Advertising Strategies

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Siddiq Iddrisu
Maximiliano Olivares
Mariana Pinos
Kadidiatou Wague
Agenda

 Introduction
 Industry Analysis
 Advertising Strategies
 Raw Data Analysis
 Recommendations
Beauty Industry

•
•
•
•
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
Why the Beauty Industry

 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
Cosmetics

 “A product used for cleansing, beautifying, promoting attractiveness or
altering the appearance.”
Ad Comparison

VS.
The Beauty Industry

 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%
Market Share
30%
25%
20%
15%
10%
5%
0%
Market Share
Background

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
Research and Development

 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.
Competition

 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
The Beauty Industry Major Players

Market Share
• Procter & Gamble
Company
• L’Oreal USA Inc.
• Estee Lauder Inc.
• Unilever USA
• 64% of the market is
smaller beauty companies
6.30%
6.90%
10.30%
12.50%
64%
Unilever USA
Estee Lauder Inc.
L'Oreal USA
The Procter & Gamble Company
Other
Product
Differentiation/Innovation

 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
Differentiation Based on Customer
Segments

 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.
Organization

 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
Global Distribution

 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

Estee Lauder

• 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.
Procter and Gamble

• 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.
L’Oreal

• 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 .
Product Packaging

 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 ecofriendly 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 Quality

 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.
Link-Selling

 This includes the use
advertisements to show the
benefit of purchasing a
combination of makeup products
instead of a single item.
Experience Goods

 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.
Consumer First

 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
Paths to Purchase

 Omni-channel approach to both commerce and marketing
 Website Redesign
 Online Shopping Widgets
Millennial Brand Loyalty

“It is important for me to find brands that I am loyal to”
Blue- Disagree
Black- Neither
Grey-Agree
Celebrity Endorsement

 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 Ex.

 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
Digital Advertising – YouTube Study

 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
YouTube

YouTube

Emotional Advertising

 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
Targeting Ads – Emotional
Advertising

 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

Male Adoption

 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.
Picking Up Market Cues

 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
“No Make-up Look”

 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.
Brand Equity – Estee Lauder

Total assets
WACC
ESTEE LAUDER FINANCIALS (in '000 of $)
2010
2011
$3,121,000
$3,686,500
10%
$312,100
$368,650
Net income
Economic Value Added EVA)
RBI (Brand Earnings)
Discount rate
Discount factor
40%
2013
$4,297,200
$429,720
2014
$4,825,200
$482,520
$482,400
$703,800
$856,500
$1,019,800
$1,204,100
$170,300
$68,120.00
$335,150
$134,060.00
$470,990
$188,396.00
$590,080
$236,032.00
$721,580
$288,632.00
1.08
1.1664
1.259712
1.36048896
1.469328077
$63,074
$114,935
$149,555
$173,491
$196,438
8%
Discounted Earnings
Value until the year 2014
Terminal value (growth rate=2%) = (Discounted
earnings in 2014)/(discount rate - growth rate)
$3,273,968
Net present value of the Brand
$3,971,461
Value of the ESTEE LAUDER brand: ~ 3.97 billion dollars
2012
$3,855,100
$385,510
$697,492
Total assets
WACC
Brand Equity – L’Oreal

L'Oreal FINANCIALS (in '000 of $)
2010
$6,673,900
10%
$667,390
2011
$7,842,300
$784,230
2012
$8,626,700
$862,670
2013
$9,216,200
$921,620
2014
$10,522,000
$1,052,200
Net income
$1,794,900
$2,242,000
$2,440,900
$2,870,400
$2,961,400
Economic Value Added EVA)
RBI (Brand Earnings)
$1,127,510
$451,004
$1,457,770
$583,108
$1,578,230
$631,292
$1,948,780
$779,512
$1,909,200
$763,680
1.08
1.1664
1.259712
$417,596.30
$499,921
$501,140
Discount rate
Discount factor
40%
8%
Discounted Earnings
Value until the year 2014
Terminal value (growth rate=2%) = (Discounted
earnings in 2014)/(discount rate - growth rate)
Net present value of the Brand
Value of the L'Oreal brand: ~ 11.17 billion dollars
$2,511,370
$8,662,463
$11,173,833
1.36048896 1.469328077
$572,965
$519,747.78
Total assets
WACC
Brand Equity – P&G

P&G FINANCIALS (in '000 of $)
2010
$18,782,000
10%
$1,878,200
2011
$21,970,000
$2,197,000
2012
$21,910,000
$2,191,000
2013
$23,990,000
$2,399,000
2014
$31,617,000
$3,161,700
Net income
$12,736,000
$11,797,000
$9,317,000
$11,402,000
$11,785,000
Economic Value Added EVA)
RBI (Brand Earnings)
$10,857,800
$4,343,120
$9,600,000
$3,840,000
$7,126,000
$2,850,400
$9,003,000
$3,601,200
$8,623,300
$3,449,320
1.08
1.1664
1.259712
1.36048896 1.469328077
$4,021,407.41
$3,292,181
$2,262,739
$2,646,990 $2,347,549.23
Discount rate
Discount factor
40%
8%
Discounted Earnings
Value until the year 2014
Terminal value (growth rate=2%) = (Discounted
earnings in 2014)/(discount rate - growth rate)
$14,570,867
Net present value of the Brand
$53,696,687
Value of the P&G brand: ~ 53.7 billion dollars
$39,125,821
Number of Ads per Brand

700
629
576
Number of Advertisements
600
500
453
400
346
300
200
100
53
77
0
Estee Lauder
Clinique
Covergirl
Brand
L'Oreal
Maybelline
Olay
Advertisement Expenditure

$37,737,100
Expenditure Amount
$28,101,600
$28,230,100
$24,529,400
$6,756,200
Estee Lauder
$7,821,700
Clinique
Covergirl
Brand
L'Oreal
Maybelline
Olay
Average expenditure per ad

Average Expenditure Amount
$140,000.00
$127,475.47
$120,000.00
$101,580.52
$100,000.00
$80,000.00
$60,000.00
$70,894.22
$59,995.39
$62,034.44
$49,010.59
$40,000.00
$20,000.00
$Maybelline
Olay
L'Oreal
Brand
Covergirl
Clinique
Estee Lauder
Average Advertisement Time

Average Advertisement Time (seconds)
35
30
30
30
25
20.462
20
16.6145
17.6269
18.3865
15
10
5
0
Maybelline
L'Oreal
Olay
Brand
Covergirl
Estee Lauder
Clinique
Average Expenditure per Second

Average Expenditure per Second
$4,500.00
$4,249.18
$4,000.00
$3,500.00
$3,000.00
$3,263.01
$3,386.02
$3,464.68
$3,519.30
$2,949.87
$2,500.00
$2,000.00
$1,500.00
$1,000.00
$500.00
$Maybelline
Olay
Clinique
Brand
Covergirl
L'Oreal
Estee Lauder
“Love the Skin you’re in”- Olay

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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
“Easy, breezy, beautiful”Covergirl

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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
“You’re worth it”-L’oreal

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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
“Maybe she’s born with it”Maybelline

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
•
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“Bringing the best to everything we
touch”-Estee Lauder

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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
“Allergy tested, 100% fragrance
free”-Clinique

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Smart
Repair
Breakthrough
Elitism
Chicago Fire, Unforgettable, Voice
“Makeup for all. All ages, all races,
all sexes”-M*A*C

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Party
Fun
Active
Standing Out
Videos

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.
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
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.
Questions?
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