CASE ANALYSISSalon only hair care products found outside the salon.

Submitted byBijayalaxmee Pradhan (10PGDMABPM037)

CASE OUTLINE
High-end, salon only hair care products have been showing up on the shelves at grocery stores, discounters and drug stores. After being marked as for sale in professional salons only the brands are being sold through mass market chains also. Currently there is no legislation prohibiting mass retailers from selling premium brands. There exists a strong gray market, also available through online retail sites.

 Due to breakage of contractual agreements with manufacturers, the makers of salon-only brands lose millions of dollars, risk brand image and reputation. Improperly diverted hair-care products are valued at up to $800 million.

PROFESSIONAL HAIR CARE PRODUCTS

The industry in the United States generates more than $15 billion in annual sales. The industry is highly fragmented, with more than 70,000 professionals salons nation wide. Sales of hair care products are important revenue source for salons and typically provide 5-40 % . Hair care products fall into 2 categories: mass market products & professional or salon-only products.

DIVERSION
The sale of professional or salon-only products through stores that do not have a salon on the premises is known as DIVERSION.

In the 1980s and 1990s, diversion occurred, but at a low level and it increased enormously in the recent past.
Today, diversion accounts for more than $1 billion of the beauty industrys $5 billion in annual sales of salon-only products.

BIF
In 2001, a group of manufacturers, distributors and salons created the Beauty Industry Fund (BIF) to support and strengthen the professional beauty industry by eliminating diversion. Members: P&G, Sexy hair, Farouk and Paul Mitchell etc.

 In the United States District Court for the Southern District of New York, A case was filed by Plantiffs on behalf of beauty salons, against the defendants, who are manufacturers of professional hair care products for false advertising and unfair competition. Plantiff, salon FAD (Fight Against Diversion) is a nonprofit organization formed in 2008 to advance the interests of salons in the face of the large scale diversion of professional products into nonprofessional retail channels.

Paul Mitchell
John Paul Mitchell Systems is a California corporation with its principal place of business at 9701 Wilshire Boulevard, Suite 1205, Beverly Hills. Paul Mitchell products and advertises professional products under the Paul Mitchell brand.

EDUCATIONAL CAMPAIGN
Paul Mitchell web site (www.paulmitchell.com):
The company is reminding customers to fight against the diversion through its product control campaign. This is designed to war customers of the possible danger of purchasing brands from intermediaries other than professional salons.
The risk associated are- tampering, expiration, contamination or substitution.

 Product Label: Guaranteed only when sold by a professional hairdresser, otherwise it may be counter feit, old, or tampered with. Internet Advertising: John Paul Mitchell Systems is the most recognized professional manufacturer of salon products worldwide. Our products are guaranteed when sold by a professional hair salon. Print Advertising: The real Paul Mitchellguaranteed only in salons and Paul Mitchell schools.www.paulmitchell.com June 2010 Instyle

Changing practices
FOR: Communicates important characteristics of products. Distinguishes professional hair care products from mass market hair care products. Communicates the superiority of professional products. It adds cache and value to the products and brand.

Against.
Advertising of products and opposition to diversion is literally and intentionally false and likely to cause confusion among consumers. Whether the products sold by salons are mass market products. Whether the products sold by salons are superior to mass market products. Whether the products sold in mass market are professional products.

 Whether the salons recommendation is necessary before buying professional products. Whether the products sold in both places are same. Whether the products sold in salon or mass market outlets are genuine, untainted and safe. Provides numerous other locations for consumers to buy. Customers will be reluctant to purchase salon products. Costly and some times non-affordable.