HAIR SALES PROMOTION

CASE ANALYSIS

What’s in here? 1.Understanding the company and its employee Dave

Robinson

2.Company’s promotional strategy alternatives

3.Choosing the best option

4.Reasons backing the decision

WHAT’RE BOOTS?

Who’s DAVE ROBINSON?

One of the best known and respected retail names in the UK. It provides health and beauty products and advices that enhanced the personal well-being.

BOOTS 1849- John Boot opened ‘The British and American Botanic Establishment’ in

Nottingham to provide physical comfort to the needy as well as a reasonable living for his family.

1860 - John’s death. Mary (w/o John) took over the management. 1877- Jesse (s/o John) took sole control of the shop. 1883- Established it as a private company ‘Boot and Company Limited’

Jesse was the MD and Chairman- he’s determined to cut down the price and prefer cash sales over credit.

1st logo:

Jesse wanted Boots to be the ‘Largest, Best and Cheapest’ 1913- 560 stores and Sales amounted to 2.5 million euros.

Change of logo to black and white one

(post war change)

1996- began to cultivate relationships with well-established hairdressers in the UK.

Celebrity endorsements to create awareness and emotional attachment between customers and the brand

Relationship with celebrity hairdressers.

So what? For hairdressers:

Gave them access to large percentage of UK customers because of Boots’ wide customer base and area coverage.

85% female adults in the UK visited a Boots’ store in a week. 1300 stores.

For Boots’: Helped them to pitch-in celebrity-endorsed products in retail stores, for the

first time.

Opportunity to be the first retail hair-care expert Offer latest ranges

So what’s the effect of partnership with

celebrity hairdressers? 1. Boots’ developed and launched mass of professional hair-care brands.

2. Formulations functionally better than other brands were designed.

3. Boots’ paid per unit licensing fee for using the celebrity’s brand name. (under

agreement)

4. The retailer hasn’t been able to link its name with the premium products developed by it. As a result:

a. Missed on profit maximization.

b. Celebrities used media contacts to manage public relation.

c. Boots’ managed all other activities in consultation with the celebrity hair dressers.

BOOTS AND ITS COMPETITORS

COMPETITION STEMMING FROM

CONTEMPORARIES

(RETAILERS)

HAIR-CARE COMPETITOR

MASS-MARKET BRANDS

Customer Behavior Analysis

1. CUSTOMERS BELIEFS AND ATTITUDES

o They believed that changing shampoo brands produced better results. Hence no brand loyalty.

2. TIME AND TREND o As decades progressed, people wanted product to cater to different needs. Hence

changing preferences.

• 70s- gentle shampoo, 80s- detangling shampoo, 90s shiny hair 3. COMPETITIVE BRANDS

o It was difficult for the customers to identify meaningful difference between various brands available.

Premium brands- 1. Customers who purchased them were highly fashion-conscious. 20-35 yo. 2. Purchased for special occasions only 3. Female head of the family, in some cases purchase only for them.

Basic/mass consumption products- 1. For kids and husbands 2. For daily use

Dave

Robinson

Category &

Operations Manager

of Boots. (from 2004, November to 2006 August)

Director of

Personalization (as of now)

WHAT’S THE

CURRENT

SITUATION?

Dave’s planning for promotional

strategy for a line of professional hair-

care products at Boots.

Primarily: shampoos,

conditioners and gels.

The Promotion Strategy 1. Targets Boots’ consumers and existing

purchasers of mass-market brands.

2. Runs for a month (entire December)

3.No variation in product sizes (to avoid the added costs and

complexities involved)

4. No media advertisement budget allocated. Strategy highlighted though flyers.

5. Dedicated place for stock display-signage to promote the offer.

Description Premium brands (euros) Mass-market brands (euros)

a. Average Pre-promotional price 3.99 2

b. Industry margins 40% 25%

c. Margin 1.596 0.5

d. Cost to retailers / Manufacturer’s price (a-c)

2.394 1.5

e. Manufacturer’s margin (on the higher side)

12% 12%

f. Margin 0.28728 0.18

g. Cost to Manufacturer (d-f)

2.1 (approx) 1.32

Note: Margin assumed to be on the price and not on cost. And since the celebrity hair-care products are important component of their strategy, we’ll consider the premium brands for the further calculations.

What’s the challenge?

Dave has to select one of three promotional activities.

1. 3 for 2

2. GWP

3. On-pack coupon worth 50p

For the Christmas season

Pros: 1. Competitors lack in the technology at point of sales to imitate this promotion.

2. Sales per day estimated to increase by 300% 3. Approx. 60% of sales will be to people who will not purchase at Boots’ during the promotional season, otherwise.

Conditions: 1. Customers can avail this offer only if they purchase 3 products from the same brand.

Pre-promotional Margin of Retailer= 1.596/bottle. No. of units sold on a regular day=100 (say each customer purchases one unit a day, implying 100 customers a day)

Margin per pre-promotional day= 1.596*100= 159.6 During promotion season, 300 units are expected to be sold, same 100 customers. Therefore, Margin during promotional season = (Price of 2 – cost of 3)*100 = [(3.99*2)-(2.394*3)]*100

= 79.8

Therefore, net margin during the promotion season, if

“3 for 2” is adopted is 79.8

Features: 1. Free sample along with regular

purchase.

2. Existing samples to be used.

3. Additional costs: 93p 4. Sales expected to raise by 170% 5. 40% of sales will be to shoppers

who wouldn’t have otherwise purchased from Boots’ if not for the promotional season.

Cons: 1. Most competitors use GWP as a promotional method.

Pre-Promotional Margin per 100 units= 159.6 During the promotional season, net margin = (1.596-0.93)*170

= 113.22

Therefore, net margin during the promotion season, if

“GWP” is adopted is 113.22

Features: 1. Conservative approach 2. Sales expected to raise by 150% 3. 50% of sales would be from shoppers

who wouldn’t have purchased from Boots if not for the promotion season.

Cons: 1. Most competitors would use price discounts

Pre-promotional margin per 100 units= 159.6 During the promotion season, net margin = (1.596-0.5)*150 = 164.4

Therefore, net margin during the promotional season if “50p on-pack coupon” is adopted is

164.4

Points to be considered 1. Leadership in hair-care segment in the UK to be secured. 2. Hair-care brands are important component of their

strategy. 3. Boots has contracts with some of the most prestigious

salon brands in the UK. This means competitors cannot copy Boots’ strategy. So what ever strategy is adopted, Boots will be on safer side.

4. Profitability is one aspect only, emphasis should be on maintaining and enhancing the professional hair-care brands.

Basis 3FOR2 GWP On-pack coupon (50p

off)

Profitability Least Medium High

Evaluation of 3 projects

Considering the pros and cons of 3 alternatives, though the profitability of “3for2” is least, it has got prospective benefits.

• It’s unique to Boots. Therefore less scope for imitation of strategy.

• It helps the customers try new products and helps Boots to sell the less moving products of a celebrity hairdresser.

• Also, it maintains and enhances the importance of professional

hair-care products.

Decision

time

3 for 2 is the best choice

Summary

DISCLAIMER Created by Meghana M., BVC Hyderabad,

during Marketing Internship by Prof. Sameer

Mathur, IIM Lucknow.