boots hair care promotions

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Page 1: Boots hair care promotions
Page 2: Boots hair care promotions

Hair-Care Sales Promotion

Page 3: Boots hair care promotions
Page 4: Boots hair care promotions

• Started in 1815 by John Boot as a herbal remedy shop in Nottingham.

• His son took over the business and christened it ‘Boots and Company limited.

• Riding on the post war industrialization wave, Boots expanded rapidly into neighboring areas and started diversifying.

Page 5: Boots hair care promotions

To Today

Page 6: Boots hair care promotions
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But Boots homegrown brands in collaboration with top designers faced stiff competition in the premium hair product market from the likes of:

Page 8: Boots hair care promotions

Boots felt it did not maximize profits from these brands and thus emerged the core problem of our case, maximize profit while gaining market share and maintaining premium image.

Page 9: Boots hair care promotions

• Major competitors in the premium segment – P&G, L'Oréal Paris and Alberto-Culver.

• Major retail competitors: Tesco – 1800 stores Sainsbury’s – 700 stores Morrison's – 400 stores Superdrug – 700 stores

COMPETITION

Page 10: Boots hair care promotions

• Large number of brands with no brand enjoying market share in excess of 9%.

• Less brand loyalty due to consumer beliefs and changing preferences and meaningful product differentiation.

• Premium brands mainly purchased by fashion conscious women in the 20-35 age group.

• More than 85% women population walked through Boots stores every week.

Page 11: Boots hair care promotions

Advertising v/s Sales Promotion • In the competitive hair care market; market share was directly proportional to amount of advertising.

• No budget was allocated for special advertising of Boots’ hair care products.

• Hence, sales promotion was the only strategy available for the marketers as a mass marketing strategy.

Page 12: Boots hair care promotions

Three sales promotion strategies were proposed – ‘3 for 2’ ‘Gift with Purchase’ ‘On-Pack Coupon’

Page 13: Boots hair care promotions

Some calculations first

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Average Prices(/250ml):Shampoo - 4.75 £Conditioner - 5.00 £Gel - 7.50 £

Page 15: Boots hair care promotions

Young, fashionable women were the target. But how many were there? And how many would visit Boots to buy their hair products?

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Percentage of urban Population

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Assume:• Mainly urban women

would buy such premium products

• The market share of such products is directly proportional to the number of stores it is sold in.

• 250 ml shampoo lasts for two weeks.

• Conditioner is used twice as often as shampoo.

• Gel is used at a quarter rate of shampoo use.

Page 18: Boots hair care promotions

Number of urban females (20-35) - 5.135 million

Number of stores selling premium hair care - 4900

Number of Boots’ stores - 1300

Average time of replacement of Shampoo(250ml) - 14 days

Average time of replacement of Conditioner(250ml) - 7 days

Average time of replacement of Gel(250ml) - 56 days

Boots sales(per day) = (No. of target consumers) * (1300/4900) / (Average time of replacement in days)

Page 19: Boots hair care promotions

Boots average pre-promotional sales per day

Shampoo - 100000 unitsConditioner - 200000 units

Gel - 25000 units

Item Average Pre-Promotional

Price

Average Profit per Unit

Shampoo 4.5 £ 1.8 £Conditioner 5 £ 2 £

Gel 7.5 £ 3 £

Average margins for premium products were 40% of the final price

Page 20: Boots hair care promotions

Shampoo; 180000

Con-di-

tioner; 400000

Gel; 75000

Profit/day

Sales 0

50000

100000

150000

200000

250000

300000

350000

Sales/day

Shampoo Conditioner Gel

Total profits – 655,000 £

Total sales – 325,000

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Which of the three sales promotion strategies to use?

Let’s briefly analyze them one by one

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Strategy Summary:• Choosing any three products from the

same sub-brand and paying only for the two costlier ones.

• Sales increase to 300% of the pre-promotional sales with 60% of the total coming from consumer who wouldn’t have bought the products without promotion.

Without Promotion

With Promotion

0 100000 200000 300000 400000 500000 600000 700000

Sales Per Day

Gel Conditioner Shampoo

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Strategy PayoffSince conditioner to shampoo usage ratio is 2:1; the predominant cluster sales under the 3 for 2 scheme would come from customers buying 2 conditioners and getting the shampoo for free.

Profit on one cluster(shampoo+2 conditioner) = (2+2) – (2.7) = 1.3 £.

Profits = (300000)*(1.3 £) +(75000)*(3 £) = 615,000 £Units sold = 975,000New consumers exposed to products = 225,000

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Strategy Summary:• Attaching a small sample of

complimentary product with the actual product.

• Average cost at 93p per attachment.• Sales would increase to 170% of the pre-

promotion sales with 40% of the final sales coming from people who wouldn’t have purchased a hair care product from Boots.

Pre-Promotion Sales

Promotion Sales

0 50000 100000 150000 200000 250000 300000 350000 400000

Sales With and without GWP offer

Gel Conditioner Shampoo

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Strategy PayoffProfits from shampoo - 1.8*(170,000) = 306,000 £

Profits from Conditioner - 2*(340,000) = 680,000 £

Profits from Gel - 3*(42,500) = 127,500 £

Promotion Cost - (0.93)*552,500 = 513,825 £

Net Profits - 599,675 £

Total Sales - 552,500 ; New Consumers attracted - 220,800

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Strategy Summary:• 50 p coupon on all products redeemable

during current store visit.• Heavy promotions by other brands of the

same type.• Sales increase to 150% of non-

promotional sales and 50% of these would have come from customers who wouldn’t have purchased a Boots hair-product otherwise.

Pre-Promotional Sales

Promotion Sales

0 50000 100000 150000 200000 250000 300000 350000

Chart Title

Gel Conditioner Shampoo

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Strategy PayoffProfits from Shampoo - (1.8)*(150,000) = 270,000 £

Profits from Conditioner - (2)*(300000) = 600,000 £

Profits from Gel - (3)*(37500) = 112,500 £

Promotion Costs - (487,500)*(0.5) = 243,750 £

Net Profits - 738,750 £

Total products sold - 487,500Products sold to new customers – 243,750

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No Promotion 3 For 2 GWP On-Pack Coupon0

200000

400000

600000

800000

1000000

1200000

Final Sales

Shampoo Conditioner Gel Total

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No Promotion 3 For 2 GWP On-Pack Coupon0

100000

200000

300000

400000

500000

600000

700000

800000

Final Profits after accounting for Promotional Costs

Shampoo Conditioner Gel Total

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No Promotion 3 For 2 GWP On-Pack Coupon0

100000

200000

300000

400000

500000

600000

0

225000 220800243750

325000

375000

552500

487500

Customers Attracted

New Customers Attracted Total Customers

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The GWP strategy attracts more customers and the On-Pack coupon strategy attracts more new, possibly one time users whereas the 3 for 2 strategy generates the highest absolute amount of sales.

Short term profit wise, On-Pack coupon is the most profitable followed by 3 for 2. Long term equity is built more by the 3 for 2 strategy as more number of quality items are being sampled.

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Secure market leadership Ensure profitable promotions Maintain and enhance the professional

hair care brands.‘3 for 2’ satisfies all the above requirements whereas 50p coupon may dilute the brand equity and GWP cannot sell as many products as to secure market leadership. So I would employ the ‘3 for 2’ strategy as a promotion strategy

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DISCLAIMERCreated by Aasish Gudi as a part of a marketing internship under Professor Sameer Mathur, Indian Institute of Management Lucknow.