BOOTS HAIR-CARE SALES PROMOTIONHarvard Business School Case

What is

?

Boots Group, one of the best known and respected retail names in the United Kingdom, provides health and beauty products and advice that enhances personal well-being

PROBLEM STATEMENT

To drive sales volumes and trade-up consumers from lower value brands while retaining or building brand equity.

History of Boots…

Early Days• John Boot, born in 1815, spent his early life as an agricultural labourer on local farms,

where herbal remedies were popular with the labouring poor

• In 1849,Boot opened ‘The British and American Botanic Establishment’ in Nottingham, hoping to provide physical comfort to the needy as well as a reasonable living for his family

• His son Jesse took sole control of the shop in 1877, and, in 1883, established it as a private company ‘Boot and Company Limited,’ with himself as chairman and managing director

• He was determined to cut prices and asked customers to pay cash rather than offering them credit

• Also, the company adopted its own logo

• Jesse wanted the company to be fully self-contained so that he could control not only prices but also quality

• He wanted to be the ‘Largest, Best and Cheapest’ and, by 1913, sales in the 560 Boots stores across the United Kingdom amounted to over £2.5 million a year

Post-War Regeneration and New Development, 1945-1968

• A program of factory development in Nottingham was begun following the war, the major part being completed by 1953.

• This included a new power-house, printing works, and, in 1959, a new pharmaceutical research building.

• In 1949, a factory for the manufacture of cosmetics was opened at Airdrie in Scotland.

• The company adopted a new black and white logo

Present Situation

The Modern Era• Boots continued to develop product ranges, many of which became

household names. ‘17’ cosmetics, aimed at the teenage market, was launched in 1968.

• In 1969, the analgesic Ibuprofen was introduced and was launched as the OTC brand, Nurofen, in 1983.

• Boots Opticians, formed in 1987, became one of the United Kingdom’s leading chain of opticians.

• Dentistry, chiropody, ‘Boots for Men’ stores and ‘Internet Services’ were introduced in 1999.

• 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.

• Boots Health and Beauty stores were established in Ireland, Thailand and Taiwan.

THE

A sales promotion strategy for aline of professional hair care products,developed in collaboration withUnited Kingdom's top celebrity hairdressers.

Competitors/Retailers inHair-Care Products

Tesco(1800 stores, 45000 employees)Sainsbury`s(700 stores)

Superdrug(700 stores)Morrisons(400 stores)

•Consumers

Shiny Hairshampoo

`90`s

Detanglingproperty

`80`s

Gentle shampoo

`70`s

Consumer Preference Trend

Major Competitors for Boots

•P&G

•Alberto Culver

•L`oreal

What type of sales promotion strategy should Boots apply

The Alternatives

3 for 2PROS• Customer would get 3 products for the price of 2.

• Estimated sales would increase to 300%

• Promotional buyers would rise to 60%

• Consumers could combine any three products of their choice, for e.g.

shampoo, conditioner, styling gel of the same brand.

• Most competitors did not have that kind of technology to imitate this

promotion

• It would be thought of as a stock clearing strategy

• Premium products would end up losing their brand equity

• Cheap promotion strategy

• Product partners might go against this strategy as this would hurt

their brand equity

CONS

On Pack Coupon worth 50p

PROS

• Customers can redeem their coupons during their store visit

• Estimated sales would increase to 150% of its pre-promotional sales

• 50% of the customers will be promotional buyers

• A very common strategy and can be imitated

• It’s a form of discounting that will dilute the brand

equity

• Less estimated sales growth than expected

CONS

GWP(Gift With Purchase)

PROS

• Product sample would be given free along with a regular

purchase

• Approximately 40% of the customers will be promotional buyers

• Estimated sales would increase to 170%

• This is a very common strategy used by most of the retailers

and can be easily imitated.

• Adding the sample would cost approx. 90p per unit for the

product + 3p per unit extra to secure the sample to the featured

product

CONS

After Effects

Consequences

Short TermCost Sales

Long TermBrands

AIM: To secure market leadership in the United Kingdom in the hair-caresegment.

Contacts and connections withprestigious salon brands in U.K.

3 FOR 2 On-pack coupon

GWP

Price of bottle $3 per bottle $3 per bottle $3 per bottle

Units Sold 300 150 170

Cost Areas Production Production+ Discount

Production+ Sample

Promotional Cost

$3 $4.07 $5.03

Total Cost $900 $610 $855

Total Revenue $600 $450 $510

Money Invested $300 $160 $345

QUALITATIVE ANALYSIS

According to calculations,the best choice is the on-pack coupon promotion strategy as it seems the most cost effective