Body Shops USPs - Case Study Example

 Body Shop’s USPs Executive Summary The cosmetic industry in UK is facing a period of transition. While the performance of the companies that operate in the particular industry is stable with a trend for growth, there are periods during which their profits are being limited mostly due to the turbulences occurred in the British and the international markets. In the case of Body Shop it could be stated that the company ‘has been following a successful strategy, but is being hampered by lack of funds; Its 'masstige' positioning, offering premium products at mass market prices, justifies its higher price points, and new product development has moved the range on, but the store refurbishment programme was slow and hampered its drive to create a modern image for the brand across the whole chain’ (In Cosmetics, 2007). The above assumptions which are based actually on the firm’s performance the last years could be opposed by the argument that the company has now passed under the control of L’Oreal which means a chance for growth all over the world. More specifically, according to a report published by the ‘In Cosmetics’ in 2007 ‘L'Oreal, as the world's leading cosmetic company, with a turnover of E14.5 billion in 2003/04, can progress the refurbishment at a much faster pace as well as investing in greater new product development; the company can also bring its marketing skills to the brand and communicate its values and relevance to consumers with much greater authority, to a far wider audience and much faster than The Body Shop could’. However, it should be noticed that the growth of Body Shop even if achieved through the intervention of L’Oreal should be based on actual capabilities of the company and not to visual strengths. In other words, the operation of Body Shop should not be an obstacle towards the development of the parent company, in terms of financial performance, and therefore a very thorough marketing strategy should be used in order to avoid possible delays in profits. I. Demographic profile of UK’s market The UK market is a market with significant potentials for growth. Moreover, the cosmetics industry faces a stable growth in all its sectors. In accordance with a report published by Mintel (2005) ‘the UK women’s hand and bodycare market was valued at £225 million in 2004, up by 38% since 2000, having evolved and matured considerably; with it’s market value soaring by 55% over the review period to reach £127 million, the biggest growth was seen in the mass-market body skincare sector; coinciding with this growth has been a boom in advertising expenditure within the sector, exploding from £11.8 million in 2000 to £30.4 million in 2004’. The above report proves that cosmetic industry in UK has much potential to achieve an even higher level of growth especially if appropriate marketing strategies are deployed. As for the preferences of women, these are more connected with particular brands. More specifically, it has been found that ‘over a third of 55+ women claim to always buy the same hand and bodycare brands; yet bodycare manufacturers are failing to fully tap into the lucrative over-45s market, which is set to represent 44% of the female population by 2008; more precise targeting of this group is required through advertising and promotional opportunities that help women over 50, marginalised by current youth-oriented advertising, to ‘feel more included’’ (Mintel report, 2005). However, the use of advertising although a valuable tool towards the enhancement of profits in all sectors and particularly in the retail one, cannot guarantee the development of a firm’s performance especially on a long term basis. Marketing in general, should be considered rather as the appropriate solution for short term profits although there are chances for gain to be reserved for a firm after the end of the relevant period (during which marketing is used by the firm). There are also other management techniques that need to be combined with marketing in order for this one to provide the firm with an advantage that will last. In a research that took place during 2004 by Mintel regarding specifically the Beauty and Health Retail Sector it has been found that ‘sales through health and beauty specialists amounted to an estimated £15.7 billion (€23.1 billion) in 2005; the sector has maintained its retail market share at this level for the last three years; Pharmacy is the largest sub-segment and accounted for an estimated 54% of sector sales in 2005; However, it grew at a much slower pace than the other two sub-sectors (medical goods specialists, which accounted for just 3% of sector sales, and toiletries & cosmetics specialists, which captured the other 13%) largely because of the regulations relating to pharmacy licence numbers and prescription drugs prices’ (Mintel Report, 2006). The growth of cosmetics sector as presented above through a comparison with the Pharmacy one could be considered as significant given the turbulences occurred both in British and the International market the last 5 years. The limited increase of the monetary amount spent by households in UK the last 2 fiscal years prove the above assumption. More specifically in accordance with a report published by the National Statistics online ‘UK households spent on average £443 a week in 2005/06, according to new results from the Office for National Statistics (ONS); in 2004/05 the average household spend was £434 a week’. II. Competitors in UK’s cosmetic industry UK market is a very competitive one. As a result, the firms operating in this market will have to keep their level of performance at a specific level trying to avoid decisions that they could put their profits in risk. According to a report published in Mirror (January 18, 2006) ‘more than 2,600 firms were swallowed in the UK in 1999 in deals worth pounds 150 billion whereas worldwide the figure was 23,000 deals worth pounds 1.5 trillion - that's pounds 1,500,000,000,000 - more than the combined value of Britain's 100 largest companies’. The expansion of mergers and acquisitions around the world as also in the UK market is the result of the failure of companies to apply an effective strategic plan ensuring their position in their industry. Towards this direction, a report that published by DTI in December 2003 states that:‘if UK-based companies fail to innovate, jobs and profits will suffer, and UK’s standard of living will fall compared with other countries; Britain already has some sectors that lead the world in innovation: aerospace, pharmaceuticals, biotechnology, financial services and many of the creative industries; and there are some firms in almost all sectors that are global leaders; however, overall, country’s performance is not good enough; although there is no single indicator of innovation, two measures of technological innovation – business R&D and patenting – show the UK’s performance is only average compared with UK’s international competitors’ (Innovation Report: Competing in the global economy: the innovation challenge, DTI, December 2003, [2]. In other words, cosmetic industry is a significant sector for UK economy while several profitable companies operate in it achieving high levels of profit on an annual basis. In accordance with the study of Black (2004, 5) ‘the value of the professional beauty industry in the UK in 1998 was £366 million, which represented a growth of almost 6 per cent on the previous year; this figure includes beauty therapy treatments in a variety of sites including mobile, hair and beauty salons and health clubs’ (Black, 2004, 5). The above findings are indicative of the performance of companies that operate in the British cosmetic market. Moreover, the above researcher refers especially to the cases of ‘Florence Nightingale Graham (later to become Elizabeth Arden) and Helena Rubenstein’ which ‘remain well-known names in the cosmetic industry; Annie Turnbow and Sarah Breedlove (Madam C.J. Walker) presided over similar business empires focused upon the African-American market; For these women, distribution was often a problem, and so they pioneered systems of home selling and mail order, copied by other businesses in later years’(Black, 2004, 28). The reference to the above findings as well as to specific examples of successful entrepreneurs in the British cosmetic sector has been considered as necessary in order to understand the ‘power’ of this sector within the country’s market. Moreover, it should be noticed that another characteristic of modern British cosmetic sector is the high number of participants/ companies which creates an additional pressure for all the participants in the relevant industry. Firms like ‘Avon’, ‘Buy Cosmetics’, ‘Harrods’, ‘Island Cosmetics’, ‘Just UK’ and ‘Miamoo’ achieve a significant annual turnover specializing in certain sectors of the cosmetic industry. On the other hand, international firms like ‘Clarins’, ‘Estee Lauder’ and ‘Yves Rocher’ enhance the competition within the cosmetic industry setting high standards of annual profits, a challenge that has to be faced successfully for any cosmetic firm in order to survive in the specific industry. Under the above terms, in order for Body Shop to survey in the UK market and achieve a stable level of growth, it has to focus on its main strengths, which could be identified in the material used by the company for all its products, in accordance with the variety that characterizes the products offered to the customers. Indicatively, it is noticed in the company’s website that the number of products offered are over 1,200 which is a unique achievement for a company of the specific industry. On the other hand, the company has retained its basic series of products that are already known to the public enhancing its production line with new types of products which, in a way, ‘surround’ the initial series of products which has been proved to be very successful. III. Marketing potential of the Body Shop in UK a. Segmentation variables Body Shop currently operates in 55 countries around the world. The main characteristic of the firm is its effort to keep the quality of its products to a specific standard without proceeding to reduction of the cost of production. All its products are naturally made without the use of any additive that can cause harm in humans. On the other hand, the company has tried to promote the issues of protection of the environment and that of the human rights globally. At the same time, the company has based it operations on the creation of brands worldwide. Branding for Body Shop has been proved to be a primary tool of corporate success. In fact, during the firm’s operation branding has helped Body Shop to expand its activities internationally. However, after the acquisition of L’Oreal and especially given the company’s financial performance, Body Shop should try to restructure its brands in terms of presentation towards the public and promotion of its products. Since its creation Body Shop has hardly changed the appearance of its brands, an issue that although can be considered as secondary in fact it is very important for the enhancement of the company’s profits. Body Shop has to find the appropriate ways to communicate with the customers through innovative marketing schemes and offers in order to keep its position in the market. The company has been traditionally a strong competitor in the area of natural cosmetics. This fact should be highlighted to the consumers in combination with the use of motives in order to gain their preference. Furthermore, the company should retain its current structure and not proceed to a separation of its departments (either administratively or financially) at least not before a complete and accurate evaluation of the primary efforts of corporate restructuring. b. Appropriate combination of marketing communications The design of the appropriate marketing strategy for Body Shop is a responsibility of the marketing manager who will have to balance all ‘opposite powers’, i.e. the power of the firm’s competitors and the company’s strengths. In this context it has been noticed by Macrae et al. (1997, 64) that ‘brand managers face many challenges (including questions of brand strength, world-class culture, “glocal” branding, seeded marketing channels, “service smart” integration, brand architecture and brand organizing) and for this reason a framework is presented for thinking about the challenges and how to deal with them; this process, called “brand chartering”, has three principal elements: creating and communicating the brand, managing the brand organization, and directing and structuring the brand’. Under these terms, the priority for the marketing manager of Body Shop should be to identify the necessary elements of the firm’s strategy in accordance with its potentials and the required targets comparing to its competitors. Body Shop has managed within a relatively short time to expand its operations around the world. The company founded in the UK in 1976 by Dame Anita Roddick and now has more than 2,100 stores around the world (corporate website, [1]). In this context, in order for the company to achieve the desired level of growth, it has to proceed to a series of initiatives in the marketing area promoting its activities, which are really significant, regarding the protection of the environment and the human rights. On the other hand, it should present effectively its achievements which include the award of the Humane Cosmetics Standard as the first company that ever received such a global recognition. At the same time, the quality of the firm’s products should be highlighted to the general public which should be informed on the material used by the firm in its production line and the tests that take place within its production department. In other words, the differentiation of the company from the others of the same industry should be highlighted trying to avoid any comparison with specific products of other firms in the industry as there is no common element (this issue should be particularly highlighted in the marketing strategy which will be used by the firm). IV. Body Shop’s USPs a. Methods of persuasion of consumers in UK to buy Body Shop’s products Body Shop has tried to apply throughout its operation a strategy of continuous innovation. In this context, it has followed a series of marketing schemes in order to enhance its performance in the British market. In accordance with a statement published in the company’s website: ‘our new branding incorporates "Passion Panels", which tell customers the stories behind our ingredients and our products; Our campaign to 'Stop Violence in the Home' is now making a real difference in 26 markets, and we've collected significant funds globally to support Tsunami disaster victims and promote HIV/AIDS awareness and research; We've focused our efforts on increasing internal communication of our values, through training and engagement within the business, and have improved our programmes to support Community Trade and to secure higher labour standards in our supply chain’ [1]. It seems that the company has tried hard to promote its products introducing new marketing plans in accordance with the local and the international context. However, it could be argued that the results have not been the expected ones. In order for the company to persuade the consumers to buy its products, it has to highlight the advantages of its products towards the ones of its competitors. The consequences for the health could be also mentioned in order to gain the preference of the consumers. In practice, this effort can be a challenging one. Although the company has applied a specific scheme of ethical principles (see Figure 2 in Appendices section) it has been hardly evaluated by the consumers who seem to prefer more ‘visual’ and ‘actual’ plans. More specifically, the company should proceed to ‘offers’ regarding part of its products and in accordance with the reaction of the public it could use this scheme to a more extended part of its production line. Although the quality of its products is high, the price can be sometimes a negative element towards the consumers’ decision to buy them. A ‘restructuring’ of the presentation of the firm’s products to the public (through especially arranged events) combined with the provision of ‘offers’ could enhance the firm’s performance within the British market. The participation in local and national events could be also valuable for the financial development of the company. b. Competitive position of Body Shop in the British marketplace Farquhar (1989, in Crimmins, 2000, 136) states that ‘a brand is a name, symbol, design, or mark that enhances the value of a product beyond its functional purpose’. On the other hand, Crimmins (2000, 136) said that ‘because brand names enhance the value of products and are difficult for competitors to copy, brand names play a critical role in marketplace competition’. From another point of view it has been stated by Laboured et al. (1999, 51) that ‘intense competition, emerging markets, brand extension, acquisitions, and many other activities have left companies with a confusion of products to make and brands to manage; more important than understanding how to manage "a brand" is how to manage the bundle of brand identities in a firm's portfolio’. The above views are in accordance with those of Hollander (2006, 1) who supported that ‘brands are successful at holding onto customers because of the emotional fabric and bond they must build with users; however, authentic innovation is a requirement while meaningful points of difference and a sharper edge with competitive options are a must; most importantly, relevance to the consumer’s life and passions may trump all as the strongest imperative at the top of the brand-value pyramid’. The plan used by Body Shop in order to promote its products to the public is summarized to a statement presented in the firm’s website in accordance with which the expansion of corporate brands around the world ‘has required a new brand identity, product innovation, a new shop design, the development of a multi-channel service (The Body Shop At Home and e-commerce) and compelling values campaigns to ensure we better meet our customers’ needs now and in the future’ [1]. It could be argued however that the results of the above plan were not the expected ones and for this reason the year that followed the company decided to proceed to cooperation with L’Oreal – in fact L’Oreal acquired Body Shop International with every consequence that such a corporate initiative can have to the firm’s (Body Shop) existed stakeholders. V. UK’s retail outlets and performance of Body Shop a. Distribution of Body Shop’s products in the British market Seitz et al. (1997, 171) examined thoroughly the current conditions in three markets (UK, German and US) and stated that ‘advertising for three self-image projective products (perfumes, cosmetics and women's apparel) were content-analysed in UK, German and US editions of Vogue; the purpose of the study was to determine the relationship between market similarity and advertising standardization of these products over a longitudinal period; findings indicated that only a single brand showed a higher degree of standardization over the six-month period for all countries investigated, suggesting that market similarity still remains as the dominant factor in advertising standardization practices’. On the other hand, Bass (2006, 3) supports that above assumptions, stating that ‘he deep underlying vision of successful brands ensures that they already have the competence they need to create new market opportunities and can grow market opportunity and brand relevance in tandem while smaller brands with a deeply relevant vision but no power to invest should consider licensing rather than powerlessly witnessing their market's decline’. In other words, in order for a company to survive within a high competitive market, it has to proceed to innovative and often risky initiatives trying to evaluate primarily its strengths and its limits for financial pressure. Under the above conditions, the distribution of Body Shop’s products in the British market should be characterized as effective regarding the number of stores operating around the country. However, there are issues that need to be reconsidered regarding the methods used for the promotion of the products to the public. Body Shop has focused in the expansion of its activities and as a result the distribution of its products may has been on a delay not only in the British market but also internationally. In accordance with a statement presented through the corporate website [1] ‘2005 is a landmark year for The Body Shop International as after three years of hard work in strengthening business processes and profitability, we are now focusing on expanding the brand across the world with a £100 million investment plan’. However, the years that followed the corporate performance has declined and for this reason the company’s management team decided to reach an agreement with L’Oreal which offered an extremely high level of security mainly in financial terms. However, the above change in the corporate structure should not prohibit Body Shop from trying to achieve a high level of performance enhancing its methods of distribution of its products to its clients. b. Issues that could enhance or constrain the success of a cosmetic firm in UK Regarding specifically the UK market, Moore et al. (2000, 919) stated that ‘UK market is buoyant, fuelled by the development of diffusion lines for the mass market; on the other hand, there are four stages of market development: wholesale channels to department stores; the creation of ready-to-wear flagships; large diffusion flagships; the opening of stores in provincial cities’. From another point of view, this of advertising within the UK market Barnard et al. (2002, 7) supported that ‘advertising in a competitive market needs to maintain the brand's broad salience--being a brand the consumer buys or considers buying; this turns on brand awareness, but together with memory associations, familiarity, and brand assurance while publicity can also help to develop such salience; however, brand advertising seems to work mainly by creatively publicizing the brand, without trying to persuade people that the brand differs from other brands’. The role of advertising as presented above from Barnard et al. can be considered as significant, however there is always the issue of cost involve under the particular conditions in which advertising will be used. Moreover, the research made by Blair et al. (2000, 43) showed that ‘brand extensions constitute an estimated 95 percent of the 16,000 new products launched in the United States every year; extensions are popular because they can provide new products with a ready-made image while helping existing products through increased brand exposure; however, extending a brand name to inappropriate products may result in product failure and/or reduced brand value’. In current UK market and specifically in the cosmetics industry, competition ‘imposes’ the existence of strong ‘cooperation’ between firms in order to survive. For this reason, mergers and acquisitions have become a common phenomenon in the country’s financial market. For this reason, a company has chances to survive and achieve a specific level of growth only if managing to follow the trends of the market. The decision of Body Shop to proceed to cooperation with L’Oreal, even under the negative effects of ‘acquisition’, can ensure the company’s survival in the British and the international market. As of its performance, it will be an issue of success of its strategic decisions and specifically of its marketing strategy as it will be formulated the period that follows. References Bass, A. (2006) ‘Branding through Innovation’, available at www.brandchannel.com Barnard, N., Bloom, H., Ehrenberg, A., Kennedy, R. (2002) Brand Advertising as Creative Publicity. Journal of Advertising Research, 42(4): 7-22 Black, P. (2004). Gender and the Beauty Industry: Discipline and Power. New York: Routledge Blair, E., Dacin, P., Gelb, B., Oakenfull, G. (2000) ‘Measuring Brand Meaning’ Journal of Advertising Research, 40(5):43-50 Crimmins, J. (2000) ‘Better measurement and management of brand value’ Journal of Advertising Research, 40(6): 136-144 Hollander, R. (2006) ‘Strategic Brand Partnership Help Create Competitive Edge’, available at www.brandchannel.com In-Cosmetics (2007) L'Oreal / Body Shop: ethical benefits outweigh risks, available at http://www.in-cosmetics.com/page.cfm/link=163 Laforet, S., Saunders, J. (1999) ‘Managing Brand Portfolios: Why Leaders Do What They Do’ Journal of Advertising Research, 39(1): 51-59 Macrae, C., Uncles, M. (1997) ‘Rethinking brand management: the role of brand chartering’ Journal of Product and brand management, 6(1): 64-77 Manning, C. Why Firms Are Superpowers of 21st Century; MERGER CRAZE GIVES BIG BUSINESS GLOBAL CONTROL. The Mirror, January 18, 2000: 18-21 Mintel Report (2006), Health and Beauty Retailing - UK - June 2006, available at http://reports.mintel.com/sinatra/reports/display/id=173664#about Mintel Report (2005), The UK Women's bodycare market - April 2005available at http://www.in-cosmetics.com/page.cfm/link=59 Moore, C., Fernie, J., Burt, S. (2000) ‘Brands without boundaries – The internationalisation of the designer retailer’s brand’ European Journal of Marketing, 34(8): 919-937 National Statistics Online (2007), http://www.statistics.gov.uk/pdfdir/efs0107.pdf Seitz, V., Handojo, D. (1997) ‘Market similarity and advertising standardization: A study of the UK, Germany and the USA’ Journal of Marketing Practice: Applied Marketing Science, 3(3): 171-183 Websites The Body Shop International http://www.thebodyshopinternational.com/ http://www.dti.gov.uk/economics/economics_paper7.pdf [2] Appendices Figure 1 - Consumer durables in UK (as in National Statistics online, http://www.statistics.gov.uk/cci/nugget.asp?id=868) Figure 2 – Body Shop – Ethical Policy Hierarchy (corporate website, [1], http://www.thebodyshopinternational.com/NR/rdonlyres/A5B3473C-FA6D-4DC9-9EED-F775F381F76D/0/EthicalpolicyhierarchyAugust06web.pdf ) Read More