SEPHORA MARKETING PLAN
Ashima Chauhan
Table of Contents Overview of the company..............................................................3-‐6 Company Description………………………………………………….3 Company History……………………………………………………..3-‐5 Mission……………………………………………………………………….5 Current Operations………………………………………………….5-‐6 Situation Analysis.............................................................................7-‐8 SWOT analysis.....................................................................................7 Analysis of Major Competitors.....................................................8 Analysis of Target Market...............................................................8 Marketing Objectives...........................................................................9 Strategies, Tactics & Implementation......................................9-‐12 Product Strategies........................................................................9-‐10 Price strategies..................................................................................10 Promotion strategies.......................................................................11 Place (Distribution) strategies....................................................12 Timetable.............................................................................................12 Evaluation Criteria.............................................................................13 Conclusion.............................................................................................13
2
1. Overview of the company
C ompany D escription Sephora is a chain of cosmetics stores founded in France. In 1997, it had been acquired by Paris-‐based conglomerate Louis Vuitton Moët Hennessy (LVMH). The Sephora chain includes more than 750 stores in 21 countries and carries over 250 brands of items that include makeup, skin care, fragrance, bath, hair products, hair tools, and other beauty accessories, including Sephora's own private label.
C ompany H istory
Sephora was founded in 1993 in France by Dominique Mandonnaud, who was an entrepreneur of perfume shops. The name “Sephora” was coined by the fusion of the two words – the Biblical name of ‘Zippo rah’ (Moses’ wife) and ‘sephos’ which is the Greek term for pretty. Dominique Mandonnaud started out in business with a single perfume store in Limoges, in France's Haute Vienne region, in 1969. He sought to create a new innovation of perfume stores by way of introducing a self-‐service format to perfume sales, and he adapted this product strategy throughout his involvement with the company that lead to becoming Sephora as we know it today. In 1979, he launched a new perfume store called Shop 8 in Limoges. Perfume stores in France back then followed a more traditional format of sales that included a counter for every brand of perfume and a sales associate for every counter; the customers had no physical access to the perfumes. This was a big venture as he had just started out as a new business and the idea was still very anomalous to the public. The self-‐service format included a large and open selling space in an attempt to making the products available to the customers to touch and try on. Also, the products were arranged according to the product line as opposed to the brand name, giving it a convenient, supermarket appeal to it. The store featured an extended range of both perfumes and cosmetic brands. It was a distinct departure from the traditional perfume stores which made it even more appealing. This sort of self-‐service format is now seen in the current Sephoras. From there, it took a few decades for Sephora to actually take off as a concrete chain store with a firm market share. Shop 8 was recreated and came under the control of various distribution groups, companies and investors that Mandonnaud dealt with. 3
Mandonnaud sought to expand Shop 8 with the help of a number of private equity groups like, Apax Partners, Astorg and Altamir (which was the major holder of the three). However, their plans ran into difficulties therefore forcing them to look for an existing perfume company that they could acquire in order to further expand. It was only until 1993 that Shop 8 merged with Sephora that was then under the company Boots PLC. Shop 8 re-‐branded all its stores and became Sephora. Altamir bought out the Sephora chain from Boots PLC at a deal of FRF 360 million ($61 million) in September 1993. This boosted Shop 8’s network to 50 stores and gave it a number of prime city center locations. Sephora continued to expand and do well through the 1990s. However, Mandonnaud decided to retire by 1997, which caused the other partners to withdraw their investment as well. The group then started to look for a buyer for the company, which is when they came into contact with the luxury good conglomerate – LVMH group Moët Hennessy Louis Vuitton. The deal was finalized and completed in 1997, and LVMH agreed to pay the equivalent of EUR 344 million for Sephora. Under LVMH Sephora doubled the number of stores and even boosted its revenue to FRF 2 Billion by the end of 1997. Sephora turned to the international market with its flagship store in New York City in 1998. While their first store in Canada was opened only until 2004 in Toronto. The cosmetics store launched its private label featuring make-‐up, bath products, and other beauty tools. Packaging for the line features the company's elongated flame logo in standard black print. By the beginning of 2006, Sephora had shifted its concentration and image of being a perfume specialist and altered its __product line to re-‐establish itself as a full-‐scale beauty care retailer; the perfume component still being a large part of their product _ Sephora launched its website – Sephora.com for the United States in 1999 and for Canada in 2003. In April 2006, Sephora joined JCPenney to entail the “store within a store” component to department stores and opened up five such stores within JCPenney by October 2006. These stores contain a rather limited selection to its customers, but create ease in reaching consumers that prefer shopping at department stores for multi-‐purpose shopping. Today, Sephora is not only the leading chain of perfume and cosmetics stores in France, it's also a powerful beauty presence in 13 other countries.
4
M ission Sephora is a division of Moët Hennessy Louis Vuitton (LVMH), the world's leading luxury products group. The LVMH mission statement is inclusive of and applies to all of its luxury brands, including Sephora. The mission of the LVMH group is “to represent the most refined qualities of Western "Art de Vivre" around the world. LVMH must continue to be synonymous with both elegance and creativity. Our products, and the cultural values they embody, blend tradition and innovation, and kindle dream and fantasy.” All Group stakeholders must imbibe five fundamental values: -‐ Be creative and innovate -‐ Aim for product excellence -‐ Bolster the image of our brands with passionate determination -‐ Act as entrepreneurs -‐ Strive to be the best in all we do
C urrent O perations Sephora provides products ranging from makeup, skin care, bath and body, hair, tools and accessories, natural products and men’s products, including around 200 brands to compare and choose from. Every store creates an open environment with a self-‐service regimen to allow customers the freedom to shop at their convenience. It even helps them compare brands of products as they are sorted by the type of product, rather than the type of brand. Customers are also given a great deal of personal attention. Almost every employee is required to be well-‐trained and should have a firm knowledge on beauty and the various products within the store. Along with their prior knowledge, all store associates are given a heavy dose of training and education on all the products and brands that it carries. The ‘Sephora University’ created by the company offers a 4-‐day course that aims towards this goal of educating all consultants before they can actually work and advise the customers. There are also skincare PhDs and color experts in every store. 5
Manager, sales associates, part-‐time associates, who plan visual displays and trend statements, etc. Sephora heavily relies on various Direct Response marketing strategies – including direct mail, e-‐mail, in-‐store communications, newsletters available at stores and the Beauty Insider program that clients can sign up for. The Beauty insider program is a great promotional strategy that Sephora currently uses for its customers. It is essentially a rewards program meant for keeping customers excited about the perks of being a member and having access to special offers, including innovative products, invitations to events and services offered throughout the year, and value products like —gift cards, discounts and even gifts for the member’s birthday. The rewards system basically helps customers accumulate earning points that can redeem certain products like free samples or featured full-‐size products. The second benefit of the Beauty Insider program is its relevance. Being a member of this program gives the customer access to personalized online advice on what products Sephora thinks the customer might be interested in, based on purchase history and profile questions. Another popular use of DR can be seen through viral communication via Facebook, MySpace and Twitter. The DR strategy helps in getting information to the customer and providing products catering to their needs and ease.
6
2. Situation analysis S WOT A nalysis
§ § § § § §
STRENGTHS Powerful distribution strategy – Innovator of self service format of sales. Sorted by product type NOT by brand. High-‐end brands (Chanel, Dior, DG, Burberry, Armani). Direct response strategies. Product mix: Variety of product lines catering to women. Well trained and educated staff.
§ § § §
WEAKNESSES Lack of men’s products. Inability to saturate market because of the price of high end products. Lack of use of natural ingredients in products. Brand exclusivity: selective distribution of brands.
OPPORTUNITES § Faster growth rate in smaller cities. § Merging with JCPenney facilitates multi-‐purpose shopping. § Endorsements by various celebrities. § Scope for artistic expression through makeup. § Growing consciousness among Men to groom. § Being a part of the LVMH group helps in obtaining access to luxury products and gives it a leveraged position.
THREATS § Idea of self service adopted by competitors. § Dynamic Economy affects consumer’s want for luxury items. § Competitors like MAC, Ulta progressively becoming popular. § Not as high-‐end as other sumptuous retailers like Nordstrom.
7
A nalysis of C ompetition Some of Sephora’s major competitors include Ulta, MAC Cosmetics, and Lush Cosmetics. While MAC does not contain any other brand of cosmetics besides its own label, the demographics for the two remain the same and can have an effect on Sephora’s sales due to the competition it creates. It mainly emphasizes on developing and marketing its own brand rather than; it also lacks the perfume component. Ulta is a retail store which follows a very similar sales strategy to Sephora’s. It offers a varied range of cosmetic and perfume brands that are similar to the luxury brands sold at Sephora. However, Ulta has a lot more tools and accessories in its stores and caters to hair and hair products a greater deal. Lush, on the other hand concentrates on creating its beauty care products out of natural ingredients. As stated in the SWOT analysis, all three of the competitors follow the open environment sales format of self-‐service that was first initiated by Sephora thus diminishing its effect on the consumers.
A nalysis of T arget M arket Since Sephora offers products that cater to both younger and older consumers, the target market for Sephora does not have any particular inclination towards a certain age group; their ages can range between younger-‐middle aged i.e., from 15-‐50years of age. The end consumers of the products are dominantly female, while the purchasers can be both male and female. They can be from a middle to lower-‐upper class background and can be of any ethnicity. Most of these consumers are from metropolitan cities and have a work-‐oriented lifestyle, since most of the stores are located in busy shopping areas around commercial locations. Also, working and social environments usually require women to groom themselves and look professional and Most of these women have a tendency of spending money on luxury brands of cosmetics and perfumes, rather than buying the same type of products at discounted departmental stores like Wal-‐Mart, etc. This is due to their higher level of discretionary income. They are most likely to be extroverted and social.
8
3. Marketing objectives
§ § § § § § §
To develop men’s products and more tools and accessories, without deviating from its reputation of being a leading cosmetic and perfume store. Create newer, innovative collections for the holidays and for sporting events. Improve advertising campaign Create a new application for the iPhone and Android. Grow number of locations in smaller towns by 25% by December Gain rights to exclusivity to certain brands for customer loyalty and creating. Employ celebrity endorsements as a means of promotion
4. Strategies, Tactics & Implementation P roduct S trategies: Product mix Sephora already has a diverse range of products and brands. However, as mentioned in the SWOT analysis, it lacks in men’s products, and Cosmetic tools and accessories. Besides a range of perfume selections and brands, the company must invest in introducing a new product line, dedicated to men’s skincare and grooming products. The line could include products such as – shaving gels and moisturizers, cleansers, facial treatments, complexion enhancers, etc. It should also include a separate line for tools and accessories required for makeup. These are essential for the use of the main cosmetic products sold at Sephora, giving rise to a well-‐sorted product mix. Also, since other competitors like Ulta, deal in such products, it is important to include them to avoid the risk of losing parts of potential customers to them.
Packaging While Sephora has no control over the packaging of the products of different brands, it can however, modify the product and product packaging of their own private label, ‘Sephora’. These products could use more communicative packaging to enhance the appeal of the products. It could also make use of Perceptual packaging and give all its stores a new, more exciting appeal. This may include changing the color palette of the store’s décor and products
9
Holiday season – new collection A new, innovative collection could be added during the holiday season. A seasonal theme would encompass every aspect of the products of this particular line. For example, a Tartan print collection could be adopted as the theme; this would be applied towards packaging, marketing and even the theme of the store itself. This would help drive customers into buying the products of the new line out of enthusiasm for festivity shopping.
Modifying the Market During various sport events, like the Super Bowl, Sephora could dedicate a particular line to Sports and makeup for sports fans. Making use of newer technology, Sephora could develop a line of cosmetics that would blend well while playing sports. This range would include products based on a certain color palette pertaining to a mixture of trend analyses and colors of regional teams. This could even help broaden the demographics of the consumers.
Focus Groups and Surveys This method includes getting direct feedback from consumers, and . These could be helpful on getting feedback from customers on what they might think about the new innovations that could potentially be added to the store.
iPhone+Android Applications This would enable customers to shop online through their phone with ease. The application would consist of a simple format where customers can browse through products according to types of products or even brands.
P ricing S trategies: Odd even pricing This sort of pricing can help create an illusion that the product is of a cheaper value, and can have a big impact on a consumer’s decision to purchase the product. This holds true for people who are impulse buyers. Sephora often uses this strategy for its products and must stick to it for its future products, as it has given positive results in the past.
Bundle pricing This is a great way of making sales, especially when it comes to cosmetics. The company should employ such offers for its private label even more to gain recognition
10
P romotional S trategies: Advertisement Sephora already makes good use of advertisements for its promotion through almost every kind of media. It is highly advertised in consumer magazines, on the internet, and outdoors on billboards, bus stops, etc. However, it lacks radio and television advertisements. While radio might not be the best kind of advertisement for the company (as cosmetics require visuals to attract customers), television ads might be a good way to promote the brand. The company could also adopt the method of co-‐op advertising, using one of the brands it endorses, for example Dior, and have them create an advertisement and have them list Sephora at the end of the advertisement, along with other vendors. This could be a cheap and efficient way of advertising quickly and with ease.
Social networking sites Having an online presence is very crucial to the promotion of a company. Sephora could employ a new team of experts and writers to control and oversee the activities of their pages on various social networking sites, like Facebook, Twitter, MySpace, etc. This is also a good way to use word-‐of-‐ mouth as a medium to promote new products being launched.
Special events Holiday seasons are a very good time to promote special events in-‐store. Bringing in celebrity makeup experts/artists can generate a lot of foot traffic in stores. These special events would essentially have a celebrity artist, associated to Sephora through an agreement, to come in and launch a new product and also share tips and sign autographs for fans. This strategy will guarantee a lot of sales for the day of the special event.
Public service announcement The introduction of a “Non-‐animal testing” campaign could help Sephora establish itself as a socially responsible and ethically moral company. This would be done with the help of a sponsoring non-‐profit organization, like PETA. The campaign would include merchandise regarding the issue concerning to provide awareness and in return gain privileges offered by the non-‐profit organization, like advertisements and further promotional advantages.
11
D istribution S trategies: Intensive distribution
Until now, Sephora adopted a rather selective distribution strategy with most of its locations in commercial districts. But now, with its growing popularity, it should strive to invest in new projects to develop and grow the number of locations in smaller suburban towns.
Licensing for more brands
The company’s aim to diversify can be achieved by reaching out and trying to obtain licensing agreements on more luxury brands.
Online presence
A good online presence can go a long way for the company. It creates an online market for the company and can generate a lot of sales, if done efficiently. A more interactive website could entice customers, like including special quizzes
T ime T able:
Month January February
Action Conduct focus groups and surveys + Create plan to grow number of locations. New Advertising campaign
March
Design new packaging system.
April
Tabulate results on Surveys.
May
Non-‐animal testing campaign.
June
Start Spring Sales.
July
Implement Survey results.
August September October
Plan and Create Holiday Collection. Sign agreement with celebrity to endorse a particular product. Create iPhone+Android application.
November
Launch new product line.
December
Plan and create Super Bowl Collection.
12
5. Evaluation Criteria
The company can measure its profitability by conducting the following steps: v View sales and financial reports of the company v Study the reaction of customers in response to new advertising campaign. v Check the increase/decrease in attendance of customers v Check inventory to measure the sales of the new seasonal collections introduced in November. v Calculate figures for iPhone+Android application users v Results of the survey v Results of PSA given by PETA and gratuitous support by non-‐profit organization.
6. Conclusion The main focus of this plan is to further promote the store and diversify its reach to the consumers. It aims at bringing in new, innovative ideas to enhance customer appeal and strives at kindling a sense of brand loyalty among customers. The plan’s potential success is completely driven by the timely completion of operations and tasks and the various strategies implemented to minimize weaknesses and threats and thrive on the strengths and opportunities. The success and acceptance of the innovational vitality of the projects will be reflected in the end results and act as a motivation for further development of the product.
13