Estee Lauder: Integrated Marketing Communications plan Essay

Executive Summary The purpose of this situation analysis is to identify internal and external factors that will have an impact on Estee Lauder’s integrated marketing communications program (IMC). A situation analysis is necessary to determine the position Estee Lauder is currently occupying, in terms of finances, promotional strategies, product range and brand image. A thorough analysis will help identify any opportunities and potential threats that the company may come across and the effect that these opportunities and threats will have on their new IMC program. Strengths and Weaknesses will also be identified and taken into account as the new IMC program is developed. As part of the internal analysis Estee Lauder’s past promotional mix strategies will be assessed and evaluated. Strengths and weaknesses will also be evaluated in terms of brand image and the products and services they offer were also identified. Estee Lauder’s current promotional strategy has a strong focus on advertising in sources of print media within media relevant to its target market such as fashion magazines including, Harper’s Bazaar and In Style. Personal Selling also plays a dominant role in Estee Lauder’s current IMC strategy. The use of the Internet and Direct marketing has played a minimal role in Estee Lauder’s IMC program for Australia. This was identified as a weakness but also as a potential opportunity to expand and use these promotional tools in their future IMC program. Other weaknesses were based around poor and inappropriate promotional strategies for reaching their intended ‘youth’ market and consumers in their twenties. Brand image, price, package and product design were seen as being â€Å"too old† for the targeted younger consumer. The new IMC program will be focused on overcoming these weaknesses and on reaching the younger audience in the most effective way. Strengths such high levels of brand awareness, trust and a strong position in the market place have been Identified and utilised in the future IMC program. The external analysis involved gaining insight regarding customers and competitors. A pilot study was conducted among 18-25 year olds regarding  their perceptions and experiences with Estee Lauder in order to develop a more in-depth analysis of Estee Lauder’s customer base amongst young Australian females. Competitor Analysis required thorough research into the strategies and positions of Estee Lauder competitors in the market place. Major competitors included Loreal and Revlon, their strengths and weaknesses were identified and will be considered during the development of Estee Lauders new positioning strategy. Although a company has little or no control over their external environment an effective marketing communication strategy will anticipate such conditions and respond to them sufficiently. Estee Lauder needs to consider socio-cultural forces such as consumers increasing concern regarding animal testing among other environmental and social issues. They must also be aware of the adverse affects on the IMC program that will occur if any social expectation are breached or if any legal or political regulations are breached. The environmental analysis also identifies the opportunity for growth due to the trend in overall retail growth and specifically cosmetic growth in Australia today. If the following factors are considered Estee Lauder have the opportunity to develop an effective IMC program that will strengthen its brand and allow them to expand into the younger market as they have been aspiring to do. Industry and Company Information Estee Lauder is a market leader in the cosmetics and skin-care industry. This market is highly competitive and rapidly expanding, with competitors continually entering the market. They offer a range of cosmetics, fragrances and skincare products. Estee Lauder is a well established brand since 1946 and has grown into a parent company for many well known skincare and cosmetics brands. These include MAC, Clinique, Stilla, Aveda and Bobbi Brown. This situation analysis will focus on Estee Lauder as a consumer brand and not the EL Companies empire as a whole (see appendix 1). Internal Analysis Today, Estee Lauder has a solid customer base in many countries including the USA, UK, Asia and Europe. Estee Lauder’s and Clinique’s combined sales made up 40% of the total cosmetics market share, with Lancome (owned by competitor L’Oreal) holding the third largest market share, with 13% of the cosmetics market (Bittar, 2002, p.29). Over the past five years, Estee Lauder’s sales have slowed, allowing for Clinique, Estee Lauder’s sister brand to gain market share, replacing them as number one brand in department store sales (Bittar,2002,p.29). Currently Estee Lauder’s primary objective is reposition themselves as the consumers first choice for cosmetics. In order to achieve this objective Estee Lauder need to analyse current marketing efforts and identify opportunities for further expansions that will increase and improve the reputable Estee Lauder brand. Pricing Strategies Estee Lauder’s prices are at the higher end of the price scale within the cosmetics market. This is consistent with many of Estee Lauder’s direct competitors namely Lancome and Dior along with other subsidiary brands including MAC and Stilla. Their prices are set 20-35% above the price points of Clinique products. Current RRP prices for various Estee Lauder products can be found in appendix 2. Review of Firm’s previous promotional programs o Advertising – Print media is the current primary advertising medium for Estee Lauder. Some of the main channels include fashion and lifestyle magazines such as Harper’s Bazaar, Vogue, In Style, Marie Claire, Cleo and Cosmopolitan. These magazines are targeted toward females with various lifestyles and levels of disposable income however they are all image conscious and is appealing to Roy Morgan’s visible achievement segment and those who aspire to be part of this group (Mindset, 1998) (See appendix 3). Estee Lauder has been featuring Liz Hurley as the face of their cosmetics for the past seven years and has proven successful in endorsing their  prestigious brand of cosmetics, fragrances and skin-care, (Bittar, 2002). Estee Lauder’s current models infuse â€Å"the brand with energy, vitality and modernity† and aiming to â€Å"connect the brand with consumers† (Staff Report, 2003). Last financial year, EL companies allocated $US56 million to advertising to promote the core Estee Lauder brand. This figure has been consistent over the past five years and is the largest advertising figure of any EL Company. o Internet – Estee Lauder have not utilised the internet within the Australian marketplace. Their current website is targeted towards the U.S, European and Asian markets. It does not provide Australian consumers with a customised information source regarding available products and new company developments. o Sales Promotion – Estee lauder endorses its distributer such as Myer and David Jones with promotional gift packs as an incentive to spend as certain amount of money or buy a specific product. They uphold their prestigious image by seldom discounting their products. Sampling promotion has also been used successfully to promote new products and allow consumers to experience the product first hand, without having to commit to a purchase.However, this has not been successfully used for Estee Lauder’s recent release of â€Å"Pure Colour† range of eyeshadows and lip gloss’s. Pilot research conducted found although this new range is targeted towards the younger market, it is still not being recognised as the brand of choice for 17-25 year olds (see appendix 4 & 5). o Personal Selling – All Estee Lauder sales consultant are specifically trained and have high levels of product knowledge. Cosmetics is a high involvement purchase and therefore requires consultants to have an in depth knowledge of all products offered by Estee Lauder. o Direct Marketing – Currently Estee Lauder are not using the internet for direct marketing sufficiently. Department stores often send promotional brochures to opt in mailing list clients if new products are released or  special offers are available. Assessment of relative strengths and weaknesses of product and brand Estee Lauder as a brand  · Strengthes – High brand awareness – High brand recall – Trusted brand – High perceived quality – High Brand Equity – Good customer service – Perceived as prestigious brand  · Weaknesses – Communication Strategy not in line with target market – Price of products too high to allow for repositioning into young market – Brand perceived as â€Å"too old† for target market – Products not designed for younger market (i.e. anti-ageing moisturisers) – Package design for mainstream product lines not innovative and modern, sending conflicting messages and confusing consumers  · Opportunities – Possible expansion into younger mass markets – Ability to pursue an online strategy to enhance their marketing communications by introducing online catalogues and creating a direct marketing database. – Ability to establish themselves as the leading cosmetics brand in other markets including Australia, specifically targeting 20-30’s market and the youth segment. – Creation of new communication strategy to build upon existing brand strengths and reputation. – Opportunities for co-branding to reach untapped markets.  · Threats – Losing existing customer base i.e. older market due to new market direction – Possible confusion for consumers regarding mixed promotional messages targeting the young and older market i.e. strategies are not integrated – Losing market share – Deterioration of perceived brand quality and prestige due to changing the promotional strategies to suit the younger market – Potential loss of revenue as a result of decreasing product prices to attract the younger customers Competitive Analysis As Estee Lauder redirects their focus from the older aged females to those in  a younger age bracket, they encounter a different group of competitors. These competitors operate in the mass market of cosmetics and skin care. Each brand is continually challenged to apply a successful integrated marketing plan so as to maintain and/or increase their share of the market thus creating a high level of competition for Estee Lauder. Direct Competitors Revlon and Loreal Paris are both mid-range cosmetics brands that represent Estee Lauder’s biggest threats. They are direct competitors of the traditional EL Company brand as the quality, price and packaging of their products are more appealing to the younger market. Recent annual 2000 figures showed Revlon making $1,491,600,000 alone in cosmetics sales and Loreal with $12,051,000,000 from cosmetic and skin-care sales combined (http://www.sharelearn.com/520samp.html). Estee Lauder presently generates $2,700,000,000 in the prestige market, and can largely be attributed to a higher gross margin in retail prices (http://www.myneweconomy.com/articles/020703/estee.htm). Indirect Competitors Estee Lauder’s indirect competitors or product substitutes consist only in skin-care and not in cosmetics. Face-moisturizers and cleansing products are not yet specifically designed or even targeted towards younger women and appear to still target mature-age women. In which case, Loreal Paris’ offering of skin-care products specifically designed to nourish the skin of young women, offers a substitute for those products not catered for by Estee Lauder. Message and Media Strategies used by Competitors  · Loreal Paris Evidently, Estee Lauder’s primary competitor is Loreal Paris because both are competing for leading positions in the skin-care and cosmetics market. The  Loreal Paris brand was developed for infiltration into the mass market and targets young females who desire high-quality, innovative and fashion-forward beauty products at affordable prices (http://www.lorealparisusa.com/frames.asp#aboutloreal/page_a.asp). Their promotional campaign ‘Because I’m worth it’ (http://www.lorealparisusa.com/frames.asp#aboutloreal/page_a.asp), has proven to be a success in terms of their efforts to communicate a modern and self-confident message to their target audience. They have used a number of international spokespersons including Andie McDowell, Laetitia Casta, Heather Locklear, Vanessa Williams, Virginie Ledoyen, and Milla Jovovich (http://www.lorealparisusa.com/frames.asp#aboutloreal/page_a.asp), all famous actors and models, to endorse the quality of Loreal Paris products and give young females an image to aspire to. Using a range of international faces allows Loreal Paris to target the cultural youth market because it promotes a wide cosmetics range suiting any skin colour and image. This allows them to expand their target market and remain competitive.  · Revlon Revlon also has a similar marketing approach as Loreal Paris. Their corporate strategy aims to offer young women a sense of ‘glamour, excitement and innovation’ (http://www.revlon.com/corporate/corp_ca_history.asp) when using these cosmetics. They have recently launched their new face for the Revlon brand ‘Halle Berry’ a famous U.S. actor, whom exerts an independent, confident and sexy young image for women of today. By using this one spokesperson, they have created a unique identity for the brand and encourages the younger market to use the Revlon products so they can be perceived in the same way. This consistent image associated with the brand gives consumers an easy product recall whenever they see her in movies, billboards, magazines and other channels of advertising. Key Benefits of Competitors and their Positioning Relative to Estee Lauder’s  · Loreal Paris – has established its brand name in the market place since 1907 and therefore high brand awareness – large budget committed to R&D and ability to be on the edge of cosmetic technology – have been targeting the younger mass market for years and are therefore trusted in their quality of beauty products and known to sell at affordable prices – is the global cosmetics leader with 16.8% market share – product offering is extended to hair colouring, cosmetics, skin care and styling aids thereby enhancing brand recognition  · Revlon – has established its brand name in the market place since 1932 – have been targeting the younger mass market for years and are therefore trusted in their quality of beauty products and known to sell at affordable prices – ranks 4th in the top ten global cosmetics leaders with 7.1% market share – product offering extends to personal care (eg. Nail polish), fragrances, cosmetics thereby enhancing brand equity  · Estee Lauder – has the opportunity to penetrate the youth mass market with years of marketing and operating expertise in the cosmetics industry – is currently ranked 2nd global cosmetics leader – extensive economic resources to conduct R&D – has economies of scale because of the size of its pre-existing operation – trusted as a prestigious quality brand – family controlled enterprise allows for consistency in marketing and management decisions although no evidence to support this observation Consumer Analysis Cosmetics is a luxury product and involves a high level of involvement from the consumer (Schiffman et al, 2001). When purchasing cosmetics and skincare, consumers want to be sure that the products they are purchasing are safe and will not harm their skin . Estee Lauder has identified this need and has catered for this by decreasing the risk involved when purchasing cosmetics at pre-purchase, purchase and post-purchase stage. Experience at Point of Purchase Estee Lauder Australia is the third country to undergo dramatic transformations in the appearance of their counters in department stores (King, 2003). The new counters are brightly coloured and have interactive displays, which allows passers by to test products at their own discretion without having to consult Estee Lauder staff. However should assistance be required with any of the products, there are always friendly, knowledgeable staff to assist potential customers. All consultants are thoroughly trained and have extensive knowledge about all product lines. This professionalism enhances to the consumer’s experience of Estee Lauder at the point of purchase as they learn more about specific products and their skin type as well. The revitalised counters are a real feature now as they are by far the brightest and most elaborate in major department stores (namely Myer/Grace  Bros and David Jones) in comparison to any of its direct or indirect competitors and creates a salon like experience for the consumer (Gold Coast Bulletin, 2003). Buyer Roles and Cosmetics Unlike products such as fragrances where the buyer is not the user, the majority of the time, cosmetics buyers are the users of the product. Although, this does differ around increased purchase periods such as Christmas, Easter, Valentine’s Day and Mother’s Day when the buyer (i.e. husbands and boyfriends) are not the end users of the cosmetics. Estee Lauder has identified this and designed their promotional activity accordingly. All advertising (predominantly instore promotion and print media) features young attractive women, that many purchasing the product would see as an aspirational figure. The more youthful Carolyn Murphy featured in the current advertisements provides the younger market that Estee Lauder is currently trying to conquer, a face that they can relate to (as opposed to Elizabeth Hurley, who Estee Lauder felt was too old for the younger market). Perception of Estee Lauder The perception of Estee Lauder amongst younger people is that it is a brand for â€Å"older people† (The Nation, 2003). This perception of the brand will clearly take an extended period of time to change, however with the current steps undertaken by Estee Lauder, they are well on their way to turning this around (see appendix 7 for Kapferer analysis of perception of Estee Lauder). As the pilot research conducted depicted, Estee Lauder’s products are priced too highly for the younger market to purchase. If they do wish to conquer this market successfully, they will have to consider pricing options on certain product ranges to make it more affordable to the target market (See appendix 8). Whilst Estee Lauder is priced too highly for people in this age bracket, they still view the brand as fashionable, as results of the pilot research study concluded (see appendix 9). Environmental Analysis Social/Cultural In recent years consumers have developed a heightened awareness of social and environmental conditions such as animal testing. Many consumers hold strong views towards animal testing and do not want to buy products that have caused animal suffering. Consequently consumers often want to acquire company information regarding animal testing before they buy the product, many cosmetic companies including Estee Lauder shy away from this controversial topic and provide confusing and ambiguous statements regarding the topic as they are guilty of continuing animal testing but wish to avoid public opposition (http://www.buav.org/pdfs/cosmetic_experiments_-_bluf.pdf). As well as being environmentally friendly consumers expect their brands to be socially responsible and to give back to the community. This force gives Estee Lauder the opportunity to sponsor charities that are important to their target market. Any sponsorship should form an integral part of Estee Lauder’s IMC to promote the brand as being socially aware and responsible.. If a customer perceives a brand as being socially irresponsible they will often remove the brand from their evoked set and not even consider them in any of their future purchase decisions. Political / Legal There are many political and legal obligations that Australian cosmetic companies must comply with in order to protect consumers. â€Å"The public has the very reasonable expectation that cosmetics should be safe to use as directed on the label and as people would normally expect to use such products† (www.ASCC.com.au). All cosmetic companies selling their products within Australia must comply with all Australian Safety Regulations. Cosmetic companies must also comply with the Trades Practices Act among other regulations and legislation regarding product safety and ingredients (www.ascc.com.au). These rules and regulations have enormous implications for Estee Lauder and other cosmetic companies in Australia. It is imperative that these regulations are followed as court action can be seriously detrimental to the company financially. Further more, bad publicity as a consequence of not following such regulations can cause irreversible damage in terms of the reputation of the brand. Technological Due to technological advancements there is a lot more information available to the consumers regarding the safety and effectiveness of cosmetic products and the ingredients within them. Due to the amount of scientific information and studies available to them, consumers have developed a very sceptical attitude towards cosmetic brands and their products. The implication for this is that Estee Lauder must provide consumers with as much information and as much proof regarding product effectiveness as possible in order to facilitate the buying decision process. Technology has also worked in favour of Estee Lauder as they have been able use technology to create new innovative products in attempt to gain competitive advantage. Economical Changes on the economy could also have a strong impact on cosmetic sales. Cosmetics are categorised as a luxury item so when the economy is down and consumers have less buying power cosmetics would be among the first product categories to suffer. After the events of September 11 sales dropped to a virtual standstill resulting in the worst holdiay season for American retailers in years (Bittar,2002). However currently Australian retail sales has experienced strong growth since May 2003 (www.abs.com.au) (See Appendix 10). In 1998-99 $4.1 billion was spent on cosmetics, perfumes and toiletries (www.abs.com.au). These statistics indicate it is a healthy growing industry giving companies the opportunity to increase sales and expand product lines.