HAIR-CARE SALES PROMOTIONCASE STUDY

HISTORY• In 1849, Boot opened ‘The British and American Botanic Establishment’ in Nottingham.• In 1883, ‘Boot and Company Limited was established.• In 1884, Boots opened its first store outside Nottingham in Sheffield.• International expansion in operations was conducted by Boots Healthcare International (formed in 1991), which exported healthcare products to more than 130 countries round the world.

Plan a sales promotion strategy for the

upcoming holiday season

Drive sales volumes

Trade up customers from from other

brands and make an emotional connect

Retain brand equity

CURRENT SITUATION

CURRENT UK HAIR CARE MARKET

60 Hair care products in UK

None has more than 9% market share

Boots-1300 stores in UK

85% female visitors per week

COMPETITORS

Apart from Pantene, Procter & Gamble offers other complete ranges of hair-care brands including Clairol, Head & Shoulders, Daily Defense, PERT plus, and Herbal Essences.

It has grown from a handful of franchised stores to over 2,000 store locations today in United States, United Kingdom (150), Canada, Germany and Japan.

Alberto-Culver’s hair-care range offered a broad assortment of shampoos, conditioners and styling agents.

The group markets over 500 brands and more than 2,000 products in all sectors of the beauty business: hair color, permanents, styling aids, body and skincare, cleansers, and fragrances.

These products are found in all distribution channels, from hair salons and perfumeries, to hyper-super markets, health/beauty outlets and direct mail.

• Tesco - largest supermarket chain in the United Kingdom - 1,800 stores

• Sainbury’s - 700 stores.

• Morrisons - 400 stores- Prided itself on providing quality products

• Superdrug - almost 700 stores in the United Kingdom.

MAJOR RETAILERS

CONSUMER CHALLENGES

•Not brand loyal

• Trends in hair care change regularly

• Face difficulty in differentiating between products

• Choices change according to packaging, pricing, fragrance etc.

Opportunity for BootsEstablish itself as a premium hair care

expert brand

Associate and advertise itself with celebrity hair care products

Maximize the sale of celebrity products and hence increase profits

Product dynamics• Bottle size=250ml• Price during non promotional events3.99 ₤ premium products2.00 ₤ mass market products• Margin on products40% premium products25% mass market products• Manufacturers margin=12% in both cases

Choose between

Promotional strategies

•This offer would enable consumers to buy two hair-care items at regular price and receive one free.

•Sales per day would increase to 300 per cent of pre-promotion sales during the deal period.

•60 percent new customers

3 FOR 2

3 for 2 offerAssuming 100 bottles are sold on a normal day and hence 300 units of bottles are sold during the promotional event on one day

(All values are in pounds)

Brand category

Selling price in market

Retailer’s profit

Price for retailer

Manufacturer’s profit

Price for manufacturer

Market selling price for 300 bottles

Cost for manufacturer for 300 bottles

Profit Profit/bottle

Premium 3.99 40% 0.6*3.99=2.394

12% 2.1375 3.99*200=798

2.1375*300=641.25

798-641.25=156.75

156.75/300=0.5225

Mass market

2 25% 0.75*2=1.5

12% 1.33 2*200=400

1.33*300=399

400-399=1 1/300=0.0033

GIFT WITH PURCHASE

• Customers are given a product sample along with a regular purchase

• Adding the sample would cost approximately 90p per unit for the product plus 3p per unit to secure the sample to the featured product

• 170 per cent of sales

• 40 percent new customers

Gift with purchaseAssuming 100 bottles are sold on a normal day and hence 170 units of bottles are sold during the promotional event on one day

(All values are in pounds)

Brand category

Selling price in market

Cost for manufacturer

Selling price for 170 bottles

Cost for 170 bottles

Profit Profit/bottle

Premium 3.99 2.1375+0.93=3.0675

3.99*170=678.3

3.0675*170=521.465

678.3-521.465=156.835

156.835/170=0.922

Mass market 2.00 1.33+0.93=2.26

2*170=340

2.26*170=384.2

340-384.2=-44.2

-44.2/170=(-0.26)

On pack coupon(50p off)

• Sales would increase to 150 per cent per day

• Fifty per cent of sales would come from new customers

On pack coupon(50p off)Assuming 100 bottles are sold on a normal day and hence 150 units of bottles are sold during the promotional event on one day

(All values are in pounds)

Product category

Selling price in market

Selling price/bottle

Selling price for 150 bottles

Cost for manufacturer per bottle

Cost for manufacturer for 150 bottles

Profit Profit/bottle

Premium 3.99 3.99-0.5=3.45

3.45*150=517.5

2.1375 2.1375*150=320.625

517.5-320.625=196.875

196.875/150=1.3125

Mass market

2.0 2.0-0.5=1.5 1.5*150=225

1.33 1.33*150=199.5 225-199.5=25.5

25.5/150=0.17

Considering all the three strategies it is observed that the 50p off coupon strategy would generate maximum profits

Also the 50p off strategy can be easily copied by competitors

Maximum sales will be present in the case of ‘3 for 2’ strategy and will also bring in new customers

EVALUATING ALTERNATIVES

Gift with product• It increases sales by 170 percent.• This strategy does not maximize the profits to a large extent.• Using this strategy highly increases costs for the manufacturer.• Competitors can easily copy.

On pack coupon• This strategy maximizes the profit both in the premium brand and the mass market brand product category.• No effort in packaging and cost is involved.• However it can be easily copied by competitors• It does not increase the number of customers to a large extent as compared to other categories

‘3 for 2’ strategy is the most efficient in such a case because

• The goal of the case was maximizing sales and building a strong customer base.• Establishing Boots as an expert hair care brand.• As sales will increase, the cost per product will decrease hence increasing profits.• It will help in building brand equity.• Competitors cannot easily copy this strategy.• No effort and cost in packaging is involved

• History of Boots• Current trends in hair care market in UK• Analyzing other competitors-brands , retail stores and consumers• 3 promotional strategies-3 for 2,GWP and On product coupon• Comparison of three strategies• Selecting the best strategy• Considering Alternatives

CREDITS• www.google.com• www.istockphoto.com• www.flickr.com• www.colorpallete.com• www.hbr.org• www.boots.com• www.compfight.com

DISCLAIMERCreated by Tarandeep Kaur, JMI Delhi, during a marketing internship, by Prof. Sameer Mathur, IIM Lucknow.