Lakme Case Study Essay

High priestess of sacred Indian temple meets English army officer who’s unwittingly strayed into holy ground. They fall in love. Her orthodox father vows vengeance… That’s the story of Lakmé, a 19th century opera written by Frenchman Leo Delibes, from which Simone Tata borrowed the name Lakmé (French for Lakshmi, the name of the priestess). The current size of the Indian cosmetic market is approximately US$ 600 million. Of this, the fastest growing segment is color cosmetics, accounting for around US$ 60 million of the market.

Industry sources estimate a rapid growth rate of 20 percent per annum across different segments of the cosmetics industry reflecting an increasing demand for all kinds of beauty and personal care product. Growth has come mainly from the low and medium-priced categories that account for 90 percent of the cosmetics market in terms of volume.

Even with a 20 percent average growth rate, the per capita consumption of cosmetics is very low in India. Current per capita expenditure on cosmetics is approximately US$ 0.

68 cents as compared to US$ 36.65 in other Asian countries. However, with changing lifestyles, higher disposable incomes, increasing advertising, penetration of satellite television, awareness of the western world and growing importance of beauty pageants, there have been significant changes and use of cosmetics is on the rise.

Lakme, a brand originally introduced by the Tata group of India, now bought over by Hindustan Unilever (HUL) of the Unilever group, Tips & Toes, another domestic player, and Revlon dominate the US$ 60 million color cosmetics market. Multinationals, Revlon of the U.S. and L’Oreal’s Maybelline has a dominant share of the small premium lipsticks and nail enamels market. Mass-market products account for a major share, while the premium segment accounts only for a mere 9 per cent in lipsticks and 5 per cent in nail enamels. Lipsticks account for nearly a third of the market at US$ 21 million, while the market for nail enamels is estimated at around US$ 23 million. The color cosmetics segment is very competitive and has a high penetration level of 80 percent.

The skin care market in India is estimated at US$ 180 million. Within the last decade, this segment has seen many consumers slowly shift from the mass to the premium end of the market. The penetration rate is high in the skin-care segment as compared to color cosmetics. In the skin-care segment, price and volume played an equal role in value growth. Moisturizing lotions, fairness creams and face cleansers are the popular categories in the skin-care segment and account for approximately 60 percent of the skin-care segment. The major players in this segments are Lakme, Ponds, Fair & Lovely of the HUL group with a 50 percent market share, followed by players such as J.L. Morison that markets the Nivea range of products in India, Godrej and Revlon.

Penetration levels of international cosmetics brands in India are still low. Foreign brands currently constitute only 20 percent of the market. A major reason for low penetration of international brands can be attributed to high pricing. These companies initially gained sales on their international brand image, however, repeat purchases were not forthcoming and to retain their sales growth, several foreign companies reformulated price strategies to tap the large Indian middle class. Urban women in the middle and upper income groups in the age range of 23-50 is the target group for international brands, as this group looks for better products and is willing to pay a premium for international quality products. Industry estimates suggest that there are close to 10 million such women in India.

PLACE AND PROMOTION
Lakme – ADVERTISING

By not following the traditional mode of advertising, Lakme Unilever, adopted different strategy for the product launches The company do not use mass media marketing for the launch or advertising Lakme Products; They have adopted the education’ strategy that means they educate their customer about the use of the products. Getting the focus right

The ‘aspirational’ qualification would mean Lakmé would compete at what the company terms the ‘upper-mass’ (premium) end of the color cosmetics spectrum (products priced between Rs 85 and Rs 250) where a slew of competitors are already slugging it out. And fashion consultants like Meher Castelino believe the brand commands an edge at the high-end: ”By appropriating the fashion platform for itself, Lakmé has entrenched itself at the glamour-end.” Getting the spread right

The premium segment, however, is just a slice of the Indian market for colour cosmetics (estimated size: Rs 275 crore). Today, the company has three brands: Lakmé itself, which will be positioned as a fashion-brand.

Advertising Strategies by Lakme

In-store sampling

Lakme has in-store trail products. Since it in the cosmetics market it is very essential to provide samples, many stores in Mumbai from time to time have Lakme sampling offers. Where they allow you to try the product and then buy it.

Brand placement & Event sponsorship

Brand placement often referred to, as product placement is the sales promotions technique of getting a marketer’s brand featured in movies and television shows. When a firm sponsors or co-sponsors an event, the brand featured in an event immediately gains credibility with the event audience. The audience attending an event already has a positive attitude and affinity for the contest that they choose to attend. When this audience encounters a brand in this very favorable reception environment, the brand benefits from the already favorable audience attitude. Lakme India Fashion Week, thus creates a positive image and has a huge impact on the sales of a brand. Lakme’s association with the annual Lakme India Fashion Week (LIFW) has helped significantly in the brand’s growth chart. A beauty brand, like Lakme, must always remain contemporary and define trends. The LIFW has certainly helped Lakme acquire that position. Product ranges have been launched every year to coincide with the event and have met with considerable success.

Internet promotions

They are the most recent form of sales promotions. They are promotions that are done via the Internet. It is becoming increasingly popular because of the large use of Internet. Lakme offers its wide range of skin and hair products as well as salons thru its website www.lakmeindia.com

BRANDING

Lakme is a brand launched with a distinct concept – “source of radiant beauty”. The brand appeals to a distinct market segment who appreciate and like the brand concept. The core idea is that the brand connects with the consumer group. Now the customers do not tend to be content with the one product, which the brand offers. Rather they want additional product which go hand in hand with the brand concept or application; for example a Lakme user wants all the products which enhance beauty-beauty lotion, deep pore cleansing cream, lipsticks, nail enamel, eye make up etc.

Line branding strategy illustrates how well cultivated brand can be extended on to a host of related products under a common concept. This strategy seeks to penetrate the customer rather than penetrating the market. It seeks to fulfil all complementary needs that surround a basic need. Line brands start with a product but later extend too a whole range of complementary products. The products in the line draw their identity from the main brand. Marketing products as a line enhances the brand’s marketing power rather than selling them as an individual brand.

CURRENT MARKET STRATEGY

* Loyalty programmes and reward systems: As part of its marketing strategy, Lakme Unilever Ltd removed loyalty programmes and encouraged beauty salons. Lakme Unilever has also launched ‘New Lakme Beauty Salon Rewards Programme’ with a tagline ‘Get benefits worth Rs 3,225 for Rs 350 only’ to attract customers. There are also different magazines and booklets designed with acme promotion and stuffs. * New look of Website: he company also re launched a new looking Website Lakmeindia.com to have a change in marketing of the company. * Direct Marketing for ‘Lakme Pure Defense’: Deviating from the traditional mode of advertising, Lakme Unilever opted for direct marketing concept to create awareness for their new launch ‘Lakme Pure Defense’. The company deployed a bevy of beauty advisors at 1200 Lakme retail outlets across the country to promote its new launch-dumping mass media ad campaigns. Their strategy is not to use mass media advertising to promote Lakme Pure Defense-the first of its kind across the globe. Instead, they opted for the ‘education’ route to create awareness for their product.

* Tie-up with Schwarzkopf: Lakme had a recent tie up with FMCG Player Henkel group’s high end hair product brands Schwarzkopf Professional. Currently, Lakme has over 100 salons across the country. Under this exclusive pact, Lakme will use Schwarzkopf hair care products in all its salons. In return, Schwarzkopf will provide training for hairdressers in the salons. * Lunched in Sri Lanka: Hemas Marketing has expanded the range of Lakme skin care products it markets in Sri Lanka, and unveiled a new international logo and image for the brand. Launched in Colombo, the additions to the Lakme skin care range are Nourishing Cold Cream, Nourishing Body Lotion, pH-Balanced Face Wash, Calamine Lotion, Sun Screen Lotion and Hair Remover.

Future Market Strategy

* Online e-group: Lakme can form some e-group like Sunsilk Gang Of Girls GOG) to understand consumer requirement. It requires no formal surveys, easy to administer, reduces paper work. In all it used technology to effectively to promote the brand and advertises the brand through e-generation. * Online ordering of Lakme products

* Online appointments for Lakme Beauty Salon

Strategies Under Product Mix

* New product lines can be added to the existing one which may be related or unrelated to the company. * Within the product line, they can have different brands at different price points to cater to different segments of customer. * Growth of Lakme Beauty Salons can provide better display of products and a beauty adviser can make it much more attractive in the eyes of the customer. * Packaging can be improved or changed of Lakme products to make it more attractive to the customer

COMPETITORS

Promotional schemes offered by Lakme and Revlon

Promotions have emerged as the most economical and effective way to establish a personal rapport with your customers. They have always been a part of the consumers product s game, but nowadays, it’s almost like one can’t buy a tooth brush without having to tote a detergent bar home as well. A gift on a festive occasion or free with the purchase of a certain product goes miles in leaving a favourable mark on the minds of your customers. Marketing heads are exploring the effectiveness of each and every product as a gift to boost sales. This frenzy has led to a deluge in the range of innovative products entering this market. Infact, the type of products entering the gifting and promotional category is simply mind-boggling and differ from product to product. The type of products offered as a promotional item range from a small ball pen to expensive electronic items. Infact, the meaning of the term gift seems to have attained a wider meaning. People tend to offer just about any thing under the label “Free Gift Inside”. Value Perception could be one reason why this freebie strategy is more effective.

Five rupees off means five rupees less to the manufacturer, but a gift item which sells for five rupees might be sourced for just Rs. 1- 2, making the offer far more cast effective. Large MNCs like the Levers, Godrej, Philips,revlon etc. have resorted to giving their own lesser known brands free with their popular brands and vice-versa. This automatically tends to reflect a better sales volume as far as both the brands are concerned. The companies tend to save their promotional expenses and utilise the same to generate better sales in the respective brands. This trend is extensively practiced by the electronic industry. The companies like AIWA and Videocon have been known to offer irresistible freebies like: a walkman or a small sound system free on the purchase of a colour television, over 10 CDs free with a purchase of a sound system etc. Such moves by these companies forced better-established brands like Onida etc. think on their feet. This trend has come in as a zephyr to the lesser popular brands striving to establish themselves in the market.

Companies that cannot invest a heavy sum in promotion or cannot afford to engage in a massive sampling exercise simply tie up with better-known brands for their products to be offered as free gifts. This acts as a mutual benefit for both the parties, as one achieves better sales while the other achieves better exposure at a very nominal expense. There tends to be a small amount of exploitation of a few lesser-known brands in such exercises, but every thing The latest trend as a promotional strategy that has set the marketing arena abuzz is contests. Every second brand seems to be running a contest to actively involve the buyer in his brand. The prizes given out by companies in contests range from gold, diamonds to cars, homes and free trips abroad. The companies are tying up big celebs and running contests where the customer gets to dine with his favourite star on winning the contest. Recently Axe for it’s brand of deodorant ‘Vodoo’ actually booked a far away island in Kerela and held the longest dance party.

Customers had to correctly answer the questions in the form placed in its pack to qualify for this party. Another womens wear store ‘Scullers’ actually ran a competition for the women in Bangalore where one could actually design a garment of their choice – tops, trousers, capris, skirts and shorts – and have it hit the Scullers Womens wear shelves. Infact a leading cosmetic company Lakme also ran a similar promotion where customers could create a shade and give it the name of their choice. It is not only the customer who is being lured by such marketing gimmicks. The companies are running extensive schemes for the dealers too.

Bell ceramics had recently organised a largest party in the ceramics industry for their dealers at ‘Tikujini’s Wadi’, Thane. The dealers along with their whole family were invited to this party. Apart from luscious snacks there was a whole lot of entertainment activities like games, competitions etc. for children. But at the end of the day what emanates as the greatest question is, the companies may have no doubt charged a premium for their products and services earlier but how safe are they by indulging in such practices? Are the companies really benefiting by sacrificing on their profit margins? Or is it as one of a customer puts it “ They have been charging exorbitant premiums earlier, its time they returned some”.