L’Oreal of Paris:Bringing “Class to Mass” with Plenitude

Executive Summary

L’Oreal was founded in 1907, in Clichy, France, by the chemist Eugene Schueller to provide advanced

hair care products for customers of French hairdressers. Under the guidance and control of Schueller's

family the company had evolved to provide cosmetic, skin and hair care products with the principle

strategy of 'quality and innovation. They also focussed on geographic expansion over the period of time.

Within the context of L'Oreal, Plenitude existed to target consumers of skincare products via the mass

market retail channels. Other ranges focused on hair care and 'Lancome' for cosmetic markets.

The huge success of L'Oreal Plenitude in France as the premium skin product with "class to mass"

strategy was the primary reason for L'Oreal to expand the product to US market. The company started

to enter the US market skin care in 1989 through mass channel by introducing the entire product line

(14 SKU's) that had been developed in France, instead of launching the products one by one. Before

Plenitude entered the US market, L'Oreal had had good reputation for its cosmetic and hair product, so

the name was critical to sell the products. The company used the same formula "star" system in

advertising as in France by putting bulk of dollars on the newest, most technologically advanced

product. Even though Plenitude had a very strong introduction in the US by becoming the #2 brand in

the market, the brand performance had been rather disappointing. In 1995, they had lost an

approximate $12.5 million on the brand, and lost the #2 position to Pond's.

In 1995 and 1996, the company conducted three market research studies. From those studies, the

company found out that the value proposition for Plenitude's daily cleanser and moisturizer was not

that well established because of the "star" system. The studies also proved that American women had

differences in pace of life, they just didn't have time to read a label about their skin products. They

thought that the skincare line was too complicated and in particular the boxes and the labels would take

too long to read. Many consumers thought that because of the product message "Reduces Signs of

Aging", Plenitude was targeting older women. The company needs to decide how to improve further

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upon Plenitude's current position in the US, in terms of promotion, product offerings and packaging so

the consumers would see it as a premium, effective, easy-to-choose brand at every age. Another

important decision to be made is how to introduce the new product (Revitalift-eye) into the product

line.

5C ANALYSIS

1. Customer

L’Oreal is focused on mature skin segment and has daily moisturizers and cleansers segment.

2. Company Skills

The L'Oreal Group is the world's largest cosmetics and beauty company founded in 1907. The

firms consistent strategy has been delivering quality, innovation & geographic expansion. It has

500 brand names over 150 countries & 81% revenue from cosmetics – 20 % from US & Canada.

Its consolidated sales were 53.4 billion French Franc in 1995 from over 2,000 products.

3. Competition

L’Oreal faces stiff competition from primarily the following players:

P&G (Olay)

Unilever (Pond’s)

Nivea

4. Collaborators

The company uses mass marketing and hence works together with various department store,

speciality store, mass merchant, drugstore & grocery store.

5. Context

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It introduced Plenitude Skincare Line using Class for the Mass in US following success of 1982

launch in France & in 1987 became market leader in France. In France It positioned as high

end, superior performance, but accessible (class to mass strategy).

It then decided to export “class to mass formula” to U.S. & its positioning was to ‘reduces the

Signs of aging’. It covered 3 products - Basic moisturizers, Treatment moisturizers, Cleansers.

But response from US consumer wasn’t similar to French and hence L’Oreal didn’t do much

success as compared to France.

SWOT ANALYSIS

Strengths

L’Oreal has competitive Edge in market.

It has a very good brand recognition

Revitalift posseses a very product potential

L’Oreal also has products in mature skin market segment

It has expertise in R&D department,Innovative technology

Weaknesses

L’Oreal is unaware about consumer behavior in US

It incures high advertising costs & hence the lack of profitability

L’Orealhas not differentiated in daily moisturizer/cleanser market

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Opportunities

L’Orealshould try to gain mass market share via Revitalift product to capture the big market

in US

Youth felt local product is old fashioned

It can further develop mature skin segment with Revitalift Eye

L’Orealshould revise pricing strategy and reduce advertising costs to make better use of US

maker has many channel for L’Oreal product

Threats

It has a expensive product Image

Competition from Olay in mature skin segment and lack of acceptance from youthful

customers

Also consumer’s loyalty to competitor product.

Question 1

Why has Plenitude been less successful in the US than in France?

The reasons behind Plenitude lesser success in US as compared to France are mainly related to the

difference in culture and demographics in both the countries and the lack of understanding of the US

customer. Plenitude’s new line of products was launched in France, where L’Oreal was already famous

and the product range was well suited to the local taste. However, the same product range was

launched in the US without any tweaking of the product or communication which would have suited the

local US market’s diverse wants and needs. The local US consumer found the moisturiser way to greasy

for her liking. Also, the advertising campaign for Plenitude “reducing signs of ageing” was perceived to

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be targeting older consumers, so the younger generation felt that the product was not for them. It was

also costlier than the existing brands.

L’Oreal entered the US market at a time when the marketplace was very competitive with players like

Ponds and Olay. The competitors had the “home” advantage, i.e. they had lots of knowledge on the local

consumers, better branding and distribution network.

Plenitude was launched in France one product at a time, and advertisements focused on that very

product; whereas in the US market, 14 SKU’s were launched immediately within 3 categories. As a

result, the customers were confused and over-whelmed.

Question 2

What do you infer from the market research studies?

The company adopted the following three market research studies:

Facial Skin Care Market Study

Market research performed by the company indicates that it is a price sensitive market. Plenitude prices

its products at a premium, hence the price sensitive customers might be driven away due to the fact

that there are other products in the market priced more conservatively, providing a more value to them

in net terms.

The study brings to front the fact that approximately 40% of the respondents really bother about the

benefits that the moisturizers and cleansers have to offer such as reducing the signs of aging or delaying

the signs of aging. Such consumers are indeed concerned about the ingredients and the superior

technology of L’Oreal. Thus 60% of the buyers are not really concerned with the ingredients’ details, etc.

This provides a possible segmentation in terms of the amount of information that can be provided on

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the packaging. Thus the company can avoid providing detailed information on its packaging for daily

moisturizers and cleansers, while continue to provide such information in treatment products.

Acceptor/Rejector Studies

People in general are not fully aware of the entire range of Plenitude products and that the entire

offering is from L’Oreal. The pricing has also not been well-thought out. The company prices its products

at a premium while trying to reach the mass buyers who are in general price-sensitive, hence the pricing

does not go well with the objectives of the company.

The market research also serves to point out the differences between average French and a US

consumer. The French buyer is more educated and makes a well-informed purchase decision after

considering all options on offer. The American buyer, on the other hand, is confused by the diversity of

products on offer and is not as well-informed as the French counterpart.

There are also concerns with the company changing its tagline from “Delays the signs of aging” to

“Reduces the signs of aging” since the latter inherently implies that the product is for elderly women

who already exhibit the signs of aging and want to reduce them rather than delay them, thus taking an

entire range of young women out of the consideration set.

Shelf Shopping Study

The in-store shelf arrangement study yielded the following insights:

Some of the customers tend to be delighted by the multitude range of products on offer in a shelf,

which gives them variety to choose from and explore new options.

The same proliferation of products on a shelf can confuse some other shoppers by overwhelming

them with the variety of products on offer, a number of them serving similar purposes.

Customers carried set perceptions about certain brands which determined their shopping behavior.

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For instance, Oil of Olay carried the perception of being an old proven brand in some sense. Some

people thought that Oil of Olay hadn’t improved much in all these years, whereas others thought

that they had been performing well and had no reason to change.

Ponds had an overall unacceptable perception in that people were mostly unsatisfied with the

brand.

L’Oreal had the image of an expensive, premium brand. Some of the shoppers chose to ignore

L’Oreal brands largely because of such notions.

There was mixed review as regards the packaging of L’Oreal products. Some shoppers were repelled

by the over-dose of information on L’Oreal product packets, whereas others thought this to be a

good thing in that it provided them details of all they had to know.

Problem Identification

Need for a strategy to improve L’Oreal‘s profitability and sales in the US mass-market skincare line

“Plenitude” that is also replicable globally.

List of possible Alternatives

1. Positioning Plenitude as purely a treatment franchise targeting the older market segment

2. Capture the youth market segment through daily moisturisers and cleansers

3. Product differentiation between treatment and youth segment(Discontinuing single star product

system and rallying instead behind a product in each segment)

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Evaluation of alternatives

CRITERIA(Weight) Option 1-

Plenitude as a

treatment franchise

Option 2 –

Plenitude as a youth

market segment

Option 3

Plenitude – separate

youth and treatment

Sales volume (7) Medium(2) Poor(1) High(3)

Profitability (4) High(3) Poor(1) Medium(2)

Competitor product differentiation(2)

High(3) Poor(1) Medium(2)

Total 32 24 33

Based on the above evaluation, the existing Plenitude brand should be split between the youth and

treatment segments

Implementation

1. Create 2 well differentiated product lines for the youth and the treatment segments

2. In the youth segment ,

a) Adopt one of the daily use moisturisers as a star product

b) Exit the cleansers market

3. In the treatment segment,

a) Continue putting marketing weight behind the Revitalift brand

b) Come up with a wider range of offerings using L’Oreal’s tech skills

4. Arrange the numerous products that the Plenitude line has according to product groups and

segments. (Youth/moisturiser, Treatment/moisturiser etc )

5. More information about the product from the front cover to the back cover

6. Give out free samples in stores to increase the low “tried ratio”

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APPENDIX

Question 3

What should Carol Hamilton do now? What results do you expect?

In order to for the “trickle down –fire up” approach to succeed the sales volume of the Plenitude brand

needs to grow. This can happen only if the entire market of women using skin care products is captured.

However because of the current methodology of putting weight behind one star product, the focus is on

the treatment market segment. This creates a perception of the brand being for “older women”. In

order to combat this, the plenitude line should be properly differentiated between the treatment and

the youth segment. Adopt a 2 – star product strategy : one for each segment.

Also, the cleanser products that Plenitude sells have no advantage over competitors because of the

nature of the cleanser market. This market can’t be scaled to the desired level. So in order to save on

costs, the cleanser line should be dropped. On the other hand, in the moisturiser market L’Oreal’s tech

skills enable it to achieve the differentiation over competitors that can drive sales. Change in the pricing

in the daily use/youth segment coupled with the brand value that L’Oreal commands can help achieve

sales increase. This is evident from the sales increase that Pond’s achieved due to the low priced

products.

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PROJECTED MOISTURISER MARKET

1991 1992 1993 1994 1995 1996 1997 19980%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

NeutrogenaAlpha HydroxPondsNiveaAlmayOlayPlenitude

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