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FORE SCHOOL OF MANAGEMENT, NEW DELHI

PROJECT REPORT : MARKETING MANAGEMENT-1

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

ACKNOWLEDGEMENT We 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. 1 2 3 4 5 6 7 8 9 10 11 12 13

Topic Executive Summary PESTLE Analysis Competitive Analysis Market share of leading Players About Company : Lakm Market Analysis Perceptual Positioning Map Objectives Marketing Strategy Action Plan Promotional Strategy Budget Analysis References

Page Number 4 6 7 10 10 11 12 13 13 14 16 17 19

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, sun protection 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 capitalization Fast 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.

The Indian Retail Beauty and Cosmetics market

Color cosmetics Fragrances 9% 13% 17% 19% 7% 14% 21% Hair care Skin care Beauty services Herbal Products Others

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. 5

INDIAN COSMETIC SECTOR FORECAST TO 2015 New 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. Every industry has to consider these factors because these factors create opportunity or threat at period of time. 1. POLITICAL FACTORS Tax 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 many companies. The Indian duty structure on imported products can pose a major deterrent to multinational vendors.

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

3. SOCIAL FACTORS Income distribution Higher paying jobs and increasing awareness of the Western world and beauty trends there have served to change the tastes and customs of the middle class 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 further Lifestyle change. 6

The increasing market size is the direct result of the changing socio-economic status of the Indian consumers, especially women.

4. TECHNOLOGICAL FACTORS Nanotechnology and Cosmetics In addition to improving the efficacy of cosmetics and skin care products, 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, because of the relative newness of the technology in terms of cosmetics manufacturing 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 are less harmful for skin, waste disposal is an important issue.

6. LEGAL FACTORS At 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 the Essential Commodities Act International cosmetic brands in Indian market International 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 Companies

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Lakm is the Indian brand of cosmetics, owned by Unilever. It started as a 100% subsidiary of Tata Oil Mills (Tomco), part of the Tata Group. 7

Strengths Cost advantage High R&D Innovation Loyal customers Market share leadership Strong brand equity Unique products High quality manpower resources
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Weaknesses No online presence Use of hard chemicals

Revlon is an American cosmetic for skin care, fragrance, and Personal Care Company founded in 1932. Strengths Customised make-up Classic products Popular High quality High profit margins Weaknesses Low range of products High price High cost of production Low 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. Weaknesses Strengths Lack of promotional activities through High accessibility mass media Sale through people who know customers Releases catalogues frequently with offers on products Depends on the network of individual Sponsors help customers choose products according sponsors on most of its distribution and available in very few stores to their skin type, climate etc. Established brand name since 43 years Natural beauty products Independent sales force of over 3 million people

4.

The L'Oral Group is the world's largest cosmetics and Beauty Company. It concentrates on hair colour, skin care, sun protection, make-up, perfumes and hair care. Maybelline is a makeup brand sold worldwide and owned by L'Oral. Weaknesses Strengths High social risk products Low prices Intense colours High product and colour variety Average profit margins Strong market penetration Sales going through independent Made to fit seasonal conditions retailers Competitive price Online services plus catalogue Wide distribution channels 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 1984 8

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Chambor cosmetic 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 cosmetics are one of the leading brands of color cosmetics in India. 9. Street Wear is 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.
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MARKET SHARE OF LEADING PLAYERS

Brands Value ( % ) Volume ( % ) 2010 2011 2010 Lakm 22.5 17.7 3.7 Elle 18 10 11.3 5.4 Revlon 6.5 4.2 1.1 Maybelline 2.1 2.5 0.3 Street wear 1.4 1.1 0.3 LOreal 1.0 0.4 0.1 Source : Nielsen; Data for all India urban for categories traditional trade

2011 2.6 5.1 0.7 0.3 0.4 0.0 lip plus nails in

INDIRECT COMPETITORS These 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

Lakm Contemporary 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.

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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 & TARGETING The 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

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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 cosmetics are forms of make-up that are composed of compressed minerals. Most of these products are pure mineral, and do not contain any oil 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. 11

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Points of Parity 1. 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 Difference 1. 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.

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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. Product 20g Dispensing Brush 30g Platinum Jar 50g Platinum Jar (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. Price 800 1000 1200

ACTION PLAN
PRODUCT STRATEGY The product Lakm mineral make-up powder will be an addition to the existing product line of skin colour cosmetics. Lakme

Chemical Cosmetics

Natural Cosmetics

Mineral Foundation 13

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PACKAGING

Dispensing Brush

Platinum Jar

The 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 of bacteria 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. SIZES Type Dispensing Brush Platinum Jar Size Standard Standard Large VARIANTS In India, skin colour varies from the darkest brown to the lightest. To meet this need, our product will come in a variety of tones,
o o o o

Specification 20 grams net volume (5 grams net weight) 30 grams net volume (10 grams net weight) 50 grams net volume (15 grams net weight)

Porcelain & Fair Ivory & Light Medium & Tan Deep & Deeper

For pale to fair skin tones that rarely tan Light to medium-light skin tones For those with light to medium tans or olive/ethnic skin tones For those with deep tans or darker skin tones 14

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WARRANTIES AND GUARANTEES The 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 agetargeted 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 Mix a) Advertising The advertising campaigns will be aimed at women wishing to improve their appearance while preserving natural skin texture, usually to increase physical attractiveness and to restore confidence in them. Use of Celebrities, a Film Personality for Product Endorsement: Lakm Brand Ambassdor Kareena Kapoor Advertising Platform - Communication 1. 2. 3. 4. TV/Radio Newspapers/Magazines (Vogue, FHM, etc.) Hoardings /Banners Leaflets

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a) b) c) d)

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

c) Public Relations and Publicity a) Holding Seminars b) Sponsoring Events/Competitions in colleges c) Sponsoring Beauty Pageants Contest d) Events and Experiences 1. A good publicity during Lakm Fashion Week 2. Used in the Lakm Salons as the base for the makeup e) Direct and Interactive marketing 1. Use of Lakm Website 2. Recommendations on social media ,telephones f) Word Of Mouth Marketing 1. Recommendation by Skin Experts, Sales Person. 2. Strategy to choose a few people to influence and spread the communication regarding the product.

g) Personal Selling Our 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 0 Year 1 Year 2 Year 3 16

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Sales Revenue Less :Cost of goods sold Gross Margin Developmental Costs Marketing Costs Allocated overheads Net contribution Cumulative cash flow Discounted cash flow

150 (60) 90 (250) (25) (12) (197) (197) (197)

165 (63) 102 0 (15) (11) 76 (121) (126.63)

173.25 (66) 107.25 0 (12) (10.5) 84.75 (36.25) (53.97)

181.91 (70) 111.91 0 (12) (10) 89.91 53.66 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.

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References: http://shodhganga.inflibnet.ac.in/bitstream/10603/8959/13/13_chapter%202.pdf http://www.beautypackaging.com/articles/2011/06/alls-fair-in-indias-cosmetics-market http://entrepreneurindia.in/start-ups/raising-the-color-bar/4766/ http://www.indianmirror.com/indian-industries/cosmetics.html http://www.companiesandmarkets.com/News/Consumer-Goods/Indian-cosmetics-market-led-byLakm%C3%A9/NI6435 http://www.business-standard.com/article/management/Lakm-s-makeover-109091400083_1.html http://www.financialexpress.com/news/Lakm-understands-indian-women-the-best/518876/0

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