H. What do you believe are the greatest challenges facing the sector or industry you would like to specialize in at IE? What role do you hope to be able to play in this sector or industry in the medium

term?

Sarah Strang SteelIE International MBA program

I would like to specialise in Sales and Marketing at IE and look forward to focusing on entrepreneurial management, negotiation & strategy. For the purposes of this presentation, I have chosen the premium UK Beauty Industry to show what I think are the greatest challenges in

this sector and the role I hope to play in the medium term.

Background market data on UK Premium Beauty Industry

* Data taken from NPD Panel YTD Dec 2012

Value sales FY 2012

Value Share % change vs 2011 FY

Total UK Prestige Market*

K£2,101,768 100% 5.1%

Total Fragrances K£1,143,970 54.4% 3%

Total Makeup K£488,652 23.2% 11.1%

Total Skincare K£469,146 22.4% 4.6%

TopRankings

Brands

1.

2.

3.

4.

5.

Types of Retailers

Retailers

Chains

Department stores

Premium

Challenge More detail on challenge My role in the medium term

1. Commercial Obstacles

Economy: The UK premium beauty market has continued to grow despite a fragile economy but this growth is driven not by full price, but by heavy reliance on discounting and promotions. The retailers force each other to compete thus creating a price war and eroding the value share of the market.

Seasonality: Beauty is very seasonal with heavy weighting on the ‘Christmas gifting’ season. For example, the last quarter of the year makes up 40% of the annual fragrance business. This means competition is fierce and there is no room for errors at this time of year.

Power of the Retailer:-Stock Management: With distribution centres becoming more efficient, retailers do not need the same levels of stock cover that they used to and so buy less from their suppliers.-Distribution: Suppliers are completely dependent on their retailers to distribute their products (A to B to C model) and merchandise them.

Economy: Through the creation of a joint strategy with each retailer, I would like to plan key periods for gifting promotions which drive incremental retail rather than erode the market. Launches are key to driving value in to the market. Through creative negotiation, I would offer each retailer a bespoke launch package, with different exclusive elements relevant to each retailer’s needs.

Seasonality: Winning market share at Christmas has to be a key focus for any beauty brand. As gift sets are the key retail driver, I would carry out careful forecasting as well as ensure a varied product offering to try to recruit through impulse buys as well as retain loyalty. To stand out amongst the competition, I would ensure retail excellence with beautiful in-store collateral, fully staffed counters and a gift wrapping service to ensure a luxury experience for the customer.Power of the Retailer:-Stock Management: Ultimately, both sides strive for optimum stock availability and I would like to put in place stock agreements and agreed launch buy ins as part of a partnership business plan.-Distribution: Retailer and supplier need to work together to invest and guarantee a luxury look and feel that best reflects brand identity. I would also like to explore the opportunity to open flagship stand alone stores.

2. Consumer Behaviour

Shopping habits: Consumers are now more savvy than they used to be as they have access to the internet to research products, compare brands and retailer promotions. This means that customers are no longer loyal to 1 brand – they are led more by innovation and value.

Shopping habits: I would like to embrace the fact that customers are now more knowledgeable. I would make sure ‘real’ consumers are reviewing our products so that we have online customer testimonials – stronger than any media campaign. I would retain loyalty by creating a ‘thank you’ scheme and creating a VIP panel of loyal customers who will have the chance to sample products before launch. Retailer loyalty cards offer insights in to customer habits – I would use this data to create a bespoke plan by retailer.

Challenge More detail on challenge My role in the medium term

3. Development Marketing

Research and Development is at the heart of bringing product innovation to the market. However, new launches need to be developed quickly so that they are still in line with market trends, and most importantly, so that they hit the market before competitors.

Private Label Brands: Large retailers take learnings from suppliers and develop their own private labels to launch products that are high margin and offer value to the customer eg No. 7 Boots owned brand. These brands take value out of the market.

Masstige brands: There has been an influx of niche ‘quirky’ alternative brands that position themselves between premium and mass, gaining customers who are trading up from mass, or seeking a cheaper alternative from luxury. They have posed a real threat to core luxury brands as their business model does not feature media, but just focuses on large staffing teams, PR and events.

Research and Development: I would like to work on a project to streamline the product development process so that launches can be more timely and efficient. I would like to champion a drive to always be first to market with innovation. Private Label Brands: These brand do not offer the level of expertise in scientific research and nor do they offer the ‘luxury experience’ through beautiful packaging and fully trained staff. I would like to make customers aware through media, that my brand can offer cutting edge ‘first to market’ technology and a tailor made experience that forms part of the ‘luxury’ dream.

Masstige brands: I think there are learnings to be taken from the business model of these brands. I would like to see if there is a way to incorporate some fun and humour in to our media, whilst still communicating the ‘science and expertise’ message. With the emergence of social media, this might come more easily through setting up beauty communities, allowing customers to upload looks and find products, and hold live make up artist chat rooms.

4. PR and Advertising Limitations

Advertising Restrictions: The Advertising Standards Authority is the UK’s independent regulator of advertising across all media. Rules are strict and large companies are often targeted. Brands are limited as to what claims & pictures they can publish. When a certain advert is banned, it leads to negative PR which can damage consumer trust.

Advertising Restrictions: Consumers, particularly in UK market, want to see the truth and so I would like to campaign for this in brand advertising. Why not use pictures showing imperfections with before and after shots to hero the efficacy of the product? This would be a positive move forward and I think a great PR story and consumer loyalty would grow off the back of it.