Revlon Situational Analysis by Sarah Lowendick

REVLON SITUATIONAL ANALYSIS Sarah C. Lowendick, Brand Specialist October 22, 2008

Table OF CONTENTS

Revlon Vision Statement…3 Revlon Executives…3 History…4 Brand Overview…4 Target Market Approach…5 Audience Profile…5 Audience Purchasing Process…5 Competitive Analysis…6‐8 SWOT Analysis…9‐10 Barriers to Purchase…11 Marketing Objectives & Strategies…12‐13 Market Growth…14 Works Cited…15‐16

Vision statement

To provide glamour, excitement and innovation to consumers through high‐quality products at affordable prices

Revlon Executives

David L. Kennedy, President Ronald O. Perelman, Chairman Robert K. Kretzman III, EVP Human Resources, Chief Legal Officer, General Counsel, and Secretary

History

Brothers Charles and Joseph Revon, along with a chemist, Charles Lachman, founded the Revlon brand. The brand of Revlon was named after the brothers’ last name and the ‘L’ in the chemist’s last name. In 1932, when Revlon was founded, it started with a single product using pigments instead of dyes. Only having a single product, the nail polish, the three founders utilized their resources and developed the unique manufacturing system. Revlon created nail enamel unlike all other competitors. This positioning allowed Revlon to offer its consumers more rich‐looking opaque nail enamel with a wide variety of shades.

Brand Overview

Currently, Revlon is a world leader with the consumer brand franchise all over the world. Within all their diverse categories, Revlon products are being sold in approximately 175 countries and territories. Revlon has created a strong brand loyalty along with product and consumer satisfaction. Only six years after the foundation of Revlon, the brand became a multimillion‐dollar corporation with recognition all around America and the world. Revlon is one of the leading mass‐market cosmetic brands and also a world leader in cosmetics, skincare, fragrance and personal care.

Target Market Approach

The current target market approach is aimed to sell to a large mass‐market. Revlon currently reaches out to a diverse target market. They cater to their loyal consumers and new consumers differently, but uphold the Revlon value in their message. Revlon’s main approach is to give their consumer a comfortable and affordable product that they will be confident in their brand selection.

Audience Profile

Revlon’s current target market is women, whose age ranges 20‐70, depending on product category. The make‐up category targets women ages 20‐30 because this demographic is beginning to establish their cosmetic brand loyalty and stay committed to the brand. Revlon’s hair color category markets to women ages 20‐40, who are looking for a quality, yet less expensive than a salon, hair color. The skin care line caters to 35‐50 year olds. Revlon’s audience has an income averaging at upper‐middle class. The target market is college educated or completing their degree and working towards a professional career. The Revlon brand extents internationally and cater to a variety of different lifestyles. The target market’s attitude towards the Revlon brand is overall very positive. The audience is knowledgeable about Revlon’s current and ethical issues. They understand Revlon is socially responsible and mature. The consumer receives several benefits from using Revlon products, including healthy skin, because they know Revlon is dermatologist recommended.

Audience Purchasing Process

The cosmetic industry’s consumer looks at all brands’ benefits, expense and quality. Revlon consumers typically have already had a good experience with a Revlon product or their friend or family member has given them good feedback about their Revlon product. The personal experience that the consumer has with the brand leads to brand loyalty and brand equity to leverage innovative products.

Competitive Analysis The three top Revlon competitors are as follows, (1) Estée Lauder, (2) L’Oréal, and (3) Procter & Gamble. Primarily the Revlon brand competes between L’Oréal’s Maybelline and Procter & Gamble’s Cover Girl. Note that Estée Lauder and L’Oréal are owned by the same brand. Their marketing is different and they have different brand names. L’Oréal has a closer brand image to Revlon, than Estée Lauder, because the price range and media channels are similar. Although Revlon has struggled the last few years to compete in the cosmetic competition, their 2007 Annual Report illustrates the great efforts and success. Compared to their net sales in 2006 of $1,3332.4 million, Revlon has increased to $1,400.1 million in 2007. David L. Kennedy, President and CEO of Revlon, credits Revlon’s successful year and significant improvements to the brand’s creative strategies, international business plan, improvement of capital structure and the strategic marketing and advertising. TARGET MARKET SERVED  The target market served in the competitive cosmetic market range from the ages of 15‐40.   Nationally, Revlon competes between the Estée Lauder, L’Oréal, and Procter & Gamble.  The  cosmetic industry leaders target women who are seeking beauty and skin care.  The cosmetic  industry’s target market looks for a product that will make them feel the most self‐confident.        PRODUCT ATTRIBUTES  The cosmetic industry’s product attributes are the physical and emotional appeal towards the  beauty category.  Specific attitudes to the cosmetic industry include the confidence associated  with the product and satisfying the need for beauty.  The attributes of the cosmetic industry  include the product’s appeal and functional benefits.  After the target market is satisfied with  their product’s benefits, they are more likely to become brand loyal.

PRICING  The cosmetic industry’s product prices vary.  Revlon has competitive pricing within the  industry’s market. L’Oréal’s Maybelline and Procter & Gamble’s Cover Girl compete in price  within the cosmetic market.  Price varies among the brands and is relative between the  different product categories.  For example eye make‐up, foundation, hair color, and skin care all  differ in prices.  The average price for the competitive cosmetic market ranges from $5 to $20.      Procter & Gamble is the category leader in the cosmetic industry because its name brand  complemented with its inexpensive price.  Procter & Gamble is a leader in several different  categories, which makes it easier to partner and promote products in several different  channels.  TABLE I—Revlon’s Financial Statements (Source Hoover.com/Revlon) COMPANY INDUSTRY MEDIAN MARKET MEDIAN PRICE/SALES RATIO 0.39 3.75 1.56 PRICE/EARNINGS RATIO 12.89 16.34 15.82 PRICE/BOOK RATIO ‐‐ 2.92 1.52 PRICE/CASH FLOW RATIO 9.32 13.17 9.88

PROMOTIONS  Promotions are especially important to Revlon in the cosmetic market.  Revlon, including its top  competitors, market through a variety of media channels, including, print, television, point‐of‐ sale merchandising, and Internet marketing.  The competition between the brands create  different tactics and more focused marketing programs to each the large mass‐market of  consumers.

DISTRIBUTION  Revlon primarily distributes its products internationally, selling in more than 100 countries  across six continents.  Revlon is very successful in mass retail channels, whereas Procter &  Gamble and L’Oréal are more successful in the national marketplace.      The mass retail channels, such as Wal‐Mart and Target, appreciate their relationship with the  different brands because of the amount of sales that the brand brings to the store.

SERVICE OFFERED  Mature brands, such as Revlon, tend to extend service to its consumers.  Revlon, along with its  competitors, are in competition for the cosmetic category. Reword this sentence its repetitive.   All brands offer services online and have similar techniques to get traffic to their website and  give away promotions.    L’Oréal offers a variety of services within the cosmetic category, but also extends into their  other leading categories (including hair and skin care).  Like L’Oréal, Procter & Gamble has been  successful with their brand success new word extending to different categories.  Revlon has not  had as much success with promotions among their other leading categories.  An important  service that Revlon’s competitors offer is beauty supplies and tips through successful television  shows. L’Oréal partners with Project Runway to aid the runway models and place their product  in a positive way to their market.  Procter & Gamble has even more successful by partnering  with America’s Next Top Model.  Procter & Gamble’s Cover Girl brand supports the show by  giving cosmetics and beauty treatment to the models.  Cover Girl also offers a prize to the  winner of the show, which includes a contract with their advertisement marketing.       L’Oréal and Procter & Gamble have taken additional steps to offer more services to their  consumers and created a larger market by partnering with successful shows.  The  endorsements and promotions related to the success of the television shows illustrate the  positive satisfaction that the brand offers.

SWOT ANALYSIS

Strengths  Revlon’s main strength as a company is their code of ethics.  By being the first to not test on  animals, Revlon, as a brand, sticks out in the mind of socially conscious consumers.  The brand  also makes a point to give back globally.  Revlon is a large supporter of women’s health, along  with beauty.  They partner with NBCC—the National Breast Cancer Coalition—to bring  awareness, support, education and funding; they also independently host a run/walk for breast  cancer.  (For more information on Revlon giving back, visit:  http://revlon.com/Corporate/AllAboutGiving.aspx).   Also Revlon has been successful in expanding their brand into new categories; for example,  Revlon has branched out in beauty care by creating new lines of make‐up, hair dyes, and skin  care.  Their marketing strategies are consistent with current social trends.  By choosing  successful, beautiful actresses, Revlon appeals to the mass market.  The brand connects to its  target market by promoting beauty in a classic, stunning way.

Weaknesses   Revlon has struggled financially because of the economy and now is reducing debt.  With a  large portion of profits going towards debt reduction, Revlon has to manage their money and  cut back on research, marketing and other helpful strategies.   The brand’s more expensive product eliminates a significant younger target market.  Revlon’s  products are more expensive then their competitors, which makes the product harder or  impossible for the younger and/or low discretionary income consumer to purchase.

Opportunities    Revlon can be more competitive in its price category by having promotions with its distributors.   An advantage of promotions and sales is brand recognition and awareness.  The print  advertisements can include a coupon to promote buying action to the reader.  Also the TV ads  can direct the viewer to the Revlon website, which could also have special saving coupons and  promotions.    Revlon could partner with a fashion television show.  By partnering with a show, Revlon would  get a lot of exposure and hopefully positive feedback.  Also the TV show would most likely  benefit from the brand partnership.  The Revlon brand could branch out to different  distributors.  Currently, the biggest distributors are Wal‐Mart and Target.  The brand could  partner with salons and small beauty retail stores to expand their current distribution market.

Threats  The poor economy is hurting Revlon’s financial success.  With limited discretionary income and  low budgets, the mass market is cutting back on purchases.  Revlon’s competitors, particularly  Procter & Gamble’s Cover Girl, are benefiting off of their less expensive product in the beauty  care category.  If the economy continues to do poor, Revlon will struggle with reducing debt  and be forced to sell, reduce or foreclose.    The marketing and advertising departments are being reduced throughout the nation and  within the Revlon brand.  The Revlon print and TV ads are less prevalent then its competitors.   For example, Cover Girl and L’Oreal are prevalent in women’s magazines (i.e. Vogue,  Cosmopolitan, Glamour, etc.).  L’Oréal Paris, Cover Girl, Maybelline, and many other beauty  care products are in constant competition on TV ads.  Put where Revlon advertises in the  strengths  With a large category industry, such as beauty care and skin care, competition is high.  The  promotions with other category products drive sales.  The loyalty levels are lower based on the  current economy, which is low.  There are still loyal consumers, but the target market is greatly  reduced because of financial reasons.  The growth in the industry also creates a larger need to  make improvements within promotions, sales and marketing.

Barriers To Purchase Environmental Problems & Opportunities  Innovation and cultural trends continues to be one of Revlon’s business strategies. Their goal is to build and leverage their strong brands across all the diverse categories, including: beauty tools, beauty care products, women’s hair color and more. In the 2007 Annual Report, Revlon continues with this objective, “We are implementing this strategy by developing and sustaining an innovative pipeline of new products and managing our production portfolio with the objective of profitable net sales overtime.” Revlon’s strategy includes utilizing their creative, marketing and research to promote their brand. Their current placement in the media is primarily print and television advertisements. In the past, Revlon’s spokeswomen have been models. However, the trends of the current Revlon mass market has been fascinated and responded to celebrity spokeswomen. Beautiful, successful actresses have replaced the stable appeal of traditional supermodels. Revlon continues to be interested in tapping into what’s relevant in society. Halle Berry has been and continues to be Revlon’s spokeswoman. A recent Revlon TV ad takes the viewer through Halle Berry’s day—waking up, getting dressed, applying make‐up and doing a photo shot—the mass market enjoys seeing Berry going through her everyday routine. Another successful, beautiful actress that has received much attention from the target market is Jessica Alba; she has been featured in print ads and TV commercials. With beautiful, successful actresses Alba and Berry, Revlon continues to be competitive with their category competitors. Jennifer Connelly, the latest face of their global advertisement campaign, believes that Revlon is a respected brand in the cosmetic industry; she is fronting Revlon’s philanthropic activities and charity fundraising. “Revlon is one of the great iconic brands today and I am thrilled to be a part of a company that has done so much for women around the world,” she said. Among Berry, Alba, and Connelly, Eva Mendes, Jamie King and Julianne Moore are all representing the stunning, classic and praiseworthy brand. Revlon continues to benefit its demographic, while satisfying the social and cultural trends. The brand’s demographic has changed because of the poor economy. It used to target a younger audience but has had to rely on loyal consumers, because it is a more expensive brand. Revlon has been a category leader and successful at a more expensive price, but has taken a hit because of the low discretionary income of its consumers. They also continue to be an ethical brand, by being the first to not test on animals and also giving back to the world in various ways. Revlon’s brand has struggled with a suffering economy.

Marketing Objectives & Strategies Objectives Presented in the 2007 Annual Report by Revlon Board of Directors, Officers and Operating Committee along with David L. Kennedy, President and CEO: 1. Build and leverage our strong brands, particularly the Revlon brand 2. Improve the execution of our strategies and plans, and provide for continued improvement in our organizational capability 3. Continue to strengthen our international business 4. Improve our operating profit margins and cash flow 5. Improve our capital structure Strategy Revlon’s goal in meeting all objectives is based in their vision. Their goal is to reduce their current debt and remain a strong competitor in the cosmetic industry. Revlon uses their company’s research to target their current market and drive different consumers to their brand. Revlon fully utilize their marketing, research and creative developments to their target market. The Revlon brand remains consistent in the cosmetic industry. They position through innovative advertising and promotions, by having celebrity spokeswoman represent different products and target markets, as well as, use the brand name appeal. Revlon remains competitive because they work with their retail customers and distributors to increase their efficiency, effectiveness and communication with their in‐store marketing. By reducing sales returns, costs of goods sold and general and administrate expenses, Revlon is improving their profit. They have implemented many reconstructions in the past year to support the increase in brand cash flow.

Continued: Strategy Revlon is focused on both it’s internal employees and it’s external consumers. There are specific characteristic traits that Revlon looks for in employee leadership. They focus on the retention of skilled employees, but also expand responsibilities to hard‐working and motivated employees. Revlon believes that in order to improve their market, they must have a strong internal company. Recently Revlon has focused on strengthening their international mass market, because the brand has been very successful in each marketed country. Revlon has allocated resources and controlled costs strategically with the objective to leverage Revlon’s brand and increase profits internationally.

Market Growth There has been tremendous growth in Revlon’s primary category, cosmetics. Although Revlon is not within the top three category spots, it had a successful year by succeeding all of the company’s objectives. Revlon had higher market penetration by selling to the same market. Their primary consumer is large mass volume retails and chain drug stores, including: Wal‐Mart, Target, Kmart, Walgreens, Rite Aid and CVS. Revlon appeals to women in the mass market that want quality make‐up for a reasonable price. The primary competitors are Estee Lauder, L’Oreal’s Maybelline, and Procter & Gamble’s Cover Girl. Revlon remains a top competitor, because they develop quality cosmetic products with innovative performance features, including: shades, finishes and packaging. The overall market share remains to be consistent, and there has been slight fluctuation. The 2007 Cosmetic Market Median’s price/sales ration was 1.56, based on the New York Stock Exchange, the American Stock Exchange and the NANNSDAQ National Market. The price/earnings ratio for the Cosmetic Market Median in 2007 was 15.82. Revlon has been targeting new markets, including, the aging baby boomers and the international market. The company’s international market has been their more successful target. Revlon leverages their current consumer’s credibility with their age‐renewal line, Vital Radiance, in other words, the consumers who are loyal to Revlon continue to use and try new cosmetic products. One of Revlon’s strategic objectives was to continue to strengthen their international business. The three international regions, Asia Pacific, Europe and Latin America are where Revlon’s marketing strategies have been successful. By using their strong, successful cosmetic brands, Revlon has creative global brand marketing plans throughout all their target regions. In 2007, Revlon’s international marketing operations net sales increased $29.4 million or 5.2% from the previous year. The age‐renewal line, Vital Radiance, however, decreased Revlon’s overall net sales. The anti‐ageing market was more successful for Revlon’s competitors. Revlon noticed that their Vital Radiance was reducing their net sales and discontinued the line in September 2006.

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