Channel Audit

Research Project

Marketing Channels
Ftima Madrid Prez
Mireia Marsal Garrido
Dongsoo Jung

Channel Audit. Lush.

TABLE OF CONTENTS

Introduction
1. Description of the company
2. Market analysis
3. Marketing channels employed by Lush
4. Service output demands and customer segmentation
5. GAP analysis
6. Recommendations
7. Bibliography
8. Appendices

Channel Audit. Lush.

INTRODUCTION
This project consists on the description of the current state of the channel of the
cosmetics company Lush. The channel audit refers to one specific geographical market,
which is the Slovenian market, as it is easier for us to collect information of the country
we are currently living in. The report is drafted from primary and secondary sources.

1. DESCRIPTION OF THE COMPANY

The company chosen for the analysis is Lush, a natural cosmetics global firm which
prides itself on being an innovative, dynamic, original and progressive company. Its
goal is to retain its current image as a premium all natural sustainable cosmetics firm.
The company was officially born in 1995 in Poole, United Kingdom, founded by Mark
Constantine and Liz Weir, Helen Ambrosen, Rowena Bird and Paul Greaves. The
present creative team has been working together for over twenty years; they started
working together when they were all very young indeed, developing hair products with
natural ingredients.
Nowadays, Lush produces and sells a variety of handmade products, including face
masks, hand and body lotions, soups and bubble bars, among others. Even though it
has many different products, they are all in the same category: cosmetics. Lush does
not have specific product lines, using just simple names, such as: Bath, Make-up,
Hair or Hand care, all of them under the brand name of Lush, within different sort
of products in each one and prices depending of the subcategory and the size of the
package.
Lush unique selling proposition is that all of its products are environmentally friendly.
Therefore, Lush uses fruits and vegetables, essential oils and synthetic ingredients in all
its products produced. Moreover, these products have not been tested on animals,
performing tests solely with volunteers. It also creates solid products which are sold
wrapped in paper or in small bags. They encourage consumers and staff to purchase
products using their own shopping bags to be more eco-friendly and even motivate
customers to let their products go naked without any packaging whatsoever.

Channel Audit. Lush.

Lush progressively grew and nowadays counts on over 800 shops in over 50 countries
around the world, and still increasing. There are roughly 6000 people working for Lush,
from making products by hand, selling soap on shop floors, to filling presents or to
travel in the jungles looking for fairly traded raw materials. This analysis will focus on
the Slovenian market, wherein we can find 3 stores.

2. MARKET ANALYSIS
Lush has seven manufacturers worldwide, which provide to each market every season.
Slovenian market is provided by Zagrebs manufacturer, which provides the markets in
East Europe. Italy, Croatia, Austria, Hungary or Bosnia get the products from that
factory. They use bulk to logistics as they carry all the products through road transport,
not air.
As it is already mentioned, Slovenias market is divided into 3 stores which are located
in Ljubljana (there is also one stand in City Park), Maribor and Koper.
Lush really cares about its products and its manufacturing process, purchasing its
sources of ingredients form sustainable farmery projects around the world, such as
from France, Sicilia or Turkey. Once they have every ingredient, they start the handmade manufacturing process to get the final product.
It is a company which does not think about real competitors, as they are positioning
themselves with organic and fresh cosmetics, and in Slovenia the only retailer or shop
with products with a high percentage of natural ingredients is L'Occitane. If we think
about normal competitors, it would be any shop which has cosmetic products, such
as DM or Mller, where we can find a wide variety of products, but only few natural
cosmetics.
The following table has been hand crafted to see the basic points of Lush and its main
competitor in the Slovenian market.
LUSH

PRODUCT DESCRIPTION

PRODUCT BENEFITS

TARGET MARKET
POSITIONING STRATEGY

Organic handmade fresh

beauty care products: soups,
hand-care, perfumes
- Organic, fresh, handmade
- No testing on animals
- Involved in recycling
- New products to keep the
company innovative and
interesting
Middle, upper class young
and adult women.
Happy people making
happy soup

LOCCITANE
High quality beauty products
and fragrances, developed
following the principles of
phytotherapy and
aromatherapy
-Traditional production
methods.
-Organic and fresh
ingredients in cosmetics
-Reliable supply of materials
Middle, upper class young
and adult women.
Natural cosmetics lovers.

Channel Audit. Lush.

Event thought the products offered by these two brands are different, we could say
that LOccitane has more market power in Slovenia as it disposes of more shops than
Lush.
Some of the most important points which make Lush different are that all its products
are handmade and organic, the eco-friendly packaging and the relationship between
the customer and the company.
Lush works with its own brand, so we can consider some of the best-seller products, as
they are the most important products under Lush brand.
Best-seller
Snow fairy

Description
Bubblegum and sweet
vanilla shower gel. Really
popular in Christmas time.

Big

Shampoo made with sea

salt, giving massive volume
to hair in need of a boost.
There is a wide variety of
this product, each with
different ingredients, but
all hand-made and natural.

Massage bars

Price
The most sold,
the medium
package, is 1395

The most sold is

1895
Different types,
one of the most
popular is sold by
925

These products, just as the others, are sold through the physical store and the official
website. The official website of Slovenia is controlled from the United Kingdom. These
are the marketing channels used by Lush in the Slovenian market; advertising also
through the facebook page. Currently, they also have a facebook ad, which is a
promotion for Christmas, but it is not considered a channel.
The PESTLE analysis is used for Lush to track Slovenias environment and to launch new
products and services there.
Political
Economic

Social
Technological
Legal

International shipping cost, local market, political relations with other

countries, food handling laws.
GDP per capita increased 3.5% up to 24,050$ (2014)
The growth of the purchasing power.
Value added per employee.
The go green movement, animals rights, buy local, natural and organic.
Online presence, International websites, tracking shipping
EU membership and world organizations.
Initiatives and actions and access to join R&D funds.
Burden of taxes and contributions.

Channel Audit. Lush.

When talking about market analysis, it is also important to consider the SWOT analysis,
to find out which are the strengths, weaknesses, opportunities and threats involved in
the business venture; some of them are:
Strengths

Weaknesses

Opportunities

Threats

High-quality fresh ingredients.

Recognized for animal rights.
Unique, minimalistic naked packaging. Eco-friendly.
Customer loyalty.
Brand awareness.
Product life.
Mid-upper class market.
Marketing and communications strategy.
Industry growth - expand Lushs franchise stores in more countries.
Develop a lotion line aimed specifically for men.
Create partnerships or sponsorships with sustainable organic
companies. Green awareness.
Creativity.
High-price products: consumers will opt for cheaper alternatives.
Fresh ingredients: short expiration dates, difficult to logistic.
Brand loyalty.

3. MARKETING CHANNELS EMPLOYED BY LUSH

First of all, part of LUSH's strategy consists of selling only to their own stores meaning
they do not sell their products to any other mayor cosmetic stores. This leads to their
marketing channel structure being very simple: manufacturer - logistics - retailer consumer. Concerning their advertising strategies, LUSH does not rely on traditional
advertising channels like magazines, newspapers, TV or radio. They rely largely on
word of mouth and the opinion their consumers have of their products. This means
that when buying a product of LUSH, the consumers base their choices largely on
recommendations and suggestions from friends and family. Additionally, LUSH uses
social media networks like Facebook and Twitter to promote their products by adding
pictures and offers. This way they have a more direct relationship with their
consumers. In conclusion, even though they do not use traditional advertising
strategies they have been able to grow steadily and become a successful company.
If we compare DM with LUSH, DM uses much more advertising and is also cheaper
than LUSH. So for consumers less interested in quality and more worried about the
price, DM will always win. Also, DM does not only offer cosmetics but also other
products like healthy foods and cleaning products for the household.
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Channel Audit. Lush.

Also, LUSH provides referent power from their employers. LUSHs head office control
the information and marketing strategies in the Slovenian market. Employers in LUSH
should be educated by LUSH head office. Reward power is also used by this firm. LUSH
provides the employers get pride to work there; they are not just clerk to help
customers. Staff in LUSH provides the all information of product in LUSH, so they are
like professional staff. Moreover, LUSH has flat management structure, so directors are
actively working at the store.

4. SERVICE OUTPUT DEMANDS (SODs) AND CUSTOMER

SEGMENTATION
LUSH targets its market with values that come from the LUSH founders, quality organic
and natural products, environmental sustainability and social responsibility that appeal
to those who live an organic and eco-friendly lifestyle. A major tenant of the LUSH is
not to test its products on animals; these vegan and vegetarian products attract
consumers fighting for animal rights. LUSH also makes the majority of its products with
fair-trade ingredients, which grabs the consumer who is concerned with social justice.
Products range from relaxing to express, which targets both the laid back and on-thego lifestyles. Thus, LUSHs target markets are women 18-45 who are middle to upper
class and desire fresh organic beauty.
LUSH exceeds beyond the traditional marketing strategy into a more creative and
experiential approach that enables them to build a unique brand identity that in turn
enhances its equity.
The company does not distribute to any local drugstore only its own brand store. LUSH
stores are located in prime localities, next to high-end stores; this enables them to
segment their customers and also advertise a premium image of the brand.
To make the products more accessible to purchase the company also offers online and
mail order selling. Depending on the weight of your order costumers have different
options. For orders under 2kg your parcel will be delivered by your local postal service
within 7 working days and if the order weigh over 2kg, they will send the parcel via a
courier, which will require a signature upon delivery and it will lasts between 5 and 7
working days.
As we have seen observing data collection, most of the customers prefer buy by the
convenience store than internet because of the service they receive. The customers
are allowed to touch and sample any of the products displayed in the shop LUSH also
trains its employees to act as a friend of the customer, helping them around the store
while creating conversations to provide better consumer satisfaction.
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Channel Audit. Lush.

The information provision they give to their costumers is much more than other
traditional stores give, informing end-users about product attributes or usages
capabilities, or pre-purchase and post-purchase services. Regarding the website, all the
products has their own description of the product, picture and the ingredients.
Furthermore, in the customer service category customers will find answers to their
questions about shopping at the online store, their order, payment options and more.

Service outputs
Segment
name
Husband
buying
products
for his wife
Young
adult
Teenager
Middle
aged
woman

Bulk
breaking

Spatial
convenience

Delivery/waiting
time

Customer
service

Information
provision

Medium

Low

High

High

Medium

Medium

Medium

High

Medium

High

High

High

Medium

High

Low

Low

Low

Medium

High

High

5. GAP ANALYSIS
After analysing the results of our survey, we have found several demand side gaps.
First of all, a large percentage of the people who answered the survey claimed the
products to be too expensive. It is understandable that organic products cost more but
they would have more market share if they had a wide range of prices able to meet
consumers budgets.
This company relies on awareness of CSR campaigns, Green Initiative, No Animal
Testing, etc. but has very limited advertisements or marketing promotions. They
should expand their marketing channels and place more advertisements strategically
on billboards, at bus stop, magazines, and on the Internet. As well as, they should open
more shops themselves, or perhaps giving certain retail shops exclusive rights to selling
their product. Furthermore, the survey shows that practically everybody buys by the
conventional store, thus they should promote their product through print ads or
commercials and encourage consumers to buy their products online.
Lushs competitors already have established distinguished lines for mens skin, hair,
body ,bath, and fragrance but Lush hasnt yet. Lush should create an organic line for
men into an existing market of competitors by using reduced pricing. The main focus
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Channel Audit. Lush.

would be pricing the new Lush line in a manner where consumers would not be drawn
to potential cheaper substitutes or other pre-existing organic lines.
A catch to this is also pricing the products in correlation to quality of Lush products
which is of higher quality. In order to create an expanded consumer base, it would be
best for Lush to set lower prices for their mens line. A man who is has not purchased
organic beauty products before will be more likely to try the product if the price is set
lower than the womens line.

6. RECOMMENDATIONS - CONCLUSIONS
LUSH is based on simple marketing channel structure so that the company can easily
be managed. LUSH gains prestige by being eco-friendly. When customers are visiting
LUSH they expect to not only buy their product, but they want to participate in LUSHs
belief and policy.
LUSH is a very successful brand, but it has weakness as well. A large percentage of its
consumers are buying cosmetics and soap as gifts for other people. But LUSHs product
packaging is not very attractive. Most of products are naked, just plastic bottles or
containers, even their price level is more expensive than others. To resolve this issue,
LUSH provides an eco-bag to wrap their products.
Slovenian market is small and it has few stores. Managers and staff of LUSH should
provide good quality service for customers, which is why they strongly recommend to
use their products in the store, and explain which ingredients are in there and what
for.
Another problem is their products have short expiry date. This is a big disadvantage
about a cosmetics company, as a company cannot predict when customers will visit
and buy new cosmetics and sometimes their products are left over. So they should
have stock in the stores. Another possibility would be to donate to orphanage to
handle these problems.
In recent times a growing interest in fresh, organic products has taken place. LUSH
should take advantage of this opportunity and advertise their products more to attract
more customers who care about their skin. Also, due to its eco-friendly nature, LUSH
products add value to the customers sense of responsibility and social consciousness.
We suggest a new marketing strategy called "LUSH hour". Originally, this would mean:
"the times at the beginning and end of the working day when many people are
travelling to or from work". We would adopt this to explain our marketing; setting the
hour to provide special sales time. Find what time sales reduce profit, so it can make
boost the sales about weakness time. LUSH could apply this marketing for customers
who do not know well about LUSH and its products. Once again, providing every
costumer to experience its products would make people purchase them.
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Channel Audit. Lush.

7. BIBLIOGRAPHY
INTERVIEWS:
Ana, worker of Lush Ljubljana, Slovenia.
Zia Jeong, customer of Lush.

SURVEYS:
Friends and people who may purchase Lush products.

BOOK:
Coughlan, A. (2006). Marketing channels. Upper Saddle River, NJ: Pearson/Prentice
Hall.

WEBPAGES:
Anon, (2015). [online] Available at: http://forsee.eu/documents/D3.33.4_NIS_PESTLE_SWOT_Slovenia_299.pdf
Anon, (2015). [online] Available at:
http://jennyku.weebly.com/uploads/1/5/4/4/15443052/lush_marketing_plan_final.pd
f
Icmrindia.org, (2015). Innovative Marketing Strategies of Lush Fresh Handmade
Cosmetics|Marketing|CaseStudy|Case Studies. [online] Available
at: http://goo.gl/NJfCTo
L'OCCITANE en Provence, (2015). L'OCCITANE en Provence | Slovenia. [online]
Available at: http://si.loccitane.com/
Lush.co.kr, (2015). HOW WE'RE DIFFRENT < LUSH STORY - LUSH KOREA. [online]
Available at: http://www.lush.co.kr/site/brand/board/lush_story.jsp
Prezi.com, (2015). LUSH: Fresh Handmade Cosmetics Marketing Plan. [online] Available
at: https://prezi.com/bd6g0eu_ylls/lush-fresh-handmade-cosmetics-marketing-plan/
Thakkar, M. (2013). Lush marketing project. [online] Slideshare.net. Available at:
http://www.slideshare.net/manalithakkar/lush-marketing-project
UKEssays, (2015). Global Marketing Lush Ltd Marketing Essay. [online] Available at:
http://www.ukessays.com/essays/marketing/global-marketing-lush-ltd-marketingessay.php
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Channel Audit. Lush.

8. APPENDICES
For achieving more and new information, we created a survey to know if Lush is known
and why is it known, for instance, a part from knowing the gender and the ages of the
customers.
The survey was the following:

Lush
Fresh Handmade Cosmetics
Have you ever heard about Lush?
Yes
No
How do you know this brand?
Internet
Friends, familiars...
Magazines
Others
How often do you visit cosmetic's stores?
More than once a week
Once a week
Once a month
Others
Do you use Lush products?
Yes, usually
Yes, occasionally
No
Why do you use its products?
For its quality

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Channel Audit. Lush.

For its price

For its customer service
For being environmentally friendly
Others
Do you know how the products are made? Which ingredients do they use?
Yes
No
I don't really care
What do you think about its prices?
Too expensive
Expensive but affordable
Reasonable
Cheap
Are you satisfied with this brand?
Yes, a lot
Yes
Not really
How do you purchase its products?
By internet
By physical store
How long are you willing to wait for this product?

1 day
3 5 days
7+ days
I dont really care

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Channel Audit. Lush.

Gender
Male
Female
How old are you?
15-20
20-25
25-30
30-50
More than 50

It was sent through the internet and we got different results in each question,
depending on the attitudes and preferences of each respondent. In order to better
visualize the findings, we generated the ensuing graphs, which we believe are the
more significant for our study and make reference to in points 4 and 5 of the project.

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Channel Audit. Lush.

With these two graphs we can see the general characteristics of respondents. The
survey got results from men and women in almost the same percentage, but if we
delved more deeply into the other results, we realise that only two of the men
surveyed consume Lush products, which strengthens Lush target market: women.
Another point is the age range, which 20-25 years old is the most representative.

Lush customers prefer to purchase the products by the physical store, as they can see
and touch every article, which is an important factor in this kind of products. Another
point why these products are less sold by internet, is because of the waiting-delivery
time and the reliance of the working staff. As we can see in the next graph, most
customers will not wait more than 5 days to get the products, what will not work with
online purchase.

We also conducted an interview with Ana, a worker in Lush Ljubljana, to whom we

directed questions about the enterprise and the brand, focusing on the Slovenian
market. She answered us very kindly and she provide us a large share of information.
Furthermore, we conducted another interview to one customer of the brand.

Interview 1. Ana, manager of Lush Slovenia.

1. Which is the best-seller in Lush?
Big shampoo is the best-seller in our store in Ljubljana, while now due to Christmas
time, Bubble Gum shower gel is getting market share, being also a best-seller.
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Channel Audit. Lush.

2. What makes people buy your cosmetics?
There are many reasons why people buy Lush. First of all, for its ingredients, as each
product is made by fresh and organic ingredients without preserves. People trust the
product and the company. Moreover, we do not conduct the product for animals and
we use recycled plastics. Even our products are, to some extent, more expensive,
people want to get right way cosmetics.
3. How many branches do you have in the Slovenian market?
3 in Slovenia: Ljubljana, Maribor and Koper. All its products provided by the factory in
Zagreb.
4. Who operates the website and Facebook page?
It is operated by the head office in the United Kingdom. They control all the
information about the webpage. But Facebook is owned by the Slovenian market,
being its promotions independent form the head office.
5. Why Lush does not provide plastic bag?
It is not ecological. Instead of plastic bag, we provide the eco-bag, made by canvas. It
can be re-used and is more eco-friendly. We have some plastic bottles, but they are all
recycled plastic, trying to minimize its use.
6. Which is the main target customer?
Most of our customers are female, of 20-25 years old.
Interview 2. Zia Jeong, user of Lush.
1. What makes you use Lush?
I start using Lush because of a present, I really like it mostly for its quality so I kept on
using it.
2. Which product you use?
I usually use bath products. Other products have short valid date so I am not keen on
them.
3. Where do you buy lush?
In the store. I do not buy Lush by internet.
4. What do you think about Lush?
I do not really know about the brand and the company but I have heard that they use
fair-trade and try to use only organic ingredients. I also know that is more expensive
than other brands, even though I consider is a reasonable price because of its quality.
5. What do you think about product information on the package?

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Channel Audit. Lush.

To be honest, I do not really care about it. Sometimes I need the package, but they
only have naked one. It makes me know how much I need of the product, but it is
uncomfortable to keep it.
6. Will you recommend this product to your friends?
Yes, I will. People will realize about its quality once they start using it. In Korea is more
expensive than in Slovenia so I would buy some here to give as a present to my friends
there.

We also got a lot of information by surfing on the internet, basically in the official
webpage of Lush.

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