L'Oréal shifts marketing model

25 October 2010

PARIS: L'Oréal, the cosmetics giant, is adapting its approach to marketing in a bid to support its innovation and global growth plans.

Jean-Paul Agon, the company's chief executive, forecast the beauty category would expand by between 3% and 4% worldwide this year.

"The good news in that the cosmetics market, despite the uncertainties of the economy, has confirmed it's come back to a normal growth. It's not extraordinary, but it's positive," he said.

"The behaviour of consumers in these times is difficult to predict."

Western Europe and the US are essentially static, meaning stealing sales from competitors, rather than boosting the size of the industry, is crucial.

"The objective of the game is to get market share," said Agon. "When you are in a positive market of, I don't know, 3% to 4% and you gain market share, you can increase your growth to 6%, 7% or 8%."

"When you are in a flat market, market share gains give you the totality of your growth. That's what we are seeing right now in Western Europe, for example, or North America."

One recent feature of the sector has been a reliance on discounts in mature markets, and Agon suggested this was set to remain over the immediate future.

"I can't say that we have seen a major change," he said. "There is definitely a high level of promotion and competition in stores, and it is probably a bit higher than it used to be."

In such a climate, providing a wide variety of goods proves particularly beneficial, according to Agon.

"The beauty of the L'Oréal portfolio is to have a very diverse and complementary range of brands from different channels and different divisions and at different price levels," Agon said.

Innovation also plays a key role, given the need to extend existing lines or roll out new products as a way of driving up sales.

"In this business, you have every year something like 17% of launches, which means you renovate your catalogue by 15% to 20% a year. And of course you are supporting all the time your brands," Agon stated.

In order to promote its stable more effectively, L'Oréal has established a new strategic marketing division, housing the organisation's first chief marketing officer.

"Everything is changing," said Agon. "There is a revolution in many aspects of the way we work. The digital world is completely changing advertising, communications, the marketing mix and business models."

"We believe there is a very interesting opportunity for us to accompany these changes in a transversal way in all divisions, in order to optimise the opportunities the new world is offering."

"This will help us project new ways of working in the 21st century."

While staffing requirements have not yet been decided, Agon revealed this unit will be responsible for creating compelling initiatives.

"It's more a question of what you bring in terms of new ideas, new directions, new vision, new inspiration. This is really the idea," he said.

"If you question is 'Will it increase cost?', the answer is no. The real idea is to bring new ideas and new visions to all divisions."

This ambition will be important given L'Oréal's target of attracting 1bn additional customers in the next two decades.

"We believe that within our channels worldwide, and especially in the new markets like India, China. Indonesia, Brazil etc., there are absolutely huge opportunities," Agon concluded.

Data sourced from L'Oréal; additional content by Warc staff