Study for L'oreal Case
Essay by FANGZHOU ZHENG • February 4, 2018 • Case Study • 947 Words (4 Pages) • 1,759 Views
MGMT 590: Case Analysis
L’Oréal in China
Team Members:
Juhua Ji
Mahitha Reddy
Fangzhou Zheng
L’Oréal acquired the Chinese beauty brand Yue Sai in 2004. However, due to the wrong market strategy and unclear brand positioning taken by L’Oréal, Yue Sai faced a decrease in sales and awareness in the China market. To help Yue Sai re-achieves success in the China market, L’Oréal needs to understand the following questions and undertake a new marketing strategy.
- What is the right brand position for Yue Sai? How should Yue Sai’s products be priced?
- How should Yue Sai be associated with L’Oréal?
- Should Yue Sai expand to other foreign markets or extend into other product categories?
- What kind of marketing mix strategy should Yue Sai use for distributing, media and ads?
The most important decision Yue Sai faces at the moment is to have a clear brand positioning as the brand changed its positioning several times in the past. Yue Sai used an uncertain business model that addresses neither the luxury segment nor the Chinese heritage-driven consumer segment. Based on its longstanding brand promise that “nobody knows Chinese skin better than Yue Sai”, Yue Sai was focused on creating products specifically designed for Chinese skin when it was being transferred from the Consumer-Product-Division to the Luxury-Product-Division. Shortly after Yue Sai successfully introduced the Vital Essential Line, L’Oréal decided to reposition Yue Sai as “the modern brand for modern Chinese women” and increased the product price at the same time. This action didn’t improve Yue Sai’s sales but has instead caused confusion among target customers about the unique selling proposition of Yue Sai. Yue Sai has never had substantial profits or sales even though it was within a booming cosmetic market. Thus, it is necessary for Yue Sai to have a clear brand positioning - the luxury Chinese beauty brand under the concept of traditional Chinese medicine.
Yue Sai currently has four options for the brand repositioning: Keep the current brand positioning; Go for high-end market; Target the mass-market with affordable price products; Try something totally different. Given the case situation, either remain in the current position or try something total different cannot help Yue Sai to get out of the current business dilemma. On the one hand, Yue Sai would become a burden of the L’Oréal group if it keeps in the current situation with a lackluster performance. On the other hand, it would be very difficult to turn Yue Sai into a completely different company (For example, try to enter to the consumer goods market) because it has the long brand history and used to be a symbolize of the Chinese beauty. The other two options like high-end or affordable market could be effective but need further in order analysis to leverage and make a final decision. The criteria to evaluate the situation and decide best position for Yue Sai would be as follows: 1) Target customer in terms of mind, body, lifestyle and demographics 2) Competitor position in the market 3) Marketing mix strategy influence: price, distribution and advertisement.
Criteria | Luxury Market | Mass Market |
Target customer segment | Pro: 1) love luxury brands and also appreciate traditional Chinese ingredients in their cosmetic products. 2)Higher income women whose awareness clearly lies with competing products in luxury category (e.g. Estée Lauder and Shiseido) as well as Chinese-heritage driven category (e.g. Herborist and Chcédo). Also, rebrand the brand as something the younger generations would be more interested in buying. Con: In the Chinese consumers’ mindsets, luxury brands are perceived to be from Europe, Japan and other foreign countries. | Pro: 1) Target moderate income earners and rebrand Yue Sai between the Luxury and Consumer division products.2) Consumers in the age groups 20-40s 3) It will be able to reach a larger consumer base with moderate prices
Con: High competition, from local brands as well, such as Herborist and Chcédo. |
Competitor position in the market | Yue Sai can directly compete with luxury brands such as Estee Lauder and gain a brand image for being a luxury brand in the Chinese sector. This will help L’Oréal to attain a concrete brand positioning for Yue Sai and get rid of its current image as a brand that has a dying consumer base and innovation. | Boost its sales volume as moderate prices will attract more consumers. |
Marketing mix strategy | Distribution: Sell in tier 1 department stores across China. Including beauty chains Watsons and Sephora Advertising: Shift focus on featuring famous celebrities and launch a new campaign relevant for this target segment. Put more emphasis on luxury and aesthetics of the product's ingredients and packaging. | Distribution: Sell in Tier 1 and Tier 2 department stores. Advertising: Launch a campaign relevant for moderate income owners. Emphasize on the value per price of the products. |
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