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Executive Summary

Creating value for company or organization is crucial for an organization to survive in

a highly competitive market. Also, creating and delivering value in an appropriate way

that matches to the brand position is crucial for companies to “capture some of that

value as profit” (Jorgenson, 2015). This report illustrates how two different brands in

the cosmetic market in Australia, Jurlique and Nivea, creating value in different ways

to earn benefits from their target customers.

Jurlique International Pty Ltd is an Australian cosmetics manufacturer specializing in

natural botanical-based skincare products. Founded in 1985 in South Australia by Dr

Jurgen Klein and his wife Ulrike (Wikipedia “Jurlique”,2017), this product developed

a wide product line including care products using on face, hands, body & hair, baby and

aromatherapy. Nivea is a German personal care brand that specializes in body-care. It

is owned by the Hamburg-based company Beiersdorf Global AG. The company was

founded on 28 March 1882 by Paul Carl Beiersdorf. During the 1980s, the Nivea brand

expanded into a wider global market (Wikipedia “Nivea”,2017). The product categories

pf Nivea include bath care, body care, deodorant, face care, lip balm, Men’s care,

sunscreen, etc. Nivea aims to create innovative skin care products for the whole family.

By comparing these two brands in four main dimensions, the author concluded that

these two brands both create a successful business model and have delivered the value

to their customers.

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Table of Content

Executive Summary ..............................................................................................................................................2

1. Market Overview .........................................................................................................................................4

2. Compare STP strategies of Jurlique and Nivea .....................................................................................6

3. Value proposition of Jurlique and Nivea ............................................................................................. 12

4. Value Discipline ........................................................................................................................................ 15

5. Value Chain ................................................................................................................................................ 17

6. Business model .......................................................................................................................................... 18

7. Conclusion .................................................................................................................................................. 23

Reference ............................................................................................................................................................. 24

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1. Market Overview

The product and service of skin care industry in Australia include lotions, creams,

perfumes and some hair-care products. There are thousands of brands in skin care

markets, making the market size quite large. Owning a diverse range of both mass

brands and premium brands, L’Oréal Australia was the leading player in skin care

in 2016, holding 12% of market share. The company’s mass brands include Garnier

and L’Oréal Paris, while its premium brands include Lancôme, Biotherm, Giorgio

Armani and Kiehl’s. (Euromonitor International, Skincare in Australia,2017) The

2016 revenue of the cosmetics and toiletry retailing industry is AUD$3.9 billion.

The annual growth rate from 2012 to 2017 is 2.6%(shown as Figure 1). With 3747

different retailing businesses, this industry faces high competition (Cosmetics and

Toiletry Retailing in Australia, 2017). In the past five years, cosmetics brands have

been catering to the growing consumer demand for natural, herbal or

environmentally friendly products and the preference for locally made products.

With high competition level and a high degree of globalization, technological

advancements are the key growth drivers (Cosmetics and Toiletry Retailing in

Australia, 2017).

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As shown in Figure 2, the skin care market has five key drivers, which can cover

different areas and factors. First, consumers are continuously moving towards a

greener lifestyle. Technology advancement and people’s healt- conscious drive the

consumers to buy organic and healthier skin care products, especially women

consumers. Besides, people nowadays have greater access to information via all

kinds of channels like Internet. Therefore, it is convenient for them to learn well

about the potential harm that some chemical ingredients could do to their bodies.

Also, Agnieszka Saintemarie (2015) argues that consumers are seeking full

transparency from cosmetics companies on their sourcing methods, production,

ingredients, and overall sustainability practices.

Secondly, advertising and sale activities are factors that drive people to try new

products. Nowadays, it is not different to find a cosmetic brand promoting that their

products are natural and have no harm to human body, which dramatically reduces

the barriers of the new products entering into the market. When walking on the

street, some consumers can be attracted by the beautiful posters and step into the

stores to buy the cream or cleaners, hoping that they can own the glamorous skin as

those models. Advertising can greatly affect one’s choice of buying what kind of

cosmetics, how often to buy and when to buy.

The third driver for skin care market is the booming of multiple channels, especially

online stores. As a result, more purchase channel such as department stores, duty-

free stores and online stores provide convenient access for people to try the new

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products like organic cosmetics.

Finally, Higher discretionary incomes drive the consumers to spend more on other

consumption goods like skin care products. It has been a common sense that sales

of higher priced and value-added cosmetics increase as the discretionary income

rises. The feedback from other users is also an important drive because it can affect

one’s choice of purchasing any commodities included cosmetics. Therefore, the

sellers pay much attention to their goodwill and reputation and the premium goods

pay more attention on word of mouth marketing.

2. Compare STP strategies of Jurlique and Nivea

(1) Marketing segment

The female facial skincare market is segmented into four categories, according to

different benefits sought, illustrated in table 1.

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Customers in the different segment have different demands and characters. Bargain

hunters live busy lives with higher levels of stress, thus convenience and

accessibility are important to them. They would like to choose products which are

easy to find and use. Meanwhile, their demands of skincare products are flexible,

which means they would purchase alternative products when they cannot find their

go-to products or brand. In contrary, quality pursuers seek a comfortable life.

They emphasize the effectiveness of the products and are willing to pay a premium

for better quality. Meanwhile, if they could find a suitable product, they would

remain loyal due to the superior experience.

Exploring and testing new products is a pleasurable process for adventurous buyers.

They also enjoy sharing their experience with others. Therefore, they regularly

change products, since they always sea new testing and sharing experience, unless

the product is unique. Besides, health-conscious buyers are a growing group with

an emphasis on a healthy lifestyle. A report by Euromonitor International (2017)

indicates that whether ingredients are natural and flawless or not becomes an

increasingly significant factor impacting the consumers choice. This segment is

attracting attention from companies.

(2) Marketing target

Although Jurlique and Nivea are two remarkably different brands, they achieved

success using different methods. First, they focus on separate customer profiles.

Jurlique targets people who look for high-end skincare products or products are

made using natural ingredients. The two customers in Figure 3 are the persona of

Jurlique, which could present characters of target marketing. Firstly, consumers

demand an outstanding impression from the products, such as fragrant smells and

nonirritant qualities. Secondly, users may need more specialized products, since

they often live in the different environment due to work or travel. Thirdly, a

premium price for good quality is acceptable to customers.

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In comparison to Jurlique, Nivea’s target market prefers affordability and

simplified products. According to the study from Roy Morgan (2015), about two-

thirds of Australian women buy facial skincare products over a 6-month period,

which shows the frequency of purchase is relatively high. Thus, the price could not

be too high if the brand plans to pitch affordability. Furthermore, customers tend

to be pushed for time thus prefer to make quick purchases. To vividly present Nivea

customers, a persona is showed in Figure 4.

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(3) Market positioning

Jurlique and Nivea locate different positions in the market to fulfil the different

demand from consumers as shown in Figure 5.

Jurlique emphasizes deep nourishing and caring, which is proved by the Table 2.

As the table presents, Nivea focuses on the essential demand for skin care

(cleansers and moisturisers). It has 16 cleaning products, including make-up

remover and face wash, and 21 moisturisers which include day cream and night

cream, which occupies approximately 80% of their product range. In contrary,

Jurlique has abundant intensive products, such as serums & treatment, toner & mist

Figure 5 positioning

(The author)

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and mask. These intensive products are not necessary for skin care, but they can

provide more specific care to the skin. In addition, Jurlique creates face oil which

has a similar function to serums but made from purely natural ingredients to

advertise its organic and natural character.

However, Nivea provides more choices in fundamental products which can meet

the basic needs of all kinds of women. For example, ingredient Q10 (shown in

Figure 6) was launched by Nivea to smooth wrinkles, then, Nivea produced three

types of Q10 day cream for different skin types. Moreover, the cream also provides

UVA protection and SPF15/30, which further simplifies the process of skincare to

women. More functions in one product and one ingredient for different skin types

helps make skin care simple and convenient for women.

Type of Product

Jurlique Nivea Jurlique Nivea Jurlique Nivea Jurlique Nivea Jurlique Nivea

Depth of Product Lines 1 12 9 4 10 14 5 7 25 37

Price Range $38 $7.5 - $10 $35 - $60 $9.2 - $10 $45 - $130 $10 - $28 $69 - $140 $13 - $28 $38 - $130 $7.5 - $28

Type of Product

Jurlique Nivea Jurlique Nivea Jurlique Nivea Jurlique Nivea Jurlique Nivea

Depth of Product Lines 2 3 8 1 8 2 5 3 6 N/A

Price Range $38 - $60 $9.2 - $10 $49 - $73 $9.97 $50 - $155 $33 $55 - $98 $19.6 - $28 $49 - $130 N/A

Type of Product

Depth of Product Lines Jurlique Nivea Jurlique Nivea Jurlique Nivea

Price Range 10 N/A 3 N/A 42 9

$45 - $130 N/A $69 N/A $38 - $155 $9.2 - $33

data from www.nivea.com.au, www.chemistwarehouse.com.au and www.jurlique.com.au

IN TOTAL

Essential ProductsMake-up remover Face wash Day Cream Night Cream

IN TOTALMASK face oil

Intensive Products

Exfoliation Toner&Mist Serums & Treatment Eye Cream Lotion

Intensive Products

Comparation of Products Between Jurlique and Nivea

Table2 Price comparation

(Nivea & Jurlique & Chemistwarehouse, 2017)

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In contrary, Jurlique obviously focuses on the high premium market, compared to

Nivea. Jurlique designed purely bio-degradable packages. For instance, the glass

bottles of Jurlique’s products utilizes a minimum of 60% postconsumer recycled

content glass (Australia Packing Covenant Organisation, 2017), which makes

Jurlique become a socially responsible brand. Moreover, Jurlique insists on organic

and natural ingredients, all sourced from its own farm, which is qualified by the

National Association for Sustainable Agriculture, Australia.

By contrast, Nivea targets affordability. As the table 2 shows, Nivea’s most

expensive product is $33, while the data from the Australian Bureau of Statistics

(2017) displays that the mean of Australian weekly income of full-time workers

was about $1605 in May 2017. Therefore, the most expensive product of Nivea

only occupies 2% weekly salary of a customer, which is consistent with Nivea's

positioning.

Furthermore, Nivea sells its products in national chain supermarkets like Coles and

Woolworth, plus pharmacies like Chemist Warehouse and Priceline because these

channels are easy to access. For example, women could buy Nivea when they

purchase food in a supermarket after work. In contrary, Jurlique sells in department

stores (Myer & David Jones) and own branded stores to provide personalized

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service. There are professional assistants to supply consultations for customers in

Jurlique’s shops.

3. Value proposition of Jurlique and Nivea

(1) Porter’s Generic Competitive Strategies:

According to Porter’s Generic Competitive Strategies, (Cambridge University,

2015), to create profit above average in the long run, the most important foundation

is the sustainable competitive advantage. Based on this, Michael Porter further

proposed three essential elements of competition – cost, product and market

(Dewey J 2016). Table 3 shows the relationship between these three generic

strategies defined by Porter, Cost Leadership, Differentiation and Segmentation.

As explained in STP section, Jurlique and Nivea has entirely different price level

and customer segments. Based on this, these two brands focus on different

elements of the strategy to maintain the long-term competitiveness.

Over the past five years, the consumers in Australia increased their awareness about

the health benefit of industry cosmetics (Ibis, 2017). In this situation, Jurlique

positions itself as the leader of the organic cosmetic market and has unique function

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to the sensitive skin, which distinguishes it from other competitors in the same

market. As a result, natural brands leading by Jurlique deliver the strongest growth

in Australia (passport, 2016). According to Porter’s generic strategies (1980),

Jurlique selected a special target attribute as “organic”, which means healthy and

environmental, to go into the cosmetic market. Using “organic” as its competitive

mantra, Jurlique successfully enters into the new cosmetic market in Australia

against its competitors.

Organic cosmetics are often marketed as luxury products due to their smaller

production runs and use of expensive organic inputs, which feed into the overall

price premium charged by distributors (Ibis, 2017). Therefore, benefited from the

concept of ‘organic‘, Jurlique gains relatively substantial financial revenue from

the high retail price of its products.

Different from Jurlique, Nivea position itself as ‘Trusted, Loved, and always

Reliable. ‘ at an affordable price level. While Nivea also gains huge success in

Australia cosmetic due to the different competitive strategy. By managing all stages

of the processes involved in the production and the distribution, Nivea can keep its

costs as low as reasonable and in turn handing on that lower price to the widest

possible reach of the market, which called ’cost leadership‘ in Porter’s generic

strategies (Cambridge University, 2015). Nivea sets the price benchmark which the

competitors will either follow or undercut to maintain the cost leadership. In this

way, Nivea could maintain a long-term market presence and maximize profits.

Beiersdorf Australia Ltd, the mother company of Nivea, has increased its revenue

about 70 million AUD from 2011 to 2016(Passport, 2016).

(2) Customer value proposition

As a strategic tool that is used by a company to deliver value to the customers,

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Customer value proposition(CVP) has been to one of the most widely used terms

in business (Anderson et al. 2006). By summarizing the previous studies, Adrian,

Pennie and Andreas (2017) have updated the definition of CVP as a strategic tool

for sharing resources in organizasion and offering a superior value package to the

targeted customers. Having two different segmentations, Jurlique and Nivea

concentrate on two different value-exchange types as shown in Table 4.

Extending this concept to the consumer market, Jurlique compares their products

with competitors’ traditional cosmetic offerings, selecting a subset of special

consumers as their target consumers and delivering their core value. As a natural

skin care brand, it creates the functional value to satisfy the needs of the special

customers who have ‘sensitive skin’. On the official website, Jurlique committed to

minimize their environmental footprint to the earth and disclosure their energy

saving report. For example, they transitioned some of the old aluminium tubes to

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plastic packaging eliminating 70% of wastage during production and saving four

trees every 1,000kg of product we produce (Jurlique, 2017). By making the

operations more sustainable and environmentally friendly, it also established the

symbolic value to signify as the environment protector.

Nivea’s value delivering to their target customer, however, as the daily necessities.

Dedicated to build a ‘close’ relationship with women, Nivea created a sales network

throughout Australia， in the pharmacy, supermarket and even convenience store.

Unlike their direct competitors (like Dove), Nivea has great advantages in the width

of the product line and the sales channel. By appearing in every location accessible

to consumers in their daily lives, Nivea attends to establish an intimate relationship

with their consumers.

4. Value Discipline

Treacy and Wiersema (1993) mention that, in the recent decade, companies are trying

to make a leading position in their industries through narrowing their business. They

concentrate on providing notable customer value consistent with one of the three value

disciplines, which are customer excellence, product leadership and customer intimacy.

Hence, companies should choose a value discipline based on their capabilities, culture

and strengths to emphasize and sustain the leadership. Jurlique and Nivea choose

different pathways of value disciplines illustrated in Figure 7.

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Jurlique targets the premium health concern women and defines the discipline of

product leadership. What makes the company prominent in this discipline is that

Jurlique always upholds with the vision of connecting people back to nature (Jurlique,

2018). It is reflected throughout the resources, the process of production and marketing

activities. With the production aspect, Jurlique features ingredients made from herbs

grown in the company’s farm in Australia. The biodynamic farm, on the one hand,

ensures the natural ingredients, plus delivers the brand’s "organic" concept through

market activities. Therefore, Jurlique creates the farm tour, in the Adelaide Hills, to

fascinate their customers and reflect the care and effort put into the products. Also, by

recycling waste to minimize its environmental footprint, Jurlique positions itself as an

" environmental-friendly" company. For example, Jurlique (2018) elilminates 70% of

wastage during production through converting some old aluminum tubes into plastic

packaging. With the marketing activity aspect, Jurlique do not have a mature marketing

strategy to touch its target consumers. It has less marketing channels to promote its

position except the guide help from the sales persons in the physical stores.

In contrast, Nivea defines the discipline as operational excellent. As mentioned above,

Australian people have more casual lifestyle compared to Europe. 54.5% of the

Australian women did not make-up at all or preferred natural or barely make-up and

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only 4.8% women like heavy make-up (Passport, 2017a). As a result, Australian female

prefers more in purchasing low-priced products in the cosmetics market (Passport,

2017a). Hence, Nivea builds its Australian business around two notions – efficient

production and low buying barrier. It typically provides acceptable products at the

affordable price. Instead of deploying their product in the department store or physical

store like most of its competitors, Nivea distributes its products in a more convenient

way, such as the pharmacies and supermarkets. That is because pharmacies and

supermarkets are the places that most of Nivea’s target audience may pass daily and it

is convenience to access. In a word, convenient position strategy with a consistently

low price makes Nivea developing as an operational excellence company in Australia.

5. Value Chain

Value Chain is a model created by Porter (1985). It describes the framework of a set of

strategically relevant activities (Kehoe & Mateer 2015) to understand the behavior of

costs and the competitive advantages (Kannegiesser, 2008, p11). It is a powerful

managerial tool to reduce company’s cost and differentiate Nivea from its competitors.

Jurlique, as an organic skincare product, significantly reduces its cost from Inbound

logistics activities. The biodynamic farm of Jurlique closes to its factory (Jurlique, 2017)

to reduce the cost of material transportation. In contrast, Nivea saves cost on its sales

channel. Products sell in pharmacies and supermarkets may reduce the cost of recruiting

and training educated salespersons in human resources activities.

Jurlique differentiates itself with other competitors in the operations and services

activities in the value chain. In the operations aspect, Jurlique emphasize the organic

operation by posting the official statement on their website. For example, on the official

website, Jurlique claimed that they strictly adhere the requirements which prohibit the

commissioning and testing new products or ingredients on animals. This creates a

unique position of Jurlique and differentiate it from other competitors in the same price

value. In the service aspect, Jurlique’s well-trained salesperson also helps to distinguish

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it from its competitors. In all the counters in the department store and the physical store,

there will be a couple of educated salespersons who can deliver the organic brand value

to the customers over and over again.

In contrast, Nivea keeps itself consistently at an affordable price and develops its

marketing strategy as "close and love". This strategy coincides with the ‘value for

money’ insight in the Australian skin care market. To make buying convenient, Nivea

distributes products as many channels as possible. It feasibly maximizes the purchasing

opportunities of Nivea in retailers and lowers the buying barrier between customers and

the brand. Using this puerile approach, Nivea also built a successful business model for

itself.

6. Business model

Business models define how an organisation generates value for itself and its customers,

describing the structures and activities needed for value creation (Osterwalder &

Pigneur 2010). The Business Model Canvas comprising nine building blocks is a highly

useful tool which can describe, challenge, design and invent business models more

systematically (Brooke, 2018). In this report, business model canvas is used to describe

the several parts of the business models of Jurlique and Nivea in detail – shown in Table

5 and 6 above.

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Recently, people pursue the more comfortable and functional product of skincare.

Both the Jurlique and Nivea can satisfy customers’ needs and they both aim to

provide more perfect products. They both have similar channels to advertise and

promote their new products, e.g., department store and online approach.

Furthermore, they both pay more attention to research about the new and more

effective products, even apply for the patent of producing technology, as well as

brands globalization. Besides, they both develop corporation social responsibilities

(CSR) to enhance the company's reputation. In a word, the content covered in cost

structure and revenue streams of these two brands are similar.

As shown in the tables, many differences appear and represent the different way

these two brands use to create value. Firstly, key partner of Jurlique only include

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retailers like David Jones and Myer while Nivea’s partners cover ingredient supplier,

factory, retailer, agent etc. Nivea has various forms of cooperation through its

established network including external partners, experts, inventors, suppliers,

research institutes and universities throughout the world (Bilgram et.al, 2010).

Therefore, Nivea outsources a lot to its partners. By contrast, Jurlique has got most

of the work done by itself. It has its own farm, factory and branded store, which

will cost a lot so as to make a higher product cost than Nivea.

In terms of customer relationship management, Jurlique has not yet built a

systematic customer relationship management system and now it just gives limited

customer service like sending the discount email. While Nivea has online customer

personal platform which helps customers to access to their membership service.

There are professionals who can provide tutorials and knowledge to customer

through the online platform, so customer service is a key activity of Nivea.

Therefore, Nivea can provide continuous customer relationship management by

establishing expertise consultancy online service.

Depending on different target segments, Jurlique and Nivea built different channels

that match with their position. Jurlique has its own branded department store but

Nivea has not. Nivea does distribution through mass market including supermarkets

and pharmacy to approach as many as customers while Jurlique more focuses on

adopting its branded element to distribute, e.g. operating Branded own store to

differentiate. Also, Jurlique is mainly a local brand in Australia so the duty-free

stores are essential to attract more overseas travellers to buy its products at its

country of origin (Beiersdorf, 2016). However, Nivea has worldwide skincare

centre which can develop its products in many countries. Therefore, there is no

significance for having the duty-free stores.

In regard to the product formula, Jurlique mainly focuses on using flora ingredients,

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while Nivea adopts more multiple technological synthesized ingredients, which can

lead to different cost. Jurlique focuses more on maintaining a maximum level of

natural herbal ingredients extracted from the plants grow at hills in Australia, while

Nivea seeks for innovative ingredients which can be developed by a lot of

laboratory activities.

When it comes to product innovation, Jurlique has no existing co-creation program

according to our research, probably because Jurlique does not need to develop new

customer segments. However, Nivea adopts co-creation enabling customers to

contribute to different tasks, e.g., to give new product ideas, to elaborate detailed

concepts, to assess or challenge existing ideas, to explore alternative solutions or to

test and experience new product characteristics (Bilgram et.al, 2010). In this way,

Nivea can explore the needs of different users to the greatest extent to cover a larger

customer base.

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7. Conclusion

The increasing awareness of personal image leads to a huge development of skin

care and cosmetic industry. More and more new brands enter into the industry and

exacerbated the competition in the industry. As two dramatically different brands,

both Jurlique and Nivea have successfully created the business models matching

with their brand images. Jurlique targets people who look for high-end skincare

products or products with natural ingredients, therefore, the business value of

Jurlique creates a unique image to enhance the premium ability. Whereas Nivea

targets consumer who pursues the budget product. Nivea pursues more on

operational excellence to maintain their products at an affordable price level, plus

highly accessible for its targeted mass market.

Currently, Nivea has superior market strategies compared to Jurlique. In the future,

they will face more challenges with increased customer needs for product quality

and price. To achieve bigger success in the future, from our perspectives, it is

recommended Jurlique improve its customer relationship management by providing

more dedicated counter service and customized customer system interface. For

Nivea, it is suggested brand uniqueness be built up through its product development

to achieve more differentiation in the cosmetics industry with fierce competition.

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Reference

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