Final Project for Marketing, Advertising, and Sales Promotions for Entrepreneurial Businesses (X497.27) Spring 2014

Dan Mu, Mariana Alonso

Executive Summary

● Kalifornia is a startup perfume company which selling LA style perfume to female customers

in United States. It will be launched on January, 1st, 2015. Our product objective is to generate

$2,000,000 in sales by the end of 2015. As a result, our price objective is to achieve 45% profit

margin by the end of 2015.

● Fragrance sales the previous year had benefited from higher-income shoppers who felt more

comfortable spending on others and themselves as the economy improved, but with no celebrity

must-have perfumes on the market in 2012, it suffered.

● In order to be competitive, we development design product lines which are more beautiful and

creative than others; we try to use various promotion methods to attract our potential customers

and increase our brand awareness. While we try to use innovative distribution channels to gain

more market share.

Situation Analysis

Market Demographics

Geographic:

● Lives in urban area

● Most of them are from big cities at west coast area

Demographics:

Age and Gender

● Female between ages 18 and 34 years old

Education Level

● High school to college degree or higher

Economic status

● Middle-income consumers who earns between $35,000 and

$70,000 annually

● If referring to a student who has no income currently, we

assume that she has a monthly budget on fashion shopping from

$100 to $500

Psychographics:

• Values time and considers it their single most limited resource.

• Excited about accepting and using innovative ideas and products.

• Consistent Web users.

• Prefer the Internet over magazines and newspapers for information they trust.

• Increasing resources invested into beauty and c issues.

Behaviors:

• They are leaders in product selection and respond to the opinions of the “industry

experts” when making purchase decisions.

• They keep exercising every week; some of them are yogis and joggers.

• This group will first look to the Internet to acquire this information.

• They defend these decisions under most any circumstance and will adamantly “sell” those

that ask why they use the product or service and why they made the choice they did.

Market Demographics

Marketing Persona

Meet Christina. She is 23 years old, college student. She is a

typical customer of NEW. To be on the cutting-edge of the fashion

trends, she has never satisfied with Amazon and eBay, even Gilt is

not her choice. Christina tends to find something different to label

herself.

Christina is an open minded, passionate, and optimistic

young woman. She is willing to share her moments to her friends. She

is expert at searching everything and she like to visit Pinterest,

Instagram and Tumblr...

Market Demographics

● Companies today have a

CUSTOMER focus (or market

orientation). This implies that

the company focuses its

activities and products on

consumer demands.

.

● Market research for

competitors also is a key

factor in obtaining an

advantage over competitors

and is necessary in order to

determine market needs that

can and should be met.

● Market segmentation is the

division of the market or

population into subgroups with

similar motivation.

Market Needs

● With the appeal of niche fragrances in the

premium segment, affluent consumers appear

to have regained their interest in fragrances.

Premium niche fragrances that are sold in

limited distribution channels allow affluent

consumers to feel that they have made a discovery.

● There has been an explosion in the use of

scents beyond fine fragrances. As a result,

fragrances have lost their mystique and become

less “special” and commoditised.

● With more than 100 new launches of fragrances a

year, the glut of fragrances in the marketplace has

also created consumer confusion. The saturated

environment in fragrances has arguably contributed

to consumer confusion and apathy, making it very

difficult to make a brand stand out.

Market Needs

Self-esteem

Unique Identity

Niche Market

Market Trends

Social/Cultural trends A New Style of Fashion TrendCustomer Needs

Promising Individual Blogs Storytelling Content Sharing Era

● Young generation is used

to choose online

shopping

● They are willing to pay

more on differentiation

● marketing E-commerce

marketing is mature

● B2C model has developed

well

● Online shopping will

continue to grow

● Luxury good is not the only

option to be cool

● Independ Brand is the new

fashion.

● Celebrities outfit followers

A new report by Global Industry Analysts expects the global fragrances and perfumes market to reach about $45.6 billion

by 2018, driven primarily by growth in under-penetrated emerging markets and innovative product launches as well as

relatively new growth areas such as men‟s fragrance.

According to the research report “Fragrances and Perfumes: A Global Strategic Business Report,” developed regions have

matured market profiles for fragrances and perfumes driven by the growing aging population, which uses perfumes and

fragrances less than younger groups. However, the report added that the “feel good factor” associated with fragrances and

perfumes coupled with increasing demand from young men and women, the men‟s fragrance segment, new product

innovation and growing popularity of celebrity fragrances are the major factors triggering growth in the maturing

markets.

By segment, women’s fragrance have been traditionally leading the overall market and is expected to continue to

generate strong demand over the coming years thanks to innovative products. Following the change in perceptions

towards the importance of male grooming and smelling good, the men‟s fragrance segment is expected to exhibit greater

growth than ever before. In addition, the growing importance of grooming among teenagers and young adults is also

expected to boost market prospects in the coming years.

Market Growth

SWOT Analysis

STRENGTHS

● Flexibility on R&D

● High quality products

● LA theme

● LA/California pride

OPPORTUNITIES

● Local business

● New generation self-esteem

● E-commerce is hot

● Self-identity

● Distribution channels‟ expansion

WEAKNESSES

• Not fully aware of the US target consumer

behavior and their preference

• Lack of cash

• Fledging distribution channel

• New brand in the fragrance market, no

brand awareness

THREATS

● Low barrier to entry

● A lot of competitors

● Current economy is not so good

● The perfume market is not thrive

● Marketing expense with expansion

Competition

Company Lady Gaga Fume 212 Jo Malone Kalifornia

Women X X X X

City Theme X

Celebrities Elements X X

Local Manufactory X

Unique Identity X X X X

Product Lines X

Green (Replacement) X

Trending Elements X X X

Free return X X

Competitor Matrix

Competition

Services Offered

Value PropositionKalifornia offers not only perfume but also an attitude towards LA

style for female customers. It represents free and wild fashion style as

well as the spirit of California. Kalifornia is a great company to discover

the most exciting truth of your life. Kalifornia offers fresh, delicate, and

elegant perfumes to fulfill your dream.

Positioning Statement

California dream with Kalifornia

Customer Service(Trends Coach) + One Year “Style” Warranty

Keys to Success

Unique Selling Proposition (USP): ● Kalifornia is a fruity fragrance combining LA style and attitude, it is for confident women who

like to live a glamour life

● Being a true Kalifornia is all about a Hollywood glamour’s life, a balance of party, friends and

connections. The Kalifornia bottle is an object of desire, refined and feminine in shape

Product: Elegant fragrance +LA Style

Price: Mid-upper range of the price

Promotion: Advertising Mix + Event+ Social Media+PR

Place: Online + Offline

Differentiation

on 4Ps:

Bargaining Power of Supplies

Threats of New Entrants

Threats of Substitutes

Bargaining Power of Buyers

Rivalry Among Existing Competitors

•Hard to monitor the products quality

•Timeline of each product line

•Manufactory competition

•Instability of cost

•More choices，e.g. Dior, Chanel

•Price preference

•Distribution cost

•Creative industry grows

•Fixed cost on import products grows

•Diversity of rivals

•Brand identity

•More entrances

•Distribution channel

•Capital requirement

•More entrances

•Distribution channel

•Capital requirement

Critical Issues

Market Strategy

Kalifornia offers not only perfume but also an attitude towards LA style

for 18-34 years old female customers. It represents free and wild

fashion style as well as the spirit of California.

Kalifornia is aim to be a great company to discover the most exciting

truth of your life. Kalifornia offers fresh, delicate, and elegant perfumes

to fulfill your dream to differentiate its product and build brand

awareness among its potential customers.

Mission

Sales Promotion Objectives

S.M.A.R.T.

Objectives

● To generate $3,600,000 in sales by the end of 2015 (0.03%

of market share)

● To achieve $2,160,000 gross profit by the end of 2015

(equals to 60% profit margin)

● Increase brand awareness from 0%-30% by various

promotions methods by the end of 2015

● Develop 4 more distribution channels and expand our

distribution to different states by the end of 2016

● To gain 0.06% market share for stationary by 2017

Sales & Advertising Plan

MONTH PERIODS (WHOLE YEAR 2015) 1 2 3 4 5 6 7 8 9 10 11 12

Social Media(Facebook/Instagram/Vine etc.) X X X X X X X X X X X X

Beauty/ Fashion/Trends Magazine Advertising X X X X X X X

Website/Facebook/Email Advertising X X X X X X X X X X X X

PR Events with Samples or Bounce Back Card X X X X X

Seasonal Discount X X X X X X

In-store Education (Fashion Coach) X X X X X X

Long Term: Education+Brand Awareness

Short Term: Gain Profit

Initial Investment: $2,500,000

Generating $3,600,000 in sales by the end of 2015 (0.03% of market share)

Achieving $2,160,000 gross profit by the end of 2015 (equals to 60% profit margin)

Achieving break even when selled 833 pieces perfume

Achieving a 10% growth in overall sales which means an extra $360,000 in revenue by

the end of 2016

Financial Objectives

Girls/women, age 18-34, middle-high

income, urban, living in US, interested in

luxury, Hollywood and celebrities lifestyle, really

care about their appearances, follow the fashion

trends and consumes magazine about

celebrities..

Target Markets

Positioning

Fashion+

Fashion –

Price – Price +

MARKETING MIX

Marketing Mix-Product

1. Objective

Since the US market Annual US perfume industry sales revenue $5.2 billion,(suppose they have 45%

profit margin),1,160 perfume brands carried by US department stores in 2010. So the market size is

$12 billion. Our product objective is to generate $3,600,000 in sales by the end of 2015. (0.03% of

market share)

2. Strategy

Differentiated & Concentrated

3. Tactics

Features – Jasmine, Wood, White Water Lily, Tonka Bean, Pear

Style – Delicate. Joyous. Bold. Lovely Design – Combination of dream of LA and Hollywood

Branding – Kalifornia Packaging – White paper box with lace decoration

Warranty – One year warranty

PACKAGE DESIGN BOTTLE DESIGN

Marketing Mix-Price

1. Objectives

Since our product objective is to generate $3,600,000 in sales by the end of 2015, our price objective is

to achieve $2,160,000 gross profit by the end of 2015 (equals to achieve 60% profit margin)

2. Strategies

Market Skimming + Market-oriented Pricing

Kalifornia has unique product in the current market; so we use skimming price strategy to collect the

money as soon as possible; Setting a price based upon analysis and research compiled from the target

market. This means that marketers will set prices depending on the results from the research

3. Tactic

List Price: Retails $ 69.99(100ml)

Discount: 1) Quantity discount 2) Seasonal discount

Marketing Mix - Promotion

1. Objective

Since our product objective is to generate $3,600,000 in sales by the end of 2015 and our product price is

$69.99, our mission is to sell 51,428 products in total. As a result, we need to get 25,714,285

(51,428*500) times of exposure in all kinds of media channels

2. Strategy

Using advertising mix, public relations, promotional programs, and events to attract our potential

customers

3. Tactics

Social Media

•Facebook

•Instagram

•Pinterest

•Twitter

•Youtube

•Vine

Publicity/PR

•Fashion Magazines

•Beauty /Fashion Blogs

•Websites

•Celebrities

Advertising Mix

• Magazine Print Ads

•Google Ads

•Facebook Ads

•Email Push

•Bounce Back Card

Promotional Events

•LAX Airport Tax Free

Shop

•LA Film Festival

•LA Music Festival

Kalifornia

LOS ANGELES

2014

MAGAZINE/PRINT AD DESIGN

California dream with Kalifornia

California Dream with KaliforniaBOUNCE BACK CARD

SOCIAL MEDIA POSTS

Marketing Mix-Place1. Objective

To accumulate 4-5 intermediaries between producers to consumer in our distribution channel

2. Strategy

Using a hybrid channel strategy for distribution

3. Tactics (Channel Design)

Agents/Brokers

Building sales representative team of 3 people for negotiating with retailers

Wholesalers

Establish agreements with wholesalers across Southwest to expand our current channels

Distributors

Establish agreements with those distributors who distribute products to Sephora, Ulta, Nordstrom‟s and other

perfume stores( LAX Airport) in LA in the first 12 months

Retailers

Establish agreements with distributors across Southwest for supplying inventory to retailers

Direct Distribution

Open official online store

Amazon/ Ulta store online

Marketing Research

●Pretest & Posttest with Benchmark (Advertising & Sales)

●Qual & Quant Methods

Marketing Research

INTERNET STRATEGIES

Facebook (1-2 posts/day)

•Good for conversation/ engagement

• Post promo videos.

• Promo pics.

Instagram/Pinterest (1 picture/day)

•Images of LA, quotes

• Our perfume Ad

• Promo pictures

• Pictures of customers with the perfume.

•Images of celebrities, quotes

Twitter (1-3 posts/day)•Direct conversation with the costumers.•Reply and RT costumer tweetsYoutube/Vine:•Release a „cool video‟ with diverse content once a weekContent could be, fragrance commercial, behind the scenes of photoshoot/commercial, promo videos.•Encourage customers to subscribe, embed, share, like and comment

Beauty/Fashion/Trends Blog (1 picture/day)

•Educate customer

Internet Strategy

FINANCIALS

Fixed Costs:

$3,800(warehouse) +,depreciation of its assets (25,000), + executive salaries ($ 30,000) =$ 58,800

Variable Costs:

(Material )$ 4 + (Factory Labor)$ 2+ (Sales Commissions)$1 = $ 7 per unit

Unit Price:

The perfume is priced at $69.99 each

Given this information, the breakeven point:

Fixed Costs/Price - Variable Costs

$58,800/$69.99 - $7= 833 units

Break-even Analysis

$

58,301

833

Sales+Expense Forecast

Sales Forecast Expense Forecast

CONTROLS

Start by getting the Kalifornia name out there targeting opinion leader’s

(beauty, fashion bloggers/vloggers) providing samples and other promotional

material, they’ll tell their large clique of people about your product, who’ll tell

their large clique of people, and so on.

Product samples: We will offer free samples for customers on our website and

in your stores.

Ads on magazines: We will do ads on fashion/beauty magazines.

Call Up distributors like Sephora, Ulta..etc to sell our products at retail value

Implementation

SIX MONTHS MARKETING MIX WITH BUYING CYCLE

Marketing Organization

Kalifornia MKT Organzation

Strategic

Manager

Public Relations

Manager

Marketing

Research Team

Advertising/

Creative Team

CMO

Customer

Service/ Sales

Team

Product

Management

Mariana Alonso Dan MuDan Mu, Mariana Alonso

Dan Mu

Dan Mu, Mariana Alonso

Re-structuring our marketing objectives+financial objectives

Focus on different target audience through consumer research

❏ Lower Prices

❏ Different distributors options

❏ See other promotions options/Focus on Sale Online

❏ Change products features

Contingency Plan

Thank you!