SK II Japan Marketing Plan - Group 1-Libre

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Global Expansion Japan – Marketing Plan

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Executive Summary

The Global prestige skin care market accounts for $2.25B in annual consumer spending. Asia

Pacific and Japan markets account for 80% of total global sales ($1.8B). Currently, P&G

accounts for approximately 22% of the global beauty product market share.

The GLT’s aggressive goal of doubling sales in the next five years, coupled with the potential

opportunity to serve a currently un-tapped market segment, suggests P&G should leverage the

already developed momentum in the Japanese beauty care market as a source of hyper-

growth. Group 1 estimates current SK-II sales of $150 million can be doubled in next five years

by focusing on growing the Japanese prestige skin care market.

Technical product innovations and the introduction of new SK-II product lines such as anti-

aging care, skin-whitening products, skin-cleansing and skin-nourishing products, in concert

with greater consumer awareness and skin care education campaigns, P&G can greatly

expand the Japan market opportunity. Group 1 estimate P&G can significantly improve the

SK-II growth rate from current 5% per annum to approximately 20% per annum in two years

by incorporating the aforementioned campaigns into the target markets segments.

This plan deals in detail the analysis of different global markets and choice of Japan for further

expansion in the premium skin care market, and how this expansion can be leveraged as a

launch pad to global expansion into Europe and new Asia-Pac market such as Malaysia, China,

Singapore & Indonesia.

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Table of Contents

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Executive Summary 2

Table of Contents 3

Summary of Current Situation 4

Current Economic landscape 4

P&G Penetration within current market 5

Opportunities and Challenges 6

SWOT Analysis 6

Decision Rationale 9

Focused Assessment of Market Opportunity 10

Target Market and customer needs assessments 10

SK-II Market Segment and product lines 10

Competitive Review and Challenges 11

Financial & Marketing Goals 12

Expected Revenue 1999-2002 12

Unit Sales 13

Month to Month Unit Sales Forecasts 14

Summary of Marketing Strategy 15

Objective 15

CVP 15

Marketing Mix 16

Product 16

Product Line 16

Place 18

Price 19

Promotion 19

The 6 M’s 21

Monitoring & Evaluation of Marketing Plan 23

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Summary of Current Situation

Current Economic landscape

In 1999, The Global prestige skin care market accounts for $2.25 billion at retail level; out of which United

States and Asia pacific combine accounts for 50% of market share. In Asia Pacific, Japan accounts for 80% of

the total sales, whereas china is becoming the second largest market with a two-year growth rate of 28%. The

facial skin care prestige market can be further segmented into facial cleansers, Anti-aging, Acne Treatments,

Moisturizes and Fade/Bleach. In the skin care segment, facial cleansers accounts for 36% of the market share

followed by anti-aging with 25%.

Procter & Gamble (P&G) is one of the global market leaders in beauty products. In terms of dollar sales, P&G

accounts for approximately 22% of the beauty product market share in the world. It sells facial skincare

products through its Beauty & Health division. The key products in the Beauty sub group are cosmetics,

deodorants, feminine care, fine fragrances, hair care, hair colorants, personal cleansing, professional hair care,

and skin care. The key brands in this product groups are: Always, Head & Shoulders, Olay, Pantene, Wella,

Cover Girl, Gillette Series, Herbal Essence, Hugo Boss, Nice ‘n Easy, Old Spice, Safeguard, Secret, SKII, and

Tampax.

SK-II is a leading, high-end beauty brand with a wide array of skin care products than had not been recognized,

much less evaluated in the Max-Factor acquisition by P&G in 1991. “SK” stands for “Secret Key” – referring to

an ingredient Pitera. Pitera, secret yeast based ingredient supposedly developed by Japanese monk who

noticed how the hands of workers in sake breweries kept young looking. SK-II had a small but loyal following.

Priced at $120 or more per bottle it was top of the skin care range.

With the SK-II product line P&G was successful in the global prestige skin care market in Japan. Taiwan and

Hong Kong, which encouraged management to begin expansion into other growth markets like China, Europe,

Singapore, Malaysia and South Korea.

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P&G Penetration within current market

P&G created its first overseas division n 1948 that drove three decades on rapid expansion. Growing first in

Europe, then Latin America and Asia, by 1980 P&G had operations in 27 overseas countries accounted for over

25% of its $11 billion worldwide sales. For the analysis of prestige skin care market we are restricting to the

locations to Japan, China, Hong Kong and Taiwan.

Japan

P&G has been operating in Japan in 1972. Not until 1990 did P&G enter the beauty care market under the

subsidiary P&G Japan. The parent company’s 1991 acquisition of Max Factor gave P&G Japan a foothold in the

10 billion dollar Japanese’s cosmetic market. But in Japan, sales of only $300 million made a distant number-

five competitor, its 3 percent share dwarfed by Shiseido’s 20%. In 1992 Max Factor Blue was launched, a top

end, self-select color cosmetic line to be sold in general merchandise and drug store. In 1994, the Japanese

beauty care business lost $50 million on sales of less than $300 million. Over the next 3 years the local

organization had made the Max Factor profitable. The product lines were rationalized from 1,400 SKU to 500,

distribution support was focused on 4,000 sales outlets as opposed to the previous 10,000 and sales and

marketing staffs were cut down from 600 to 150. By 1999, SK-II had sales of $150 million in Japan. They had

created a great brand and loyal customer base.

China

P&G has been operating in china since 1988. Because of the extraordinarily low prices of Chinese laundry

products, the company had uncharacteristically led with beauty products when it entered the huge market.

Olay was launched in 1989, and after early problems, eventually became highly successful by adopting a

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nontraditional marketing strategy. Olay was sold through counters in state-owned department stores staffed

by beauty counselors. By 1999, Olay had almost 1,000 such counters in china and was a huge success.

Taiwan & Hong Kong

P&G entered the Taiwan & Hong Kong market in the mid 1980. By 1999, both these markets were success full

and accounted for 45% of total SK-II market sales.

Opportunities and Challenges

SWOT Analysis

SWOT analysis is used as a framework to evaluate the SK-II launch as Global Brand in the markets of Japan,

China and UK. In the following analysis the market has been broken down by geographical area and further at

the country level.

Market SWOT Analysis

Japan

Strengths:

• Successful and established brand in Japan.

• Loyal SK-II customers spend $1000 a year on the brand.

• Established distribution channel in Japan and

• Best R&D Labs creating innovative products.

• Investment quite low for moving into new markets.

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Weakness:

• High spending on advertising in Japan, Taiwan and Hong Kong.

• High R&D spending.

• Slow Development of new products.

• Simultaneous organizational restructure.

Opportunity:

• Market of 10 Billion. Max-Factor has tapped only 3% of market

share.

• Opportunities to move into new segment by anti-aging and skin

whiting.

• Strategy of product innovation and superior in-store service has the

potential to double sales in Japan over the next 6-7 years.

Threats:

• Market growth slowed down in recent years.

• Intense competition (Shiseido, Kanebo, Kao).

China

Strengths:

• Highly successful Olay brand.

• China market well known through Olay launch.

• Established distribution channel through Olay brand.

• Best R&D Labs creating innovative products.

Weakness:



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• Cost of Product 20-30 times more than local brand.

• More complex regime of using SK-II (4 step process).

• High import duties.

• Forecasted 10% sales drop in the initial three-year period.

• Distraction to P&G strategy of becoming a main stream Chinese

company and to its competitive goal of entering 600 Chinese cities.

Opportunity:

• Prestige beauty segment growing at 30-40% a year.

• Second largest market in the world.

• Cheap labor and marketing cost will improve profits.

• 10-15 million in sales in 3 years.

• Highest growth rate of skin care market (28%).

Threats:

• Battling Counter fit products.

• Intense Competition.

• Every major competitor in beauty skin care space is already here.

UK (Western

Market)

Strengths:

• Relatively large and sophisticated group of beauty-conscious

consumers.

• Achieve 10 million by the fourth year in UK market.

Weakness:



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• No brand awareness or heritage in western market due to

prohibitive laws in advertising.

• More complex regime of using SK-II (6-8 step process).

• Initial consumer research in the U.K. had proved mixed results. Blind

testing. Because of the lack of beauty counselors, analysis and

advice and had not practiced the full skin care regimen.

• Loss of 1-2 million annually over the first 3 years.

Opportunity:

• Possible to exploit sales chain already successful with fragrances.

• Growth rate of 17% in skin care products.

Threats:

• Intense competition from Estee Lauder, Clinique, Lancôme, Chanel,

and Dior.

• Prohibitive Advertising laws.

Decision Rationale

While there is a significant worldwide growth potential within the $9B prestige skin care industry, P&G should

fully consider the feasibility of successful and profitable market development and not solely focus on sales

potential. Based on recent organizational changes, new corporate priorities and market analysis (SWOT

analysis and the Revenue forecast template (attached excel template), P&G should continue to focus on the

Japanese market by expanding into other new segments like anti-aging and skin-whiting to increase market

share, with a keen eye on other global markets like Europe and China, and seizing the opportunity when P&G

resources, capability, and strategy align.

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Focused Assessment of Market Opportunity

Target Market and customer needs assessments

SK-II’s market consists of female users who look for a superior one-step facial experience that offer the

benefits of cleaning, conditioning and toning. The female users consist of teens and young adults and aging

women with different needs. For teens and young adults, they look for a skin care product that can help them

to treat acne. For aging women, they look for a skincare product that can allow them to maintain a youthful

appearance.

SK-II Market Segment and product lines

SK-II is positioned in the premium cosmetic product based on the following unique factors:

1. SK-II offers the facial treatment essence with its unique SK-II Foaming Massage Cloth, which helps

boost moisture levels to improve texture and clarity. It also has the microfibers ability to clean pores

and trap dirt.

2. The innovative Beauty Imaging System (BIS) allows SK-II beauty consultants to boost the accuracy and

credibility of their skin diagnosis. This system allows SK-II to build significant loyalty to the customer.

3. SK-II spent significant amount of effort in developing detailed product performance data that Japanese

beauty magazine required to prove that its product fits to the premium product category

SK-II provides different product categories to meet the customer needs. The product categories include: Basic

Cream, Whitening, Aging Care, Skin Oil/Pore care and Complex Trouble Care.

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Competitive Review and Challenges

The following table shows a selection of competitors that directly compete against SK-II

Competitor Model Size Price (USD)

Shiseido Extra Rich Cleansing Foam 4.23 oz. $55

Nivea Anti-wrinkle & Firming Cream 1.7 oz. $9.99

Este Lauder Ultimate Lifting Cream 1.7 oz. $1000

SK-II Facial 3.8 oz. $50

The above table shows the wide range of price offered by the facial cleaning companies and according to the

market analysis, Shiseido is considered to be the biggest competitor to SK-II based on its unit price and feature

offering. Despite the strong competition, SK-II can stand out against its competitors based on its definite

image and brand recognition among the targeted segments.

As the Japanese skin care users has big focus in facial treatment (over 90% skin care usage in facial treatment),

given the fact that P&G has achieved only 3% of the $10 billion of the Japan market with the forecast 6% two-

year growth rate, the continuous innovation in house, and its superior in-store service experience, SK-II would

have a very good chance to grow significantly in its Japan market and thus, P&G should expand the SK-II brand

within Japan.

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Financial & Marketing Goals

Expected Revenue 1999-2002

Revenue for P&G skin care line is expected to increase

revenue ranging between 3-14% in the years 1999-2002.

China, the least mature market, is expected to lead Y/Y

growth, by increasing sales at a rate of 14% over the four-

year period. The GB and US markets are expected to grow at a 9% rate Y/Y for the next e years and Japan,

P&G most mature prestige market is expected to grow at a rate of 3%.

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Unit Sales

Unit sales for the prestige product are expected to be in line with Y/Y revenue growth.

The P&G Sales unit forecast is based on annualized forecast and distributed evenly across 12 months. The

current forecast model does not account for seasonality for specific product lines, it does account for country

specific momentum and sales growth.

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Month to Month Unit Sales Forecasts

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Summary of Marketing Strategy

Objective

Although there is a huge potential of SKII to be a global brand in prestige skin care product, we feel that there

is a huge scope of growth in Japan market. There is such a large un-tapped market segments for premium skin

care products which can be catered in Japan. Current SK II sales of more than $150 million can be potentially

doubled in next five years.

With technical product innovation, introduction of new SK II product lines such as anti-aging care, skin-

whitening products and skin cleansing and nourishing products, and consumer awareness and skin care

education campaign, we can greatly expand the market opportunity. With targeted marketing campaigns,

production innovation and quality product support, we can significantly improve the SK II growth rate from

current 5% per annum to around 20% per annum in two years.

Slow and steady globalization and expansion of SKII to other Asia Pacific such as Singapore, Malaysia, China &

Indonesia and European markets can still happen in parallel if P&G’ GLT chooses to do so as we believe SKII

has the potential to succeed in those markets.

CVP

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Marketing Mix

Product

SKII is a premium skin care product developed exclusively from ‘Pitera’ secret yeast based ingredient which

helps keep the skin young and glowing. SK II Pitera contains components natural moisturizing factors that

occur naturally in the skin. Pitera has other ingredients such as polysaccharides and proteins that improve the

skin function. Pitera helps in Radiance Enhancement, Spot Control, Wrinkle Resilience, Firmness Power, and

Texture Refinement.

Product Line

With a goal doubling the sales in next five year and potential opportunity to serve the un-tapped market

segment in Japan as shown by relevant market researches, developing new product lines will help target

different market segments to meet our sale goals.

Based on the research of the product attributes and skin care requirement, possible product category and

target market segments and the percentage usage and recent sales, following product categories can be

defined

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# Product Category Market Segment %

1 SK II Toner and Skin Nourishment Young Women (Age 15- 45) 11%

2 SK II Anti-Aging Care Middle Aged & Old Women (Age 35 -70) 12%

3 SK II Signature Facial Treatment All Women (Age 15 – 60) 12%

4 SK II Eye Care* Young Women (Age 15- 45) 5%

5 SK II Men* Young & Middle aged Men (Age 19 – 60) 5%

6 SK II Acne Care* Young Men and Women (Age 15 – 30) 8%

7 SK II Moisturizers & Body Lotion All Women (Age 15 – 60) 5%

8 SK II Skin Enhancement, Lift & Glow Middle Aged & Old Women (Age 35 -70) 8%

9 SK II Sensual Lips & Care* Young Women (Age 15- 45) 4%

10 SK II Cleanser, Foundation, Exfoliation & Mask Young Women (Age 15- 45) 12%

11 SK II Skin Whitening Products & Bleaches Young Women (Age 15- 45) 10%

12 SK II UV Protection* Men & Women (Age 15 – 50) 8%

* proposed new product line

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Place

Majority of the SK II customers are Urban and Sub Urban women rich and upper-middle class women who love

to shop for premium beauty products and who are beauty conscious. Most of the Japanese women would like

to browse at the store, look around different products, and talk to beauty consultant before buying their

premium skin care products. So the Departmental stores and Premium outlet malls are the best place to sell

SK II products in Japan. As more and more Japanese customers are now turning to online shopping, most of

the repeat sales are made online.

P&G will retain the exclusive brand rights for SK II skin care products and sell then directly through retail

channels and online through their web portal.

# Product Channels %

1 Department Stores 40%

2 Premium Outlets & Malls Kiosk 24%

3 Exclusive Beauty product Stores 14%

4 Online Sales 12%

5 Specialty Stores, Beauty Salons & Spas 8%

6 Mass Market Merchandizing & Others 2%

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Price

Since SK II is a premium skin care product with unique ingredients for total skin care revolution, we will

maintain the SK II luxury brand perception by keep the prices 5-10% higher than the competition in the

premium skin care products. We will add value to the customer for paying premium price with free in-store,

online and over the phone beauty consultation, product support, help choosing the right product, access to

beauty blogs and health and beauty tips online and exclusive email and social media notification to store

promotions, events and by invitation only beauty seminars.

The targeted marketed segment customers for SK II are not price sensitive and they can afford to pay a higher

price for quality product and great service. A small increase of price will not affect the size of the market and a

small decrease of price may help attract a whole middle class market segment. Effective pricing without

compromising on the brand perception of premium skin care products is very critical.

Promotion

Japanese consumers are ‘need to know’ kind of shoppers and they are usually are market aware. They like to

know and learn about their products before they buy. Once they are satisfied with the product they tend to

remain loyal to the brand. So education and product awareness is the key to attract loyal customers. Majority

of the first time purchases occur at the store. The following product promotion can be considered.

1. In-store beauty consultant to demonstrate, educate and create product awareness among the

customers.

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2. Touch screen kiosk for product self-learning and helping customers in choosing and buying the right

product.

3. DMS and LCD product display in department stores and in premium malls, clubs, movie theaters and

other elite venues frequented by rich and upper middle class patrons.

4. Mobile App for choosing SK II products, online chat support and toll free live agent help

5. SK II sponsored invitation only beauty & health seminars in-store, at malls and other public places

6. Social media campaign using social tools such as twitters, blogs, Facebook& YouTube videos about

different products lines.

7. Blogs about health tips, beauty care and how SK II can help.

8. Targeted web based personalized ads and promotional events

9. New products and promotional announcements on web using social media tools

10. Maintaining vibrant and engaging online community such as interactive twitter followers, Facebook

page likes etc.

11. Exclusive coverage and advertisement on beauty and health care magazine

12. Product endorsement by young and popular female celebrities

13. PR events, media coverage, TV shows, movie premiers to create positive awareness of SK II brand

14. Doctor/Dermatologist and health care expert endorsements

15. TV and radio commercials, print and popular magazine advertisements

16. Training and educating in-store beauty consultants to educate and sell SK II products to the customers.

17. Product purchase reminders and new product tips for repeat customers

18. SK II website with detail product descriptions, beauty tips and product recommendations.

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The 6 M’s

Market

The Japanese premium skin care product market. Different target segmentation based on product line is

described in product section.

Mission

To double the SK II product sales in Japan from current $150 million in next five years by 2004 and significantly

improve the growth rate from current 5% per annum to around 20% per annum in two years by 2001.

Message

Our brand awareness, product and value proposition

“For young, bold & beautiful woman who wants to take control of her life & destiny, SK II premium skin care

products by P&G are the secret to beauty, self-confidence, success, happiness & crystal clear skin.”

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Media

We would leverage both traditional and not traditional media. Our media strategy also includes extensive use

of social IT platforms and social media tools to educate and spread brand awareness of our SK II products.

Detail use of different media is discussed under promotion

Money

We will heavily depend on the marketing budget set aside for the SK II global expansion product. Our target is

to use no more than 5 million dollars for all marketing activities. Detail marketing budget requirements will be

documented separately and sent to the global leadership team for approval.

Measurement

A detailed market objective assessment exercise will be undertaken every quarter and impact of each

marketing campaign and event will be assessed. Any course correction and lessons learned will be

implemented immediately as needed. Next section discuss the detailed monitoring and evaluation of

marketing plans

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Monitoring & Evaluation of Marketing Plan

Monitoring and evaluation of marketing plan will be done on quarterly basis. Here are some of the

measurement indices against which objective assessment and success of the marketing plan and strategy can

be measured on an ongoing quarterly basis

1. Increase in sales revenue due to impact of marketing event/s in that quarter or fiscal year

2. Quarterly Increase in total customer numbers directly related to marketing promotion

3. Number of Online website visitors & kiosk browsers

4. Online purchases made

5. Facebook page likes, twitter followings & YouTube video views

6. Mobile Apps downloads

7. Number of online bloggers about SK-II products

8. Number of celebrity and expert endorsements

9. Number of repeater customers through online ad campaign and promotions

10. What is the positive impact on the brand, percentage increase in brand valuation?

Documents

SK II Japan Marketing Plan - Group 1-Libre