Dear All,

Question 1: Compare and contrast the offering of LOreal in France and

America from the perspectives of the 4 Ps. Why did it retain some and
change the others?

Comparing US and France Situations

Standardized

Adapt

Different

France
Product Positioning
Class of
Mass/Premium
Quality
Basis for Quality
technology
Star System of
concentrating promotional
dollars on new product
Creative
Modern Woman/Live
with times
Technologically
Advanced Products
Delays Signs of
aging
Product (heavy
based)
Single product
Introduction
Competition
negligible
Customer
Sophisticated and
knowledgeable
Salons primary
distribution
channels

US
Same

Same

Same

Reduces Signs of
aging
Some Adjustment

14 SKU Line
Introduction
P&G (According to
the case)
Soap and Water

Kmart/Wal-Mart

The key issues that need focus is

1. 14 SKU introduction challenge of customer acceptance

2. Kmart and Wal-Mart stores are self service stores while salons are assisted
storesIs consumer behavior the same?
Question 2: What is the market share of each of the 3 main players in the
Daily Moisturizers Market and the treatment moisturizers market? Based
on this data, who is a greater threat to LOreal, Oil of Olay or Ponds?
There are three major players in the US skin care market: Olay, Ponds, and
Plenitude. Each offers products in the three segments of the market: Treatment
Moisturizers; Daily Moisturizers; and Cleansers. Some players like Noxzema offers
only cleansers while there are some others who offer only moisturizers.
Exhibit 8A shows the pricing details; Table on page 7 gives the retail dollar sales of
moisturizers and cleansers and also the units breakdown of moisturizers (between
daily and treatment). Our job is to find the dollar sales of treatment, daily and
cleansers of each competitor. Heres how we do it!
For any firm suppose that
M = Dollar sales of moisturizers
T = %Treatment moisturizers unit sales as a % of all moisturizers sales for the firm
D = % Daily moisturizers unit sales as a % of all moisturizers sales for the firm
T

avg

= Average Treatment moisturizer price

avg

= Average Daily moisturizer price

Then; % of moisturizer dollar sales for treatment is given by

(T T

avg

)/ { ( T T

avg

) + (DD

avg

)} ---------------------------------------- 1

We can rewrite 1 as (by replacing D in the denominator by (1-T)

(T T

avg

)/ { ( T T

avg

) + ( (1-T)D

avg

)} ---------------------------------------- 2

Now, divide the equation 2 by D avg both in the denominator as well as numerator,
we get
(T T

avg

/D

avg

)/ { ( T T

avg

/D

avg

) + ((1-T)} ---------------------------------------- 3

In this equation T avg/ D avg is called the price premium. Basically this is the price the
firm gets for the costlier product over the cheaper product. So, we can now put the
values collated from Exhibit 8A and Table on page 7
Brand

Moist

% Unit

Average

Average

% Dollars

Plenitude
Olay
Ponds

Sales in $

Treatment
(T)

65.9
132.8
71.1

65%
12%
49%

Price
Treatment
(T avg)
12.14
7.46
13.09

Price
Daily
(D avg)
8.16
7.50
8.19

Treatment

Treatment
Sales

73%
12%
60%

48.11
15.94
42.66

Thus the breakdown of retail sales for all major players is as follows (in $ million)

Olay
Ponds
Plenitude
Noxema

Total retail
Sales
158.73
107.85
77.09
70.8

Treatment

Daily

15.94
42.66
48.11
-

Cleansers
116.86
28.44
17.80
-

25.9
36.9
11.1
70.8

Yellow is the segment leader. What is interesting to see is

1. Presence of Ponds as number 2 in all segments!
2. Ponds is the highest priced and yet has a good toe-hold in all segments
3. Perhaps due to the fact that LOreal is the highest priced cleansers. Ponds
cleansers price is lower (much lower!). So, do customers form price
perception based on cleansers (more used than moisturizers? In other words,
do people perceive LOreal to be high priced because its cleanser is highly
priced?
Final thoughtLOreal is the leader in Treatment, even there it is closely followed by
Ponds. Olay is the leader in Daily, Ponds is a very poor second. Treatment is a
smaller market (about 105 million) while Daily is a larger market (about 170
million). So, it is natural for Loreal to aspire to be in Daily (Class to Mass). The
Question, therefore is, do they have the internal competency?
Question 3: LOreal has a Star product policy. What is this policy? Why is
this Policy? What is the consequence of this policy with respect to
marketing expenditure?
What is the policy: Very Clear from the case
Why is this policy: Due to technology platform
Consequence of the strategy with respect to marketing expenditure. See Table on
page 7. The Sales are given, so you can find the market share. The ad expenses are
given you can find the share of expense. And therefore, you can find the ad
efficiency. You should find that Ponds is very efficient and Plenitude inefficient.
Surprisingly (or is it?), Olay is also inefficient. Why?