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Stage 1: Analysis of L’Oreal Skin Care Brand

Vietnam Skin Care Market overview

Vietnam cosmetic market is regarded as a potential market amongst Asian countries. The increase in cosmetic consumption I last four years is reported as average of 7 percent wit per consumer expense of $3 per annum on cosmetic products (Euromonitor 2014). Hence, this steady growth has attracted the global cosmetics and skin care brands like Unilever, P & G, L’Oreal, and Johnson & Johnson to Vietnam and generated a competitive landscape. Chemical Cosmetic Association Vietnam reported that over 430 leading local and foreign cosmetic companies are operated in the country, in which around 90 percent are known foreign brands (NDHMoney 2012). Furthermore, Vietnam consumers have shown an increase in purchasing power after gaining economic prosperity due to increase in trade in the region. Vietnamese consumers spent approximately 45.34 billion USD in 2012 on consumer goods shown a rise of  20.8 percent as compared to the year 2011 (People Army’s Newspaper 2012). This growth has encourage youth and young professionals to invest more in personal grooming products with more expandable income and can afford high quality international brands (Pitman 2012). As Vietnam is relatively young country with more than 45% youth population is attractive for international brands like Unilever, and L’Oreal to penetrate in this small market in last decade with an offensive strategy.

 

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Though, US brands like L’Oreal are well penetrated in Vietnam cosmetic market but the consumers are still not familiar with US brands as compared to the oriental Japanese brand Shisiedo and UK based brands of Unilever. Yet the brands of L’Oreal like Maybelline, Body Shop, and Garnier have performed well in the market as Vietnamese consumers are still not exposed to the premium end cosmetics brands like Estee Lauder, Guess, and M.A.C. Also, the ranking of US brands like Revlon and L’Oreal is still not clear to Vietnamese consumers. Therefore, a clear and visionary marketing communication strategy is required for the case company L’Oreal Paris in Vietnam.

 

L’Oreal Paris Vietnam

L’Oreal Paris operated in more than 130 countries globally with a broad focus on products categories of hair care/ styling, cosmetics, and skincare. L’Oreal Paris is the second largest personal care and hair care products manufacturer across the globe, and popular in Vietnam for good quality brands with reasonable price in cosmetics market of Vietnam. In skin care, L’Oreal is the second largest market share holder after Unilever in Vietnam and growing at a faster rate due to heavy expenditure of R&D and promotion. The cutting edge technology of skin revitalizing creams brands of Youth Code and Hydra Fresh, and whitening solutions of White Perfect™ has enabled fast penetration in this market. Furthermore, Market Line (2014) concluded that the company is engaged in manufacturing and marketing of the skin care products with the well known brands Maybelline and Garnier, Lancôme, and NewYork. This growth of skin care is a global phenomenon as Euromonitor (2014) reported that in the period of 2011 till 2015, the global skin care brands market grew at about 4.4% due to the increase in ageing population and more concern towards the use of organic and natural ingredients in skin care products.

 

 

Political

Vietnam has followed a system of mixed economy with still an important role of government in regulating the state affairs. The market economy is still not well organized even after its signing the WTO announcement of free market economy in year 2006 (Pham 2011). The National Party Congress announced the running of free market under the social orientation. Therefore, a part from the freedom given to the operations of multinationals, the State Owned Enterprises (SOEs) still have the prominent role in market controlling and policy formation.

 

Economic

Vietnam cosmetics industry’s annual growth rate in the period o 2007 till 2012 was around 5.35 with 90% share of foreign cosmetic brands in the country. These international brands are concentrated more in urban areas and cosmopolitan centers of Ho Chi Minh City (Ken Research 2014). The economic growth of Vietnam was also stable at around 7% in last decade. The local business has been facing the financial and credit management challenges as compared to their foreign counterparts. Also, Vietnam business are facing high inflation rates of 9% to 11%. In cosmetics market, US brands share is around 10% as compared to EU share of 23% and Japan share of 17%. The following comparison shows 11% share of cosmetic products in Vietnam GDP (Mintel 2014)

Source: Mintel (2014)

 

Social

Around 46% population in Vietnam is young and in working age, with one million new workers entered every year in labour market. On the other hand, the productivity level of work forces are even lesser that that of ASEAN countries. The positive sign is the inclusion of Vietnam in top five countries Happy Planet Index (HPI) of year 2009, that shows that Vietnamese are fun loving, social, and optimistic nation. The social life is peaceful due to stable government and economic growth in the country (Vietnam General Statistic Office 2012).

 

Technology

The technology is advanced in urban areas of Vietnam with wide exposure of population to telecommunication, but remote areas and villages are still lacking latest technology. Therefore, the technology revolution still needs some more time to create advancement in landscape of media and communication.  The availability of internet is widely accessible in urban areas at normal price. Counterfeit products are also widely available in cosmetics market acting as a threat to foreign brands.

 

Legal

The laws available in Vietnam are Investment and Enterprise Law, with provision of global agreements like WTO and regional agreements like ASEAN and APEC. Though, the legal structure is strong, but implementation of these laws and agreements is still challenging in the country. The high rate of corruption and poor quality of human resources are some major obstacles.

 

Environmental

High natural disaster risks and very long coastal border of around 2500 km create more serious environmental concerns in Vietnam. Rapid climate change, and rises in sea levels are needed to be considered in planning of organizations for manufacturing and marketing of products. People are also more concerned about the eco friendly approaches of foreign and local brands. 

 

Matrix of PESTLE Analysis

Factors

Indicators

Opportunity / Threat

Political

·       Stable government.

·       Less political Risk

·       Favourable policies multinationals 

O/T

O

O

Economic

·       Increasing GDP

·       Large skin care sector

·       intense competition

O

O

T

Social

·       Youth market tends to cosmopolitan lifestyle

·       High international cosmetic products demand

·       High loyalty to international cosmetic brands.

·       Increased personal care and social activeness

·       Internet savvy young population

O

O

O

O

O/T

Technology

·       Internet is less accessible.

·       More international brands in the urban areas.

·       Revolution in digital media

T

O/T

O

Legal

 

·       Less effective intellectual property rights.

·       Less measures for problem of counterfeits.

·       More eco-friendly and natural products demand

T

T

O

 

In conclusion, L’Oreal has great opportunities in stable political and economic growth environment of Vietnam. Also, environmental and legal challenges counter the growth potential of the company in this new social and cultural environment.

 

Competitive Landscape

According to NDH Money (2012), Chemical Cosmetic Association reported that the major brands in Vietnam’s cosmetic market for the urban areas are Shiseido, Ponds, L’Oreal, Estee Lauder, Maybelline, Olay, The Body Shop, and Oriflames. The production bases of Olay, Shiseido, and Pond’s are also available in Vietnam with L’Oreal is going to start its production base in near future. Saigon, My Hao and Thorakao are some of the leading local cosmetics brands in Vietnam Market. The major challenge for L’Oreal is from the market leader Unilever and P&G as strongest and long standing players.

 

 

Unilever

Dove, Ponds, Vaseline Intensive Care

 

 

Max Factor, Olay

Integrate

 

Revital

Branding

Global brand act as Unilever Vietnam, less lines in skin care product include Ponds, Dove, and Vaseline Intensive care the most prominent. R& D and product innovation has made it the market leader.

Global skin care brands of Olay and Max factor are managed by P&G Vietnam. High quality and innovation focus with large line of variants in Olay brand.

Japanese origin global brand, in top five international brands in Vietnam. Skin care products target is both men and women with oriental and innovative skin care range. The company has more than ten skin care brands line with Shiseido Ultimate is the latest inclusion. The global net sales are around $10 to $50 billion yen per annum for these brands.

Target market

Women of age group 20 years and above. Mass consumer market and focus on middle and upper middle class.

Female target market of age group 20 years till 65 years. Income range from middle to high income families and individuals. Professional and skin conscious women are major target.

Target men and women, broad product range available for youth, middle, and elderly age groups. Low to middle income groups target.

Product

Large product line from face washes to revitalizing skin creams and lotions.

Premium line of products, with R&D based skin care solutions in Olay. Anti-Ageing and whitening solutions are available. 

Large product line ranges from routine moisturizers, uplift creams, and revitalizing solutions.

Price range

Middle to high   price

Middle to high price

Low to middle prices

Distribution

– super stores and  Retail markets

– Beauty spots and parlors

– Online and franchised stores

– Convenience stores

– super stores and  Retail markets

– Beauty spots and parlors

– Online and franchised stores

– – Convenience stores

– super stores and  Retail markets

– Beauty spots and parlors

– Online and franchised stores

Promotion & Communication

TVC, Website, digital media, newspapers, magazines, , billboards, Events sponsorships

 

TVC, Website, digital media, newspapers, magazines, , billboards, Events sponsorships

 

TVC, Website, digital media, newspapers, magazines, , billboards, Events sponsorships

 

 

Product portfolio

 

Current Performance

Skin care

Skin care supplements and solutions are available to all age groups for males and females.  The cream jars, bottles, and tubes are available in the sizes vary from 30 ml to 200 ml. 

Product

White Perfect

Hydra Fresh

Men Expert

 

Youth Code

Price

Low, middle and high price range is available in different variants. 

Placement

Supermarket, convenience retail stores and online sales from the website.

Promotion

Less use of TV and print media, except the women lifestyle and beauty magazines, and point of sales displays. More billboard and digital campaigns Less promotion and TV advertising, billboard or event campaign, however, there are some print ad in women magazine. 

 

 

SWOT analysis

Strengths

Weaknesses

1.     World recognized brand portfolio of Body Shop, Garnier, Maybelline.

2.     Capabilities are focused on cosmetology and dermatology in skin care range.

3.     Strong capabilities of research and development.

4.     Diversified presence in over 130 countries across five continents

5.     heavy advertising expenditure over the years

1.     L’Oreal’s long term revenue growth has been low, A weak performance in Far East strategic geographic market has undermines confidence of  investor

2.     decline in competitiveness and lack of revenue driving products

3.     losing market share in the parts of Vietnam to Unilever in hair care and skincare market

Opportunities

Threats

1.     rise for cosmetics companies due to increasing popularity of beauty contests and increasing disposable incomes

2.     Demand for safer and more eco-friendly natural personal care products is rising

3.     Growing beauty consciousness Investment in emerging markets.

4.     Increasing use of social networking.

1.     Intense competition due to trend of  Acquisition and alliances:

2.     Growing Low quality counterfeits also reduce consumer confidence

3.     Growing popularity of cosmetic surgery and hair treatments

 

 

Analysis of Consumer Behaviour

Segmentation

The segmentation is derived on the four aspects as shown below:

Table 3: Segmentation profile of Vietnam Consumers

Dimensions of Segmentation

Segmentation variable

  Details

Geographic

Region

Vietnam

Density

Cosmopolitan, and Urban

Climate

tropical region

Demographic

Age

15- 35 years

Gender

Male plus female

 

 

 

Occupation

Professional

Life Cycle

Individuals and family

Race

Universal appeal for all ethnicities

Income

Middle and high income

Psychographic

Personality

Personality conscious, variety seekers, personal groomers, personal value high orientation.

Lifestyle

Independent and active, extrovert, professional and personal excellence, self actualization

Brand Loyalty

strong loyalty

Behavioral

 

Usage behaviour

regular to occasional

Perceptive Benefits

-Established international brand

– fresh, regenerated, and moisture skin

-Whitening solutions

-support cosmopolitan life style

 

Target market

In skin care category of Vietnam cosmetics market, the segments of youth and young professional males and females are identified. These segments are comprised of both individuals and family oriented, in the age group of 15-35 years, and belongs to the social active and personality sensitive consumers groups. Due to the limited personal income sources in this age group, especially for Youth in the age bracket of 15-30 years, face the challenge of high prices of L’Oreal skin care products. Therefore, the targeted brand’ Youth Code’ for this segment should focus on affordable prices; otherwise the target market will not be penetrated easily in Vietnam.

Type of Customers

Consumer Profile

Professional males and females

Age group 20-35

junior & middle level executive, public figures, celebrities

Socialization and personal grooming needs

youth

Age 15-30

Middle and high socio-economic income level

High personal care, social image sensitive

Internet savvy, social media users

 

This target market can be accessed by focusing on the advertising in the appropriate media. Social media is influencing in this age category due to this internet savvy generation who spend less time on TV and on print media as compared to hours spending on internet. Due to high mobility in cosmopolitan life style, billboards and event sponsorships will also be viable promotion choices.

Consumer decision making     

Consumer decision making process for skin care process is based on the influence of advertising, word of mouth, social needs, and personal level of personality consciousness.

Decision making process

Influencing factors

Implications to L’Oreal

Need Recognition

Skin care needs, problem recognition, personal awareness, information sources,

Maslow’s hierarchy Need level affect want to buy suitable product – Highly concern of personal image

 

– offer products for every segment of target market from men (Extra Men) to youth (Youth club)

– proper media selection for targeted consume groups, Advertising campaign stimulate their need

Information search

– Past experience, digital media support, printed resources, reference groups

– Advertising through print , TVC and digital media

.

Alternatives Evaluation

– Past experience, Financial constraints, lifestyle and social activeness

– Advertising through print , TVC and digital media

– product and price alternatives

 

Purchase decision

– attitude and situational factors

– Price, product, Promotion, discount, and distribution channel

Post-Purchase

– product response, consumer satisfaction,  repurchase intentions

 

– Customer engagement and retention

-Customer care and long term relationship

 

Market trends and response to customer demand

According to TNS Vietnam survey (2012) the latest Vietnamese consumer trends industry are inclined towards use of telecommunication, entertainment savvy, and  high-tech consumer goods. Also, due to increase in global awareness through social media and internet, the demand of health and skin care products is also raised (ThanhNien News 2013). The consumers demands more eco-friendly and organic skin care products that comprised on natural ingredients. The tastes of consumers become matured and the international brands share is around 90% in Vietnamese market due to high concern f brand image and product quality.

 

Consumer Value Drivers

The concern for body image and social appreciation are important for Vietnamese consumers and economic prosperity in recent years have allowed them to utilize skin care products to save their skin from early ages. The high- end consumers have more economic liberty to select from the premium foreign brands, but the selected target market of youth and young professionals are facing the issues of low expandable income and high demand of personal care products. This target market is also aware of the ageing problems created for the skin and they want early remedies for future potential issues. Therefore, a more informative and sensational advertising and promotional campaign is needed for this target market

 

Impact of Consumers Life styles and cultural factors

The impact of local culture and consumer lifestyle factors are also important to consider in evaluating this perception. As Vietnam is rich in natural resources and vegetation suitable for local recipes of skin care products, therefore, the households have natural remedies available due to the use of oriental lotions and creams. The global information exposure and cosmopolitan cities changed demographics have made the local generations staying away from their cultural norms an values. Also, the busy lifestyles in cities increase the dependence on readymade skin care solutions offered by the companies like L’Oreal.

 

Brand Association and Loyalty

The popularity of international skin care brands in Vietnam markets is largely because of consumers perception of high quality and trust associated with these brands. On the other hand, brand loyalty developed in high-end consumers is due to the price and consistency association of international brands. High brand loyalty is experienced by prime brands like Christian Dior and Estee Lauder in this market. On the other hand, the selected target market of youth and young professionals are fewer brands loyal due to their variety seeking and price sensitiveness. Hence, the generation of brand association and loyalty in this segment is an important objective of market9ing communication plan for L’Oreal.  

 

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Brand Positioning

The above discussed segmentation strategy and selected target market needs a specific brand positioning. According to Harrison (2010), brand positioning is the creation of desired brand image and perception in the minds of consumes. The desired brand position for skin care brands of L’Oreal in Vietnam market can be expressed by the table below:

Brand Name

L’Oreal Vietnam 

Product Category

Personal Grooming and Skin Care

Logo

Skin Care

Packaging

cream jars, tubes, and serum bottles

Slogan

 

Brand Personality

Exciting, revitalizing, Fun, and healthy

Brand Image

Innovative, Trustworthy, and unique

Stage of Product Life Cycle (PLC)

Growth phase in Vietnam Market

Therefore, a competitive strategy is required die to the presence of global leading brands of Unilever and P&G in this market. L’Oreal can target the its brands of Youth Code, Expert Men, white perfect, and Hydra fresh for youth and young segment at low price with high commitment of quality. Promotion of local herbs and other oriental ingredients will also create a strong brand association of local consumers. The following perceptual map below show the positioning according to selected variables.

 

To change the current position of L’Oreal in Vietnam market which contributes to around 5% of the skincare market and approximately a half of the leadership brand’s market share, L’Oreal choose to improve the potential market – focusing on men. Objectives will be established to meet the SMART criteria (Specific, Measurable, Achievable, Realistic, and Timely).

 

Goal: Launching new product for men in order to increase brand awareness and brand’s market shares and product sales.

Objectives for short-term (6 month): Vietnam is known with the quick development and quick recession; 6 month is enough to prove the effectiveness of a marketing communication campaign.

  • Create the strong discussion on social media (more than 95% of male users, who are target audience) after launching a social media campaign (by May 2016).

  • Develop the brand awareness of target audience to 80% from the success of the campaign (by May 2016).

  • Reach 14% of target audience having purchase intention after the campaign will be launched for 3 months.

 

Objectives for long-term (2 years):

  • Achieve 95% of target audience being aware of the brand.

  • Increase the number of people having intention to purchase new products by 30%

  • Retain 30% number of customers after the first purchase of new products within 3 years.

 

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