boots hair care

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)

• 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.

• Boots Healthcare International exported healthcare products to 130 countries.

• In 2004 the company employed around 75,000 people & operated in 130 countries worldwide.

Lets have a look at the company’s Product line

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)

• 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)

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

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--

• 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.

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)

• 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)

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

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)

Consumer Behavior Analysis(2/3)P

Largely fashion-conscious women

In the 20-35 age

More affluent than buyers of mass- market brands

Consumer Behavior Analysis(3/3)B

Other consumersused premium brands as a

“treat” for occassionsIn some cases, female would buy basic products for family and premium for

herself.

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)

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)

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)

Which one would prove to be the

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 %.

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

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

…cont. (1/3)

“3 For 2” Offer Profit £800 - £654.54

= £145.46 Profit/ Bottle £145.46 / 300

= £0.485

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

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

GWP (Gift with Purchase)

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

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

On Pack Coupon(50p off)

Maximum Profit

Making the right Decision

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

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

DISCLAIMERCreated by PrachiBafna,NIT Jaipur, during a marketing internship by Prof. Sameer Mathur, IIM Lucknow.

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