Delivering Customer Value Through Marketing Case Study June and September 2012

Professional Diploma
in Marketing
(Level 6)
541 Delivering Customer Value Through Marketing

Case Study
June and September 2012

Lush
The Chartered Institute of Marketing 2012

Delivering Customer Value Through Marketing Case Study June and September 2012

Delivering Customer Value through Marketing Case Study

Important guidance notes for candidates regarding the pre-prepared analysis
The examination is designed to assess knowledge and understanding of the Delivering
Customer Value through Marketing syllabus, in the context of the relevant case study.
The examiners will be marking candidates scripts on the basis of the questions set.
Candidates are advised to pay particular attention to the mark allocation on the
examination paper and plan their time accordingly.
Candidates should acquaint themselves thoroughly with the case study and be
prepared to follow closely the instructions given to them on the examination day.
Candidates are advised not to waste valuable time collecting unnecessary data. The
cases are based upon real-life situations and all the information about the chosen
organisation is contained within the case study. No useful purpose will therefore be
served by contacting companies in the industry and candidates are strictly instructed
not to do so as it may cause unnecessary confusion.
As in real life, anomalies may be found in the information provided within this case
study. Please state any assumptions, where necessary, when answering questions.
The Chartered Institute of Marketing is not in a position to answer queries on case
data. Candidates are tested on their overall understanding of the case and its key
issues, not on minor details.
As part of the preparation for the examination, candidates will need to carry out a
detailed analysis of the case material ahead of the examination. Candidates will find
that the time available during the examination is sufficient to answer the compulsory
questions, but only if detailed analysis has been undertaken beforehand. When
compiling their analysis, candidates should only use the information found within the
case, supported by their knowledge and understanding of the syllabus.
Candidates are encouraged to use a range of analytical tools and models in order to
undertake a thorough investigation of the key aspects of the case. This will improve
their understanding of the case and the issues faced by the organisation(s) and/or
industry sectors to which it relates. Clearly, the analysis required will vary depending on
the specific case content but, as a guide, candidates should consider undertaking the
following:

analysis of the external environment using PESTEL analysis

analysis of the competitive environment using Porters Five Forces model
strategic review using Ansoffs matrix and/or Porters generic strategies
stakeholder analysis
detailed review/analysis of each of the marketing mix elements
product/portfolio analysis (eg using product life cycle analysis, BCG (Boston
Consulting Group) matrix, GE (General Electric) matrix
SERVQUAL
SWOT analysis.

The copying of pre-prepared group answers, including those written by

consultants/tutors, or by any third party, is strictly forbidden and will be penalised by
failure. The questions will demand analysis in the examination itself and individually
composed answers are required in order to pass.
Candidates will then need to condense their analysis into a FOUR side summary (a
maximum of four sides of A4, no smaller than font size 11. The content of tables,

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models or diagrams must be in a minimum of font size 8). The analysis should be
numbered for ease of reference when answering the examination questions.
Candidates must hole-punch their analysis and staple it in the top left hand corner.
They should write their CIM membership number and examination centre name in the
top right hand corner of each page of the analysis. It should then be attached to the
answer booklet on completion of their examination, using the treasury tag provided.
Although no marks are awarded for the analysis itself, candidates will be awarded
marks for how the analysis is used to answer the questions set. Candidates are
advised not to repeat or copy the analysis summary when answering the exam
questions. It is important that candidates refer the examiner to the analysis summary,
where and when appropriate, when answering the questions.
Candidates are only permitted to take their analysis into the examination room.
Candidates are not permitted to take in the downloaded case study or any other notes.
The invigilator will issue candidates with a new clean copy of the case study at the start
of the examination along with the question paper.
Candidates may not attach any other additional information in any format to their
answer book. Any attempt to introduce such additional material will result in the
candidates paper being declared null and void.
The Chartered Institute of Marketing reserves the right not to mark any
submission that does not comply with these guidelines.
Important Notice
The following data has been based on real-life organisations, but details have been
changed for assessment purposes and do not necessarily reflect current management
practices of the industries or the views and opinions of The Chartered Institute of
Marketing. Figures used in tables may differ as they have been compiled from different
sources, using a range of criteria.
Candidates are strictly instructed NOT to contact individuals or organisations
mentioned in the case study or any other organisations in the industry. Copies of the
case study may be obtained from:
The Chartered Institute of Marketing, Moor Hall, Cookham, Berkshire SL6 9QH, UK or
may be downloaded from the CIM student website www.cimlearningzone.co.uk
The Chartered Institute of Marketing 2012. All rights reserved. This assessment, in
full or in part, cannot be reproduced, stored in a retrieval system, or transmitted in any
form or by any means, electronic, mechanical, photocopying, recording, or otherwise,
without prior written permission of The Chartered Institute of Marketing.

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Delivering Customer Value Through Marketing Case Study June and September 2012

DELIVERING CUSTOMER VALUE THROUGH MARKETING

CASE STUDY
Preparation
In preparation for the examination you will need to analyse the Lush case material
provided, in order to prepare your analysis of the company. You will be given a clean
copy of the case study on the day of the examination, but you must bring your analysis
with you into the examination. Your written analysis must not exceed FOUR A4 sides
and must include your CIM membership number on each page. The written analysis
must be submitted as appendices on completion of the examination and attached with
a treasury tag to your answer book.
Role
You are employed as a marketing consultant in the Health, Beauty and Toiletries
sectors. You have been asked to advise Lush on a number of marketing related issues,
including the companys approach to:

product development, positioning and brand management

managing customer relationships
marketing communications in support of other elements of the marketing mix
pricing
distribution and channel management.

In addition, you have been asked to particularly focus on Lushs ethical and
environmental credentials in the context of its objectives and strategies.

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Case Study: Lush

Introduction
Mark and Mo Constantine founded Lush in 1995 and in the space of just over 15 years
their brand of fresh handmade soaps and other cosmetics has become widely
recognisable and highly successful. Lush products are made largely from fresh
ingredients, including organic fruit and vegetables, which are sourced, where possible,
according to Fairtrade principles. The company invents its own products and
fragrances, which are then handmade using vegetarian ingredients and the finest
essential oils. A key principle that governs the companys operations is its commitment
to buying ingredients only from organisations not involved in animal testing. All of
Lushs products are tested on humans only. The owners have been quoted as saying
that they believe 'fresh' and 'organic' have an honest meaning beyond marketing. They
also believe that their products are good value and that the customer is always right.
Lush Fresh Handmade Cosmetics Ltd (Lush) is a privately owned, UK based company.
It enjoyed global sales of around 240 million in 2009, up from 194 million in the
previous year. Despite a 4% fall in sales in the UK in 20091, the company expected
overall profits to increase by 10% (Sanghera, 2009).
The companys core proposition is based on the use of ethical and natural materials
and processes. By using a combination of franchises and partnerships, it has grown
very rapidly over the decade and a half since it was established. From a single store in
Dorset, UK in 1995, it had around 600 stores in 2009 across 46 countries, including
Russia, Japan and the USA. Sales in the US alone were worth 35 million in 2009
(Sanghera, 2009). The number of stores has continued to increase, reaching 689 in
2010 (Lush, 2010) and the company employs 6,000 people. Production, which is
largely manual using predominantly natural ingredients and with no animal testing, is
shared between five plants. Packaging is kept to a minimum, thus ensuring that every
Lush store has a fragrant smell of soap and other scents. The company currently offers
around 294 different products, in the UK range, that are presented as wholesome and
fresh none of the items found in store are more than six months old.
Lushs approach to marketing is also distinctive in that it does not adopt many of the
standard methods. Instead it relies wholly on in-store advertising, word of mouth
recommendations and PR. At the time the company was launched, observers and
analysts opinions about this approach were divided. Either the whole approach would
prove enough of a differentiator to enable the company to prosper or it would lead to its
downfall, with the company unable to grow or capitalise on its initial success.
As part of its ethical culture, 2% of the profits from Lush are donated to charity. It uses
Fairtrade sources where possible and has some product lines whose entire proceeds
are donated to charity (including the Dorset Wildlife Fund and the Sumatran Orangutan Society). It has made a concerted effort to find alternatives to palm oil, a common
ingredient in cosmetics but one that is associated with the destruction of rainforests,
especially in South East Asia. In 2010, Lush announced that it had found an
alternative, using a combination of oils, and promoted its discovery to encourage other
soap manufacturers to make the switch (Siegle, 2010).
Lush is regularly listed in The Sunday Times 100 Best Companies To Work For and in
2010, based on a poll of over 14,000 consumers, the company was voted one of the
1

Note: These figures relate to the calendar year January to December 2009. Other figures quoted later in
this case study relate to the financial year July to June.

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Delivering Customer Value Through Marketing Case Study June and September 2012

top three retailers in the UK (Eckerall, 2010). The company prides itself on creating a
sense of fun in its stores, with careful attention to customer service.
Origins
Mark Constantine had a lifelong interest in makeup but being unable to gain access to
the industry as a male, he entered hairdressing instead. His first business venture, after
training in hairdressing and specialist scalp treatments known as trichology, was as a
founding director of Constantine and Weir plc, formed in 1976 and dedicated to
producing bath and beauty products from natural ingredients.
The organisational structure was intentionally very flat, with the directors having direct
involvement in day-to-day operations. At the outset, the company adopted an
unconventional and creative approach to its products and business operations.
Cosmetics were created by hand, using a range of natural ingredients, such as fruit
and vegetables, and were made available in unusual colours with eye-catching names.
The products were presented in store as if they were food items in a delicatessen on
wooden counters with little or no packaging and sold by weight.
Constantine and Weir made its products available to a number of customers, one of
whom happened to be Anita Roddick, founder of The Body Shop. The Body Shop went
on to become widely acknowledged as an innovative enterprise founded on ethical
principles, with spectacular results, but at this stage (1976) had only just opened its
second store. Roddicks confidence in their products quickly ensured that Constantine
and Weir became a regular supplier of The Body Shop. The success of each company
contributed to the growth of the other. Constantines influence had a major impact on
Roddicks own approach to business, with many of The Body Shops leading items
being produced by Constantine and Weir. These included classics such as peppermint
foot lotion, honey beeswax cleanser, herbal hair colours and body butters, pushing
Constantine and Weirs annual sales in the 1980s as high as 8.5 million.
However, the relationship between Constantine and Roddick became strained, as a
result of a number of actions by The Body Shops founder. In 1984, The Body Shop
was floated on the stock exchange and this led to a review of its reliance on suppliers.
In particular, it was recognised that The Body Shop was in danger of being overly
dependent on a single supplier, Constantine and Weir. Accordingly, Constantines
influence lessened and fewer of his companys innovative products were adopted. In
turn he became concerned about his dependence on The Body Shop and the risk of it
seeking alternative suppliers or producing its own goods. As a result, Constantine
started a mail order business called Cosmetics to Go and sold the manufacturing rights
in Constantine and Weir to The Body Shop for 11 million in 1990 (as reported on the
Lush website). Later, in 2001, after the creation and success of Lush, Constantine
made a bid to buy The Body Shop, although this was unsuccessful. Instead, it was
purchased, controversially, by LOral, a company whose own ideals and methods
seemed at odds with the approach taken by The Body Shop.
Like Constantines previous endeavours, Cosmetics to Go featured ethical and natural
cosmetic products that had not been tested on animals and which relied on manual
manufacturing methods. The online catalogue contained a wide range of new products
with inventive names and very limited use of packaging.
Cosmetics to Go enjoyed rapid success, which quickly became unmanageable. Fairly
soon it was unable to satisfy customer demand. In addition, inadequate stock control
often meant that the company ran short of items in demand. Its pricing strategy was
confusing and promotion was expensive, and not always successful. All these factors

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led to the failure of Cosmetics to Go in 1994 with debts estimated at 2 million (quoted
in Jenkinson and Sain, 2003). The company was sold off with all of its equipment and
machinery, and continues trading to the present day under new ownership using the
original name.
Lush
Out of the disappointment of Cosmetics to Go, the Constantines formed Cosmetic
House Limited in 1994, changing its name to Lush the following year. Its trademarked
name is written in uppercase letters as LUSH and was chosen to convey greenness,
freshness and a certain amount of frivolity (in one meaning, lush is a slang term for a
person who drinks too much alcohol). At first, the Constantines and their business
partners created products at home in their kitchens using ordinary domestic
appliances, having sold off everything with the collapse of Cosmetics to Go. They
experimented with unconventional ingredients such as lemon, orange and cinnamon.
Initially, Lush sold its products through car boot sales, being restricted by a clause in
the sale of Constantine and Weir from going into direct competition with The Body
Shop. This, however, no longer applied from 1995, at which point Lush opened its first
store. The profits from this store allowed Lush to open a second store in 1996 and
further growth resulted in a total of 25 stores by 1998. Some of these were funded
directly by external investments, evolving into partnerships in Canada and Australia
and enabling expansion on a global scale.
In addition to selling through its stores, Lush also uses its website and mail order
catalogue to make its products available to a wide audience. Its online offer is
comprehensive and sales went up by about 25% year-on-year in 2009. This channel
helps the company to reach a wider audience than it can just through the stores.
Repeat purchases are common and an important part of the companys success is
supported by its ability to promote new products to existing customers. In addition to
in-store advertising, the catalogue and the website, Lushs only other form of marketing
is PR, placing press articles to create maximum profile.
The Lush customer experience
Lush looks for premium sites for its stores. This means high profile positions in close
proximity to other stores selling up-market products. This enables the company to
promote a premium image without the need for direct advertising. The displays are
designed to intrigue and entice passers-by inside. The walls are often brightly coloured
and the interior warm and inviting. Because of the absence of packaging, together with
the fact that the products are freshly made (none being more than six months old), one
of the most striking features of a visit to a Lush store is its fragrant aroma. Products are
often laid out like food, on bare wooden benches, in baskets or on shelves, and many
sold loose by weight. Many of them even resemble food such as ice cream cones,
slices of pie, cakes, lollipops, fruit and vegetables. Some are wrapped in greaseproof
paper. The colours of the products are equally arresting. Overall, through the
combination of smell, vivid colours and being able to feel the textures of the products
directly without intervening packaging, the Lush experience is a powerful and sensual
one.
Customers are able to buy with the confidence that no product has been tested on
animals and that a portion of profits will go to help protect the natural world and
promote ethical ideals. For some of the products (Charity Pot), there is a guarantee
that 100% of the proceeds go to charities as chosen by staff. Gift wrap is usually in the
form of a cloth designed to be used as a scarf afterwards rather than paper to be

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Delivering Customer Value Through Marketing Case Study June and September 2012

thrown away. Hand-written signs describing products add to the sense of authenticity
and naturalness.
The involvement by staff in committing to the same ethical principles as the company is
an important feature. Staff surveys reveal that Lush employees tend to feel a very
strong sense of solidarity with management in support of corporate social
responsibility. It is also clear that staff enjoy working for the company and are happy to
work in their teams to deliver excellent customer service. Teams enjoy active social
lives outside work, which contributes to a lively in-store atmosphere.
Part of the secret of keeping staff positive about their work is ensuring that they are
involved in decision making. The management structure is flat and within the UK there
are no area managers, meaning that decisions are taken locally by teams taking
responsibility for manufacturing or retail. Individual products bear the date they were
produced and a sell-by date, together with a cartoon of the individual at Lush
responsible for creating it. Product lines are changed on a regular basis to maintain
interest from customers as well as staff. 15% of products are replaced each year, with
a target to increase this to 30%. There is also a policy of keeping stock levels low in
shops and factories to maximise the rate of turnover.
Staff training is very important in order to safeguard the levels of customer service that
Lush customers have come to expect. Rather than a hard sell, staff are encouraged to
give advice, provide demonstrations and be enthusiastic about the products. The
personal involvement staff feel in the company and its goods clearly makes this more
likely. Customers similarly feel connected personally through the rich and happy
environment and the motivation of staff.
Product development
Over a period of time, from the beginning of Constantine and Weir to the present, the
Constantines have built a team of highly creative individuals, with Mo Constantine
taking the lead in overseeing product development. Working in a kitchen was a
necessity at one stage as there was nowhere else available, but this style of
environment became established as the norm. The products are often highly
individualistic and sometimes it is necessary to educate consumers. For example, the
introduction of bath bombs that fizz in the water while dissolving initially caused
consternation at The Body Shop, but soon became firm favourites. On average one
new product is launched every week, while those that are under-performing are
eliminated just as quickly. The speed of introduction also requires innovative forms of
marketing. In fact, much of it is distinctly atypical. The personal tastes of the staff and
directors are used as a guide to determine what new products to introduce. Feedback
from staff and customers is used to judge their success or otherwise. Word of mouth
plays an important role in promotion. A lively online users discussion forum is also a
very useful source of ideas and input to the creative process. The withdrawal of a
product can sometimes lead to angry complaints by customers. Lush has a very
innovative solution to this problem. It offers previously withdrawn products exclusively
by mail order at a premium price.
Raw materials
The following is a sample of the raw materials used in a single year:

25 tonnes of organic fruit

50 tonnes of fresh fruit and vegetables (locally sourced where possible)

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the oil from 20 million Sicilian lemons, 6 million bergamot fruits and 900,000
Sicilian mandarins
10 tonnes of organic coca butter (Fairtrade)
the juice of 90,000 zest lemons and 33,000 oranges
8,000 bunches of fresh flowers
20 tonnes of olive oil from 30,000 olive trees.

Market positioning
Lush has a strong niche appeal. Its position as a provider of affordable, everyday
indulgences with a young, funky image, sold in bright lively stores in high footfall
locations, provides it with a competitive edge. This is reinforced by the companys
approach to ethical buying, minimal packaging, non-animal testing and fresh
handmade products from natural ingredients. Mintels research indicates that ethical
responsibility is one of seven key consumer behaviour trends for the year ahead.
Forecasts indicate that consumers will be scrutinising ethical claims and there will be
more activity in eco-friendly labels. Lush is already ahead of the game in this area.
Store portfolio and sales
According to Mintel, Lushs underlying revenues are declining in the UK. Weaker
financial performance has been coupled with rising costs. Despite this decline, Mintel
reports that Lush is still seen as the most engaging, indulgent and vibrant of the top
brands, but needs to convert those strengths into store growth.
In 2007, Lush opened 12 new stores in the UK but as the economy began to slow
down, average sales per store fell, as shown in the following table:
Lush Retail Ltd UK: 2004 2010
At June
Outlet numbers
Sales per outlet (000)

2004
63
507

2005
64
497

2006
73
516

2007
85
495

2008
87
490

2009
87
477

2010
86
473

Source: Mintel, Beauty Retailing - UK, Retail Intelligence, January 2010 with additions from Lush

Further expansion remains slow, with only four stores opening in the year from June
2008. This took the number of UK stores up to 91 in 2009.
International stores
In June 2008, Lush had 546 stores, operating in 37 countries throughout the rest of
Europe, Asia, North America and Australia. These included 24 stores in Germany, 17
in Italy, 11 in France and 8 in Spain. It also operates an e-commerce facility in the
Netherlands. The company has a small presence in Belgium, Slovakia, Estonia,
Austria, Sweden and Russia.
In January 2012 Lush reported having over 750 stores across 46 countries. However,
the number of stores is always fluctuating.
Asia accounts for 21% of total revenue and is Lushs most significant international
market. North America accounts for the most store openings, with 33 new outlets in
2007/2008. This included 11 in-store shops in Macys department stores.

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In-store spas
The opening of an in-store spa in 2009 enabled the company to extend its range into
spa products. It is planning to introduce 12 spa treatments and the service is to
become available in up to six stores between 2009-2012. This may help to overcome
the current problem facing the company of falling incremental sales growth despite new
product development.
Global Financial performance
The Lush group more than doubled its global operating profit in the year to June 2008
to 18.4 million. International expansion, especially in North America and Japan helped
to increase sales by 28% to 153.2 million. European operations, excluding the UK, are
relatively small, accounting for 12% of total revenue or 18.4 million (25.2 million).
However, higher costs, as a result of the rising price of raw materials coupled with
rising occupancy and staff costs, and higher overheads associated with new store
openings, have resulted in the UK business making an operating loss.
UK Financial Performance 2004 2010 (million): Lush Retail Ltd
Latest year end: June 2008

2004 2005 2006 2007 2008 2009 2010

Sales (m excl. VAT)

Sales (m excl. VAT)
Operating profit (m)
Operating margin (%)
Pre-tax profit (m)

24.4
35.9
1.5
6.2
1.5

31.3
46.0
1.1
3.4
1.1

35.1
51.6
0.4
1.0
0.4

39.1
57.5
-1.4
-3.5
-1.4

41.7
52.1
-1.5
-3.6
-1.5

41.0
49.2
-3.4
-8.2
-3.3

44.2
53.0
-2.3
-5.3
-2.3

Source: Mintel, Beauty Retailing UK, Retail Intelligence, January 2010 with additions from Lush

Policy on animal testing

Lushs hard line on animal testing is such that not only will the company desist from
any testing of its own products or their ingredients on animals (other than humans), it
will also avoid purchasing from a supplier that tests any of its products or ingredients
on animals. This is quite unique in the cosmetics industry and has led to the creation of
Lushs Supplier Specific Boycott Policy. Many of Lushs competitors, even those that
consider themselves to operate on strong ethical principles, may allow themselves to
trade with suppliers who refrain from animal testing for those products they wish to
purchase, while engaging in such tests on other materials or for other purposes.
A commonly adopted standard (the Humane Cosmetics Standard) requires adherence
to a cut-off date policy. This means the company agrees that it will no longer carry out
animal testing for its products or ingredients henceforth. However, this allows it to
continue to sell substances that have been tested prior to the cut-off date. Lushs own
policy is stricter than this, as the company has opted to eliminate any substance or
product that has been tested on animals or provided by a supplier that uses animal
testing for any reason (such as cosmetics, food or pharmaceuticals). Suppliers to Lush
are required to sign a statement to attest their adherence to Lushs own policy, with an
annual confirmation.
The directors of Lush have adopted this approach as they feel it is more effective in
moving manufacturers and suppliers towards a cruelty-free position. If a company
wants to do business with Lush it knows it must eliminate animal testing from its
activities.
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In the absence of animal testing, Lush draws upon tests on human beings. It argues
that not only is this method more humane, it is actually more appropriate and effective.
Animal testing, as a method of checking on safety for human use, is flawed and
unreliable. Volunteers form a panel of assessors in order to confirm that each Lush
product is safe before it is launched. This activity is not as hazardous as it may sound,
since most of the ingredients Lush uses are natural and are known to be safe. Even the
small number of synthetic ingredients used are limited to those with a well-established
record for safety.
Pricing
In general Lush does not compete on price. Instead, it largely differentiates itself from
its competitors through product innovation and image. The exception is with close
competitors such as The Body Shop. In this instance, Lush tends to price itself lower.
Otherwise, it is able to command prices above those offered by alternative products,
such as those sold at convenience stores and supermarkets. Lush customers are
prepared to pay for what they regard as superior products, together with a superior
customer experience, its ethical stance and the natural raw materials that are used to
create the products.
The company tends to attract those with higher than average levels of disposable
income that are not only willing but also able to pay premium prices. The profit margins
on Lush products are quite tight, because their production is very labour-intensive.
However, despite the brand being perceived as a premium product, it is comparatively
affordable as a product offering.
Lush mission and values
Lushs mission statement comprises a set of beliefs.

We believe in making effective products from fresh organic fruit and vegetables, the
finest essential oils and safe synthetics.

We believe in buying ingredients only from companies that do not commission tests
on animals and in testing our products on humans.

We invent our own products and fragrances, we make them fresh by hand using
little or no preservative or packaging, using only vegetarian ingredients and tell you
when they were made.

We believe in happy people making happy soap, putting our faces on our products
and making our mums proud.

We believe in long candlelit baths, sharing showers, massage, filling the world with
perfume and in the right to make mistakes, lose everything and start again.

We believe our products are good value, that we should make a profit and that the
customer is always right.

We also believe words like 'Fresh' and 'Organic' have an honest meaning beyond
marketing.

These beliefs inform Lushs policies. For example, its environmental policy is based on
a desire to have a positive impact on the planet, which leads the company to seek
innovative solutions. One such innovation is solid bars of shampoo, which do not

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require any packaging (and certainly not a bottle). According to its own estimates, this
alone has resulted in the saving of over six million plastic bottles. It also requires
significantly less water to produce. Non-mineral organic oils (such as plant oils) are
used in preference to mineral ones, on the basis that trees enrich the lives of
individuals far more than sites of mineral excavation. The company also contributes to
charities and pressure groups targeting environmental issues.
Lush aims to keep packaging to an absolute minimum, encouraging customers to take
products home naked. Where packaging is necessary, the company seeks to use
recycled materials. 90% is already from recycled sources and the aim is to reach 100%
recycled and recyclable packaging. The absence of packaging is particularly striking in
the cosmetics industry, where manufacturers and retailers often seek to differentiate
their product through the use of distinctive containers and the reinforcement of identity
and logos.
Similarly, minimising waste in the production process and from its retail outlets is also a
priority. The majority of what waste is produced can be recycled, and only a very small
amount ends up in a landfill site. Lush aims to reduce this to less than 5%.
The company is aware that in operating across 46 countries and drawing resources
internationally it relies upon road, rail, sea and air transportation. It sets itself a target of
keeping air-freighted resources to below 5%. It has six production plants around the
world in order to be able to draw upon local resources where possible and plans to
expand upon this. Video conferencing is used in preference to moving people around
the country or internationally. Where flights are absolutely necessary, Lush has a selfimposed tariff, donating 50 to environmental groups for every metric tonne of CO2
created by using this means of transport.
Raw materials are selected very carefully. As noted above, Lush has found an
innovative way of eliminating the use of palm oil in order to protect bio-diversity. The
products are almost entirely bio-degradable, containing very few synthetic ingredients
or preservatives. Accordingly, Lush seeks suppliers that reflect similar values. All
suppliers are required to comply with its own non-animal testing policy.
Energy consumption is reduced by using efficiency measures such as high efficiency
light bulbs and switching lights and appliances off when not in use. Solar panels are
being installed, with a target of reducing energy in its UK factories by 5% each year for
five years.
Lush actively supports a number of ethical campaigns, lending its name and time as
well as donating funds. The campaigns and groups that it supports are chosen
carefully, on the basis that not only do they share values held by Lush, but also that
they would not be able to secure the necessary funds elsewhere very easily. Some of
its more striking direct actions have included dumping manure at the European
Parliament in Strasbourg in protest against animal testing legislation, and having staff
displayed in its shop windows on meat hooks in protest against the treatment of sharks.
Initiatives that Lush actively supports include:

World Development Movement a company campaigning against speculation by

large investors, such as banks, on the prices of staples, eg wheat and maize, as a
means of generating substantial profits for their shareholders; such speculation
pushes prices up and increases world hunger

Biofuel Watch a campaigning group committed to raising awareness about the

devastation to rainforests created by the biofuel industry; despite the industrys

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apparently eco-friendly sounding name, it is responsible for substantial

deforestation and long-term environmental impact

Protecting Animals in Democracy a movement that encourages individuals to

choose their elected representatives (in part, at least) by considering who will have
the most positive impact on the rights of animals and the interests of animal welfare

Sea Shepherd pirates of compassion who patrol the oceans in order to protect
sharks and whales and their habitats

Climate Rush a group promoting the use of trains in preference to planes, as the
former generates only one tenth of the CO2 emissions of the latter

Reprieve a campaign to release Binyam Mohamed, who was imprisoned in

Guantanamo, where, it is claimed, he was illegally detained and tortured; he has
since been freed, thanks in part to Reprieve

Animal Protection Agency for the protection of reptiles, six million of which were
brought into the EU as pets in 2009, many dying in transit or living in poor
conditions in peoples homes

Meat Free Lush is committed to vegetarian principles, its products being 100%
free from animal products and made without cruelty; this campaign is aimed at
raising awareness and challenging common beliefs and policies

Campaign against greyhound racing many puppies are destroyed or abandoned

as being unsuitable for racing and older dogs face a similar fate once they become
too slow; dogs that could live as long as 14 years may live as little as three or four,
in poor conditions and forced to perform in difficult circumstances

Bat Conservation Trust a group that campaigns for the protection of the natural
habitat of bats, which is frequently under threat

World vegan day many Lush products are free from any animal products
(including milk, eggs and honey) and the company supports campaigns to promote
veganism.

Lush Times magazine

The company produces its own magazine for staff and consumers, born out of the
catalogue produced for Cosmetics to Go. It is available as an electronic or hard copy
publication, and features write-ups on the latest products, news of the various
campaigns Lush supports, feedback from consumers, competitions and other items. It
acts as both a newsletter and a catalogue. The same image and principles are
apparent throughout. Hand-drawn pictures are used rather than photos, a quirky and
humorous approach is very evident, with participation by customers and staff, and it is
all printed on recycled paper.
The market for bathroom products
In 2009, the global market for bathroom products grew by 5.2% to US$19.9 billion,
0.2% more than growth by the rest of the cosmetics and toiletries market (Cosmetics
Business, 2010). Growth in Europe, however, was only 1.6%. Among bathroom
products the category that has shown the most rapid growth is bar soap. This grew by
7.4% to a total value of US$8,130.5 million. Growth has been particularly strong in the

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Delivering Customer Value Through Marketing Case Study June and September 2012

Middle East, Africa and Eastern Europe. This is largely the result of a trend among
consumers to trade up to more expensive and luxurious brands. In the long term it is
likely to result in a move towards bath and shower gels, as has been the case in more
mature markets. Growth is expected to remain strongest in Asia India in particular.
In 2009, the UK bathroom products market grew by 2.8%, despite the global economic
downturn. Its total sales value increased from 557.091 million to 572.905 million over
the 52 weeks to 1 November 2009 (Cosmetics Business, 2010). The volume of goods
sold increased even more, rising 5.8%. The largest proportion of the market as a whole
is represented by shower products (37.2%), whose sales grew by 4.3% overall.
Meanwhile, sales of liquid soaps grew by 8.2%, to take a 19.5% share of the market.
Category within UK bathroom
products market
Shower products
Liquid soaps
Bath liquids
Body washes
Bar soaps
Bath salts
Bath cubes

Market share in
2009 by sales
37.2%
19.6%
19.5%
11.6%
10.8%
0.8%
0.5%

Growth/(decline) in 2009
sales compared with
2008
4.3%
8.2%
(3.7%)
4.8%
3.6%
(36.0)%
7.3%

Source: Cosmetics Business, 2010

According to Cosmetics Business (2010), global economic conditions have influenced

the way consumers are buying soap. There is a move away from bath and shower
products, towards bar soap. Consumers do not tend to be very loyal to brands and are
increasingly likely to purchase soap at the supermarket during their weekly shopping
for groceries, rather than selecting more luxurious or niche brands at department
stores. However, there are variations within the general trend, and some brands
command higher levels of loyalty. In addition, while cutting back on some more
expensive products and beauty treatments, a lot of women are replacing them with
smaller indulgencies. The use of spa products at home may be increasing at the
expense of visits to the spa for professional treatments.
Awareness of the importance of cleanliness was heightened in 2009 by fears of a
pandemic of swine flu. Although the levels of infection fell well below the worst
predictions, the publicity surrounding it caused many consumers to buy hygienic and
anti-bacterial hand washes and wipes.
Otherwise, the market for bathroom products did not experience any significant
innovation or new trend, according to Cosmetics Business. In this respect, 2009
showed a continuation of the previous year, with continued moves towards
incorporating food ingredients (especially fruit and vegetables), growing spa products
for home use and an interest in Asian treatments and remedies. The use of exotic
fragrances to enhance a sense of well-being and health, and shiny additives that add a
shimmer to the skin, were also on the increase. Boots, Palmolive and The Body Shop,
for example, all introduced product lines to pamper the body and indulge the senses.
One important innovation for 2009, however, was the introduction of the Fairtrade
Foundations standard for beauty products, enabling manufacturers to seek the
Fairtrade certification for products that meet its demanding requirements for adherence
to environmental and ethical principles.

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Natural and organic

One of the main trends to continue in the bathroom products market is the growth of
natural and organic lines. A number of new players have entered the market, including
Evolve and amaZene. These and companies like them are commonly concerned not
only with wholesome ingredients, but also with environmental issues and other ethical
matters. Boots, for example, is one company to have introduced a product approved by
Fairtrade. According to Cosmetics Business, it remains to be seen to what extent
consumers are swayed by social and moral principles when faced with hard economic
choices. However, Fairtrade products do not necessarily have to be more expensive or
limited to luxurious brands.
The Fairtrade Foundation was set up in the early 1990s. It provides an accreditation
service, allowing manufacturers to use their logos on their goods, so long as the
methods of production, including the sourcing of raw materials, meet stringent ethical
standards. It is a not-for-profit organisation. The Fairtrade brand is well known through
its association with manufacturers of coffee, tea and other foodstuffs, where getting a
fair deal for the crop growers and farmers has been of paramount concern.
The initial requirements for Fairtrade certification for cosmetics are that wash-off
products must have a minimum of 2% of Fairtrade ingredients by weight, and leave-on
products a minimum of 5%. However, what is also required is a full commitment to
Fairtrade values. In particular, this means ensuring that the suppliers get a fair deal and
are supported through, for example, the sharing of knowledge and technology to
improve their productivity and profitability.
This extension of the accreditation to beauty products first became available in the UK
in 2009. Recent research on consumer habits suggests that as many as 31% of UK
shoppers would buy a Fairtrade certified beauty product if one were available (quoted
by Cosmetics Business, 2010). Other findings show that 74% of consumers recognise
and value the Fairtrade logo. The first 57 beauty products to be recognised by
Fairtrade are made by five companies:

Boots
Bubble & Balm
Essential Care
Neals Yard Remedies
Lush.

A further 73 products have now been accredited. In addition to Fairtrade, there are
other companies offering similar kinds of recognition schemes. Ecocert, for instance,
specialises in providing a certification scheme for organic and natural beauty products.
To gain approval with Fairtrade it is necessary that the ingredients come from Fairtrade
sources. At present these are limited, but include products such as sugar, honey,
cocoa butter, shea butter and brazil nut oil. The list is being expanded over time.
According to a Lush representative:
Lush has always used Fairtrade cocoa butter in its Fairtrade Foot Lotion but this new
category allows us to formalise our support to Fairtrade. The product will carry the
Fairtrade mark, an independent consumer guarantee that suppliers are getting paid a
fair wage for their produce.
Julia Franklin, Business Development Manager for beauty at the Fairtrade Foundation
has been quoted as saying:

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Delivering Customer Value Through Marketing Case Study June and September 2012

If a cosmetics company wants to get Fairtrade accreditation then it has to agree to a

Trading Partnership Plan with us and it is a three-year agreement. Then, once
accredited, 1.7% of any products wholesale price goes back into the Fairtrade
Foundation. This money is used by us for further producer development and standard
setting so its something of a win-win situation.
The requirements for Fairtrade (as quoted by Lush, 2010) for the accreditation of
cosmetics products are as follows:

all ingredients that can be Fairtrade must be Fairtrade

non-Fairtrade oils must be replaced by Fairtrade oils where possible
ingredients for scrub-type products must come from Fairtrade sources where
possible
surfactants should be replaced with surfactants derived from Fairtrade materials
where feasible
companies are expected to use the highest amount of Fairtrade ingredients
possible in their products
products must comply with the relevant national legislation in each individual
country.

Staff policy at Lush

2010 proved to be another successful year for Lush, not just for its financial
performance but also for its status as a good employer. Its listing of 40th place in The
Sunday Times 100 Best Companies To Work For survey represented an improvement
from its 50th place in 2008 and 68th in 2007. The fact that the company has regularly
featured in the survey for the last eight years is recognition of the positive working
culture that the two ethical entrepreneurs, Mark and Mo Constantine, have developed
within their company, reflecting their passion for their work and their ethical stance in all
aspects of their business operations. With its flat management structure, employees
clearly feel valued, perceiving that the company is run on strong moral principles. The
directors are actively involved in all aspects of the business, from new product
development through to staff development and training. In The Sunday Times 100 Best
Companies To Work For survey, staff reported that they feel a strong sense of family in
their team, and that working for the company is a way of life.
The key findings of the staff survey reveal that staff believe there is a real sense of
mutual respect and cooperation. 80% provided a positive response to the statement
that staff care for each other and 78% to the claim that staff go out of their way to help
each other. In addition, staff enjoy working together, with 71% agreeing that they get a
buzz out of working with their colleagues; 75% confirm that there is a sense of family
within the company. This is reflected in a number of ways, including strong personal
friendships between the Constantines and some members of staff. Working for Lush is
almost a way of life for some. The senior team is well respected, with 70% of staff
expressing confidence in top management and 83% believing the business adheres to
strong ethical principles. Support for good causes is seen to be genuine rather than a
bid for publicity, by 69% of staff. In particular, the highest rating (87%) was given to the
belief that Lush makes a positive impact on the environment, while 82% confirmed it
was changing the world for the better.
Innovative approaches are taken in internal communications. The staff structure is flat,
so top-down and bottom-up lines of communication are fast and effective. Every three
months each member of staff is sent a DVD by Mark Constantine, with news of
performance over the last quarter as well as forthcoming plans and developments.
Ideas and solutions from staff are encouraged and attributed.

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Professional Diploma in Marketing

The future for Lush

In terms of the future Lushs CEO, Andrew Gerrie, commented: As we have read
everywhere businesses are maintaining a cautious watch on the worldwide economy.
Lush is no different. Even so, we are optimistic as there are plenty of opportunities for
us to keep growing. We have made a number of internal improvements and continue to
strive for more. We are also expanding, with new shops opening and new production
facilities in planning. Across the world, we now have the strongest management team
we have ever had and so far this team is delivering our best year ever.
Part of the intended legacy for the future is that Lushs approach will encourage other
businesses to adopt similar stances on environmental and ethical issues. Given the
public interest in corporate social responsibility, there is a tendency for organisations to
adopt an appearance of green credentials without committing wholeheartedly to
fundamental principles. There is likely to be plenty of interest in acquiring Lush if the
company becomes available, as this could be a way for another organisation to gain
ethical respectability.

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Delivering Customer Value Through Marketing Case Study June and September 2012

References and sources

Cosmetics Business (2009) Foundation Fairtrade certifies its first beauty products. 24
June [online] Available from:
www.cosmeticsbusiness.com/news/article_page/Fairtrade_Foundation_certifies_its_firs
t_beauty_products_/49305 [Accessed July 2011]
Cosmetics Business (2010) Bathroom products clean-up operation. 23 February
[online] Available from:
www.cosmeticsbusiness.com/technical/article_page/Bathroom_products_-_Cleanup_operation/47952 [Accessed July 2011]
Cosmetics Business (2010) Bathroom products. [online] Available from:
www.cosmeticsbusiness.com/market_reports/article_page/Bathroom_Products/46446
[Accessed July 2011]
Cosmetics Business (2010) Fairtrade an ethical investment. 28 July [online] Available
from: www.cosmeticsbusiness.com/news/article_page/Fairtrade__an_ethical_investment/55864 [Accessed July 2011]
Eckerall, F. (2010) Soap stars as Lush in top three shops. The Daily Echo, 28 May
[online] Available from:
www.bournemouthecho.co.uk/news/8189676.Soap_stars_as_Lush_in_top_three_shop
s/ [Accessed July 2011]
Jenkinson, A. and Sain, B. (2003) Lush, the scent of success. Centre for Integrated
Marketing, 1 April [online] Available from: www.steppingstones.org/externalDocs/E22.pdf [Accessed July 2011]
Mintel (2010) Beauty Retailing UK, Mintel.
Mintel (2011) Beauty Retailing UK, Mintel.
Retail Week (2010) Conference speaker overview.
www.retailweekconference.com/speakerdetail.cfm?officeContactId=3159&eventYear=2011 [Accessed July 2011]
Sanghera, S. (2009) Lush founder Mark Constantine on the recession and hypocrisy.
The Times, 5 February [online] Available from:
http://women.timesonline.co.uk/tol/life_and_style/women/beauty/article5662077.ece
[Accessed July 2011]
Siegle, L. (2010) Mo Constantines innovation: finding an alternative to palm oil. The
Guardian, 30 May [online] Available from:
www.guardian.co.uk/environment/2010/may/30/lucy-siegle-innovator-lush-cosmeticswar-palm-oil [Accessed July 2011]
Teather, D. (2004) Lush couple with a shed load of ideas. The Guardian, 13 April
[online] Available from: www.guardian.co.uk/business/2007/apr/13/retail2 [Accessed
July 2011]
Two websites with more information about the company:
http://en.wikipedia.org/wiki/Lush_(company)
http://secure.lush.ca/shop/about-lush/articles/history

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APPENDIX ONE
Figure 13: UK: Leading beauty specialists, 2009/10

Retailer (parent/country of
origin)

Operations

No. of
outlets

Sales (m
excluding
sales tax)

Notes

Alliance Boots

Pharmacy/health &
beauty

2,473

6,322

AS Watson Europe (Hutchison

Whampoa/Hong Kong)
of which:

Drugstores/perfumeries

1,315

1,426

Superdrug

Drugstores/in-store
pharmacies

917

1,075

Savers Health & Beauty

Drugstores

230

172

The Perfume Shop

Perfumeries

168

179

(b)

The Body Shop

Beauty

338

159

(e)

Molton Brown

Beauty

45

48

(c)

The Fragrance Shop

Perfumeries

106

47

(d)

Space NK

Beauty

61

47

(g)

Lush

Beauty

87

41

(h)

LOccitane (France)

Beauty

47

27

(i)

Penhaligons

Perfumeries

16

(j)

(a)

(e)

(a) Sales = total turnover not just beauty/toiletries but excluding opticians, store
numbers include opticians.
(b) Store numbers include Ireland.
(c) Includes two airport stores. In addition trades through 31 third party stockists.
(d) Sales cover the period 13/1/09 to 31/3/10 following a company restructuring.
(e) Sales and store numbers estimated for The Body Shop, and store numbers only for
Superdrug.
(g) Includes sales from one store in Ireland and Eve Lom international wholesaling.
(h) 2008/09 figures.
(i) Store numbers include concessions.
(j) Includes three concessions and two outlet stores. In addition trades through 19
third party stockists.

Source and copyright: Mintel, Beauty Retailing - UK, January 2011

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Delivering Customer Value Through Marketing Case Study June and September 2012

APPENDIX TWO
Figure 15: Leading retailers advertising spending, cosmetics and toiletries,
2006-09
Retailer
Boots The Chemists Ltd
Avon Cosmetics Ltd
Superdrug Stores Plc
Asda Stores Ltd
Tesco Plc
Wm Morrison Supermarkets Plc
Perfume Shop
LOccitane Ltd
Debenhams Plc
Sainsburys Supermarkets Ltd
The Body Shop
House of Fraser Plc
Space NK Limited
Selfridges & Co
Lloyds Pharmacy Ltd
Molton Brown Cosmetics UK
Harrods Ltd
Wilkinson Hardware Stores Ltd
Argos Ltd
Fenwick Ltd
Total of the above

2006
2007
2008
2009
14,636,165 19,889,927 25,074,254 17,559,511
3,811,713
5,589,658
7,628,511
5,110,193
3,079,272
2,287,403
2,403,816
3,338,834
561,580
710,435
1,356,237
2,540,987
108,444
441,088
870,730
1,751,327
152,806
231,132
1,082,920
1,547,028
248,760
410,925
819,906
1,064,214
56,344
0
43,892
945,002
1,783,351
1,413,795
965,477
882,202
691,705
558,729
1,312,583
827,865
79,541
377,448
457,601
536,080
1,150,981
212,343
328,503
501,839
249,646
74,925
855,850
436,098
1,159,553
148,388
595,037
340,372
182,285
765,612
3,319
143,956
5,563
5,292
102,237
261,780
169,689
95,764
92,107
11,140
107,316
1,830
79,318
7,213
72,868
122,078
39,171
64,239
71,246
28,354,357 33,433,547 43,965,761 37,943,284

NB: figures relate to total advertising spend on cosmetics and toiletries by the retail
brand. Lush does not prioritise spending on main media advertising and therefore is not
included.

Source: Mintel, Beauty Retailing - UK, January 2011

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Professional Diploma in Marketing

APPENDIX THREE
Figure 52: Lush Retail Ltd: Sales as share of UK health and beauty retailers
sales, 2005-2008

1.8
1.6
1.4
1.2
1

Health & beauty*

0.8

Beauty**

0.6
0.4
0.2
0
2005

2006

2007

2008

* Including all NHS receipts and all of the Boots store network
** Share of cosmetics/toiletries specialists sales (drugstores, perfumeries, beauty and
other personal care shops)

Source: Mintel, Beauty Retailing - UK, January 2011

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Delivering Customer Value Through Marketing Case Study June and September 2012

APPENDIX FOUR
Figure 32: Attitudes towards the Lush brand, December 2009

Brand attitudes towards Lush

Base: 232 GB internet users 18+ who expressed a view

Source: Mintel, Beauty Retailing - UK, Retail Intelligence, January 2010

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APPENDIX FIVE

TRADING UPDATE
London, Tuesday 30 March 2010: Lush, purveyors of fresh handmade cosmetics,
announces today that;
For the first 8 months (to 28/02/10) of the current financial year:

Lush Group turnover is currently 10% ahead of the previous financial year

a further 56 Lush shops have been opened worldwide

profitability is up on prior year

morale remains high after Lush staff voted the company top for believing their
employer does all it can to help protect the environment, 3rd for giving something
back and in the top 10 for staff feeling that the company makes a positive
difference to the world, in The Sunday Times 100 Best Companies To work For
survey 2010.

For the financial year ending 30 June 2009:

Lush Group worldwide turnover increased by 40% reaching 215 million

the number of shops worldwide at end June 2009 reaches 651, an increase of 19%

profit before tax fell from 19.4m to 13.9m.

Source: Lush publicity

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Delivering Customer Value Through Marketing Case Study June and September 2012

APPENDIX SIX
Summary of strengths and areas for improvement
Mintel summarised the companys strengths as follows:

high brand recognition although only three in ten had been into a Lush store, 83%
of people think it is distinctive. It is seen as cool and quirky, non-conventional but
yet serious about ethical principles

it commands strong CSR values, with two in five people stating that the company
has a caring attitude towards animals. 61% of those interviewed felt it was a brand
leader in product innovation

the products appeal to the younger teenage age group, in contrast to the more
conservative, mature customers that remain loyal to The Body Shop

the company matches The Body Shop in customer satisfaction ratings, but has
more top ratings, with one in four (24%) thinking it is excellent compared to one in
five for The Body Shop

most customers feel that the products, with their aesthetic indulgence benefits, are
worth a higher price

expansion has seen overall sales remain buoyant.

The following areas for improvement have been identified:

falling sales per outlet and same-store customer retention is an issue that needs
addressing. Mintel brand research supports this, with 18% of visitors stating that
they are unlikely to go back and 24% saying they no longer visit

one in three people (32%) stated that they would never consider the brand and
37% stated that they had never heard of it

customer opinion is polarised with almost half (47%) of customers recommending

the organisation, similar to the proportion for The Body Shop. However, customers
feel it lacks The Body Shops service image and warmth

the final issue relates to the complaint that the strong smells lingering within the
store give customers headaches and puts them off browsing. This is a difficult
problem to address given that the smell of the products is part of the brands USP.

Source: Adapted from Mintel, Beauty Retailing - UK, Retail Intelligence, January 2010.

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Moor Hall
Cookham
Maidenhead
Berkshire, SL6 9QH, UK
Telephone: 01628 427120
Facsimile: 01628 427399
Website: www.cim.co.uk

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