PROJECT REPORT : MARKETING MANAGEMENT 1

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FORE School of management, new delhi

PROJECT REPORT : MARKETING MANAGEMENT-1

GROUP - 10GROUP MEMBERS:Ashlesh Sonkusare (073010)Heena Manchanda (073024)Niharika Pundir (073037)Shambhavi Singh (073050)

ACKNOWLEDGEMENTWe take this opportunity to express our profound gratitude and deep regard to our Professor Bhalender Singh Nayyar for his guidance, monitoring and constant encouragement throughout the course. We also take this opportunity to express a deep sense of gratitude to other members of the class who have provided and supported us with valuable suggestions and guidance that has helped us throughout various stages of the course. This knowledge and support have been helpful in the preparation of this report.

CONTENTS

Sr. No.TopicPage Number

1Executive Summary4

2PESTLE Analysis6

3Competitive Analysis7

4Market share of leading Players10

5About Company : Lakm10

6Market Analysis11

7Perceptual Positioning Map12

8Objectives13

9Marketing Strategy13

10Action Plan14

11Promotional Strategy16

12Budget Analysis17

13References19

Executive Summary

The Indian cosmetics sector has mainly been driven by improving purchasing power and rising fashion consciousness of the Indian population. The industry players are readily spending on the promotional activities to increase consumer awareness and widen their target audience. Growth in the Indian Cosmetic Industry has come mainly from the low and medium-priced categories that account for 90 % of the cosmetics market in terms of volume. Moreover, colour cosmetics market is expected to grow at a rapid rate in comparison to other segments. There is an ever-Increasing perception towards make-up being an extension of Skincare. It is no longer enough for makeup to simply enhance appearance; it also needs to aid in the health of skin. This report focuses on the introduction of a new product of the leading player Lakm. Lakm has been making artificial cosmetics and due to rising awareness and health consciousness of the consumers, it has decided to foray into the natural cosmetics market by introducing a natural mineral-based foundation for its consumers. The target segment is considered to be the middle income group which forms a significant majority of the sales. Mineral makeup provides an all-in-one formula for foundation, colour,sunprotection and camouflaging whilst at the same time nourishing the skin. Lakm intends to go ahead with this addition to the existing product line of skin colour cosmetic products and predicts to generate annual revenue of INR 150 Cr in the first fiscal. Since the composition of the product is based on natural ingredients which is different from existing range offered by Lakm, there is a need to aggressively promote the product through emphasising on its point of difference. With a conservative outlook in a rapidly growing market, we expect to capture a 5% market share against an industry average of over 10% CAGR, and reach up to 150 Million urban women in the next 4 years.

INDUSTRY ANALYSIS

Market capitalizationFast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. Items in this category include all consumables (other than groceries/pulses) that people buy at regular intervals. The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1 billion. Availability of key raw materials, cheaper labour costs and presence across the entire value chain gives India a competitive advantage. The FMCG market is set to treble to US$ 33.4 billion in 2015. Penetration level as well as per capita consumption in most product categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the untapped market potential.

Size of the industry

According to analysis and figures given by the Confederation of Indian Industries (CII), the total Indian beauty and cosmetic market size currently stands at US$ 950 million and showing growth between 15-20% per annum. The overall beauty and wellness market that includes beauty services stands at about US$2,680 million, according to CII estimates. Industry sources estimate a rapid growth rate of 20% per annum across different segments of the cosmetics industry reflecting an increasing demand for all kinds of beauty and personal care product. Growth in the Indian Cosmetic Industry has come mainly from the low and medium-priced categories that account for 90 % of the cosmetics market in terms of volume.

INDIAN COSMETIC SECTOR ANALYSIS (2009-2012)The cosmetics industry registered impressive sales worth US$ 950 Million in 2010. The sector has mainly been driven by improving purchasing power and rising fashion consciousness of the Indian population. Moreover, the industry players are readily spending on the promotional activities to increase consumer awareness.There has been a rise in variety of products offered by the industry players. Moreover, the companies have started opting for online retailing and are offering specialized products to generate revenue from all the corners. Rising usage of Cosmeceuticals and Nutricosmetics by the Indian consumers is also paving way for the Indian cosmetics market.

INDIAN COSMETIC SECTOR FORECAST TO 2015New product launches catering to consumers growing requirements will fuel growth in the industry, for which the future outlook seems exceptionally bright. During 2011, the premium cosmetic market reached an estimated level of around INR 43 billion. With growing product availability, increasing consumer preferences, and rise in personal income, the market is estimated to reach around INR 88 billion by 2015, growing at a CAGR of around 17% during 2013-2015. Hair care have been showing tremendous performance and emerged as a potential investment area for players. Moving forward, hair care market is anticipated to grow at a 20% CAGR during 2011-2014 to reach around INR 208 billion by 2014.Consumers are increasingly shifting towards natural and herbal cosmetic products as they are associated with bio-active ingredients and safe for human skin. In addition to this, women are spending more on cosmetics as they are actively earning and spending money on grooming themselves. Besides, rural India is also showing its willingness to look attractive. Among various segments, such as hair care, skin care, oral care, fragrance and colour cosmetics, colour cosmetics market is expected to grow at a rapid rate in comparison to other segments.

PESTLE ANALYSIS

All external environment factors consider in PESTLE analysis the factors are Political, Economical, Socio Cultural, Technological, and Legal. Each factor is more or less affecting cosmetic industry. Everyindustryhastoconsiderthesefactorsbecausethesefactorscreate opportunity or threat at period of time.1. POLITICALFACTORSTax policy: Reduction in excise duty on cosmetics containing therapeutic ingredients from 70% to 15%. There could be some savings on excise paid on raw materials, which would result in overall cost efficiencies and savings for manycompanies. The Indian duty structure on imported products can pose a major deterrent to multinational vendors.

2. ECONOMIC FACTORSDisposable income India has the worlds second largest population behind China, and is poised to see strong growth in disposable incomes over thenext five years.

3. SOCIAL FACTORSIncome distribution Higher paying jobs and increasing awareness of the Western world and beauty trends there haveserved tochange the tastes and customs of themiddleclass and higher strata of the society, with the result that a woman from such social strata now is more conscious of her appearance and is willing to spend extra cash on enhancing it furtherLifestyle change. The increasing market size is the direct result of the changing socio-economic status of the Indian consumers, especially women.

4. TECHNOLOGICAL FACTORSNanotechnology and Cosmetics Inadditiontoimprovingtheefficacyofcosmeticsandskincareproducts, nanotechnology is making it possible for other ingredients to be used in the manufacturing of beauty products. Sunscreens and some anti-aging products are the main cosmetic products on the market currently being made using nanotechnology. However,becauseoftherelativenewnessofthetechnologyintermsofcosmetics manu-facturing there is still concern as to how safe nanotech cosmetics are and their long-term effect.

5. ENVIRONMENTAL FACTORS Environmental protection is one of the most important issues nowadays, especially in chemical, pharmaceutical industry. Though chemicals used in cosmetics areless harmful for skin, waste disposal is an important issue.

6. LEGAL FACTORSAt present the following Acts and Rules made there under that govern the manufacture, sale, import, export and clinical research of drugs and cosmetics in India. The Drugs and Cosmetics Act, 1940 The Pharmacy Act, 1948 The Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954 The Narcotic Drugs and Psychotropic Substances Act, 1985 The Medicinal and Toilet Preparations (Excise Duties) Act,1956The Drugs (Prices Control) Order 1995 (under theEssential Commodities Act

International cosmetic brands in Indian marketInternational cosmetics brands in India constitute about 20% of the market. The penetration levels of international brands are still low, which may be due to high pricing of these brands. Women living in urban areas and in the age range of 20-50 years are the target market for quality brands. Industry estimates suggest that there are close to ten million women in India which are target customers for International cosmetic brands.

Top leading Companies1. Lakmis the Indian brand of cosmetics, owned by Unilever. It started as a 100% subsidiary of Tata Oil Mills (Tomco), part of the Tata Group.Strengths Cost advantageHigh R&DInnovationLoyal customersMarket share leadershipStrong brand equityUnique productsHigh quality manpower resources Weaknesses No online presenceUse of hard chemicals

2. Revlonis an American cosmetic for skin care, fragrance, and Personal Care Company founded in 1932.StrengthsCustomised make-upClassic productsPopularHigh qualityHigh profit marginsWeaknesses Low range of productsHigh priceHigh cost of productionLow advertising budget

3. Oriflame Cosmetics S.A.(Luxembourg) is a cosmetics group, founded in 1967 in Sweden by the brothers Jonas AF Jochnick and Robert AF Jochnick.

Strengths High accessibilitySale through people who know customersReleases catalogues frequently with offers on productsSponsors help customers choose products according to their skin type, climate etc. Established brand name since 43 yearsNatural beauty productsIndependent sales force of over 3 million peopleWeaknesses Lack of promotional activities through mass mediaDepends on the network of individual sponsors on most of its distribution and available in very few stores

4. The L'Oral Groupis the world's largest cosmetics and Beauty Company. It concentrates on hair colour, skin care, sun protection, make-up, perfumes and hair care. Maybellineis a makeup brand sold worldwide and owned by L'Oral.Strengths Low pricesHigh product and colour varietyStrong market penetrationMade to fit seasonal conditionsCompetitive priceOnline services plus catalogueWide distribution channelsWeaknesses High social risk productsIntense coloursAverage profit marginsSales going through independent retailers

5. Make-up Art Cosmetics or MAC Cosmetics, is a manufacturer of cosmetics which was founded in Toronto, Canada by Frank Toskan and Frank Angelo in 19846. Chamborcosmetic line is a blend of the finest traditions in terms of radiant color, soft texture and skin accentuator.7. Avon Products, Inc. is a US cosmetics, perfume and toy seller with markets in over 140 countries across the world.8. ColorBar cosmeticsare one of the leading brands of color cosmetics in India.9. Street Wearis a young, funky and hip brand which globally is positioned at the young and trendy shopper and the range consists of about 30 SKUs covering categories like nail enamel, lipsticks, lip gloss, face make-up kits and eye shadows.MARKET SHARE OF LEADING PLAYERS

BrandsValue ( % )Volume ( % )

2010201120102011

Lakm22.517.73.72.6

Elle 181011.35.45.1

Revlon6.54.21.10.7

Maybelline2.12.50.30.3

Street wear1.41.10.30.4

LOreal1.00.40.10.0

Source : Nielsen; Data for all India urban for categories lip plus nails in traditional trade

INDIRECT COMPETITORSThese competitors may not offer similar product but operate in the same market and have the capability to attract a business customer base by providing them with an alternative. Indirect competitors sell products that are satisfy the same need of the consumers but by a different product offering altogether. These competitors although operate in a different sector, compete for the same customer base. Specialized salon products Ayurvedic beauty products Home-made natural DIY remedies

LakmContemporary Indian beauty expert Lakm continuously innovates to offer a wide range of high performance and world class color cosmetics, skincare products, and beauty salons. Combining international cosmetic technology with an in-depth understanding of the Indian womans needs, Lakm also offers its consumers a comprehensive beauty experience through its products and services at the Lakm Salons and Studios.KEY FACTS Lakm was the country's first cosmetic brand to introduce make up to Indian women and takes pride in being the expert on Indian Beauty for over 50 years It is a complete beauty brand spanning colour cosmetics & skin care and extending to beauty services through the network of Lakm Beauty Salons. Its bond with beauty and fashion is manifested through the Lakm Fashion Week, which is now the largest fashion event of its kind in the country. The company reported that its personal products' revenue was up 17 per cent to Rs 1,847 Crore (2012 data).

Various products of Lakm: Face : Products like Lakm daily wear souffl, Lakm perfecting liquid foundation, Lakm Radiance compact, Lakm flawless Matte complexion Compact Lips : Lakm Enrich Lipcolor, Perfection Defining Lip color, Starshine Lipgloss Eyes: From dramatic to natural look Lakm kajal, Lakm Insta eyeliner, Nails : True wear nail enamels

Product categorization to suit the consumer needs: Lakm 9 to 5: focussed at the office going women. Lakm Absolute: The products under this range are aimed at the long-lasting properties of the product. It can last upto 16 hours and comes with skin care properties. This product has come up as success in the market Lakm Classics: The conventional Lakm product range that has been in the market since its inception.

Promotional Strategies of Lakm:

Lakm Fashion Week: Through Facebook, Twitter and Vine, Absolute Royal collection was launched Free trial samples of newly-launched products at Lakm salons Trials in malls and moving vans Screens outside the Malls playing advertisements of the Brand In-Shop and Shop Front Activities & Display Units Distributing pamphlets Brochures and service Catalogues Holding Seminars Product Launches Competitions/Events in Colleges in Fashion shows

MARKET ANALYSIS

SEGMENTATION & TARGETINGThe segmentation of the audience who buy cosmetics was done on three parameters GEOGRAPHIC The customer base was divided into rural and urban segments, but considering the product characteristics, it was found more suitable to be rolled out for urban population. Tier 1 and Tier 2 cities are considered to be the direct audience. DEMOGRAPHIC The customer base was divided on the basis of age segments, and cross referenced with occupational segments. A consensus was reached that the new product should be targeted at single as well as married females within the targeted age group of 20 to 55 years of age, who are preferably students or professionals. The target audience is upper middle class and upper class. PSYCHOGRAPHIC AND BEHAVIORAL The public was divided on the basis of their aim behind choice of cosmetic products. They were also segmented on the basis of their beauty regimes and make-up habits. The company then decided to target ambitious young professional women who want a hassle free make-up solution that does not harm the skin on regular usage.

PERCEPTUAL POSITIONING MAP

The perceptual positioning map helps to understand where in the consumers mind Lakm products lie and where the competitors are positioned. This can be used in identifying the positioning gaps that can be exploited to market the new product, Mineral Makeup Powder. The map is as follows:

Identification of needs being met

There is an ever-Increasing perception towards make-up being an extension of Skincare. It is no longer enough for makeup to simply enhance appearance; it also needs to aid in the health of skin. Mineral cosmeticsare forms ofmake-upthat are composed of compressedminerals.Most of these products are pure mineral, and do not contain anyoil or wax additives.Some kinds of minerals can have beneficial health results for the skin, combining health effects with cosmetic results. Mineral makeup provides an all-in-one formula for foundation, colour, sun protection and camouflaging whilst at the same time nourishing the skin.

Points of Parity1. Since the recent market trend focuses towards natural ingredients so there are other brands offering herbal products in this line, e.g., bodyshop.2. Lakm has been offering compact powders and foundations previously.3. Dispenser bottles are widely used by leading cosmetic brands for portable and comfortable storage.

Points of Difference1. Mineral makeup provides an all-in-one formula for foundation, colour, sun protection and camouflaging whilst at the same time nourishing your skin.2. Pricing used for the product is not that high considering the product portfolio of other international players.3. Emphasize the target taking pride in using the mineral makeup powder and revealing why she chooses Lakm over other brands. The appeal will be positive, showing the ultimately confident women.

POSITIONING STATEMENT

For eternally beautiful women who need a natural youthful glow and a subtle makeup that stays good all day long, Lakm Mineral make-up powder is a 100% natural, true minerals solution that hides blemishes and uneven skin tone and is a 1-step-complete-make-up solution for all skin types

OBJECTIVES

The short-term objectives should include tapping higher share of the medium and high-priced segment in which it already has one of the largest market shares. The strong point of Lakm is its reach of close to 1000 counters and an overall direct reach of 40,000 stores. These will also help in awareness and distribution of new products. As Lakm needs to first create awareness and trust in the minds of its new target segment, it should target to capture around 5% of the segment in the initial phase and expect sales revenue of Rs. 150 Crore in the first fiscal. It also expects to reach 150 million women at the end of three years with total revenue of Rs. 670 Crores.The product will be launched nationally in tier-I and tier-II cities and gradually expand to tier-III cities.

MARKETING STRATEGY

Product: The Lakm Mineral make-up powder will be an addition to the existing product line of skin colour cosmetic products. It is aimed to suit the need for a long-stay make up powder for the working urban professional. It will be sold in a simple, yet elegant high-end platinum packaging, with a shelf life of two years. We will initially introduce the handy 20g pack. Once we have established our product, we will launch the larger-sized packs. The brand and logo will be displayed on our product and packaging as well as in all marketing campaigns.Promotion: The product will be introduced in the market with free demonstrations at the retail as well as standalone cosmetic stores. The Lakm salon will be extensively used to market the product so as to make the Lakm loyalists aware of the launch of the new product and make them understand its benefits. Pricing: The mineral makeup powder will be priced according to the type of packaging as given below.ProductPrice

20g Dispensing Brush800

30g Platinum Jar1000

50g Platinum Jar1200

(All values in Rs.)Place: The mineral makeup powder will be launched in Tier-1 cities. A pilot test will be conducted to observe the response to the product in a few Tier-2 cities across India such as Bhopal, Vishakhapatnam, Indore, Mysore, etc.

ACTION PLAN

PRODUCT STRATEGYThe product Lakm mineral make-up powder will be an addition to the existing product line of skin colour cosmetics.

PACKAGING

Dispensing Brush Platinum JarThe product will be sold in a high-end platinum packaging. The packaging will be elegant, yet simple, with a detailed description of ingredients and product code on the bottom and a clear top for Lakm logo.Transparent ingredient labels with black lettering will complement the elegant look.The unique packaging design prevents spills and cross contamination between powder that has come in contact with the skin and powder that is still in the package. Cross contamination can lead to the growth ofbacteria in the unused product.The loose mineral foundation acts as a flawless foundation, sunscreen, powder, and concealer an all-in-one formula. It will be made available in two types of packaging a platinum jar and a convenient "no mess" dispensing brush that is perfect for the woman on the go.

SIZESTypeSizeSpecification

Dispensing BrushStandard20 grams net volume (5 grams net weight)

Platinum JarStandard30 grams net volume (10 grams net weight)

Large50 grams net volume (15 grams net weight)

VARIANTSIn India, skin colour varies from the darkest brown to the lightest. To meet this need, our product will come in a variety of tones, Porcelain & Fair- For pale to fair skin tones that rarely tan Ivory & Light- Light to medium-light skin tones Medium & Tan - For those with light to medium tans or olive/ethnic skin tones Deep & Deeper - For those with deep tans or darker skin tones

WARRANTIES AND GUARANTEESThe foundation will be best before 24 months from the date of manufacture. The result may vary from person to person.The company also assures an exchange in case of product not standing up to the image projected by it for complaints made within 15 days of purchase.

PROMOTIONAL STRATEGY

Communication Strategy will include formulation of communication method to achieve the desired response.Message Strategy encompasses the traditional value of the brand Lakm, at the same time being projected as a brand for the professional women. It will provide a rational-reward after customers result-of-use experience.Creative strategy will focus on the advertising focused upon middle-aged working professional women. Because Lakm products are sold at retail as well at Lakm salons, it would be beneficial to strategically utilize these stores by displaying in-store advertisements and posters that are more age-targeted and appropriate, giving the message that working women can feel comfortable and understand the benefit of the mineral make-up.Central theme: All messages will show the vision of a working woman who needs a complete solution for not only her makeup needs but also skin care, both at the same time. The brand should become a staple in her life.Appeal Technique. The message will emphasize the target taking pride in using the mineral makeup powder and revealing why she chooses Lakm over other brands. The appeal will be positive, showing the ultimately confident women.Media Mixa) AdvertisingThe advertising campaignswill be aimed at women wishing to improve their appearance while preserving natural skin texture, usually to increasephysical attractiveness and to restore confidence in them.Use of Celebrities, a Film Personality for Product Endorsement:Lakm Brand Ambassdor Kareena KapoorAdvertising Platform - Communication1. TV/Radio2. Newspapers/Magazines (Vogue, FHM, etc.)3. Hoardings /Banners4. Leaflets

b) Sales Promotiona) Distributing Free Sample on every purchase of Lakm products worth Rs.1000b) Discount Couponsc) Tie up with Megastores and Departmental Stores like Westside, Globus, Shoppers Stop d) Organising Contests, lucky draws and advisory sessions with make-up experts.

c) Public Relations and Publicity a) Holding Seminarsb) Sponsoring Events/Competitions in colleges c) Sponsoring Beauty Pageants Contest

d) Events and Experiences1. A good publicity during Lakm Fashion Week2. Used in the Lakm Salons as the base for the makeup

e) Direct and Interactive marketing1. Use of Lakm Website2. Recommendations on social media ,telephones

f) Word Of Mouth Marketing1. Recommendation by Skin Experts, Sales Person.2. Strategy to choose a few people to influence and spread the communication regarding the product.

g) Personal SellingOur sales person will go to the Salon owners to create awareness & to promote the product. These Salon owners in turn will give some demo to the target customers.

BUDGET ANALYSIS

Advertising Costs: Cost of advertisements on television: Rs.10000 / 30 sec Number of times advertisements are shown in a day: 15 Number of channels on which advertisements are shown: 5 Duration for which advertisements are shown: 180 days Total cost of advertising = 10000*15*5*180 = Rs.13,50,00,000

Cost of hoardings: Rs.10,00,000 Quantity of hoardings: 30 Total cost of hoardings = Rs.3,00,00,000

TOTAL COST OF MARKERTING INCLUDING NEWSPAPER AND EVENTS = Rs.25,00,00,000

Year 0Year 1Year 2Year 3

Sales Revenue150165173.25181.91

Less :Cost of goods sold(60)(63)(66)(70)

Gross Margin90102107.25111.91

Developmental Costs(250)000

Marketing Costs(25)(15)(12)(12)

Allocated overheads(12)(11)(10.5)(10)

Net contribution(197)7684.7589.91

Cumulative cash flow(197)(121)(36.25)53.66

Discounted cash flow(197)(126.63)(53.97)12.12

(All values in Rs. Crores) (Figures in brackets indicate negative values)

Assumptions: 6 months utilised in product development and launch and then Year 0 starts. Sales growth rate predicted to be approximately 5% except for Year 1 when the effects of marketing take place resulting in growth of 10% instead of 5%. The growth falls to 5% in the following years due to the entry of competitors. Price of the product taken as Rs. 500 (average of all three variants) Urban female population: 150 Million Conversion Ratio: 2% = 3000000

The Break even occurs in Year 3.

References:http://shodhganga.inflibnet.ac.in/bitstream/10603/8959/13/13_chapter%202.pdfhttp://www.beautypackaging.com/articles/2011/06/alls-fair-in-indias-cosmetics-markethttp://entrepreneurindia.in/start-ups/raising-the-color-bar/4766/http://www.indianmirror.com/indian-industries/cosmetics.htmlhttp://www.companiesandmarkets.com/News/Consumer-Goods/Indian-cosmetics-market-led-by-Lakm%C3%A9/NI6435http://www.business-standard.com/article/management/Lakm-s-makeover-109091400083_1.htmlhttp://www.financialexpress.com/news/Lakm-understands-indian-women-the-best/518876/0

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