1. 1.

L'Oreal Of Paris: Bringing "Class To Mass" With Plenitude A CASE SOLUTION

BY : APOORV MALU
2. 2. INTRODUCTION : LOreal France based leading global cosmetic company.
Founded in 1909. Led by Lindsey Owen Jones, the chairman and CEO of the
Company. Achieved double digit profit for eighteen consecutive years.
Business in 130 countries with a turnover of around 13.7 billion Euros. Only
cosmetic company in the world to own more than one brand franchisee.
Cosmetic industry refers to the cosmetics, toiletry and perfumery industry
brands.
3. 3. Plenitude LOreals first ventures beyond the hair care and cosmetics
arena. France positioned the brand as high end, superior performance but
accessible. Plenitude was introduced under a class of the mass strategy.
The success of Plenitude in France validated the class to mass strategy in
the minds of L'Oreal executives in France. L'Oreal began to seek geographic
expansion of both Plenitude products and the marketing approach.
4. 4. Over time, the success in France led LOreal to more precise specification
of and deeper belief in the formula for success in mass skin care, viz. Have
Technologically Superior Products Concentrate Resources and Support on
newest Star Product to pull the entire line. Follow the Golden Rules of
Advertising: feature star product provide technological superiority
evidence depict an executive woman who is up-to-date and assertive (I
live with the times) L'Oreal tried and transported this formula to the U.S.
5. 5. SWOT ANALYSIS STRENGTH KNOWN WITH GOOD QUALITY GREAT R&D
MATURE SKIN MARKET SEGMENT EXPERIENCE IN COSMETICS WEAKNESS
UNKNOWN US MARKET HIGH ADVERTISING COSTS NO PROFITS NO
DIFFERENTIATION IN CLEANSNERS AND MOISTURISERS OPPORTUNITY BIG
MARKET IN THE US YOUNG PUBLIC FELT DOMESTIC PRODUCTS NOT AT PAR
MANY CHANNELS FOR DISTRIBUTION THREATS EXPENSIVE PRODUCT
RANGE COMPETITORS KNEW CB LOYALTY TO OLAY AND PONDS SWOT
6. 6. PORTERS FIVE FORCES MODEL INTERNAL RIVALRY US- HIGH THREAT OF
NEW ENTRANTS IN US - HIGH BUYERS BARGAINING POWER- HIGH
SUBSTITUTES- HIGH IN THE U.S. -SUPPLIERS BARGAINING POWER- LOW.
7. 7. THE UNITED STATES LAUNCH AND EARLY RESULTS LOreal decided to
launch the brand nationwide. Specially, 14 SKUs were introduced covering
three categories: 1. Basic moisturizers 2. Treatment moisturizers 3. Cleansers
It had a very strong introduction in the United States, quickly becoming the
#2 brand in the market, only behind Oil of Olay
8. 8. Plenitude sales grew pretty well through 1991 and the company was
achieving what it set out to do. But then it just hit a four-year sales plateau.
It lost the #2 position to Ponds. 8 or 9 years after the U.S. introduction
and the company still was not making any money there.

9. 9. THE KEYS 1. Improve the top-line - break through the sales plateau and get
more product moving off the shelf to maintain a strong position with the
trade. 2. Get the bottom-line moving in the right direction quickly. 3. Get the
united states in a position to be a major contributor to the brands position
globally. 4. Make sure that the company has suitable skincare products for the
U.S. Customer; but also that they fit within L'Oreal's technology portfolio.
10.10. Rethink All Aspects Of L'Oreal's Business- 1. Does L'Oreal have too many
different types of products? 2. Is the premium pricing strategy appropriate for
all the products? For any of them? 3. Is the star system of putting almost all
the media dollars behind the newest and most technologically advanced
product still the best way to go? 4. Are aspects of the strategy too French
for the U.S. market? 5. How to best utilize an asset which the consumer
research shows is very powerful and no one else in this business has - the
L'Oreal brand name?
11.11. THREATS AND SOLUTIONS UNAWARE OF US CUSTOMERS TOO MANY
PRODUCTS: CONFUSION ELDERS PRODUCT HIGH PRICING MARKET RESEARCH
BY AC NEILSON AND SELF SHORTENED RANGE OF PRODUCTS FROM AGEING
TO FACELIFT PRICECUTS ON MOISTURIZERS
12.12. THREATS AND SOLUTIONS SALES IN THE U.S. : VERY POOR PROFITS :
NEGATIVE EXTENSIVE ADVERTISING CUSTOMERS LOYALTY FOR COMPETETORS
PRODUCT CLIMATIC AND SKIN DIFFERENCES TAKEN INTO CONSIDERATION
FORMULA PROBLEMS: GREASY PRODUCTS
13.13. PERCEPTUAL MAPPING The image created by L'Oreal is of technically
sophisticated skin care used by elderly women. The user image of L'Oreal is
products for exclusive and glamorous women with premium pricing. Brand
users were able to separately identify the brand as Young, premium and
stylish. Brand image held a different perception of a product similar to
Nivea, AlphaHydrox, not able to separate itself from the class.
14.14. RECOMMENDATIONS Reinforce L'Oreals position as a innovation
technological leader. Continue in the daily moisturizer and cleanser mass
market. Follow star product promotion strategy. Maintain premium
pricing Because I am worth it Change the technology and product
according to geographies.

L'oreal Presentation
1. 1. TEAM International SwaggersBecause youre worth it
2. 2. Executive SummaryThe strategic problem is LOreal could not fully
penetrate the USAmarket because they were utilizing a global strategy that
workedin France while not adapting to the local USA market.Strategic
Alternatives: Reducing the number of SKUs New external marketing
strategy for intended market segment Concentrating on technologically
advance productsRecommendation:By focusing on the moisturizer category
and reducing prices onall products by 20%, will obtain profits of $24M by the
fourthyear.
3. 3. LOreal benefits from a strong competitive position in Europe.With
LOreals strong brand name and its reputation ofliving up to its
commitment, it can shoot up its sales ofnew productsWith LOreals strong
brand name and its reputation of livingup to its commitment, it can shoot
up its sales of newproducts.S Technologicallysuperior product Strong brand
valueO The market growthpotential hasincrease by 52.5% Market
developmentindex
4. 4. The position is vulnerable in US as they are experiencing pressurefrom
other strong brands.Their class to mass strategy backfired when they
introduced14 SKUs at the same time in US.W Packaging was not
aimtowards US consumers Product was not design forthe US segment High
price compare tocompetitors 30% customer retentionrateT
Increasecompetition/intensityof rivalry Last moverdisadvantage in US
5. 5. 78% of the US market knew of the product, 7% used it and retentionrate of
30% from 1991 to 1995.LOreal has 57% market potential, especially with the
theirspecialtiesW Leverage their products usingclass to mass and
tickledown and fire upB Upscale skincare business Top line improvement
Make US major contributor tobrands global positionM Competitors
increase marketshare Huge sales force againstLOreal No global-local
approachH Good reputation andcommitments Product education
Department store environment
6. 6. The 4 biggest players cater almost 65% of the moisturizer marketwhich
increases the barrier of new entry.High level of risk due to intense
competition can be mitigatedby increasing brand value to informational

advertisement andlowering price.Power ofSupplierPower ofBuyerThreat of

newentrantThreat ofSubstituteIntensity ofRivalry Competitive price Brand
perception Intro of new SKU[Plenitude] Price sensitive Lack of
productinfo Existing strongpositions Low verticalcompetition Low
switching cost
7. 7. Potential to capture 3 significant target segments: StressedOut, Aged
Focused and Price Conscious Socializers, totaling57% of the market.Plenitude
gives the most customer value for Stressed Out and AgedFocused segments,
which comprises 40% of the market.Segment Name Unconcerned
IngredientApatheticPrice ConsciousSocializersStressed Out Aged FocusedCore
Need Skin Hydration Skin Hydration Skin Hydration Skin Hydration Skin
HydrationDifferentiatingBenefitValue Reducing Signsof AgingBetter Look
Effectiveness NaturalIngredientsSegment Size 25% 17% 17% 22% 18%Kay
Demographic Teens 30 - 40
CollageStudents/YoungAdultsSuccessfulBusinesswomanWorking MumsPrice
Paid Low Medium Medium High High/MediumSample Product Ponds Nivea Oil
Olay Plenitude Alpha Hydrox
8. 8.MarketPenetrationProductDevelopmentDiversificationMarketDevelopmentEx
istingNewNew(treatment)Existing(daily)MarketsProductsThere is still more
potential growth in these market segments.Plenitude holds 37% of market
share in moisturizer for treatment and 13% inmoisturizer for daily product,
$42.9 USD million and $23.1 million respectively, in1995.
9. 9. Reduce thenumber of SKUsNew marketingstrategyFocus
ontechnologicallyadvance productsLose 22.3%market shareGain 21%
marketshareGain 17% marketshareRecommendation:Reduce number of
SKUs, devise new marketing strategy andprice reduction by 20% in order to
increase profits to $24MA change in marketing strategy will lead to a 21%
increase of market share
10.10. ProductLeadershipOperationalExcellenceCustomerIntimacyRecommendati
on:Reduce number of SKUs, devise new marketing strategy andprice
reduction by 20% in order to increase profits to $24MTaking Product
Leadership approach, there will be an increase of moisturizer treatmentand
moisturizer daily market share to 38% and 14% respectively.
11.11. Yearly sales objective increase of 57%.The marketing plan will gain $24M
in revenue by 1999. Strategic goal: gainmarket share of16.19% by 1999
Productstandardization Price reduction of20%
Advertisementbudgetrearrangement Tactical plan:Quarterly sales of$8.8M
Total annual sales of$26.5M-100,000,00050,000,000050,000,000100,000,000150,000,000200,000,000250,000,00030
0,000,00095 96 97 98 99 00 01Plenitude 5 Year ForecastTotal Sales
ProfitMarketing Plan
12.12. Plenitude Product Selection of Marketing Segments, Double Star product
selection among PrimaryMarketing Segment (Moisturizer

Treatment)Moisturizers - Daily Size (oz) Everyday Average Retail Price $H,

Hydra Renewal Jar 1.7 10.17M, Active Daily Moisturizer SPF 15 4 7.21L
Active Daily Moisturizer 4 7.11Moisturizers - TreatmentH, Eye Defense 0.5
12.07H, Firming Facial Serum 1 15.19M Revitaliff 1.7 12.31M, Advanced
Overnight Replenisher 1.4 12.26M, Excel Cream 1.4 11.36L, Advanced
Wrinkle Defense Crme -Tube1.2 10.3CleansersM, Hydrating Cleasing Cream
6 7.07However, in the long run, we will adapt to the standardized need
ofthe market thus increasing our long run sales per product by 17%Reducing
SKUs will decrease $5.8 in sales assuming that we lose those
specificcustomers that previously purchase the discontinued products.SKU
Decrease Moisturizers wouldhave at least 3products with oneStar
Treatment moisturizerwould have twoStar, one high andone medium
13.13. We will obtain a yearly increase of 19% in volume ofsales.Price reduction
of 20% on all products.8.145.77 5.699.6612.159.85
9.819.098.245.6610.177.21 7.1112.0715.1912.31
12.2611.3610.37.070.002.004.006.008.0010.0012.0014.0016.00Hydra
Renewal JarActive DailyMoisturizer SPF 15 Active
DailyMoisturizerMoisturizers- TreatmentEye DefenseFirmingFacial
SerumRevitaliff AdvancedOvernightReplenisherExcell Cream
AdvancedWrinkleDefenseCrme -TubeCleansers HydratingCleasingCream
Plenitude Future Pricing DecisionsNew Average Retail Price $Everyday
Average Retail Price $
14.14. 12.5107.57.51.5Planned Budget on Year 6 inMillionsM , Active
DailyMoisturizer SPF 15M, RevitaliffH, Eye DefenseM, Hydrating
CleasingCreamMarketing ReaearchIncrease sales by 21% yearly per Star
product.The marketing plan will gain $24M in revenue by 1999. Separate
marketsegment: Star product: Moisturizer daily Moisturizertreatment
(mainfocus) two starproducts Cleanser Market Research Adapt
forcontinuous marketchange (differentproduct needs)Budget Plan
15.15. LOreal will be the leader in moisturizing category by 2001 with35.37%
market share.With the new marketing plan, LOreal will have a total market
share of 23.89%
in2000.14%16%13%13%14%14%15%15%16%16%17%Moutirizer %Plenitude
Moisturizer Market Share1995 vs
19991995199936.86%12.89%38%14%0.00%5.00%10.00%15.00%20.00%25.
00%30.00%35.00%40.00%Treatment -Moisturizer Daily-MoisturizerPlenitude
Inner Markets Share 1995vs 199919951999
16.16. THANK YOU
17.17. Exhibit 1 GE/McKinseyHIGH MEDIUM LOWHIGHMEDIUMLOWBUSINESS
UNIT STRENGTHMARKETATTRACTIVENESSPlenitudePondsAlpha-HydroxOlay
18.18. Exhibit 2 Income StatementPlenitude Income Statement for USA -Amounts in millions1990 1995Sales 31.7 63.4COGS 7.925 15.85Gross Profit
23.775 47.55Operating expensesAdv and promotion Costs 35.5 38.3Total
operating expenses 35.5 38.3Non-Operating ExpensePre-Tax loss 25.4

12.5Total Non-Operating Expense 25.4 12.5Net Income/Loss -37.125

-3.25LOreal was losing 3 million dollars in 1995 rather than 37 million
dollarsin 1990. In 5 years they deacreased the loss ny 34 million dollars
19.19. Exhibit Market LossPlenitud Product $ Volume Product Market Segment
Total Sales PlenitudExcell Lotion 1232140MT 25807235Eye Makeup Remover
644700N/AClarify A3 Mask 638049CActive Daily Moustarizer Lotion Oil Free
622619MDHydrating Floral Toner 593784CWrinkle Defense Cream Tube
546502MTHydra-Renewal Cream Tube 513212MDDeep Cleansing Gel Tube
467872CClarify A3 - Cleanser 447221CClarifying Toner 692416CProduct
Market Segment $ Volume # Products decrease % decrease of Total
SalesMousturizer - Treatment 1778642 2 6.89%Mousturizer - Daily 1135831 2
4.40%Cleanser 2839342 5 11.00%Total Decrease $ 5,753,815.00 9 22.30%
20.20. Exhibit Marketing Share
Ownership42.8615.9434.8522.6423.08116.8836.272.80Plenitud Olay Ponds
Alpha-HydroxTreatment -MoisturizerDaily-Moisturizer
21.21. Exhibit CompetitionPonds Oil of Olay Alpha-HydroxMoisturizers -DailySize
(oz)Everyday AverageRetail Price $Moisturizers -DailySize (oz)Everyday
AverageRetail Price $Moisturizers -DailySize (oz)Everyday AverageRetail Price
$Dry Skin Cream 11 8.19H --> U/VProtectant BeutyFluid5.25 9.6H AHA
SouffleSoothing Anti-Wrinkle15.26Moisturizers - TreatmentM SensitiveSkin
Beuty Fluid4 6.66M NightReplenishingCream9.7H Prevent andcorrect
cream2.5 15.2L Original BeutyFluid4 6.59L Foaming FaceWash7.65M
Prevent andCorrect Lotion4.25 14.94 Moisturizers - Treatment Moisturizers TreatmentL Age defyingLotion3 10.99H Age DefyingProtectiveRenewal
Cream2 7.31H Sheer SiklMoisturizer SPF1515.26Cleansers M Night of Olay
2 6.45M AHAEnhanced Lotion11.33H Self FoamingCleaner4 7.44L
RepleninshingCream (4 SKUsby type)2 8.73L Spot LightTargeted
SkinLightener10.99M Cold Cream 3.5 4.09 Cleansers CleansersL
RefreshingToner7 5.6H Age DefyingDaily Renewal6.78 4.76 Toner Astringent
7.99M RefrenishingToner6.78 4.56L Age DefyingDaily Renewal7.2 3.98
22.22. Exhibit Forecast 1996Total Sales GoalMoisturizers -DailyNew Average
RetailPrice $SellingVolumeIncrease from PriceDecreaseIncrease
Advertisement"Star"Increase from Standarizationof ProductsNew
TotalSales($)Hydra RenewalJar8.136 170,000 202300 244783 286396
2,330,119Active DailyMoisturizer SPF15 5.768 149,734 178183 215602
252254 1,455,003Active DailyMoisturizer5.688 136,079 161934 195940
229250 1,303,974Moisturizers -TreatmentEye Defense 9.656 211,237
251372 304160 355867 3,436,255Firming FacialSerum12.152 56,408 67126
81222 95030 1,154,800Revitaliff 9.848 513,824 611451 739855 865631
8,524,730AdvancedOvernightReplenisher9.808 125,698 149581 180993
211761 2,076,955Excell Cream 9.088 151,525 180315 218181 255272
2,319,908Advanced WrinkleDefense Crme -Tube8.24 202,831 241369
292056 341706 2,815,657CleansersHydratingCleasing Cream5.656
110,573 131582 159214 186280 1,053,602Total VolumeIncrease 1,827,909
347,303 456,794 447,441 $26,471,002

23.23. Market Growth95 96 97 98 99 0 1Market Growth 471,000,000

511,500,000 552,000,000 592,500,000 633,000,000 673,500,000
714,000,000Total Sales 65,940,000 26,478,482 41,571,216 65,266,810
102,468,891 160,876,159 252,575,570Market Share Ownership 14.00%
5.18% 7.53% 11.02% 16.19% 23.89% 35.37%Exhibit Market Growth
24.24. Future Tactical ObjectivesPeriods 96 97 98 99 00 01Targeted Sales
26,478,482 41,571,216 65,266,810 102,468,891 160,876,159
252,575,570Quarterly Objectives 8,826,161 13,857,072 21,755,603
34,156,297 53,625,386 84,191,857Exhibit Future Tactical Objectives

Analysis and Recommendations on the Plenitude Strategy

Analysis of the Problem
Plenitude by LOreal was introduced to the US market in 1988. Eight years since its
introduction, it has quickly become the #2 brand in the market only to lose it later
to Ponds. Plenitude also hit a four-year sales plateau and was still not making any
money in the US market.
LOreals problems and root causes should first be identified and addressed. The
root causes of LOreals problems are:
1. Wrong assumptions of the target market
2. Applying a market strategy based on the those assumptions
3. Continuing to do so for an extended period even given the results
The target market
When LOreal planned to release Plenitude in the US market, it is assumed that what
would be successful for the French market would translate to the same success in

the US market if the same formula was applied.

The model of an executive woman had mass appeal thus was so successful in
France. However, as clearly shown later on in the market studies done in 1995, the
market segments that attracted Plenitude the most was the stressed out and age
focused segments which only made up 40% of the market. Also, the
acceptor/rejector studies indicated that consumers perceived that Plenitude was
specifically targeting older women.
Analysis of the Dollar Shares table combined with the Moisturizer Units Sold
table (on page 309) shows that Plenitude actually leads in the treatment category.
On the other hand, they are only third when it comes to the daily category (see
appendix). This all contributes to the fact that Plenitude does not have the massmarket appeal which it needed for the class of the mass strategy to work. People
viewed LOreal as a high-end, a step-up, more expensive and only for older women.
Evidently, consumer behavior in the US is different as compared to that in France.
What would work in France would not necessarily work in the US.
The marketing strategy
The strategy used called class of the mass had these aspects:
Technologically superior products
Focused resources and support on star product
Golden rules of advertising:
1. Feature star product
2. Provide evidence of technological superiority
3. Depict an executive woman who represents the target market
The implementation of this strategy in the US did not have the same effect as in
France. The root causes for this are:
The featuring of a technologically superior product, the fact that LOreal is French,
the tag line Reduces the signs of aging, plus the depiction of an executive woman
may all have contributed to the current perception and position of Plenitude for
older women, and expensive.
The product itself had some issues. It was thought to be greasier and oiler than
the competition.
The fact that the full product line was released all at once in the US did not give
consumers time to get used to one product at a time. The star product system
worked in France because products were released one at a time.
Display in Health and Beauty sections in drugstores and supermarkets do not have
the same effect as in department stores since there are no accompanying sales
people. Consumers are overwhelmed and do not know which to product to use.
In relation to the previous point, the packaging does not help either. It was too
confusing with too many words in the box.
Because of these problems, Plenitude still wasnt making money after 8 or 9 years
in the US. Losses for 1995 amounted to $12.5 million. These problems would have
to be addressed to turn Plenitude around.
Solutions and Recommendations
LOreal established four key objectives that would presumably improve the brand
and its performance:
1. Improve the top line
2. Get the bottom line improving in the right direction quickly

3. Get the US to be a major contributor to the brand globally

4. Create suitable skin products for the US customer at the same time those
products should fit within LOreals technology portfolio
To achieve these goals, LOreal has to address the issues mentioned above. I believe
that the first key step in this has already been done doing and in depth research of
the market and Plenitudes position in it.
As stated above, Plenitude is perceived to be a product for older women and it is an
expensive brand. To be able to reach a wider range of segments in the market and
get back to the class to the mass strategy, Plenitude has to change its image and
the way people perceive its products. Looking at the perceptual map (exhibit 9),
Ponds and Oil of Olay which dominate the market are perceived differently. LOreal
can position Plenitude in a similar way which attracts the masses and still maintain
its position as a class above the others:
Technologically advanced a bit pricier but worth it since it has better quality
Readily available
Change tag line from reduces signs of aging to something like stay young and
healthy to remove link to old age
This will help Plenitude widen its target market to include other segments.
In terms of promotion and advertising, LOreal should change the star product
approach and instead focus on the whole product line or perhaps a set of products
for a given target segment. In this way, LOreal can inform its customers on its
products which should also help them in choosing the right product for themselves.
LOreal should also focus on building the brand Plenitude since this is something
that customers are not aware of. They only know LOreal.
One of the problems mentioned was that people were confused on which product to
choose. Informational advertising mentioned above should help with that. Another
way to help reduce confusion is to simplify the display and packaging of the
products. The front of the package and displays should only contain a few high
impact key words such as Daily cream and for oily skin. The assumption here is
that people shopping at health and beauty sections are not the same people
shopping at department stores. There are no salespeople to help them thus they
want things easy to understand and simple. Simplifying the description on the front
of the box will make it easier for customers to choose and attract them to buy the
product. All the technical information can be placed at the back of the box.
All in all Plenitude can be a very strong brand in the US. With these actions:
1. Changing brand image and perception to include a wider market
2. Refocusing advertising and promotion resources to include all products
3. Rearranging displays and changing packaging to increase attractiveness and
decrease confusion,
Plenitude can maintain its standing as having technologically advanced products,
continue to compete with its main competitors Ponds and Oil of Olay, increase its
market share and start to turn a profit in the US market.
Appendix
This table is derived from Dollar Shares and Moisturizer Units Sold to analyze
the dollar shares (in $ MM) of moisturizers split between daily and treatment for
the top 3 brands:

Total Moisturizers Share Daily Moisturizers Share Rank Treatment Moisturizers Share
Rank
Plenitude 14.0 4.9 3 9.1 1
Olay 28.2 24.82 1 3.38 3
Ponds 15.1 7.7 2 7.4 2

Problem indentification