Emily Martin

IMC 617

Boots

Emily Martin Boots Final Assignment IMC 617

IM

Emily Martin

IMC 617

Boots

(Charles, 2009). Boots has a long history of providing beneficial health and beauty products at reasonable prices. As founder John Boot worked in the agricultural business, his interest in herbal healing spurred from his family and co-workers. (Richard Ivey School of Business, n.d.). Today, Boots has grown into a family of international pharmacy-based locations focused on health and beauty. (Boots, 2011). Currently Boots stores are available in four types of locations: Flagship stores which offer the widest range of products, big on new beauty Local Pharmacy stores are centered in the community, focused on healthcare Health and Beauty stores are on the edge of town, highly convenient Airport shops are available for travelers last minute needs. (Boots, 2011).

Boots carries innovative and fantastic products of various origins and categories within its 3,280 locations. (Boots, 2011). The company has created various product lines spanning health care to beauty, and even insurance. (Richard Ivey School of Business, n.d.). The wide variety of private label products offered creates a unique brand presence, with premium to massdistributed products. (Evison, 2006). Given its healthcare history, customers trust Boots from the perspective of a close friend, lending itself to being seen as an expert friend. (Evison, 2006). A Boots History Timeline 1849 (Richard Ivey School of Business, n.d.). 1913 1949
New black and white logo adopted, Scotland cosmetics factory opened

The hair-care 1883 market: 1877

Jesse Boot takes sole control of company after his fathers death in 1860 Boot and Company Limited is established as a private company, adopted new logo

1968
Boots launches 17 cosmetics line

1969
Ibuprofen introduced and launched as OTC brand for Boots

1999
Line extensions introduced: dentistry, chiropody, internet, insurance, & Boots for Men stores

John Boot opens The British and American Botanic Establishment based upon herbal healing

560 Boots stores open across the UK, generating over 2.5 million per year

Emily Martin

IMC 617

Boots

The hair-care market in Europe generated $16.7 billion in total revenues in 2008, with shampoo sales at the top of the list, generating $5.9 billion, 35.4% of the market. (Datamonitor, 2009). The UK accounted for 13.5% of the European hair-care markets revenue in 2008 (Datamonitor2, 2009). In 2007, shampoo and conditioner retail sales in the UK surpassed 706million, though plummeting to 700m in 2008. Shampoo accounted for 391m of the market in 2009 (Bainbridge, 2009), accounting for 33.9% of the overall sales. (Datamonitor, 2009). In 2008, the UK hair-care market increased sales by 2.3%, with a value of $2.2 billion, and is projected to increase to a value of $2.4 billion by 2013. (Datamonitor2, 2009). Hair-care products are generally sold in high volume to virtually all consumersThe UK market is currently exhibiting a low rate of growth (Datamonitor2, 2009).

Factors impacting the hair-care industry:

The following trends within the hair-care industry and the greater economy have impacted the manner in which consumers use products: Fashion styling trends impact the hair-care market. While the fashion industry inspires clothing purchases, customers seek styles and products seen on the couture runways. Essential purchases like shampoos had been cut-back or purchased only on promotion to save money, some consumers eliminating conditioner completely. During economic hardship, women have cut-back on going to the hairdresser, leaving them apt to purchase higher-quality, salon-finish products for maintenance between visits. Value-sized products were also popular, offering longer use per purchase.

Emily Martin

IMC 617

Boots

The aging population does not use product as often as younger consumers, leaving them less susceptible to promotional activity. However, given an explanation of how a specific product may affect them positively, older consumers would see more value for products made specifically for ageing hair. (Bainbridge, 2009).

In 2009, Boots was the center of a controversy surrounding grey market distribution of Paul Mitchell products within its flagship stores. (Charles, 2009). Paul Mitchells distributor, Salon Success, intended the brand to be sold exclusively in salons to preserve brand image. A separate distributor sold inventory to Boots stores, breaking that exclusivity. Considering the decline in salon visits and reduced dollar spend on high-cost hair-care products, some analysts believed Paul Mitchell should have reconsidered their strategy. (Charles, 2009). Brands wanting to retain exclusivity could face a dilemma as the recession takes its toll. (Charles, 2009). Those brands wanting to maintain exclusivity could face declined sales in the short-term, while brands that relent to the mainstream pressure may reduce long-term brand equity. Hence, the decision to alter distribution channels should consider long-term initiatives to determine whether or not to stay the course. As consumers spending power diminishes, the prospect of wider distribution through grey market channels should be embraced. Indeed, they may even be an opportunity, rather than a threat, for brands. (Charles, 2009).

Offers considered:
The hair-care market within the UK is highly competitive. Given low consumer brand loyalty and highly competitive environment, Boots would certainly benefit from promotional activity. The primary target for the promotional activity is the current Boots customer and existing purchasers of mass-market brands. Beginning December 1, the promotion will run for one month without the presence of advertising support in the media. Promoted items will be placed in prominent areas of the store: on end-caps or in mid-aisle displays. Point of purchase support 4

Emily Martin

IMC 617

Boots

includes in-store signage in all stores and 400 stores within the chain will utilize exterior signage as well as flyers to support the activity. The promoted items carry an average bottle size of 250 milliliters at an average price of 3.99 with average profit margins of 40%. Buy two hair-care items at regular price; receive one free (3 for 2): During the economic slump, two-for-one promotions have been used frequently. Limited-time twofers also play on the current consumer need to feel OK about spending money on anything. (Horovitz, 2009). Along these lines, Boots proposed three-for-two promotion carries the same tactical motivations. A market research study found 72 percent of customers questioned listed BOGOF as their favorite type of promotion. Similarly, BOGOF was the most recalled promotion type by shoppers. (Valentine, 2006). (Valentine, 2006).

A 2005 study found that joint bundle (Buy X and Y for $), compared with when it is presented as a Buy one get one free offer, consumers are willing to pay less for the product offered free. (Raghubir, 2005). When a product is offered for free, the offer devalues the product for consumers when the promotion ends, reducing the likelihood they will purchase it at full price. (Kamins, Folkes, & Fedorikhin, 2009). Consumers may discount the full price item as well. If a firm must offer free accompanying products in order to sell a full price product, the value of the full price items may be discounted in the mind of the consumer. As a result, offering a product for free could negatively impact not only the free item, but the focal product as well. (Kamins, Folkes, & Fedorikhin, 2009). In the long-run, consumers are more likely to respond to

Emily Martin

IMC 617

Boots

and hold a higher value for the bundled promotional items, as opposed to the free item later offered at full price. (Raghubir, 2005). Bundling products for one price was proven to create a higher total product value for consumers than when offering one of the products for free. The lasting impression of the value for both products was a result of detaching the word free from the promotion. The fact that customers prefer to not divide the value of the total bundle when given one price for multiple items attributes to the increased value perception of both items. The drawback of a mixed bundle (when two separate products are offered together as a bundle) may result from customers who are not (Kamins, Folkes, & Fedorikhin, 2009). interested in the additional items offered. Thus, the selection of items offered in a bundle is important to choose according to consumer preferences. When offering a free item accompanying a full price item, the context in which it is presented may also provide a higher value perception. (Kamins, Folkes, & Fedorikhin, 2009). In a short study presented to college students, Kamins, Folkes, and Fedorikhin (2009), found that when they presented the freebie offer as two products in a bundle to get familiar with the product or make them aware of the product, the value perception for the free item increased by almost one dollar (98 cents). Given this finding, marketers may increase long-term value and willingness to purchase at full price when a promotion is presented strategically as an introduction instead of a freebie. (Kamins, Folkes, & Fedorikhin, 2009).

Emily Martin

IMC 617

Boots

Boots may consider the 3 for 2 promotion in a period where the company wants to decrease inventory volume, moving through additional product rapidly. The negative perceptions mentioned above may result in decreased perceived brand value for both Boots and the branded hair-care products involved in the promotion. The long-term effects of the 3 for 2 offer may decrease consumer intention to purchase at full-price, since they have been exposed to the promotion. While the company does not expect customers to stockpile as a result of the offer, a tendency has been shown to purchase larger quantities of product when it is offered at a reduction. Hence, an additional concern may be the opportunity for customers to purchase product in bulk, while the promotion lasts. This activity may boost sales within the month; however negatively affect the sell-through in upcoming periods. Gift with Purchase (GWP): GWP promotions are widely-used incentives, improving deal valuations, purchase intentions, and sales. (Lee-Wingate & Corfman, 2010). They can generate as much as 65 percent of some cosmetic companies annual volume. (Naughton, 2008). Premiums are useful to encourage trial, induce brand switching and maintaining loyalty. Non-monetary promotions are more effective than simple discounts, they have a less negative effect on the brand than price promotions, and they are less sensitive to negative quality information. (Lee-Wingate & Corfman, 2010). They can also create quick-surge sales for a stipulated period of time. (Prendergast, et. al., 2008). Most gifts-with-purchase are designed to have practical appeal, appear to be intended for use by the purchaser, and are closely related to the item being purchased. (Lee-Wingate & Corfman, 2010). It has been identified that the premium must be related to the product or perceived to have value or quality to the consumer. Otherwise, consumers will not respond positively (purchase) to the host item. (Prendergast, et. al., 2008). In the current economic situation, customers often feel 7

Emily Martin

IMC 617

Boots

guilt about purchasing non-essential items. Guilt often accompanies and discourages selfindulgent, nonessential consumption. (Lee-Wingate & Corfman, 2010). GWP offers must be designed with special attention to appeal to the user via the relation to the product, offering an opportunity to counterbalance self-indulgence, or to create a special use for someone else in the purchasers life. Lee-Wingate & Corfman (2010) found that GWP offers diminish guilt when (a) the gift is guilt-neutral (e.g., practical or necessary) and intended for use by the purchaser or when (b) the gift is guilt-inducing (e.g., hedonic or self-indulgent) and intended to be enjoyed by someone else. (Lee-Wingate & Corfman, 2010). Gifts intended for use by the purchaser should be guilt-neutral. If the gift is intended for use by someone different from the purchaser, the gift should be communicated as such within point-ofpurchase messages. (Lee-Wingate & Corfman, 2010). Opposite of guilty purchasers, premium proneness may also affect purchase decision. Fondness for purchasing items when offered with a premium is referred to as premium proneness. (Prendergast, et. al., 2008). Compulsive buyers are those who purchase repetitively and excessively, acting upon powerful, uncontrollable urges to purchase. Research has found ten percent of the US population can be considered compulsive buyers, (Prendergast, et. al., 2008) considering freebies irresistible. A product for free is an implausibly good deal (unless, or course, the freebie is a product of trivial value). (Kamins, Folkes, & Fedorikhin, 2009). All consumers fall subject to compulsive purchases at one time or another. Consumers with compulsive buying tendencies are prone to have a greater response to premiums. It was found that deal proneness, compulsive buying tendency, and variety-seeking tendency were significantly and positively related to premium proneness. (Prendergast, et. al., 2008). Dealproneness was found to be the single largest predictor of premium response among the three 8

Emily Martin

IMC 617

Boots

variables. The results were consistent with studies in the UK, where it was found that that promotion junkies are attracted to GWP promotions. (Prendergast, et. al., 2008). Time-strapped consumers will reduce their decision-making time at point of purchase. GWP offers can create the added incentive to purchase one item over another, providing decisionmaking motivation during time-pressured shopping visits. (Prendergast, et. al., 2008). Customers have been proven to be more promotion-sensitive when faced with a larger selection as well. GWP can create the purchase motivation when multiple products are presented. (Prendergast, et. al., 2008). Prendergast, et. al. (2008) suggest that when facing information overload (as might be the case when facing a variety of choices), customers tend to resort to simple decision rules. Those consumers who seek variety will fulfill their need by way of promotional premiums. High variety seekers are more sensitive to promotional effort. (Prendergast, et. al., 2008).Hence, premiums are widely offered when the product category holds several alternative brand competitors. On-pack coupon (50p off): Analysis suggests that when brand managers select package coupons, the criterion for use should be thoughtfully laid out: market share, desired redemption rate, and profit impact. Package coupons that lead to the highest market share (or redemptions) may not lead to the highest profit impact. (Dhar, Morrison, & Raju, 1996). Those who seek variety and immediate satisfaction tend to respond better to front-loaded promotions, which include on-pack peel-off coupons. However, for a more sustainable profitability, rear-loaded promotions are optimal. (Zhang, Krishna, & Dhar, 2000). Redemption rates for package coupons are estimated to be five times higher than those of coupons distributed in alternative methods. (Dhar, Morrison, & Raju, 1996).

Emily Martin

IMC 617

Boots

On-pack coupons intended for future use are prone to create long-term consumption and higher market share, as opposed to the immediate, short-term reactions of automatically redeemed onpack coupons. (Dhar, Morrison, & Raju, 1996). This assertion is justified by the fact that immediately redeemed coupons spurs the singular purchase of the item during the same visit, whereas on-pack coupons intended for future use require the consumer to make the initial purchase and then redeem the coupon at a later date. This spread-out redemption process captures the consumer purchase twice, instead of only once. (Dhar, Morrison, & Raju, 1996). When selecting coupon redemption terms, immediate redemption should be used for weak brands, while future redemption strategies should be used for established brands. (Dhar, Morrison, & Raju, 1996). Front-loaded incentives are effective in luring customers away from competing brands. (Zhang, Krishna, & Dhar, 2000). Peel-offs enhance the consumers choice probability on the first purchase, but do not affect the repurchase probability. (Dhar, Morrison, & Raju, 1996). Immediate value promotional (front-loaded) incentives provide the consumer with an immediate reward, and the retailer with an immediate purchase. However, they do not consistently produce the repeat purchase that leads to extended market share and prolonged profitability. (Zhang, Krishna, & Dhar, 2000). A study performed by Valentine (2006) indicated on-package promotion response doubled in 2005. Health and beauty items were the most noticed (by one-fifth of respondents) when onpackage promotions appeared, followed by canned and bottled drinks. (Valentine, 2006). Given the findings, on-package coupons for immediate redemption would not be the optimal promotion to meet Boots objectives for the period. The on-pack coupon would immediately promote purchase and even induce brand switching. However, the long-term return on investment would not be profitable. An optimal promotion utilizing coupons would be to include an on-pack 10

Emily Martin

IMC 617

Boots

coupon intended for future use featuring a significant savings. According to the above studies, the consumer would be provoked to purchase immediately and return for future use, prolonging the purchase intent and keeping Boots and the hair-care brand at the top of the consumers mind.

Discussion, Justification, Implications

According to a 2010 survey, slightly over half of the respondents purchased a product due to a promotion within the past three months. (Valentine, 2006). Bainbridge (2009) asserts that one quarter of women wait to purchase their favorite brands until a price promotion is offered. Thomas Hine, author of I Want That! How We All Became Shoppers, suggests In times of economic uncertainty, (Valentine,2006)

people are more willing to make a purchase if they feel theyre being responsible. (Horovitz, 2009). Hine adds that those customers may also be coerced into buying items they may not need. (Horovitz, 2009). When deciding upon products that are perceived as important, consumers will take more time and pay more attention to their choice. Health and beauty products can evidently fall into that category and can be easy to remember. (Valentine, 2006).

Proposed method
Gift with purchase + On-pack coupon Boots intends to increase immediate sales within the short-term, boosting sales within a one month period beginning December 1. The long-term objective of any efforts in business should ultimately gain consumers and retain market share through repeat purchase. Boots can increase existing consumer loyalty and win brand-switcher dollars in the long-term by offering an attractive GWP + on-pack coupon promotion. Although this promotional tactic has not been discussed, the combination of two proven successful activities will enhance the short-term

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Emily Martin

IMC 617

Boots

promotion by driving immediate sales and provide the opportunity for repeat purchase and more valuable brand loyalty in the long-term. Supporting elements of the promotion include: Employee support through interactive greetings featuring the offer, distributing flyers, and suggestive selling Exterior signage in 400 stores featuring an image of the sample-sized gift along with the fullsized host products, prominently communicating the free offer and an added bonus coupon. Visual display will be added to the windows featuring the promoted items stacked in a cart along with the banners in these stores. Interior signage promoting the hair-care segment, directing the consumer to the beauty section to find their gift End-of-aisle signage End-of-aisle display space On-package coupon for future purchase of the sample product

Shelf edge communications are the most noticed types of signage within the store. (Valentine, 2006). Shelf-edge product placement will appeal by attracting immediate attention. (Prendergast, et. al., 2008). To add to the appeal of the promotional posture, the free gifts will be included on the host product, giving the consumer no (Valentine, 2006).

doubt there is a special offer surrounding the product. Considering Boots will be using existing sample-sized products, in the event the sample products sell-out, they can switch the sample products according to inventory levels of other hair-care products. Premiums can be changed often without negative reaction from the consumer, given the financial ease of switching premium items, and the tendency of the targeted audience to accept change (brand-switchers,

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Emily Martin

IMC 617

Boots

promotion junkies, compulsive-buyers). (Prendergast, et. al., 2008). This could induce prolonged interest in the promotion beyond sole interest in the base product. The GWP offer appeals to many different types of consumers: compulsive buyers, guilt-laden consumers, overwhelmed lookers, premium-prone purchasers, time-strapped shoppers, and variety seekers to name a few. Given the target audience for this promotional period is the existing Boots customers, which includes busy mothers and young women, GWP would appeal to their fast-paced lifestyle. The economic situation has impacted their ability to purchase nonessential items, where GWP may alleviate that guilt. The busy consumer would have a tendency to purchase the GWP items over other brands due to the rationale of receiving a free item with an item they already desire, saving time during the decision-making process. Compulsive purchasers and premium purchasers have been proven to purchase GWP items. The mass appeal of the GWP and the proven success rates in similar industries indicate this promotion is beneficial for successful short-term sell-through. A GWP in combination with an on-pack back-loaded coupon promotion is the optimal method to drive immediate sales and promote future purchase. To fulfill Boots sales expectations within the month of December as well as to drive sales beyond the short time frame, a GWP + coupon promotion would provide optimal results.

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Emily Martin

IMC 617

Boots

References
Bainbridge, Jane. (2009, August 26). Downturn washes out value. Marketing, 00253650. Retrieved October 18, 2011 from http://web.ebscohost.com Boots. (2011). About Boots. Retrieved October 17, 2011 from http://www.bootsuk.com/About_Boots.aspx Charles, Gemma. (2009, February 25). Far from black and white. Marketing, 00253650. Retrieved October 16, 2011 from http://web.ebscohost.com Datamonitor. (2009, July 1). Haircare in Europe. Datamonitor, reference code: 0201-2242. Retrieved October 15, 2011 from http://web.ebscohost.com Datamonitor 2. (2009, July 1). Haircare in the United Kingdom. Datamonitor, reference code: 0183-2242. Retrieved October 15, 2011 from http://web.ebscohost.com Dhar, Sahjay K., Morrison, Donald G., & Raju, Jagmohan S. (1996, March 1). The effect of package coupons on brand choice: an epilogue on profits. Marketing Science, Vol. 15, Issue 2. Retrieved October 17, 2011 from http://web.ebscohost.com Evison, Jane. (2006, November). Beauty and glam. Global Cosmetic Industry, Vol. 174, Issue 11. Retrieved October 18, 2011 from http://web.ebscohost.com Horovitz, Bruce. (2009, February 26). 2-for-1 offers ease shoppers guilt. USA Today. Retrieved October 167, 2011 from http://web.ebscohost.com Kamins, Michael A., Folkes, Valerie S., & Fedorikhin, Alexander. (2009, December 1). Promotional bundles and consumers price judgements: when the best things in life are not free. Journal of Consumer Research, Vol. 36, Issue 4. Retrieved October 16, 2011 from http://web.ebscohost.com Lee-Wingate, Sooyeon & Corfman, Kim. (2010, December). Marketing Letters, Vol. 21, Issue 4. Retrieved October 16, 2011 from http://web.ebscohost.com Naughton, Julie. (2008, August 22). Nordstrom, Trina Turk, Clinique team up for gwp. WWD: Womens Wear Daily, Vol. 196, Issue 40. Retrieved October 17, 2011 from http://web.ebscohost.com Prendergast, Gerard P., Poon, Derek T. Y., Tsang, Alex S. L., & Yan Fan, Ting. (2008, June 1). Predicting premium proneness. Journal of Advertising, Vol. 48, Issue 2. Retrieved October 16, 2011 from http://web.ebscohost.com Raghubir, Priya. (2005). Framing a price bundle: the case of buy/get offers. Journal of Product & Brand Management, Vol. 14, Issue 2. Retrieved October 16, 2011 from http://web.ebscohost.com 14

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IMC 617

Boots

Richard Ivey School of Business. (n.d.). Boots: hair-care sales promotion. The University of Western Ontario, 95A22. Retrieved October 12, 2011 from https://ecampus.wvu.edu Valentine, Matthew. (2006, April). The shoppers speak. In-Store. Retrieved October 18, 2011 from http://web.ebscohost.com Zhang, Z. John, Krishna, Aradhna & Dhar, Sanjay K. (2000, March 1). The optimal choice of promotional vehicle: front-loaded or rear-loaded incentives? Management Science, Vol. 46, Issue 3. Retrieved October 17, 2011 from http://web.ebscohost.com

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