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Cultural difference impact on global marketing strategy

4795 words (19 pages) Essay in Marketing

27/04/17 Marketing Reference this

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L’Oreal, which was started in 1909 by a French chemist named Eugéne Schueller now, is the largest cosmetic and beauty company in the whole world. With 100 years of proficiency in cosmetics, the company has 23 global brands in 130 countries around the world and 649 patents in 2009. The company has made its presence in all major markets in the world. The company’s main focus is on hair insignia, skin care, protection from sun, perfumes, etc. This company is more vigorous in dermatology and pharmacy fields and is leading patent holder in nanotechnology in USA. The company accounts for 50% sales outside Europe and has acquired brands in those countries. Not only to women, but the company offers beauty products to even men. The brands of the company are grouped by the particular markets like mass, professional brands, luxury products and active cosmetics. The “Consumer products” are high technology ones at aggressive costs through mass-marketing trade channels. The “Professional products” is a pool of brands which meet the needs of salons and provides customers an extensive variety of modern products. Next, the “Luxury products” are high-status brands that present customers with products and finest quality services in stores and travel outlets. The “Ac

tive cosmetics” are mainly cosmetics related to skin sold in pharmacies and need advice of dermatologists. The company is known for its steady quality of products worldwide and priority to diversity. The main focus of the company is on research and development with research work being done in 14 countries to develop new products for the customers. For the past 19 year, the growth rates of the company have been in double digit numbers. With sales at € 14.029 billion, the net profit of the company was € 1.653 billion in 2003. 96.7% sales occurred in cosmetic activities and rest in dermatology. The company conducts Brandstorm contest, a marketing related game for students round the world. L’Oreal and UNESCO in partnership have established awards to recognize women with exceptional research work. The company promotes its brands through renowned celebrities like Beyonce, Freida, etc. (About Loreal)

Marketing Globalization:

Globalization has influenced every filed and marketing is not an exception for it. Marketing today is not the same from what it used to be earlier due to free flow of knowledge and Information Technology. Businesses now have to require different and brand new strategies to be implemented to face the competition around the world. Marketing globalization is marketing on a wide-reaching scale taking business benefit of operational differences and similarities worldwide and opportunities so as to meet the global objectives. The 4 P’s are influenced when a company shifts to global from domestic. The affect on Product due to marketing globalization is that a company produces single product and makes adjustments to fit the targeted market. Same product has to have varying Prices in different markets. The way in which the product is placed is also a matter of concern; the distribution is affected from market to market because of difference in competition offered in different markets. Same message in different parts of the world may not be received the same way in all places; hence the Promotion should be done keeping in mind several factors that vary from place to place. Through global marketing a product can be introduced by advertisements. This lowers marketing costs with increasing power and scope. It provides consistent brand image, goods can be leveraged fast and effectively with uniform marketing practices all over the world. Four important marketing constituents need to be taken care of to analyze globalization of marketing: Customers, Brands, target market and academic field. There are different types of strategies in this category. Incorporated Global Marketing Strategy under which many of the elements of marketing policy have been made all over the world. Global Product Class Strategy which is the slightest integrated type of the above. A firm that wants to target the identical segment in many places of the world employs the Global Segment Strategy. Globalization along each marketing mix constituent like pricing, place, promotion is done using Global Marketing Mix Constituents Strategy. Company that wants to globalize its products uses Global Product Strategy. When same logo is used worldwide, it is called Global Branding Strategy. A company which acquired different other firms may use different local brand names and depend on a same ad worldwide; this policy is Global Ad Strategy. In reality, when more than one policy from the above are mixed, it is Amalgamated Global Marketing Strategy. (Edmondson, 1999)

L’Oreal Marketing Strategy in India:

Many brands like the L’Oreal tried a lot of innovative and new marketing policies that paid-off. Today, the success of the company can be seen by its 41.5% share in hair conditioner market, 20% in hair coloring, 6.5 in skincare and 4.6 in shampoo markets. L’Oreal is India’s foremost player in beauty salon products sector.

The company’s focus is on the 2 most populated classes of the country vis-à-vis the middle and the upper classes. Innovation for local markets was done in both product and price along with a forceful marketing strategy proved profitable and effective for the company.

GOING LOCAL:

For the customer product brands like Garnier, the company has chosen to adapt to the neighboring culture and preference was the main priority of the firm. For example, Garnier restructured its superior hair-coloring goods which demanded more man power and manual work in order to blend the dye. But, it was found that the customers were ready to buy the products at a quarter of the retailing price prevailing worldwide. Introduction of Oil-based shampoo i.e. Oil blended with Garnier Fructis , is proven to be another success. This was done to equivalent the usage of hair oil along with the goods for earlier-dormant parts like the wrinkle free creams and skincare for men. India’s head of operation Dinesh Dayal call it ‘Indo-vation’. Apart from this, informing people about the brand and making them aware through celebrities in television ads proved critical in gaining a strong grip. When it was first launched in 1997, the company targeted the unstructured salon industry to sell its products. The company has started to educate the hair stylists for which five regional centers to offer training were opened. International Hairdressing Academy was launched in 2006 in Mumbai to offer basic and higher styling training and invites instructors even from abroad to organize workshops and seminars.

INCREASING THE CUSTOMER BASE:

Product penetration is not fast in the budding markets providing not enough scope for growth. Even when the products do well and the usage is more, they are to be upgraded to increase the performance. And this happens not just within a section but among them.

Along with the luxury products that are showing an increasing trend, the focus of the company is on every sector as each has their own preference.

SEGMENTING MARKETING:

As per experts, even if the luxury products are selling in more developed cities like Bangalore, Hyderabad, Mumbai, etc, the small customer base in these cities make these highly competitive markets let it be for cosmetics, perfumes or any other products. There are greater opportunities in two-tier cities which are developing faster but are lagging behind in luxury products. There is also a large choice of growth in middle market where customers are willing to consume products, but of less cost which is a challenge for worldwide brands like L’Oreal. With the products costlier for the middle class to afford, the company has introduced the same product in smaller trail packs which increased its reach to every sector of the society. The competition in this area is mainly from local brands. It was at the time of setting up of the company that television viewing exploded in India. Women earning money and exposure to global culture are two main key points.

Viral Marketing, a very popular technique used by companies to advertise its products was adopted by L’Oreal to advertise its product, Garnier Fructis shampoo in the Indian markets. The firm brought out a competition in which consumers can register on a website and create a relationship with the company’s brand. With this, they even invited their friends to visit and this would add to the scores. A record of 76,000 customers got registered and the link was forwarded to around 82,000 others, a survey indicated. The company was not expecting profits then and there but it was looking for long term profits which was the basic concept underlying in Viral Marketing. Garnier was positioned mainly as a product for youngsters and teenage girls. This is evidential from the advertisements of Garnier products. A recent ad had a girl giving advising her mother to give it a try and hence the product is promoted even among the middle-aged.

So, increasing the target segment’s base gives a new market to the marketers only thing they have to be successful in making the consumers believe the second-rung section. (Brannigan, 2008)

L’Oreal Marketing Strategy In China, Japan:

Customers of different countries and from different parts of the world have their own expectations about the product they purchase. Companies like L’Oreal, dealing with markets all over the world should take these issues into consideration. The effectiveness in marketing is measured by the way a company adopts to the local cultural values. Culture was proven to influence the usage of cosmetics. The brands of the company are more customary in Asia while the brand of product is more of western. Product brands are made up for the purpose of positioning and differentiation and positioning policies are more of Western. Both these are against supplementary brands of company’s portfolio of brands. Not only does standardization or adaptation bother the product but also the way they are packed and other extra services. A standardized product can be sold in any country the same way thereby reducing the extra costs. Extreme standardization of a product is known as globalization of a product. Success in one country doesn’t mean the same product would be successful everywhere else. The factors related to adoption of product are: Physical Attribute, Packaging, Service Attributes and Symbolic Attributes. The firm had taken into account, understanding of the regional language. The message to be conveyed can be influenced by the character, language and structure of words. The firm’s head chooses to walk through the streets to directly find out what people think about the firm’s products. In an incident, Owen-Jones, CEO of L’Oreal stopped two women going on a street and asked if they used the firm’s products for their hair. The women when gave a negative response, the person he himself escorted them to a nearby store and offered the hair-color kits free for them. These kinds of incidents give him knowledge and keep his executives sharp. Paris has a luxury association in Asia. The firm used this as an advantage while entering the Asian market. The people of Japan are more reluctant to products from outside; they don’t accept any products which are from outside Japan. Hence, L’Oreal Paris established Japanese laboratory that helps them to understand and cope up with this aspect of culture of Japanese. Unlike Japanese, the people of China and Korea are confident about products from USA and France and hence they accept products from the West than of their own. The labs in Japan and China also helped to increase the awareness about the brand by spreading L’Oreal’s name through the research and through its existence in the country. The main motto of L’Oreal Paris is not to turn into L’Oreal Japan or L’Oreal China in Japan or China respectively, L’Oreal Paris is just adapted to the respective country. Brand image carried by the L’Oreal as luxury made its products to be sold at a higher price than at a few other places. (Christine, Spring 2006)

When it comes to product decision making in Asia, 5 important things are to be taken care of:

Whether the product is acceptable in the market.

Brand name related decisions and selling features.

Labeling, packing and repacking needs.

Service needs.

How the culture affects the products.

The company’s main focus is to know more about the markets of Asia, behaviors of customers and what they expect. Tests and surveys are conducted by the firm to get details about the different types of Chinese skin as per their habits, etc.

The company also collects experiences from the customers about its products by giving a product to consumer test for a few days and taking feedback from the customers. Along with this feedback method, experts are employed to check how the used the product and what the impacts were. L’Oreal also uses CRM (Consumer Reply Management) in order to gain more knowledge about the customers. L’Oreal adopts different product mix for different countries. Example, products in North Europe and Asia are lighter in color. In Japan, products are made separate when compared with other countries as they think they are special in needs. L’Oreal has put Sun Protection Factor for women in Asian countries to be safe guarded from the sun. (Brannigan, 2008)

Japanese give importance to packing along with the aesthetic of a product. Even smaller imperfections may cause the product’s rejection. Equally important is the size and design standards. The products of the firm aren’t sold in supermarkets in mass mainly in Japan, these products sold through selective marketing. Rigorous training for 2 weeks minimum is given to salespersons as Japanese people are more aware of cosmetics. L’Oreal tests the skin of people in a special way in order to advice them correct product to get desired results. L’Oreal spends a lot on ads; each country has a website with its regional language. The advertisements in different parts vary with place. The ads in China are different from those in Sweden.

L’Oreal Marketing Strategy In Netherlands:

Dutch market is a faster growing market with higher per capital income and increasing number of working women. The Dutch women spend a lot on cosmetics and toiletries which shows they are more aware of the cosmetics. Accurate results of color are main value drivers for women from Dutch. Most of the Dutch women (47%) use hair colorant, they are brand loyal. The Dutch ladies prefer lighter shades and 73% of them use permanent colorants. Women from Dutch care a lot about natural ingredients in the cosmetics they use. In a market like this, performance matters a lot and as the customers are brand loyal, the loyalty increases with increasing age.

The main objective of L’Oreal has been to promote the brand presence of Garnier in Netherlands without negatively impacting its present market share. The main focus of the company has been to increase the awareness about Garnier family products, to reduce cannibalization through introducing Garnier products and to meet the customer needs of the Dutch. L’Oreal develops products that best suits the market needs. There are two strategies employed by the company: Short Run for 0-12 months and long-term from 12- 36 months. While the former includes launching Garnier Synergie skincare cosmetics and increasing the distribution of L’Oreal Recital, the later includes development and improvement of the L’Oreal and Garnier products and observe with Synergie the anti-aging cosmetics. The brand of L’Oreal is well accepted by the Dutch customers. The demand for products range from high quality, mid-market to high quality and high ending products. But the brand presence of Garnier among Dutch women is very less. The high ending, high quality product Recital is losing its share in market due to its aggressive allotment policy and competition from local brands and salons. The company avoided cannibalization by bringing out new product name L’Oreal Plenitude. With its high reputation and older people seeking better anti-aging cosmetics, the product is well placed in the market. Garnier Belle Couleur is reformatted in order to meet the requirements of the targeted segment. The product has got strong positioning statement and as this statement resonates the Dutch people, the product is easily accepted in the market. L’Oreal is known for positioning its products as per the needs of the customers. As the customers of Dutch are known to be more brand aware and loyal, proper positioning of the product is more important for both short-term and long-term survival. Synergie, a product of L’Oreal is positioned with this aspect and is known by worry-free, natural cream for skin care. L’Oreal has high value, mid-value, upper end and lower end products for different group of customers. The pricing is made as per the segment it is going to be concentrated upon. High end products are more priced when compared to the other groups and are also positioned for particular groups. The positioning of a product in L’Oreal is associated with capabilities, needs of the consumers and competitive landscape. The prices of new products are fixed in such a way so as to please the value-conscious customers. L’Oreal knows that for success of any product, a proper co-ordination between salesperson and distributor is needed and this, the company maintains through different means. It offers customized literature about any new product launched, trains the new employs so as to face the customers who are aware about the cosmetics. The firm educates the targeted market about the usage and benefits of the product and also sells bundling options to the retailers. The firm offers free trail offers through mass mailing to the selected neighborhoods and as known, the firm spends a lot on advertisements as they are the ones which are going to take the company’s message to target market. It also organizes local charity events to make its word spread all over. Demonstrations about the products are made at shopping malls and near distribution outlets. Advertising is not only done through TV ads but also out door advertising is done like those in bus shelters, malls and public transits. Every business is based on customer satisfaction, if the product reaches the customer in right place and at a right time, the product is going to be a success. L’Oreal’s improvements are mainly based on the feedback they get back from customers after they use a product for a particular period. The firm even organizes competitions wherein people from around 44 countries come together to participate. Not only does the metrics like profit, revenue, sales volume and market share, but also retailer penetration, retail margins, market share against share of voice and awareness of brand and customer’s purchase intentions are used to measure the success of the company.

L’Oreal Marketing Strategy In USA:

The major profits earned by L’Oreal are earned from USA with 15.9% of the whole profits earned by the company accounting for US only. It owns several brands including Garnier, Maybelline, etc. The two main competitors of L’Oreal USA are Revlon, Proctor and Gamble Company. Packaging of every product sold in US was made captive and informative. The printing of information had a unique purpose i.e., to push these products in the retail outlets without dedicated salespersons which shows that the customer should get educated through the instructional package. With this, customers would know more about the products and also know more products as they don’t have anyone to guide them and they have to search for the needed product by themselves. The company had good collaborations with the channel partners which were of most importance for distribution of the products across markets. The relations with retail shop owners were of importance, which ranged from very high class stores like Les Galeries Lafayette to small hair salon and beauty parlors which particular products of the firm like Salon Classics targeted. These relations were extended to operators like the Wal-Mart and the K-Mart. Branding and communicating information about the product also was of a critical success feature at L’Oreal. Proper collaboration with the agencies like ‘Publicis’ was very important to send the message about each sub-brand inside a market. Collaborations with agencies like ‘AC Nielsen’ helped the company in introduction and maintaining of new products and product portfolio through tracking of quantitative as well as qualitative issues of the target market. Collaboration was also made using U.S Licensee, Cosmair through which the salon products were marketed. The requirements fulfilled by each product were more than fundamental physiological needs and comprehended to ‘belonging’ and self-esteem’ factors which are important for a person’s sense of closeness, self-importance and necessity for respect from their peers. This is the reason behind the company’s ad campaign with a punch line that means ‘as you are worth it’. The nature of goods exceeded the functional values and exciting attachment that customer thought was also of importance to differentiate and create ‘star’ goods. This policy is adverted into the ‘Consumer Value Hierarchy’ that identifies basic, improved and core product values.

The firm understands the high needs of customers and shows them that it is tempting to their needs. The company’s strategy involved licensing its Technique Professionelle, the Salon Classics and Cosmair. The positioning of few product lines like the plenitude was ‘high-end greatest performance but still accessible’ in a competitive market and still the company could not attract many from the mass-market. Keeping in view this opportunity, the firm launched the ‘Class of Mass’ policy in which even high-end cosmetics were sold at 30% premium compared to competitors. Another significant part of L’Oreal was the policy was launched in incremental basis. Example, only moisturizing cream was launched first as invention in the purification segment was viewed as hard to achieve. Along with, awareness was created through print campaign which evolved to integrate TV as spots. To roll-out the Plenitude from the US market, the management used ‘blast’ type strategy which introduced 14 SKU’s just within3 categories in the market which didn’t workout properly in U.S that resulted in confusion among customers. When compared with the strategy adopted in France by L’Oreal for Plenitude, a new set of product was launched in France while an already existing product was brought to the U.S market. A fundamental theory of L’Oreal’s policy was to provide quality, innovation along with expansion in the U.S market was educating the consumer when they buy the products. The Health and Beauty stores did not have trained staff members to tell the importance of a particular product. Even as the customers are aware of the lipsticks, nail-polishes and other subtle products, the purchase depended on how effectively the products were packed.

Why L’Oreal Needs To Understand Cultural Differences?

A business is not restricted by nationals or political constraints, liberalization and globalization brought out the world major changes. With increased Information Technology and knowledge sharing, there is more customer focused approach to win in a competitive world like today’s. Selling across different cultures worldwide is a prosperous business with the world moving nearer to the global economy. Many countries around the world have started selling their products in other parts of the world and the degree of success without giving much importance to the local culture is found to be less. L’Oreal is one such type of companies whose branches are present surrounded by customers whose tastes, expectations change from place to place. Proper importance should be given to these changing needs of customers and proper changes are to be made to cope up with the values of the country.

Knowing the cultural differences is of utmost importance for survival of any business. Along with the local cultures, there are also other issues to be addressed like the political and business factors while preparing marketing policies. Neglecting the cultural considerations not only results in negative response for a product but also can impact the firm’s international image. A few countries frown at the usage of colors, symbols mainly in experiences of their lives. Even colors appeal different in different countries. Gender is another matter of importance to be taken care of by the firm. To sell a dermatological product to the customer is more different in Russia when compared to US, UK, etc as the number of female doctors are higher in Russia than male doctors while males dominate female doctors in the latter countries. Even gender esteem is a matter of notable implication in countries India, Japan where the power to make a decision lies with men ultimately. Past and present political influence in the particular country also can influence the way people read or hear. Some countries would not give their citizens a freedom to choose while others may seek goods with government’s approval seal which seems trustier for them.

The society in which individual thought was suppressed for long time, people might not have the capacity to go by a rational thought process. And so, buying the product of their choice may be difficult for them. These individuals need every single aspect of the product explained in detail to build confidence in them about the product. Family structures also are a matter of concern. Family structures in Asian countries vary from those of many other countries worldwide. Considerations of the family rule respect in every matter even for small individual actions. People who have lived under such circumstances place family decision uppermost compared to their own. As elderly people expect respect, they have command on almost all small matters relating to the family members.

A most marked factor in selling to Asian cultures is avoiding ‘loss of face’. The Chinese have a culture of business that is based on the status in the society and fame of the individuals. Doing anything that degrades the personal standing of Chinese, they think is equal to insulting them copiously. Using any insulting terms in ads or during promotions will destroy the marketing stone dead. In few countries like India and China, tradition is of utmost importance to the people and the most respected. Unity in diversity has been way of life in India for Hundreds of years.

The socio-economic status and the general perception of the customers about any related product is to be taken care of. A few people believe that the more costly a product is, the more is its value and quality while others seek for products with better quality but at a lesser price. In countries like India, religious beliefs are also of importance to the society. Religion affects every aspect of an individual including reaction and response to a product. Educational, sensitive and informative data is well received in the Indian markets.

With careful study of the distinction between different countries, a firm can modify the right set of words to increase the reach of its products and even impact the international market. (Welsh, 2005)

Conclusion

L’Oreal is a growing company which uses different strategies for different parts of the world with changes in Price to Promotion. This has lead to success of the company worldwide. Before entering a market, the company has taken into consideration all the cultural aspects of the market which it is entering which helped it to grow. Continuous innovation of new products, understanding the customers and reaching every sector of the customers has been the main area of focus of the company. The firm did not end up with selling/delivering the product to the customer but also has taken into account, how the customer was thinking about the product through its feedback mechanism and CRM. The feedback then used to make continuous improvements to the product.

Neither did the company use same marketing strategy for the products around the world; it even changed the product mix among few countries. The present day’s success of L’Oreal can be attributed to its varying strategies for different customers. The only market in which it saw failure was the U.S market during the launch of its new product Plenitude as it has failed to differentiate between the French and U.S market. Hence, different places in the world demand different strategies to be employed which can be done through a thorough research about the target market.

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