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BOOTS: HAIR-CARE SALES PROMOTION
Richard Ivey School Of Business
WHAT IS BOOTS?What is the case all about?
• Opened In 1849 by John Boot as ‘The British and American Botanic Establishment’ in Nottingham, to provide physical comfort to the needy.
• Established as a private company “Boots and Company Limited” by son Jesse Boot in 1883.
About the Company (1/3)
BOOTS: HAIR-CARE SALES PROMOTION
• Diversified into research & manufacturing of drugs. Boots continued to develop product ranges, many of which became household names. Ex: ‘17’ cosmetics, aimed at the teenage market
• With time, new services introduced like Boots Opticians, insurance services etc.
About the Company (2/3)
BOOTS: HAIR-CARE SALES PROMOTION
• Boots Healthcare International exported healthcare products to 130 countries.
• In 2004 the company employed around 75,000 people & operated in 130 countries worldwide.
About the Company (3/3)
BOOTS: HAIR-CARE SALES PROMOTION
Lets have a look at the company’s Product line
Bran
d De
scrip
tion
Bran
d De
scrip
tion
Objective of the case study
• Understand the relationship between promotional strategies and their impact on product sales
• To define the criteria to select the appropriate strategy to boost up sales and increase customer base
OBJECTIVE OF THE CASE(1/2)
BOOTS: HAIR-CARE SALES PROMOTION
• Illustrate the design, implementation, and interpretation of research surveys
• Evaluate primary research studies,• Setting research objectives, • Questionnaire design, • Data analysis and interpretation.
OBJECTIVE OF THE CASE(2/2)
BOOTS: HAIR-CARE SALES PROMOTION
What is the present situation?
Situation Analysis(1/2)
Boots wants to plan a sales promotional strategy for a new line of professional hair-care products at Boots.
To Drive sales volumes and trade-up consumer from lower-value brands, while retaining or building brand equity.
Collaboration with UK’s top celebrity hairdressers → an important component of their strategy
BOOTS: HAIR-CARE SALES PROMOTION
Situation Analysis(2/2)
Get three for the price of two (“3 for 2”)
Receive a gift with purchase (“GWP”)
An on-pack coupon worth 50p
Has to choose between one of the three alternatives for the Christmas season--
BOOTS: HAIR-CARE SALES PROMOTION
• Sales promotion of boots hair care products • Consumer preferences for those products • Attract consumers from lower value brands• Build and retain the brand equity• To make the most of Christmas season as
compared to its competitors.
BOOTS: HAIR-CARE SALES PROMOTION
The United Kingdom haircare Market
• In 2000, over 60 major brands of hair-care products in U.K.
• None had a market share greater than 9%.
Market(1/2)
BOOTS: HAIR-CARE SALES PROMOTION
• Brand sales directly proportional to the amount of advertising expenditure.
• Severe price competition → use of price promotions to secure volume → overall decline in prices by approximately 1 %
Market(2/2)
BOOTS: HAIR-CARE SALES PROMOTION
Product Retailers Tesco, Sainsbury’s, Morrisons– Traditional Supermarket Superdrug
– Value Retail
L’Oreal5% Market Share Portfolio
of over 500 brands and 2000 prod. Pioneer in promotions
Alberto-CulverTop brands: St. Ives, VO5, Increased product base by Global acquisitions Wide
product-range
P&G 8.4% Market Share
Leading Brand: Pantene High brand Awareness
Major Competitors
BOOTS: HAIR-CARE SALES PROMOTION
Price Comparison Chart
Consumers in UK not very brand loyal due to trends in buying behavior led to changing preferences.
A general belief → changing shampoo brands produced better results
difficulty for consumers to identify meaningful differences between various brands
Consumer Behavior Analysis(1/3)
BOOTS: HAIR-CARE SALES PROMOTION
Consumer Behavior Analysis(2/3)P
rofe
ssio
nal
Bra
nd
s
Largely fashion-conscious women
In the 20-35 age
More affluent than buyers of mass- market brands
BOOTS: HAIR-CARE SALES PROMOTION
Consumer Behavior Analysis(3/3)B
asic
Bra
nd
s
Other consumersused premium brands as a
“treat” for occassionsIn some cases, female would buy basic products for family and premium for
herself.
BOOTS: HAIR-CARE SALES PROMOTION
What are the available sets of alternatives to promote sales?
Buy two hair-care items at regular price and receive one free
Three items had to be the same brand.
Least expensive of the three items would be free
Three for Two (1/3)
BOOTS: HAIR-CARE SALES PROMOTION
2
Product sample along with a regular purchase
Existing sample product would be used to avoid the need to design and produce additional packaging
Gift With Purchase(GWP) (2/3)
BOOTS: HAIR-CARE SALES PROMOTION
3
Consumers will get 50p off on their purchase.
All customers would be able to redeem the coupon during their current store visit.
On Pack Coupon:50p off (3/3)
BOOTS: HAIR-CARE SALES PROMOTION
Which one would prove to be the
best?
Thodi simaths…
Important Data
Average bottle size (shampoo/conditioner) → 250 ml Average pre-promotional price → £3.99. Lets assume it
to be £4. Industry average retail margins on premium brands →
40 % Manufacturer’s typical margin → 8 - 12 %. Lets
assume it to be 10 %.
BOOTS: HAIR-CARE SALES PROMOTION
Manufacturing cost per bottle
Cost to retailer = 60% of selling price = 0.6 * 4 = £ 2.4 Let Cost to manufacturer = x 10% of x + x = 2.4 x = £ 2.1818
BOOTS: HAIR-CARE SALES PROMOTION
Profit Evaluation(1/3)
“3 For 2” Offer • Increase in sales = 300% i.e. if 100 units of hair care product were sold per day
before the promotion, 300 bottles would be sold per day during the promotion (including the free bottles = 100). Cost = 2.1818 * 300 = £ 654.54 Selling Price = 200 * 4 = £800
BOOTS: HAIR-CARE SALES PROMOTION
…cont. (1/3)
“3 For 2” Offer Profit £800 - £654.54
= £145.46 Profit/ Bottle £145.46 / 300
= £0.485
BOOTS: HAIR-CARE SALES PROMOTION
Profit Evaluation(2/3)
Increase in sales = 170% i.e. if 100 units of hair care product were sold per day before the promotion, 170 bottles would be sold per day during the promotion (plus the free bottles = 170 (75ml each)).
Cost per 250 ml bottle = £ 2.1818 Additional cost due to free sample = 93p (90p per unit for the product
plus 3p per unit to secure the sample to the featured product) Thus, Cost per product = 2.1818 + 0.93 = £ 3.1118 Selling Price = 150* 3.5 = £525
BOOTS: HAIR-CARE SALES PROMOTION
GWP (Gift with Purchase)
…Cont. (2/3)
Cost = 3.118* 170 = £ 529.006 Selling Price = 170* 4 = £680 Profit £680 - £529.006 = £150.994 Profit/ Bottle £150.994 / 170 = £0.882
BOOTS: HAIR-CARE SALES PROMOTION
GWP (Gift with Purchase)
Profit Evaluation(3/3)
Increase in sales = 150% i.e. if 100 units of hair care product were sold per day before the promotion, 150 bottles would be sold per day during the promotion. Cost = 2.1818 * 150 = £ 327.27 Selling Price/ bottle = £4 – 0.5 = £3.5 • Selling Price = 150* 3.5 = £525
BOOTS: HAIR-CARE SALES PROMOTION
On Pack Coupon(50p off)
…Cont. (3/3)
Selling Price = 150* 3.5 = £525Profit £525 - £327.27
= £197.73 Profit/ Bottle £197.73 / 150= £1.318
BOOTS: HAIR-CARE SALES PROMOTION
On Pack Coupon(50p off)
Maximum Profit
Making the right Decision
BOOTS: HAIR-CARE SALES PROMOTION
Comparison Chart
Company Name Increase in sales New Customers added Profit
3 for 2 300% 60% £0.485
GWP 170% 40% £0.882Pack(GWP) On Pack 150% 50% £1.318Coupon
According to the above analysis, maximum profit can be achieved by On Pack Coupon Strategy
But the company’s main target was not to gain maximum profit but to build Brand Equity and attract a large no. of consumers
Conclusion
BOOTS: HAIR-CARE SALES PROMOTION
Although Max profit lies with the 3rd strategy, from Robinson’s estimates, the first promotional strategy(3 for 2) should be chosen as it serves the dual purpose of increasing sales as well as capturing new customers more efficiently than the other two.
Company Overview
Objective of the case study
Situation Analysis
Competitors
Consumer Behavior
Alternatives Analysis Choosing the right alternative
Recap
DISCLAIMERCreated by PrachiBafna,NIT Jaipur, during a marketing internship by Prof. Sameer Mathur, IIM Lucknow.