Case Study: LOral

Marketing Strategies in
India
Before the facial cosmetics, LOreal was known as a hair-color
formula developed by French chemist Eugene Schueller in 1907. It
was then known asAureole. Schueller formulated and
manufactured his own productswhich were sold to Parisian
hairdressers. It was only in 1909 that Schueller registered his
company as Societe Francaise de Teintures Inoffensives pour
Cheveus,the future LOreal. Scheuller began exporting his
products, which was then limited to hair-coloring products. There
were 3 chemists employed in 1920. In 1950, the research teams
increased to 100 and reached 1,000 by 1984. Today, research
teams are numbered to 2,000 and are still expected to increase in
the near future. Through agents and consignments, Scheuller
further distributed his products in the United States of America,
South America, Russia and the Far East. The LOreal Group is
present worldwide through its subsidiaries and agents. LOreal
started to expand its products from hair-color to other cleansing
and beauty products. The LOreal Group today markets over 500
brands and more than 2,000 products in the various sectors of the
beauty business. Such includes hair colors, permanents, styling
aids, body and skincare, cleansers and fragrances. Indeed, the
LOreal Group have reached the peak that all cosmetic brands
sought after.
LOreal has engaged in many forms of Market Segmentation in
their venture in India, with different variables during different time
periods. Firstly we will discuss the segmentation methods when it
first entered the market in 1991, followed by what ensued after
their makeover.
When it First Entered the Market
Gender Segmentation: LOreal first segmented the
population into the different sexes as they thought their
products combination of low price and natural ingredients
would fit Indias market, where women use plants and herbs as
part of their beauty culture. Their product specifically catered
to the women of India, though later our group discusses how it
should carve a niche market for itself in the Mens sector as
well.
Income Segmentation: LOreal segmented the market into
2 main segments: the poorer masses and the rest. It marketed
its product as low in cost to attract the poorer masses, and her
efforts in reducing ingredients to cut price reveals her aim to
minimize costs as much as possible. At this point of time, it was
not yet targeting the affluent middle class or upper class and
thus did not make any distinct segmentation of the richer
classes, preferring to regard them as a whole entity.
The LOreal Makeover
After a poor start, LOreal approached the market with a different
concept. Presence of home brands posed problems as they had
already captured a large proportion of the masses market share.
They offered cheaper products to buyers at a price which LOreal
was unable to match, and their long presence had established a
strong sense of loyalty in the buyers, making it difficult to pry
them away. With the understanding that it needed to capture a
different market, it proceeded with a different from of
segmentation in order to better identify its target segments

Income Segmentation: This time LOreal separated a new

segment from the original 2 segments: the quickly rising
middle class which was gaining in affluence. This was very
specific compared to the original two broad segments it
identified as they saw that this was the fastest growing income
class that represented a highly untapped market potential due
to their radically different mindsets from the masses.
Psychographic Segmentation: LOreal segmented India
into different groups based on their thinking and behavior from
the older, more conservative Indians who held conservative
values of thriftiness more strongly and stubbornly, and the
younger more impressionable generation who had developed a
very different and westernized view on spending and culture.
Influx of brands like Tommy Hilfiger, Benetton and even MTV in
1991 greatly emphasized Western values of luxury, beauty,
and self-awareness leading to the rise of a new segment of
people who did not view thriftiness with equal importance as
their predecessors but were rather more willing to splurge on
luxury goods which were previously considered too expensive
and wasteful.
 Age Segmentation: By segmenting the market into the
younger middle class from the more conservative, often older
Indians, it had also inevitably segmented the market based on
age, and showed an increased interest in capturing the market
share of the younger Indians.
Benefits Segmentation: LOreal further segmented the
market on a benefits basis when it introduced Excellence
Crme. Being in crme form, it [was gentler on hair] compared
to the natural ingredients such as ammonia which damaged
and dried up womens hair. It thus segmented the market into
those who needed the hair dying and strengthening benefits of
Excellence Crme and those who did not. This was a crucial
form of segmentation for LOreal as it underlined the core
concept of its marketing strategy to promise superior products
with additional benefits to consumers when choosing between
LOreal and Home brands, and subsequently has led to the
immense success that LOreal has experienced in India.
LOreal has made use of various variables to identify the
segments it wishes to target, and also engaged in using Multiple
Segmentation Bases (Age, Income, Psychographic and Benefits)
to complement its Differentiated Marketing approach. This allows
them to effectively identify several differentiated segments and
design separate offers for each, translating into stronger sales
and a stronger position within each market segment. In the
following section we discuss which segments were targeted and
the strategies employed by LOreal with its newly identified
segments.

LOreal targeting and positioning its products

LOreal now targets the young affluent middle class females,
especially those with graying hair, and also maintains some effort
in targeting the masses. It saw a need to target this new
untapped market for maximum profits as it not only possessed
the purchasing power that masses lacked, but more critically a
modernized mentality that made these people more receptive to
purchasing LOreals more luxurious and expensive products..
While retaining their core values of thriftiness, [the young middle
class were more willing to spend on luxuries and formed the heart
of transformation of consumer spending in India].

LOreal also target women that sought benefits from using its
products. Since there was previously no product that solved
womens hair greying problems, LOreal introduced Excellence:
Crme that promised additional benefits apart from just dying of
hair. It did not damage hair like henna or ammonia but even
promised to strengthen it. The young middle class fit into this
segment well because unlike their older predecessors, who did
not mind using products that damaged their hair as long as they
were cheap due to monetary problems, these women were more
educated and concerned for the need to have healthy beautiful
hair, as well as more equipped with the purchasing power to do
so. Cheap harmful products would not appeal to them as much as
high quality LOreal products which justified their higher price
with higher benefits.

LOreal has not given up on targeting the lower income masses

however. Demand for necessities have been increasingly driven
by the rural rather than the urban sector, and as of 2008 only
29% of India lived in urban areas. Thus it has introduced new
products like Colour Naturals which be used multiple times and
cost only $3.10, translating into increased value for the masses.
Though difficult to capture, the masses market share formed too
large a proportion of the total market share to be ignored, and
LOreal maintains some effort in capturing their market share,
thus inducing LOreal to introduce products in this sector of the
market.

Excellence Crme was marketed as a luxury purchase and a

high-end niche product(), positioning itself as higher quality and
made of extensively developed ingredients with additional
benefits. One of the most innovative and pricey products in
Europe then, it was also gentler on the hair than local products
such as henna or ammonia. LOreal hired Ms World in an
advertisement to show that beautiful women use LOreal, thus
positioning itself as not just a basic shampoo, but one that made
women beautiful. This promise of beauty and benefits positioned
LOreal higher in the market compared to the home brands which
positioned themselves as cheap, value-for-money products which
only served the most basic of functions of hair cleaning.

In terms of how LOreal differs from other brands, it employs a

more for more marketing concept while home brands used a
less for less concept. Home brands sought to sell the most basic
shampoos with the lowest quality ingredients in order to offer the
lowest prices, while LOreal justified their high prices by using
high quality ingredients. While home brands used such a concept
to attract the lower-income masses that only needed bare
necessities, LOreals strategy targeted the more affluent that
were more educated and had more disposable income to splurge
on luxury items if they justified their price.

There was also a difference in how they captured loyalty. Home

brands aimed to garner loyalty of existing users through brand
familiarity as repeated use by generations of Indians would bring
about feelings of trust and dependability. This attracted thrifty
housewives who wanted the cheapest products, which translated
into loyalty and substantial profits when their children grew up
and also continued to use the same brands. LOreal however
could not and did not try to establish brand familiarity in such a
short time as it was very new in the market. It thus attempted to
capture the loyalty of a new segment of the market by promising
better quality products to the rising middle class, hoping they
would realise LOreals higher price and better quality justified a
move away from home brands to a new found loyalty in LOreal.

Finally, in LOreals attempt to re-enter the lower income market,

it differs from home brands by offering good quality at lower
prices instead of the home brands offer of low price and low
quality. While still more expensive than home brands, it was
considerably cheaper than its own up market products but
retained much of its quality. This translates to greater value for
the masses who might switch to LOreal when they realised the
better quality shampoo offered at similar prices to the home
brands.

Does any social responsibility play in LOreals marketing

strategy in India?
Corporate Social Responsibility (CSR) plays a significant role in
profitability in many companies, describing the relationship
between businesses and the larger society surrounding it. It can
also redefine the role and obligation of the private business within
that society if deemed necessary(Keinert). When LOreal first
entered India, beauty education was absent, training seemed
redundant and hairdressers were well satisfied with cheap local
domestic brands(Patel). LOreal realized that its business
operations in this case concerned a larger group than itself if it
wished to increase profits. LOreals CSR thus began to be driven
by the need to include social concerns into its business decisions
and operations, and it focused on increasing its reputation as the
leading beauty industry amongst the urban Indian middle-class.
Since then, they have envisioned to differentiate themselves from
the rest of its competitors and invested heavily in education and
training to boost their status in the community.(Patel)

LOreals social initiatives can be linked to 3 key areas: Education,

Women and Science. Working with Aide et Action, a non-
governmental organization whose aim is to promote access to
education in rural areas, LOreal India launched the program
Beautiful Beginnings on 7th July 2009, an initiative which aimed
to train at least 200 unprivileged school drop-out girls every year
to make them employable. It was even inaugurated by Bollywood
actress AishwaryaRai , an influential and popular female artist in
Bollywood. Her patronage enabled the masses to identify LOreal
more closely to the Indian community, and we believe this had
far-reaching effects on how the masses perceived LOreal as a
socially responsible and dependable brand. The initiative was very
successful, with more than 200 students graduating within a year,
and some even gainfully employed by LOreal. In January 2009,
LOreal, in collaboration with Nehru Science Centre (NSC), set up
an exhibition Decoding the Hair in Mumbai. An exhibition that is
first of its kind in India, it showcased large magnified sculptures of
the hair strands as well as other games and activities relating to
hair care and products. Housed in a well-known exhibition point
like NSC and reaching out to schools, college and the corporate
sector, LOreal is able to position itself in India as a true expert in
hair care with its focus on scientific research and development.
In 1998, LOreal India started the For Young Women in Science
Scholarships which awarded Rs 250,000 to 5 esteemed girl
students each year from the state of Maharashtra, to pursue
studies in a recognized college or university in India. By
sponsoring these young women and their hopes for the future,
the programme can increase the role of women working in
scientific disciplines, empowering them with knowledge.

By empowering women with new skills and knowledge, female

participation in the labour market can be increased, thereby
increasing their disposable income and their financial
independence. This translates to a larger pool of urban middle-
class females with the purchasing power for LOreal products and
thus a rise in profits for. Most importantly, with these initiatives,
LOreal places itself in the light of possessing a genuine sense of
responsibility via its contributions back to the community.
Ultimately, this increases their reputation, image and reliability
with not just the targeted female urban middle-class, but the rest
of India and even the world.