries and continents, and behave socially responsible. This is something in particular that L’Oreal need to consider because of the fact that they are trying to penetrate a new product into an area outside of France.
The technological environment is the next aspect of the microenvironment. Arguably this is the factor also most subject to change; technology is constantly advancing allowing businesses to improve their products. It is essential for businesses to adjust to these advancements in order to maintain their customers- if not they are at risk of losing these customers to businesses who can provide them with the latest advancements.
The next factor is the ecological environment. The ecological environment refers to all living and non-living things around us. Individuals affect the ecological environment they live in and in turn the ecological environment affects those living in it. They include geographical position, climate change, and weather.
The final factor is the legal environment. The legal environment is also linked with the social environment. This is because, for instance a business sends a message out in its advertising that could potentially be offensive or racially prejudicial, the law would intervene to protect the interests of the public. So, it is vital that businesses not only take care with advertising for social impacts but also for legal reasons. However, it is almost impossible to predict the future of the legal environment, because we aren’t sure which laws will be enforced next year and so on. But, it is obviously incredibly important for businesses to understand and abide to all laws relating to their business, as otherwise they are risking substantial fines or even worse.

SWOT Analysis
SWOT analysis, like PESTEL analysis, is another analytical tool used in marketing. The SWOT tool is used to put realism into potential external opportunities and threats, using the organizations internal strengths and weaknesses. This method provides a business to assess the number of possible opportunities within an environment. A business depends on its internal strengths and weaknesses to allow it to take advantage of opportunities and resist threats. I will now discuss the SWOT analysis of both the Synergie and Belle Couleur product range.

Synergie
Strengths
1) L’Oreal are already a well-established existing brand with a good reputation, and can provide a lot of financial support despite the fact that only one Garnier product has been launched previously in the Netherlands 2) Natural products are a current trend in the market- Synergie uses natural ingredients; this makes it a niche range of products 3) Although there are established competitors, from the case study there is no clear current market leader

Weaknesses 1) Lack of current brand awareness 2) Research showed the products were too expensive 3) Manufacturers losing distribution power

Opportunities 1) There is room in this market for growth; it isn’t already over populated or saturated, demand for these products is growing and this allows L’Oreal the opportunity to launch the Synergie range 2) Fastest growing age segments= over 25s. Women are more confident, have a higher disposable income, more likely to spend on cosmetics and toiletries 3) Consumers who have used Garnier Ambre Solaire in the Netherlands may be more inclined to try a newly introduced product

Threats 1) Competitors- such as Oil of Olay are already well established and popular within the market 2) Dutch per capita spending on toiletries & cosmetic only 60 percent of the amount in France or Germany. 3) Consumer purchase behaviour is important to monitor- the case study demonstrated that consumers typically only purchase skin products once or twice a year

Belle Couleur
Strengths
1) L’Oreal are already a well-established existing brand with a good reputation, and can provide a lot of financial support despite the fact that only one Garnier product has been launched previously in the Netherlands 2) L’Oreal already sell most popular brand of permanent hair colouring products in the Netherlands 3) Belle Couleur has already existed in the French market for 2 decades

Weaknesses 1) The hair colouring market is saturated; 9 alternative leading brands currently supply alternatives to this product 2) Slogan- generally consumers in the Netherlands want to dye their hair as for a fashion statement as oppose to covering grey hairs 3) Manufacturers losing distribution power 4) Increase in interest in semi-permanent hair dye rather than permanent 5) Research showed after actual use of the product buyer intentions decreased

Opportunities 1) Consumers who have used Garnier Ambre Solaire in the Netherlands may be more inclined to try a newly introduced product

Threats 1) Indirect competitors- hair salons 2) Hair colouring products not often impulse buys

As well as each range having its own strengths and weaknesses, obviously if both ranges were launched simultaneously it could be detrimental to L’Oreal’s reputation as a whole in the Netherlands which is arguably the biggest threat to L’Oreal and their plans to expand in the Netherlands.

Objectives & Strategy
After intensively examining the case study, it is clear that between the Synergie product range and the Belle Couleur hair colouring products, Synergie has the higher potential to succeed in the current market. With the increase in interest in natural ingredients and a decrease in interest in permanent hair dye, Synergie is the niche range of products which has the opportunity to become incredibly successful if marketed and advertised correctly.
Synergie cleanser and day moisturiser will be the two products primarily introduced and alternatives can follow depending on the success rate and time. This is because 46% of the women in the Netherlands that use skin care products use day cream, and 40% of those women use cleansers.
In recent years, L’Oreal has created an image of a brand that is high quality yet still mass-market so potentially Synergie could compete with the likes of brands such as Ponds and Estee Lauder- this allows them to target a wider target audience and access more customers.
A vast target audience also allows Synergie products to more distribution channels. Considering L’Oreal is already a sustainable, successful and reliable brand, drug stores and supermarkets for example would be more inclined to sell and stock new and innovative products on L’Oreal’s behalf.
It is key to set out realistic objectives for L’Oreal to aim towards in order for Synergie to be a success. It has been proved that specifically within the toiletries and cosmetics market consumers are particularly loyal to the same brand so L’Oreal need to ensure that they provide potential consumers with some sort of incentive; for example vouchers or free gifts within magazines, drug stores, or alternatively whenever consumers purchase a L’Oreal product for example they could be given a discount towards a product from the Synergie range. As well as this raising brand awareness, with L’Oreal’s existing positive reputation, this would result in consumers who were existing customers of L’Oreal trying out a product from the new range.
As well as this, considering the current use of social media and technology within marketing and advertising, social media is a key tool to access a wide customer base in a short space of time. Using social media is also beneficiary for the age range of the customers that Synergie hopes to appeal to (18-55). The use of channels such as Twitter and Facebook does not only allow L’Oreal to access a wide customer base, but interact personally with potential customers. Magazines are also a beneficial type of media to use to advertise. Adverts within magazines could provide consumers with free trials, as well as reminding them that Synergie is a product of L’Oreal so consumers would be more inclined to try it, as well as adverts endorsed by celebrities on TV.
Market penetration is also incredibly important, specifically within this product as the case study showed that generally women only purchase facial creams once or twice a year. Therefore, it would be most productive for Synergie to intensively promote their products twice a year; summer and winter, for example summer for primarily greasy skin and winter for dry skin considering the typical climates during those given seasons.

Action plan & budget
Innovative products suffer the potential threat of being quickly copied as retailers could introduce private labels in 4 months. Manufacturers could develop competing product and ad campaign in 6 months. Manufacturers can also look for products abroad. With this being said, L’Oreal need to monitor competitors test markets to ensure no products alternative to the Synergie range are going to emerge in the market within the upcoming months. This takes approximately 9 months to complete. As well as this, a sustainable marketing campaign needs to be formed. On this basis, Synergie would be ready for launch by next summer, potentially June/July.
The budget of this campaign will be fairly vast considering that we know that in order for a new product to succeed in the Dutch market, intensive marketing and advertising needs to be implemented. However, as the product is so niche, depending on how quickly it becomes a success determines the intensity of the advertising campaign over another 9 month basis. For example, for 6 weeks before the product is introduced and 4 months after the product needs to be promoted on all platforms possible as mentioned above. This is determined to cost approximately $350,000, providing an estimated $600,000 total sales. From studying a profit and loss statement, there will be an estimated 30% increase in unit sales 6 months after the range is initially introduced to the market. We are expected to break-even within an estimated 9 months. Providing the profit to sales ratio remains high, return on investment is guaranteed to in turn, reflect this and remain high also.
Monitoring progress of Synergie will be possible through monthly and annual revenue, sales figures and projections. Not only will these figures provide levels of current success but also determine and demonstrate whether the products will continue to remain a success and whether is it even possible to introduce another product from the range.