Boot's Hair-care Sales Promotion Case Study

BOOT’S: HAIR-CARE SALES PROMOTION CASE STUDY

BY: KEYUR VOHRA, IIT MADRAS GUIDE: PROF. SAMEER MATHUR , IIM

LUCKNOW

AIM

TO MAKE BOOTS MARKET LEADER IN UNITED KINGDOM IN IT’S HAIR CARE SEGMENT

OBJECTIVETO DRIVE SALES VOLUME AND TRADE UP CONSUMERS FROM LOWER BRANDS, WHILE RETAINING OR BUILDING BRAND EQUITY FOR A LINE OF PROFESSIONAL HAIR-CARE PRODUCTS AT BOOTS.

OBJECTIVE

•PROFITABLE PROMOTIONS•ENHANCING/MAINTAINING PROFESSIONAL HAIR CARE BRANDS VALUE

WHEN? WHERE?

DECEMBER 2004 UNITED KINGDOM

HOW?

THROUGH CHOOSING 1 OF 3 DIFFERENT PROMOTIONAL STRATEGIES WHICH CAN EFFECTIVELY ACHIEVE OBJECTIVES

PROMOTIONAL STRATEGIES

1) GET THREE FOR THE PRICE OF TWO (“3 FOR 2”)

PROMOTIONAL STRTEGIES

2) RECEIVE A GIFT WITH PURCHASE (“GWP”)

PROMOTIONAL STRTEGIES

3) AN ON-PACK COUPON WORTH 50P

1£1 = 100 pence (p)

BOOTSINTRODUCTION

•ONE OF THE BEST-KNOWN AND RESPECTED RETAIL NAMES IN UNITED KINGDOM•EMPLOYED AROUND 75,000 PEOPLE AND OPERATED IN SOME 130 COUNTRIES WORLDWIDE IN 2004

BOOTS OPERATIONAL AREA•HEALTH AND BEAUTY PRODUCTS•ADVISOR TO ENHANCE PERSONAL WELLBEING•GLOBAL DIFFERENTIATED IN SELF MEDICATION MARKET

BOOTSHISTORY• STARTED IN 1849 BY JOHN BOOT AS ‘THE BRITISH AND AMERICAN BOTANIC ESTABLISHMENT’• IN 1883, JESSE (JOHN’S SON) ESTABLISHED IT AS A PRIVATE COMPANY ‘BOOT AND COMPANY LIMITED’

BOOTSPROGRESS

•WANTED IT TO BE ‘LARGEST, BEST AND CHEAPEST’ •BY 1913, SALES IN THE 560 BOOTS STORES ACROSS THE UNITED KINGDOM AMOUNTED TO OVER £2.5 MILLION A YEAR

BOOTSPOST WAR GENERATION PERIOD (1945-1968)

• A FACTORY FOR THE MANUFACTURE OF COSMETICS• A NEW POWER HOUSE,• PRINTING WORKS• A NEW PHARMACEUTICAL RESEARCH BUILDING

BOOTSMODERN ERA• ‘17’ COSMETICS, AIMED AT THE

TEENAGE MARKET• NUROFEN, THE ANALGESIC IBUPROFEN

WAS INTRODUCED • BOOTS OPTICIANS • INSURANCE SERVICES AND INITIATIVES

IN DENTISTRY• CHIROPODY, ‘BOOTS FOR MEN’ STORES • ‘INTERNET SERVICES’

UNITED KINGDOM HAIR-CARE MARKET MID 90’S

HAIR-CARE BRANDS• PROCTER AND GAMBLE•ALBERTO-CULVER• L’OREAL

SUPERMARKETS AND DRUG RETAILERS • TESCO• SAINSBURY'S• MORRISON'S• BOOTS• SUPERDRUG

UNITED KINGDOM HAIR-CARE MARKET 2000

60 MAJOR BRANDSNO BRAND HAS >9% MARKET SHAREMARKET GROWTH: 1-3%(NEXT 5 YEARS FORECAST)

SEVERE PRICE COMPETITIONVOLUME WOULD GROW MORE QUICKLY THAN VALUE

UNITED KINGDOM HAIR-CARE MARKETIN CASE OF SHAMPOO : 1% DECLINE IN PRICES DUE TO THE USE OF PRICE PROMOTIONS TO SECURE VOLUME

BOOTS IN HAIR-CARE MARKET•USING CELEBRITY ENDORSEMENTS TO CREATE AWARENESS•CULTIVATE RELATIONSHIP TO GET CELEBRITY ENDORSED PRODUCTS •BOOT HAS 1300+ STORES• FEMALES GENERALLY VISIT BOOTS STORES ONCE A WEEK.

BOOTS IN HAIR-CARE MARKET•DEVELOPED A CRITICAL MASS OF PROFESSIONAL HAIR-CARE BRANDS• IT MISSED ON MAXIMIZING PROFITABILITY BY NOT LINKING PROPERLY WITH BRAND IN FIRST 5 YEARS

MAJOR COMPETITORS – MASS MARKET BRANDSPROCTER & GAMBLE

• BEST-SELLING HAIR-CARE BRAND IN THE WORLD• 8.4 PER CENT SHARE OF THE U.K. HAIR CARE MARKET IN 2001

MAJOR COMPETITORS – MASS MARKET BRANDSALBERTO-CULVER (UNITED KINGDOM)• IN ORDER TO INCREASE ITS PRODUCT

BASE, HAS GLOBALLY ACQUIRED DIVERSE FIRMS• SOME OF ITS TOP BRANDS INCLUDED: ST. IVES, VO5, CONSORT HAIR CARE FOR MEN, AND FDS ETC.

MAJOR COMPETITORS – MASS MARKET BRANDSL’ORÉAL

• THE GROUP MARKETED OVER 500 BRANDS AND MORE THAN 2,000 PRODUCTS IN ALL SECTORS• 5% SHARE OF THE U.K. HAIR CARE MARKET IN 2001

MAJOR COMPETITORS – MASS MARKET BRANDSHAIR-CARE PRODUCT RETAILERS• TESCO WAS THE LARGEST SUPERMARKET CHAIN IN THE UNITED KINGDOM WITH MORE THAN 1,800 STORES AND 45,000 EMPLOYEES

• SAINBURY’S WAS THE SECOND LARGEST WITH 700 STORES.• MORRISONS HAD 400

STORES AND PRIDED ITSELF ON PROVIDING QUALITY PRODUCTS

MAJOR COMPETITORS – MASS MARKET BRANDSHAIR-CARE PRODUCT RETAILERS

• SUPERDRUG: ONE OF THE LARGEST HEALTH AND BEAUTY RETAILERS, WITH ALMOST 700 STORES IN THE UNITED KINGDOM•MORE THAN 25 PER CENT OF THE COMPANY’S STORES FEATURED A PHARMACY

CONSUMERSNOT VERY BRAND LOYAL BECAUSE:• BELIEF THAT CHANGING SHAMPOO

BRANDS PRODUCED BETTER RESULTS• TRENDS IN BUYING BEHAVIOUR LED TO

CHANGING PREFERENCES• DIFFICULT FOR CONSUMERS TO IDENTIFY

MEANINGFUL DIFFERENCES BETWEEN THE VARIOUS BRANDS

CONSUMER BUYING PHENOMENON•MOST BOOTS CONSUMERS BOUGHT BOTH BASIC AND PREMIUM BRANDS•OTHER CUSTOMERS BOUGHT BASIC PRODUCTS FOR EVERYDAY USE AND PREMIUM PRODUCTS FOR SPECIAL OCCASSIONS

DECISION• AVERAGE BOTTLE SIZE (SHAMPOO/CONDITIONER): 250

MILLILITRES (ML) • AVERAGE PRE-PROMOTIONAL PRICE OF £3.99• INDUSTRY AVERAGE RETAIL MARGINS ON PREMIUM

BRANDS AVERAGED 40%• MASS-MARKET BRANDS HAD AN AVERAGE RETAIL

PRICE OF £2, WITH RETAILER MARGINS OF APPROXIMATELY 25 %

• THE MANUFACTURER’S TYPICAL MARGIN WAS BETWEEN EIGHT PER CENT TO 8-12 % ON THEIR COST FOR BOTH TYPES OF PRODUCTS.

SALES AND REACH TABLE FOR DIFFERENT STRATEGIESStrateg

ySale price

(before)

Eff. Sale price

(after)

Sales Growth

(%)3 for 2 S 2S/3 200 40 60

GWP S S-93p 70 60 40On-pack coupons S S-50p 50 50 50

Customer reach(%)Existing New

£1 = 100 pence (p)

LOSS CALCULATIONS PER PRODUCTS= £3.99

Strategy Sale price (before)

Eff. Sale price

(after)Loss Loss

value

3 for 2 S 2S/3 S/3 £1.33

GWP S S-93p 93p 93pOn-pack coupons S S-50p 50p 50p

LOSS CALCULATIONS WITH SALES GROWTH

Strategy Loss value

Sales Growth

(%)

Total sales now

(%)

Loss/sales

growth3 for 2 £1.33 200 300 .44

GWP 93p 70 170 0.547On-pack coupons 50p 50 150 0.35

LOSS CALCULATIONS WITH SALES GROWTH

StrategyTotal

sales now (%)

Loss/sales growth

3 for 2 300 .44 40 60

GWP 170 0.547 60 40On-pack coupons 150 0.35 50 50

Existing NewCustomer reach(%)

AS WE CAN SEE IN ABOVE TABLE, GROWTH FOR NEW USERS IS MINIMUM IN CASE OF GWP AND LOSS/SALES GROWTH IS MAXIMUM SO WE CAN REMOVE IT FROM THE LIST OF STRATEGIES WHICH CAN BE IMPLEMENTED

LOSS CALCULATIONS WITH SALES GROWTH

StrategyTotal

sales now (%)

Loss/sales growth

3 for 2 300 .44 40 60On-pack coupons 150 0.35 50 50

Existing NewCustomer reach(%)

OBJECTIVEWHAT WAS OUR OBJECTIVE?TO DRIVE SALES VOLUME AND TRADE UP CONSUMERS FROM LOWER BRANDSFROM ABOVE 2 STRATEGY, SALES VOLUME AND NEW CUSTOMERS BOTH ARE HIGH FOR 3 FOR 2 STRATEGY

COMPETITORSMOST OF THE OTHER BRANDS CAN ALSO USE THIS AS THEIR STRATEGY BUT THEY CAN’T USE 3 FOR 2 STRATEGY EFFECTIVELY AS BOOTS CAN.IF 3 FOR 2 IS PROFITABLE, IT WILL BE THE FINAL CHOICE.

PROFITABILITYPRICE: £3.99RETAIL MARGIN: 40%MANUFACTURER’S PROFIT: 8-12% BRAND OWNERS PERCENTAGE: 5%TOTAL MARGIN FOR BOOTS: 45%COST PRICE: £3.99* (1-0.45) = £2.19

PROFITABILITY

StrategyEff. Sale price per product

Cost price Profit Profit (%)

3 for 2 £2.66 £2.19 0.47p 21.46On-pack coupons £3.49 £2.19 £1.3 59.36

TOTAL PROFITABILITY

Strategy Profit (%) Total Sales (%) Total Profit

3 for 2 21.46 300 64.38On-pack coupons 59.36 150 89.04

RESULT

IN TERMS OF TOTAL PROFITABILITY, STRATEGY ON-PACK COUPONS WIN, BUT OUR OBJECTIVE IS TO INCREASE BRAND VALUE, SALES AND REACH TO OLD AND NEW CONSUMER, 3 FOR 2 IS THE FINAL STRATEGY

3 FOR 2

REACH : 300%BOOT’S CUSTOMERS: 40%NEW CUSTOMER: 60%

CREATED BY KEYUR VOHRA, IIT MADRAS DURING A MARKETING INTERNSHIP BY PROF. SAMEER MATHUR, IIM LUCKNOW

KEYUR VOHRAIIT MADRAS

PROF. SAMEER MATHUR

Thank you