Boots Hair care Sales Promotion

5

Hair Care Sales Promotion

MARKET LEADER IN HAIR CARE SEGMENT

BOOTSPharmacy-led health

and beauty group Helps customers

look and feel better

Close to 2,500 storesFantastic products and services cared for by

expert, friendly people

THE BOOTS STORY

POST WAR REGENERATION AND NEWDEVELOPMENT (1968)

•Program of factory development in Nottingham including a new power house, printing works, and a new pharmaceutical research building.•A Cosmetic manufacture factory was also opened.

EARLY DAYS (1913)•Initially established as providing herbal remedies to the needy as well as poor by JOHN BOOTS in 1849.

•But as his Son JESSE BOOTS took over he established ‘THE BOOTS AND COMPANY LIMITED’ and wanted to become the LARGEST, BEST and CHEAPEST’

MODERN ERA

Developed a range of products and became a household name.

Main Products:•Cosmetics aimed at teenage market•Analgesic Ibuprofen and Nurofren introduced.

New Services:•Boots Opticians : Became leading optician in UK•Insurance Services and initiatives in Dentistry,Chiropody, and Internet Services also in 1999.

•In UK with more than 2500 Stores •It started exporting its health care products to more than 130 countries.•Boots health and Beauty stores were established in Ireland, Taiwan and Thailand.

HAIR CARE MARKET ANAYSIS

In 2000 over 60 major brands of hair care products were there in UK market.

None of the brands had more than 9% market share.

The overall market was expected to grow by BETWEEN 1% and 3% per year for the NEXT 5 YEARS.

.

SEVERE PRICE COMPETITION MEANS THAT VOLUME WOULD GROW MORE QUICKLY THAN

VALUE•The use of PRICE PROMOTIONS to secure volume would see an overall decline in prices of approximately one percent.

•Significant PRICE DISCOUNTING through promotional activity and COMPETITION FROM LOW COST private label alternatives were expected to continue into foreseeable future.

In the times of severe competition BOOTS Primary Objectives were:

1.Drive Sales volume UP.2.Trade up Consumers from Low value Brands3.Retaining and Building Brand Equity.

HOW TOACHIEVE THE PRIMARY OBJECTIVESOF BOOTS SALESPROMOTION?

In SEVERE COMPETITION times Every company needs to CRAFT ITS POSITIONING IN THE MARKET WELL.

BOOTS took a step which was UNIQUE and carved its own NICHE.

• Boots began to cultivate relationships , beginning 1996 with well established hair dressers in UK.• They desired to build a new market by using

celebrity endorsements to create AWARNESS and create an EMOTIONAL ATTACHMENT between

consumers and brand.

This ensured:HIGH CONSUMER AWARENESSPREMIUM POSITIONING OF BRAND.

PARTENERED BRAND DESCRIPTION

RESULT•The relationship with BOOTS was lucrative for the hairdressers because it gave them access to a large percentage of U.K consumers through1300 Boot’s stores.

•Research indicated that over 85% of female adults in the United Kingdom visited a Boots store within past week.

HOW CAN BOOTS DRIVE ITS SALES

VOLUME UP?

3Ways in which Boots Can change its course

MARKET MODIFICATION

PRODUCT MODIFICATION

MARKET PROGRAM MODIFICATION

MARKET MODIFICATIONA company might try to expand its mature

brand by working With 2 Factors:

VOLUME= (NUMBER OF BRAND

USERS)*(USAGE RATE PER USER)

EXPAND THE NUMBER OF

USERS

INCREASE THE USAGE RATES AMONG USERS

CONVERT NON USERS HAVE CUSTOMERS USE THE PRODUCT ON MORE OCCASION

ENTER NEW MARKET SEGMENTS HAVE CONSUMERS USE MORE OF THE PRODUCT ON EACH OCCASION

ATTRACT COMPETITORS CUSTOMERS

HAVE CONSUMERS USE THE PRODUCT IN NEW WAYS

ALTERNATE WAYS TO INCREASE SALES VOLUMES

PRODUCT MODIFICATIONManagers also try to stimulate sales by improvingQualityFeaturesStyle

Quality improvement :Increases functional performance by launching a new and improved product.

:Feature ImprovementAdds size, weight,material,supplements and accessories that expands products performance ,versatality,safety or convenience.

Style Improvement:Increases the products aesthetic appeal. Any of these can attract consumer attention.

Styling Products in Female Category

Styling Products in Men’s Category

MARKETING PROGRAM MODIFICATION

Finally brand managers might also try to stimulate sales by modifying non product elements—

PRICEDISTRIBUTIONCOMMUNICATION

They should also assess the likely success of any changes in terms of effects on new and existing customers.

Let’s feel goodIs the Brand Mantra of

The company

LIMITATIONSDue to efficiency considerations and ongoing management of stock, boots was not considering any variation in product-sizes because of the added cost and complexity involved.

No media advertising budget was allocated for this promotion, although it would be highlighted in flyers distributed by the store

Alternatives

“3 for 2” Gift with

Purchase On-Pack Coupon(50p off)

CURRENT BOOTS CONSUMERS AND EXISTING PURCHASERS OF MASS-MARKET BRANDS ARE THE PRIMARY TARGET FOR THE PROMOTION.

DURATION 1 MONTH

AVERAGE BOTTLE SIZE 250 ML

PRICE £4 AND £2 FOR MASS MARKET PRODUCT

MANUFACTURER’S MARGIN : 8-12%

RETAIL MARGIN 40% AND 25 % FOR MASS MARKET PRODUCT

It has been observed that same customer buys both premium and basic products and to take advantage of promotion customer will try to buy premium product ,also Christmas and new year is approaching so customer are more likely to but premium product increasing its sale

Hence it is assumed for the next month premium and basic product sale will be at par, so an average can be assumed for all quantities

 ASSUMPTIONS UNDERTAKEN

GIVEN DATA

PRICE £3.99

RETAIL MARGIN 40%

MANUFACTURERS MARGIN 8%-12%

RETAILER’S COST=SELLING PRICE*(100-MARGIN%)

=3.99*0.6=2.394 POUNDS.

ACTUAL COST PER BOTTLE= 2.176

1st

3 for 2

CONDITION:CONSUMERS WOULD GET 3 AT PRICE OF 2 CUSTOMERS COULD COMBINE ANY THREE ITEMS THEY LIKED (E.G., SHAMPOO, CONDITIONER, AND STYLING GEL, ETC. ] AND THE LEAST EXPENSIVE ITEM WOULD BE FREE.THEY COULD IMPLEMENT ONLY A 3-FOR-2 OFFER WHEN THE PRICES FOR THE THREE ITEMS WERE THE SAME. SALES WILL INCREASE TO 300%.

THE PROBLEM: 60% OF CONSUMERS WILL BE JUST PROMOTIONAL BUYERS. THIS WILL DILUTE BRAND EQUITY OF PREMIUM PRODUCTS CELEBRITY HAIRDRESSERS WHO ARE PRODUCT PARTNERS MAY NOT LIKE ITAND IT MAY WEAKEN RELATIONSHIP BETWEEN THEM AND COMPANY.

 CALCULATIONS:Selling Price of 3 items=3.99*2=7.98 pounds

Actual Cost of 3 items=2.176*3=6.528

Thus, profits= 0.484 Pound/unit

Now we knowThe sales was 3 times more in promotional period.

Thus, Profit during promotional period=3*0.484

=1.452 Pounds/unit

CONDITION: A GWP WAS AN OFFER IN WHICH CUSTOMERS WERE GIVEN A PRODUCT SAMPLE ALONG WITH REGULAR PURCHASE. AN EXISTING SAMPLE PRODUCT WOULD BE USED TO AVOID THE NEED TO DESIGN AND PRODUCE ADDITIONAL PACKAGING. SALES WILL INCREASE TO 170%

PROBLEM:40% WILL BE JUST PROMOTIONAL BUYERS A COMMON STRATEGY AND CAN BE EASILY IMITATED ADDITIONAL COSTS

Selling Price =3.99 PoundsCost /item =(2.176+0.93)=3.106 PoundsHenceProfit/item= 0.884 Pounds

During the promotional period the sales were 1.7 times more

Profit during promotional period= 1.7*0.884=1.502 Pounds/item

Calculations

ON PACK COUPON

 CONDITION:ON-PACK COUPON (50P OFF) CUSTOMERS WOULD BE ABLE TO REDEEM THE COUPON DURING THEIR CURRENT STORE VISIT. ESTIMATED THAT SALES WOULD INCREASE TO 150 % CUSTOMERS WILL VISIT STORE MULTIPLE TIMES

PROBLEMS: A CONSERVATIVE APPROACH QUITE COMMON AND CAN BE EASILY IMITATED INCREASE IN SALES IS NOT TOO MUCH IN CASE IF CUSTOMER FAILS TO REDEEM COUPON BY HUMAN TENDENCY HE IS MOST LIKELY TO BLAME BRAND AFFECTING BRAND LOYALTY

Selling Price of an item= 3.99 poundsCost per item= (2.176+0.5)=2.676Hence Profit=1.314 Pounds/unit

We know Sale was 1.5 times more in the Promotional Period.HenceProfit during promotional period= 1.5*1.314=1.971 Pounds/unit

CALCULATIONS:

PROMOTIONAL SCHEME

SALES REPORT

PROFIT PER UNIT

REMARKS

3 FOR 2 300% 1.452 COMPANY’S INCREASED SALES VOLUME CAN BE BEST ACHIEVED BY THIS.ITS REACHING OUT TO MORE NEW CUSTOMERS.AND THIS POLICY MOREOVER CANNOT BE IMMITATED BY COMPETITORS.

FREE GIFT WITH PURCHASE

170% 1.502 ALONG WITH REACHING OUT TO NEW CUSTOMERS IT ALSO GIVES A REASONABLE PROFIT PERCENTAGE.IT GIVES THE USERS TO USE THE PRODUCT IN MORE NUMBER OF WAYS.THUS CREATING MORE AWARNESS.

GIFT COUPON FREE WORTH 50P

150% 1.971 IT FAIRLY REACHES OUT TO NEW CUSTOMERS BUT HELPS TO ENSURE THAT THEY COME AGAIN.THE HIGHEST PROFIT PERCENTAGE AS NO ADDITIONAL COST IS INVOLVED.

Keeping in mind the primary objective of the company

The company should go for:“Free Gift Coupon” Promotional scheme.

Because The Company remains in profit with a much greater margin than the other two.

Also It ensures customers come again and again to its stores and use its products more and in a variety of ways. Thus increasing the sales volume.

It attracts the customers of the low value brands not just within the promotional period but can help build a loyal customer base.

This scheme helps to maintain its Brand Equity.

It also doesn’t involve any additional expenses.

DISCLAIMER

Created by Shivani Mishra, CET-Bhubaneshwar under a marketing internship by Proff Sameer Mathur,IIM Lucknow.