Assignment - Marketing 3 MAR303.docx

Compiled by Rehana Ismail (I87653)

For IMM (Institute of Marketing

Management)

26 October 2015

Marketing Plan: Lush – Hand Made Cosmetics

REHENA ISMAIL I87653 MARKETING 3 (MAR303)

Executive SummaryThe PastLush emerged from the demise of mail order business Cosmetics To Go,

initially set up by Mark and Mo Constantine and Elizabeth Weir – after working

together creating products for The Body Shop. After CTG collapsed, the same

team dusted themselves off and created a new venture called LUSH.

The first shop opened in Poole in April 1994, with another following in

London’s Kings Road in 1995 and the business has been profitable since day

one.

The PresentToday, seventeen years since its inception, we have over 900 shops in 51

countries across the globe. Lush has since taken the cosmetic industry in

leaps and bounds against animal cruelty, and environmental responsibility.

Lush makes hand-made cosmetics using the finest natural raw ingredients.

Charity and community building is also strongly imbedded in Lush’s culture.

We believe in giving back to communities and making a difference.

The FutureWe aim to improve our products by not make use of synthetics. We will keep

on putting masses of natural ingredients in our products, dreaming up

preservative-free cosmetics, worrying about their environmental impact and

working with our suppliers to minimise that. We choose to give our love (and

money) to suppliers that respect the environment and the animals and people

living there.

We would like to report on our environmental performance on a yearly basis

and make sure we maintain green issues alive in the hearts of our staff,

ensuring that this policy delivers on what it promises.

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Contents

EXECUTIVE SUMMARY..........................................................................................I

1. SITUATIONAL ANALYSIS...............................................................................11.1 POLITICAL / LEGAL SITUATION.......................................................................................11.2 ECONOMIC SITUATION..............................................................................................................21.3 TECHNOLOGICAL SITUATION....................................................................................................31.4 TRENDS...................................................................................................................................31.5 SOCIAL / CULTURAL SITUATION.....................................................................................31.6 ECOLOGICAL SITUATION......................................................................................................41.7 INDUSTRY / MARKET ANALYSIS.....................................................................................41.8 THE MARKETING MIX.........................................................................................................6

2. SWOT ANALYSIS...............................................................................................8

3. STRATEGIC CHALLENGES (CRITICAL SUCCESS FACTORS).............8

4. ASSUMPTIONS...................................................................................................9

5. MARKETING OBJECTIVES............................................................................9

6. TARGET MARKET, POSITIONING PLATFORM AND UNIQUE SELLING PROPOSITION.................................................................................9

6.1 TARGET MARKET STRATEGY ..........................................................................................96.2 POSITIONING PLATFORM ................................................................................................116.3 UNIQUE SELLING PROPOSITION (USP) ........................................................................126.4 GROWTH STRATEGIES .....................................................................................................13

7. STRATEGIES....................................................................................................147.1 PRODUCT STRATEGY (INCLUDING BRANDING) .......................................................147.2 PRICING STRATEGY ..........................................................................................................157.3 PLACE / DISTRIBUTION STRATEGY ..............................................................................157.4 PROMOTIONAL STRATEGY ............................................................................................15

8. ACTION PLAN..................................................................................................16

9. BUDGETS, CONTROLS AND REVIEWS.....................................................179.1 EXPECTED REVENUE & MARKET SHARE...................................................................179.2 HIGH LEVEL BUDGET........................................................................................................179.2 MARKETING EFFECTIVE RATING REVIEW..................................................................189.3 QUARTERLY SALES AUDIT..............................................................................................189.4 BRAND IMAGE AUDIT.......................................................................................................189.5 COMPETITOR INTELLIGENCE TRACKING....................................................................18

REFERENCES...........................................................................................................19

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1. SITUATIONAL ANALYSIS

(A) ORGANISATION AND PRODUCT

Lush is an organisation that makes hand-made cosmetics. There are

approximately 6000 people working for Lush from selling soap on shop floors

to filling presents, to travelling in the jungles looking for fairly traded raw

materials. We pride ourselves on being dynamic, original and progressive.

We Believe

We believe in making effective products from fresh, organic fruit and

vegetables, the finest essential oils and safe synthetics.

We invent our own products and fragrances. We make them fresh by

hand using little or no preservatives or packaging, using only vegetarian

ingredients and tell you when they were made.

We believe in buying ingredients only from companies that do not

commission tests on animals and in testing our products on humans.

We believe in long candlelit baths, sharing showers, massage, filling the

world with perfume and in the right to make mistakes, lose everything

and start again.

We believe our products are good value, that we should make a profit

and that the customer is always right.

We also believe words like fresh and organic have honest meaning

beyond marketing.

(B) MACRO ENVIRONMENT

1.1 Political / Legal Situation Government is planning to regulate South Africa’s fragrance, cosmetics

and toiletries industry, it is currently self-regulated. Under the self-

regulated regime, companies have recourse to the Advertising

Standards Authority (ASA) should they feel that a competitor is making

unsubstantiated claims, using ingredients that are not permitted, or

selling a substandard product.

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The Foodstuffs, Cosmetics and Disinfectants Act control the sale,

manufacture, importation and exportation of cosmetics.

New legislation affecting this industry is the Consumer Protection Act,

which has sections relating to the quality of products in the market;

consumer safety, marketing and communication to suppliers and

customers (including labelling, advertising and promotion).

A steering committee was formed in 2003, spearheaded by Black Like

Me founder Herman Mashaba, to establish a sector-specific BEE

charter for the cosmetics industry.

Lush keeps on top of legislation and welcomes new regulations that

genuinely reduce our impact. Lush also supports environmental groups

that participate in creative action to help change the law.Imrie, K., 2014

1.2 Economic Situation Strikes in the platinum sector, energy supply constraints and slow

spending growth by consumers and businesses are the main reasons

for the projected decrease in growth forecasted.

Volatility of the rand makes imported products and ingredients more

expensive and further interest hikes are expected.

The black middle class is expanding and moving to more expensive

ranges, however, there remains significant demand for affordable yet

effective products.

Although economic factors are likely to reduce consumer spending in

general, there may still be growth in spending on cosmetics because of

“the lipstick effect” where hard-pressed consumers who cannot afford

larger luxury purchases, replace them with smaller ones. Imrie, K., 2014

This is where Lush’s success comes in as our products are guaranteed

to make the user feel great and incorporates the element of being

socially and environmentally friendly.

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1.3 Technological Situation Many companies make use of the online channel for distribution of their

products as technology improves. Online shopping is becoming popular.

Lush is launching a website together with store openings.

Lush is improving technological processes by generating power through

energy on-site to facilitate activities.

Although technology is changing rapidly, Lush would rather employ

more people than machines to do the job.Imrie, K., 2014

1.4 Trends Natural and organic cosmetics are on the rise as more South Africans

are adopting healthier lifestyles.

The male grooming market is growing.

There is an increased demand for healthy living and anti-aging products.

An expanding middle class is creating demand for premium cosmetics.

There is an increased demand for multi-functional products – for

example: beauty balms or blemish balms (BB creams). These do the job

of five or six different products: moisturiser, primer, sunscreen, skin

treatment, concealer and foundation. Imrie, K., 2014

1.5 Social / Cultural Situation South Africans have a healthy lifestyle and Lush embodies that with

using only the finest raw materials and limited amount of safe

synthetics.

Lush created the Charity Pot body cream product to raise money for

charities and other good causes. Monies are given to fund grassroots

organisations working on animal protection, human rights and

environmental issues around the world

Lush is involved in educating of local communities in squatter camps in

and around Cape Town.

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Lush motivates and encourages the youth in Joe Slovo Park and

surrounding townships and make them realise that the future lies in their

hands.

1.6 Ecological People are becoming more environmentally aware and would rather

support organisations that are environmentally friendly. Lush ensures

that all products including packaging etc. is 89% recyclable and bio

degradable and tries not to use packaging for products.

Lush campaigns against the testing of products on animals and

suppliers must sign a statement to that effect.

Environmental issues are at the heart of the company – for example, we

use almond and olive oil – partly because we think fields of trees make

our lives richer than oil fields.

Lush is working to reduce the amount of energy produced.

By making some products solid, for example – shampoo bars, we avoid

using incredible amounts of water.

(C) INDUSTRY / MARKET ANALYSIS

1.7 Competitor Analysis

Porter’s Five Forces Model

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New entrants

Industry competitors

Intensity of Rivalry

BuyersSuppliers

Substitutes

Threat of new entrantsBargaining power of

suppliersBargaining power

of buyers

Threat of substitutes

Figure 1


Industry competitors – intensity of rivalry

There are many players in the cosmetics and toiletries industry in the South

African market. These include: The Body Shop, Origins, Trilogy, Weleda,

Organixs Cosmetics and Neal’s Yard Remedies. The Body Shop and Origins

are Lush’s main competitors.

Threat of New Entrants

The threat of new entrants is largely dependent on barriers to entry. A

substantial barrier to entry is setting up manufacture is the capital costs. Lush

has overcome barriers to entry by focussing on nice products made from

natural products.

Threat of substitutes

Permanent makeup is seen as a threat for the cosmetics industry, however,

state regulatory agencies haven't kept pace with the growth of the permanent

makeup industry, and there are lots of unqualified people wielding needles. In

the hands of a skilled person, the procedures are generally safe. Skamulis, L., 2004

Home-made cosmetics by customers are also becoming popular amongst the

environmentally aware consumers, however, this is time consuming for most

of the consumers who have busy lifestyles.

Suppliers / Buyers

As Lush is a global company it has bargaining power over its suppliers hence

an opportunity for Lush to obtain their raw materials at favourable prices.

Lush picks their raw materials from jangles to get fairly traded raw materials.

Bargaining power of Customers

Lush’s customers demand good quality for the price they are paying. There is

no threat of backward integration from Lush’s customers. However, Lush

should be concerned about home-made cosmetics becoming popular.

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Distributors

Lush has a very viable distribution process as all their products have a shelf

life of less than six months. They have their own retail stores thus uses

forward integration.

Market

The market that Lush operates in is at the embryonic stage and is poised for

Growth

The market is attractive

Lush is likely to enjoy first mover advantage

(D) INTERNAL ANALYSIS

1.8 The Marketing Mix

Figure 2

Products

Lush’s range of products includes lotions, shampoos, haircare,

perfumes and male grooming products.

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Focus on satisfying customer needs

profitably

Product

Price

Place

Physical Evidence

Processes

People

Promotion


The products are made from organic raw materials and fairly traded

ingredients.

Lush differentiates itself from its competitors by using only the best

quality of ingredients.

Most of its products are unpackaged and the scent attracts

consumers to its stores.

Lush constantly comes up with creative and innovative products that

do not require packaging and when packaging is used it is also made

from bio-degradable products.

Price

Lush’s products are at the introduction stage and a premium price is charged

for their products.

Place / Distribution

Lush has six retail stores within South Africa and uses exclusive distribution.

Promotion

Billboards are used for advertising

Public relation activities are used through its Charity Pot concept

Endorsement advertising is used through celebrities such as Halle

Berry, Angelina Jolie and many others who patronise Lush.

Online advertising is used through Lush’s website.

Processes

Lush uses manual systems which it prides in and they would rather employ

more people than machines. As a result their processes are labour intensive.

People

Lush has a team of dedicated, hardworking and experienced people who are

passionate and innovative.

Physical Evidence

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The décor, display, colourful products and scent in Lush shops are evident of

the beautiful, aromatic products they offer.

2. SWOT ANALYSIS

Strengths Weaknesses Strong focus on values,

environmentally friendly and

community uplifting (charity) is at

the heart of the organisation

Innovative teams

Experienced management

Strong commitment to public

relations

Self-financing

Establishment of a supply source

Labour intensive

Low distribution – very few outlets

Not enough brand recognition

Opportunities Threats Bargaining power over suppliers

Expansion in the SA market

Access to raw materials

The opportunity to educate the

youth about how to preserve the

environment and animals

Expansion in the SA market

The banning of refills by the

government

VAT is high

Competitors

Table 1

3. STRATEGIC CHALLENGES (CRITICAL SUCCESS FACTORS)

Increase brand awareness – Lush should invest in marketing

communication.

Increase support for sustainable farming – Lush should continue funding

for sustainable farming to sustain their raw materials.

Increase the rate of stock turnover – Lush should work on reducing

stock turnover from 6 month to 3 months.

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Packaging – Lush should work on maintaining unpacked products so

that the beautiful scent and colours can be maintained.

4. ASSUMPTIONS

Lush will gain more market share as customers become more aware of

their products between 2016 and 2019.

The demand of organic products will continue to rise between 2016 and

2019.

Purchases of Lush products will increase between 2016 and 2019.

The ecological environment over the next 3 years will remain favourable

for sustainable farming.

The economy over the next 3 years will remain stable and people will

have more disposable income to spend.

5. MARKETING OBJECTIVES

To increase the number of campaigns against human and animal testing

by 5% in 2016.

To increase sustainable farming by 20% each year until 2019 in each of

the provinces in South Africa

To segment sustainable farming activities according to each of the

different climates in the provinces – to recruit at least 1000 youths to

work on the projects in each of the provinces in South Africa for the next

3 years.

To reduce unpreserved range of products by 23% each year from 2016

to 2019.

6. TARGET MARKET, POSITIONING PLATFORM AND UNIQUE SELLING PROPOSITION

6.1 Target Market Strategy

Segmentation

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Demographic Segmentation

The market will be split into male and female gender segments

Customers will be grouped according to their occupations and

education levels e.g. business people, celebrities, students, etc.

Customers will be segmented according to age groups 5 to 12; 13 to

18; 19 to 25; 26 to 35; and 36 above.

Customers will be grouped according to income: low income earners

18 to 25 years; medium income earners 25 to 35 years and high

income earners 36 years and above.

Geographic Segmentation

Customers will be grouped according to the areas they reside in

within the provinces of South Africa.

Further segmentation will involve segmenting by characteristics such

as educational attainment, race / ethnicity, predominant age range,

occupational achievements and types of housing.

Psychographic Segmentation

Psychographic segmentation will enable us to group customers by

interests, activities, lifestyles and opinions as follows:

Children will be interested in size and colour

Celebrities for the luxury product

Families who love natural products for a healthy lifestyle

Business people who want to unwind after a stressful day at work

Behavioural Segmentation

Benefit sought – the key benefits that this group of customers seek

are quality, performance, status and freshness.

Usage rate – Lush will categorise its customer into:

Heavy users – the customers who use the products more than

3 times a day

Medium users – the customers who use the products twice a

day and;

Light users – the customers who use the products once a day

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Usage occasion – some products can be specifically used for occasions

for example a special function where one needs to feel unique or after a

sporting game for freshness

A differentiated targeting strategy is recommended to cater for different

customer needs in different geographical areas.

6.2 Positioning platformPositioning of a product means the product occupies a prominent and

favourable place in the mind of customers as opposed to competitors’

products. Lush’s customers will seek benefits such as quality, natural

ingredients, performance and unique features. The following perceptual map

will communicate these benefits to the customers.

Figure 3

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Low

Qua

lity

Non-organic

Hig

h Q

ualit

y

Organic


6.3 Unique Selling Proposition (USP)

Competitive Strategy

A differentiation strategy will be adopted by Lush in order to meet the needs

of its different customers by offering tailor made products. Lush should

maintain the status of their products by continuing to maintain premium

prices.

Lush’s differential advantage

Products are hand-made. Lush makes use of fresh ingredients

produced from organic raw materials.

Products are based on its unique customised orientated designs for

example their shampoo bar.

Lush’s differential advantage is also based on their bargaining power

over suppliers, which enables them to obtain fairly traded raw

materials at a lower price.

They have the expertise and ability to make use of innovative

advertising.

They cater for a wide range of needs with digital solutions using strong

research and development capabilities.

Anti-animal tested products are guaranteed.

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6.4 Growth Strategies

The Ansoff Matrix

Use social media to promote products and educate customers on the benefits of using organic products

Customer value improvement – increase customer profitability by decreasing cost to serve and increase purchase or usage frequency and quantity by offering a delivery service

Add value to existing products by improving product designs and adding more features for example shampoo can be used as a body wash

Use facilities for online and cash card payments

Develop products that are synthetic free

Target new customers in new geographical areas of South Africa to reach more segments

Create new distribution channels for example – courier services, online purchasing and the use of agents

Diversification into related businesses for example cosmetics

Diversification into unrelated businesses for example electronics for personal grooming

Upstream integration (with suppliers) - get involved in the production process of farming organic materials

Downstream integration (with intermediaries) – retail shops which sell the products in small towns

Table 2

7. STRATEGIES

7.1 Product Strategy (including branding)

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Market Penetration Product Development

Market Development Diversification

Existing New

New

Products

Existing

Mar

kets


Product Life Cycle DiagramA product strategy is the foundation of a

product life-cycle and the execution plan

for further development. The product

strategy allows the business to zero in

on specific target audiences and draw

focus on the product and consumer

attributes.

Major considerations for products include scent, size, features, shape, colour,

design, product range and the product life cycle:

Continue to source and use the very best and high quality of organic

raw materials.

The shape, colour and design for soaps will differ for different segments.

For the younger generation – small, colourful and toy-like designs will

suit this segment and for the upper end customers special and

professional designs will be more suitable.

Avoid use of palm oil in products.

Avoid use of synthetic in all products.

Bear in mind that colours play an important role on the social cultural

platform.

The product range is very important to ensure variety to customers.

Lush will continue to improve its product line and quality in order to

reach its goals by 2019. The power of a brand cannot be

underestimated – many people buy on the strength of brand alone with

no regard for price or performance.

7.2 Pricing Strategy Differentiation by price – price differs from product to product.

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Figure 4


Lush products are associated with the highest quality hence the high

price.

Discounts will be offered to agents and distributors buying in bulk.

Skimming price is ideal for the top end customers

Prices will match the features on the product.

7.3 Place / Distribution Strategy Selective distribution to enable coverage in all provinces.

Agents and distributors will be based in all provinces.

Courier services will be used to ensure that products reach customers

timeously.

This distribution strategy will be reviewed periodically until 2019.

7.4 Promotional Strategy Advertising

Advertising will be used to promote the brand and inform customers.

Advertising will include insight about Lush, its success stories, strengths, and

its competitive advantages as well as the key benefits sought by customers.

Public Relations

Interaction with customers will be enabled through public relations and Lush

will use this vehicle to share information and create a platform for customers

to ask questions about the products.

Personal selling

Sales personnel will meet existing and potential customers face to face to

educate and demonstrate the features and use of Lush’s organic products.

Internet

Lush will make use of the internet to disseminate information through the

website so that customers can resonate with the Lush brand.

Sales promotion

Sales promotions will be carried out once new products are launched and to

keep the product fresh in the mind of the consumer thereby increasing sales.

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8. ACTION PLAN

Strategy Who? Does What? By When?

People strategy

Human Resources department

Marketing and Sales department

Finance management

Recruiting

Training and development

Motivating and compensating employees

Performance review and feedback

Succession planning

Ongoing exercises

Physical Evidence Strategy

Marketing and sales department

Operations department

Effectiveness of visible cues

Building effective distributors

On-going corporate branding

Process of production


Customer Care Production

Department - Buying Quality assurance

department

Efficiency of production process

Consistency of service and product quality

Speed of service delivery

On-going

Promotion Strategy


Finance department Public Relations

department

Advertising Sponsorships Public relations Sales promotions Personal selling Setting promotional

budgets and control

On-going

Distribution Strategy

Marketing and sales management

Retail Management - Operations

Logistics management

Finance department management

Technology Officers

Identify franchises and alliances

Identify intermediaries Incorporate transport

requirements. Establish technological

requirements

On-going

Product Strategy


Production manager Quality assurance

Pricing of the products in line with product strategy

New product

On-going

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department development opportunities

Ensure consistency and quality

Target market strategy

Marketing and Sales department

Research team

Segment sizes to be determined

Gauge consumer expectations

Scan the external environment

On-going

Pricing Strategy

Marketing and Sales management

Financial management

Set product pricing Pricing strategy will be

aligned in relation to internal and external environments

On-going

Table 3

9. BUDGETS, CONTROLS AND REVIEWS

9.1 Expected revenue / market share

9.2High level promotional budget

Budgets % AllocationOperational ExpensesRental 10%Salaries and Wages 30%Administrative Overheads 10%

Promotional ExpensesSales Promotion 20%Advertising 10%Public relations 5%Sponsorship 5%

9.3 Marketing effective rating review

Marketing effectiveness rating reviews will be conducted after each promotional activity.

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Market Share2019201820172016

2016 2017 2018 2019012345

Expected Revenue

Expected Revenue

Figure 5

Table 4


9.4 Quarterly sales audits

Sales audits will be conducted on a quarterly basis.

9.5 Brand image audit

The plan is indicated in figure 6 below:

Figure 6

9.6 Competitor intelligence tracking

Will be conducted on a continuous basis:

Figure 7

REFERENCES

1) [Online] Available at: http://www.lush.com [Accessed: July 2015]

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http://www.lush.com/


2) [Online] Available at: http://www.graziadaily.co.za/graziabeauty/oh-so-

lush/ [Accessed: 5 May 2015]

3) Imrie, K., (2014) Research: Manufacture of Cosmetics and other Toilet

Preparations

4) Skamulis, L., 2004 [Online] Available at:

http://www.webmd.com/beauty/makeup/how-safe-permanent-makeup

[Accessed: August 2015]

5) [Online] Available at: https://www.google.co.za/search?

q=competitor+intelligence+examplessa=X&es_sm [Accessed: August

2015]

6) [Online] Available at: http://www.smallbusiness.wa.gov.au/business-in-

wa/about-sbdc/corporate-publications/business-guides/marketing-

product-strategy/ [Accessed: August 2015]

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http://www.smallbusiness.wa.gov.au/business-in-wa/about-sbdc/corporate-publications/business-guides/marketing-product-strategy/



https://www.google.co.za/search?q=competitor+intelligence+examplessa=X&es_sm

https://www.google.co.za/search?q=competitor+intelligence+examplessa=X&es_sm

http://www.webmd.com/beauty/makeup/how-safe-permanent-makeup

http://www.graziadaily.co.za/graziabeauty/oh-so-lush/

http://www.graziadaily.co.za/graziabeauty/oh-so-lush/

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Assignment - Marketing 3 MAR303.docx