Applied Project in Marketing (Capstone) - 24100
Bachelor of International Marketing
University of Technology, Sydney
Marie Bekkum Date: 15. June 2018
This paper is done as a part of the undergraduate program at BI Norwegian Business School.
TABLE OF CONTENT
1. INTERNAL ANALYSIS
3
1.1. CURRENT STATE OF DAILY NATURALS 1
1.2. RESOURCES & COMPETENCIES 4
1.3. EMBODIMENT & PERFORMANCE 5
1.4. CUSTOMER SEGMENT 5
1.5. STRENGTH 6
1.6. WEAKNESS 6
2. EXTERNAL ANALYSIS
7
2.1. MARKET ANALYSIS 7
2.1.1. MARKET SIZE 7
2.1.2. MARKET TRENDS 8
2.1.3. MARKET PROFITABILITY 9
2.1.4. DISTRIBUTION CHANNELS 9
2.1.5. KEY SUCCESS FACTORS 9
2.2. EXTERNAL COMPETITOR ANALYSIS 10
2.2.1. DIRECT & INDIRECT COMPETITORS 11
2.3. CUSTOMER ANALYSIS 12
2.3.1. TARGETING 12
2.3.2 POSITIONING 13
2.4. MACRO ENVIRONMENTAL ANALYSIS 14
2.4.1. POLITICAL 15
2.4.2. ECONOMICAL 15
2.4.3. SOCIOCULTURAL 15
2.4.4. TECHNOLOGICAL 16
2.4.5. ENVIRONMENTAL 16
2.4.6. LEGAL 16
3.0. SWOT ANALYSIS
17
3.1. STRENGTH 17
3.4. THREAT 18
3.5. KEY ISSUES 19
Key Issue 1: Differentiation with Davroe range 19
Key Issue 2: Expansion into a new market. 19
Key Issue 3: Highly competitive market 19
4. MARKETING OBJECTIVES
20
4.1 SALES OBJECTIVE 20
4.2 MARKET SHARE OBJECTIVE 20
4.3 MARKETING OBJECTIVE 21
5.0 TARGET MARKET & POSITIONING
21
5.1 TARGET MARKET 21
5.2.1 B2C 21
5.2.2 B2B 22
5.2 POSITIONING 23
6.0 KEY STRATEGIES
23
6.1 KEY STRATEGY OPTION 1 23
6.2 KEY STRATEGY OPTION 2 24
6.3 KEY STRATEGY OPTION 3 24
7.0 KEY RECOMMENDATIONS
25
7.1 DISTRIBUTION STRATEGY 25
7.2 MARKETING STRATEGY 26
7.3 PROMOTIONAL STRATEGY 26
7.4 E-COMMERCE STORE 26
7.5 SOCIAL MEDIA PLATFORM 27
7.6 COMMUNICATION STRATEGY 27
7.7 FUTURE RECOMMENDATIONS 27
REFERENCES
29
APPENDIX
32
EXECUTIVE SUMMARY
This report examines the marketing challenge faced by Daily Naturals, established by Dresslier. The report includes an internal and external analysis, based on primary and secondary data. Based on the research conducted, three main issues have been identified;
Differentiation between Daily Naturals and Davroe
Dresslier have not been successful in differentiating their two brands Davroe and Daily Naturals. The two brands appear almost identical in design, packaging and product performance, which creates mixed signals for their customers.
Expansion into a new and unknown market
As Dresslier wants to expand Daily Naturals into new markets across Australia, and can not only rely on their experience with Davroe when seeking new markets.
Highly competitive market
Daily Naturals does not only face challenges concerning expansion into a new market, but also attracting market share and customers in a highly cluttered and competitive market.
The following are the strategies recommended for Daily Naturals to reach the sales, marketing and market-share objectives within the next 12 months;
Strategy option 1:
Distribution through Priceline Pharmacy in Sydney
Strategy option 2
Marketing strategies including advertisement through Priceline, online and in-store, and the use of billboards.
Promotional strategies such as the use of sachets and exclusive offers for Priceline’s Sister Club loyalty members.
Strategy option 3:
Create an e-commerce store and social media platform Change product design
1. INTERNAL ANALYSIS
The internal analysis is based on a Business Model Canvas (Figure 1), which is used to assess the current state of Daily Naturals about the firm's value proposition, infrastructure, customers and finances.
Figure 1 - Business Model Canvas
1.1. CURRENT STATE OF DAILY NATURALS
Daily Naturals is a startup brand which has been developed by the well-established mature company Dresslier. The startup phase involves many challenges, and Daily Naturals need to establish objectives that are concise, measurable and quantifiable to move forward and become a successful company.
Additionally, it is essential to keep the corporate strategy balanced between profitability initiatives, product development and other value-adding activities.
Daily Naturals’ general marketing goals are to:
● Build brand awareness through word of mouth
● Get engagement rates
● Be high on Google search ranking and search engine optimisation.
Daily Naturals´ corporate goals are to:
● Increase market share by expanding from South Australia into New South Wales, and throughout Australia
● Expand current product lines
● Achieve more sales per stock keeping unit (SKU) as this, in turn, will receive good profits for the company.
Figure 2 - Business Life Cycle
Figure 2 shows the business life cycle. As a startup company, the initial annual growth is expected to be small, yet increasing. As the company gets more knowledge within the field, growth is expected to rise more significantly year after year. A mature company traditionally experiences a declining increase, and in the final stage, growth is likely to halt unless preventative measures are taken.
According to representatives from Dresslier, in 2015, the Daily Naturals range achieved growth in sales of 11%. Further, the increase went to 9% in 2016 to 7% in 2017. In 2018 Daily Naturals is expecting a 5%
sales growth. What is interesting about Daily Naturals is how their growth the last years, including the expected growth in 2018, shows a declining increase. This is shown below in figure 3:
Figure 3 - Daily Naturals growth
Referring again to the business life cycle, we see that Daily Naturals is acting more like a mature company when in theory the business should find itself in the startup or growth phase. The question that arises is to what degree Daily Naturals manage to differentiate itself from mature sister brand, Davroe.
The embodiment of attitudes and goals within Daily Naturals is building on the same principles as Davroe but yearns for its own, unique approach to the market.
Product Line
All information on the product line is obtained directly from the Dresslier brief. The range in its entirety is naturally derived and environmentally friendly, it is further described as “an easy to use, high quality/
high-performance professional range of hair care products now being made available to mainstream retail outlets”. Daily Naturals is a low irritant product that is free of Sulphate, Paraben and Sodium Chloride (salt).
The shampoo and conditioner are focused on five different hair care areas:
● Colour protect shampoo and conditioner
● Volume enhance shampoo and conditioner
● Moisture intense shampoo and conditioner
● Smooth control shampoo and conditioner
● All clear anti-dandruff shampoo and conditioner The treatments and styling consist of:
● Rich moisture hair mask
● Leave-in mask
● Leave-in argan oil
● Leave-in sealer to battle split ends
● Detangler spray
● Styling lotion
● Curl enhancer
1.2. RESOURCES & COMPETENCIES
Physical resources:
Daily Naturals aim to use as many Australian produced ingredients as possible, whereas all extracts are Australian. Considering Australia is the driest inhabited continent on Earth, with 70% of its mainland classified as arid or semi-arid (Outback Australia Travel, 2018), only 5% of the ingredients are actually from Australia. The excess ingredients are sourced from other parts of the world; 55% from the US, 30%
from Europe and 10% from Asia. Certified Moroccan Argan Oil is frequently used in the range.
Regarding property, Dresslier has an established manufacturing plant in Adelaide where all products are made and distributed.
Financial resources:
According to the Dresslier brief, the company as a whole has shown positive, sustainable growth in sales over the last three years with an average growth rate at 28.33%. Dresslier is in an excellent financial position to launch the start-up company Daily Naturals without interfering with Davroe. Due to already established deals through Davroe, transaction costs can be kept at a low level. The two brands contain around 70% of the same ingredients (J.& M. Centofanti, Personal Communication, April 16, 2018), which facilitates low production costs of Daily Naturals.
Human resources:
Through decades of experience, Dresslier has attained valuable knowledge of the beauty industry, which seeps through the organization. At present a third generation member of the Sloan family still hold the reins, assuring the original core values are still intact. These are irreplaceable, intangible assets confirming trust throughout distribution networks and production sites, all the way to the retailer and end user.
Intellectual capital:
Dresslier has been ahead of their time since the company was founded 80 years ago, by being pioneers in all natural hair care products. By strengthening core company values, Dresslier has continued to reap profits from their labor. In 2011, Dresslier showed strong initiative to change according to changing market demands, when launching Daily Naturals to reach a new target market. The company values expertise and strive to deliver quality products. Experts carefully select all ingredients within the field, which reflects the integrity of the Dresslier organization.
1.3. EMBODIMENT & PERFORMANCE
Relationships are critical in the market value chain, and Dresslier has the opportunity to utilize this further by using the same suppliers and distributors for both their brands. This will generate lower transaction costs, as Daily Naturals benefits from Davroe’s position in the business market. Introduction of new products equals an increase in supply orders from existing suppliers. Increasing supply orders enables Daily Naturals to profit from economies of scale due to increased unit cost. Dresslier as a company has always been ahead of their time, with a strong focus on Research & Development which is one of the reasons for their success with Davroe.
The value proposition of the business is directed at the end user. By creating Daily Naturals, the end user will be able to access a high performance, natural and vegan alternative. Daily Naturals has a product line that will let the consumer access high quality, premium products available through suitable and more convenient retailers. Being certified “cruelty-free” is a significant point of difference, and adds value for the conscious consumer. The VRIO framework (Figure 4) has been used to map Daily Naturals competitive advantage.
Figure 4 - VRIO Framework
1.4. CUSTOMER SEGMENT
Daily Naturals was established as a reaction to pressure from National Pharmacies, whom initially wanted to acquire Davroe in their shelves. As Dresslier did not want to distribute its salon brand through other retailers, Daily Naturals was created. Through Daily Naturals aimed to fill a gap in the market, namely to target the customers who value premium quality but do not buy products from their hairdresser.
Dresslier as an organization has been producing vegan, natural products since the 80´s, which gives Daily Naturals a high level of trustworthiness. A noticeable sociocultural trend is a focus on natural resources,
“clean living” and a renewed attention towards the environment (Murray-Ragg, 2018). To ensure that customers return and will remain loyal in the future, it is vital that the merchandise deliver what is expected by the consumer. Through trustworthiness and transparency, they will be able to build up a
positive word of mouth, which has shown to be an efficient and vital channel in today’s society. One of Daily Naturals’ current market goals is to ensure that customers recommend products to their friends through this channel.
1.5. STRENGTH
Dresslier as a company has strength through their already established brand name Davroe. Their acquired beauty care knowledge is a strong and valuable resource they can use in their new brand Daily Naturals.
Already existing production and distribution systems, as well as business partners, can be utilized in a beneficial way for Daily Naturals. The startup company will have to use less of their resources and financial capital to establish new business relationships.
1.6. WEAKNESS
Issues regarding Daily Naturals´ organizational structure include allocation of resources and capital, and especially concerning research and development. It is important to acknowledge that a new product line requires just the same amount of care and commitment as an entirely new business, considering the principal object is to be differentiated from and not mistaken for the existing product line.
One challenge when expanding a new product line within the same organization is keeping the brand culture intact, while precisely differentiated. Strategic direction is lacking, regarding not explicitly specifying how it is distinguished from Davroe other than place. At this point, the two product lines appear too alike, which will make it difficult for customers to understand the difference between the two.
Instead of being a more “available” product, Daily Naturals has been identified as the “cheaper” version of the quality brand Davroe. Anticipated issues regarding sales and retailers include assumptions regarding natural and vegan products, is short recommended shelf time and low performance. Low performance both entails the products not being able to remove the dirt and soil properly, and not fulfilling the specific areas of promised hair care. It is crucial to educate retailers and customer regarding these issues, to prevent them from becoming popular opinions.
2. EXTERNAL ANALYSIS
2.1. MARKET ANALYSIS
2.1.1. MARKET SIZEThe beauty industry is a highly competitive market which involves nearly 3 out of 4 Australians (Roy Morgan Research, 2016). The study conducted by Roy Morgan Research found that in 2016, 73.9% of Australians purchased shampoo at least once in an average six months. By rounding this number up to 75% to account for the growth in population since 2016, we can identify a total market size of 18,695,230 consumers based on an estimated population of 24,926,973 Australians on the 7th May 2018 (Australian Bureau of Statistics, 7th May 2018). Due to some factors such as an aging population and increase in net overseas migration, the population of Australia is expected to increase to over 25 million people this year and reach 40 million people within 40 years (Ting, Hoad, Doman & Liu, 2018). This means that the total market size for hair care products within the beauty care industry will grow, but it does not necessarily lead to a percentage market increase.
The initial target market for Daily Naturals will be in the Sydney area and focusing predominantly on 20- 34-year old’s in the Eastern suburbs area. The target market will expand to the Greater Sydney area after a six month period, and evaluation of Dresslier should reassess and make any modifications to improve sales while potentially extending into the Greater Sydney area and still focusing on the 20-34-year-old age bracket.
● The population in the Greater Sydney area in 2016 was 4,823,991 people, with over half being females (50.7%) and a median age of 36 ("2016 Census QuickStats: Greater Sydney", 2017).
● The overall population of 20-34-year old’s in the Greater Sydney area in 2016 was 1,115,138 people, increased from 984,146 people in 2011 ("2016 Census QuickStats: Greater Sydney", 2017).
● The population in the Eastern Suburbs was 267,037 people in 2016 with 51.5% females and a median age of 35 ("2016 Census QuickStats: Sydney - Eastern Suburbs", 2017).
● In 2016 there was 75,159 20-34-year old’s living in Eastern Suburbs, 28.1% of the Eastern Suburbs population. The overall number of people in this demographic has risen from 71,020 people in 2011 but was 28.4% of the population in the Eastern Suburbs at that time ("2016 Census QuickStats: Sydney - Eastern Suburbs", 2017).
● Using the Roy Morgan Research results and accounting for growth, 75% of the target market would purchase shampoo once every six months. This number would be 56,369 people buying shampoo every six months (Roy Morgan Research, 2016).
Figure 5- Target Market 2.1.2. MARKET TRENDS
A trend of the market that was previously mentioned involves the aging population. As the life expectancy increases, consumers are searching for high-quality products that will maintain colour and prevent hair loss. The loss of hair and colour is expected as people reach an older age, but there are ways to delay and avoid this by taking care of the hair throughout a person’s life.
An increasing trend in the hair care market is the decline of shampoo which is being replaced by natural hair washing agents (Murray-Ragg, 2018). These are seen as being better for the hair as well as the environment, and this trend will suit Daily Naturals significantly. This trend is consistent with the increase in environmental awareness and veganism. In recent years, society is more aware of the impact they have on the environment through the products they use and consume which has led to a shift towards more natural and eco-friendly products. The growth of veganism has also fueled the need for more vegan products.
The consumer market is increasingly being shaped by influences of the Internet and strong social media presences. This is a force that brands need to be aware of to reach their customers in the modern marketplace successfully. Trends exhibit strategies where brands use both commercial and private social media accounts to communicate further their product to end user (Forbes Communication Council, 2018).
2.1.3. MARKET PROFITABILITY
● Penetration rate: 9.6% ("Personal Care - Australia | Statista Market Forecast", 2018)
● Market volume: 56369 x 0.096 = 5411 (rounded to whole number)
● Market value: 5411 x 17.95 (price of most products) = $97,127.45
● We have identified the market value to be $97,127.45 due to a penetration rate of 9.6%.
● Median weekly personal income for people aged 15 years and over in the Eastern Suburbs was
$1020 in 2016.
2.1.4. DISTRIBUTION CHANNELS
Distribution channels in the Australian beauty industry usually consist of one or two levels of the three primary levels of distribution used for the fast moving consumer goods (FMCG) (Figure 6). An example of this is Dresslier´s deal between Daily Naturals and National pharmacies where it operates on one level of distribution. Larger brands in the beauty industry like Head & Shoulders who works on an international level usually consists of three levels of distribution (Dasgupta, 2008).
Figure 6 - Levels of a distribution channel
2.1.5. KEY SUCCESS FACTORS
Key Success Factors are factors businesses must do or comply with within an industry to be successful (Simister, 2013). IBIS World (2018) identified 250 Key Success Factors for business and addressed the five most important ones for the Australian cosmetic & toiletry industry as:
1. Ability to control stock on hand: Industry players should ensure adequate stock controls are in place to reduce inventory costs and increase stock turnover.
2. Having a clear market position: Projecting a clear and consistent image is extremely important for industry players to attract discretionary consumer expenditure. In the age of social media and digital beauty, this factor is growing in importance.
3. Production of goods currently favoured by the market: Industry players should ensure that their product mix and pricing strategy are appropriate for their target market to be thriving.
4. Experienced workforce: In line with its customer-centric focus and reliance on one-on-one selling techniques, the quality of shop-floor staff needs to be high to ensure quality customer service.
This is particularly important in the prestige or high-end segment of the industry.
5. Attractive product presentation: The store layout and stock display should encourage customers to experiment and to enjoy their in-store experience, while the store design should reinforce company image. The use of digital screens is projected to increase over the next five years.
2.2. EXTERNAL COMPETITOR ANALYSIS
Daily Naturals is not alone in providing vegan, cruelty-free, Australian-made and salon quality hair care products. However, this does not mean they cannot differentiate themselves from their competitors.
Before beginning an analysis of competitors, it is essential to distinguish between direct and indirect competitors. Daily Naturals main aim would be to differentiate itself from competitors with the same features before targeting people who do not currently buy shampoos based on those factors. A direct competitor for Daily Naturals would have the following three qualities:
1. Vegan 2. Cruelty-free 3. Australian made
An indirect competitor would have a combination of these factors, but not all three. In making this distinction, it is now possible to analyze the competitors based on these factors. After identifying these factors, it is essential to consider the price (to be examined per 100ml, from company websites) as a key differentiating factor. Also, it is important to note where brands are stocked. They could be stocked:
1. Online 2. Supermarkets 3. Pharmacies 4. Salons
Potential competitors in this industry would be companies who sell their vegan-cruelty free hair care products purely to salons but may venture into the pharmacy market. Potential competitors could also be established hair care brands such as Head & Shoulders who decide to release a vegan/cruelty-free range.
Multiple competitors focus on the business to business (B2B) market rather than the business to consumer (B2C) market which Daily Naturals currently operates in (McPherson’s, 2018).
2.2.1. DIRECT & INDIRECT COMPETITORS
Through this analysis, two key direct competitors and one indirect competitor have been identified. These are A’kin, Sukin and Tresemmé hair care products.
Daily Naturals A’kin Sukin Tresemmé
Launched 2011 (Australia) 2002 (Australia) 2007 (Australia) 1948 (USA)
Salon quality ✔ ✔ ✔
Cruelty free ✔ ✔ ✔
Vegan ✔ ✔ ✔
All Australian ✔ ✔ ✔
Price per 100mL
$7.18 $5.40 $2.99 $0.78
Figure 7 - Direct Competitors
Looking at Porter's Competitive Strategy (Appendix 2), the direct competitors have the same drivers, being that they prioritize sustainability, environment and animal-friendly practices. These seem to be the key drivers for all four companies. Current strategies include heavily marketing their adoption of these values, on the packaging or in digital presence. The primary competitive strategy amongst these three competitors is current price, as is evident from the figure 1. A critical weakness of the three competitors is that they do not advertise salon quality as a feature of their products, which Daily Naturals does heavily.
This gives Daily Naturals a competitive edge as it places itself as the premium quality product.
It is also important to note that Daily Naturals is primarily a premium hair care product more so than it is vegan and cruelty-free. Thus, it aims to compete with brands such as Schwarzkopf, Tresemmé, and
L´Oreal. Apart from being salon-quality it easily differentiates itself from these brands by having that strong association with being a vegan and cruelty-free. Hence Daily Naturals holds a unique claim that it is the only salon quality and socially responsible hair care product on the market. On the other hand, where brands such as Schwarzkopf prioritize quality over social responsibility, Daily Naturals strongly believes and proves with its product that you can have both.
2.3. CUSTOMER ANALYSIS
Based on the market- and competitor analysis, we have identified four possible segments for further targeting. These segments are roughly based on demographic factors to paint a picture of consumer purchase behavior when it comes to hair care products, as shown in the table below (figure 8).
Age Income Location Needs Type Point of sale Price Brand Size
>20 M & F
Low At home
with caretakers
Quick & easy, does the job
Reliability Supermarket, online, discount
pharmacy
Low Tresemmé, Dove 288,362
20-34 Male
Middle Greater Sydney
Clean & easy Three-in-one Supermarket, Discount pharmacy
Value for money
Head &
Shoulders
549,763
20-34 Female
Middle Greater Sydney
Silky and shiny, smells good, healthy hair, result
Quality &
natural
Online, salon, pharmacy
Premium Sukin, A’kin, Joico
565,375
34<
M & F
Middle- Upper
Greater Sydney
Smooth, clean
& smells good
Quality &
reliability
Online, Supermarket,
Pharmacy,
Mid-upper range
Pantene, Garnier, Schwartzkopf
2,520,192
Figure 8 - Customer Analysis 2.3.1. TARGETING
Whereas Davroe is servicing the hair salon market and their customers, Daily Naturals is currently servicing to pharmacies. Daily Naturals targets the customers that want the salon products, but without actually purchasing them from a hair salon. They want to catch the customers who are willing to spend more money on premium products but shop their hygiene products at pharmacies. The target market, being young consumers, is increasingly accessible through online platforms. Marketing through online
channels is both cost-efficient and makes it easier to reach the actual target market, and simplifies the analysis of data.
2.3.2 POSITIONING
As of today, Daily Naturals have strong brand recognition in South Australia. They are being sold at National Pharmacies and has consistently been in the top three of the hair care category across the board including brands on promotions. Daily Naturals desires to be perceived as “better than organic”, without focusing on the fact that they are a vegan hair care brand. They also want to position themselves with a clear distinction from Davroe. However, as the current situation stands, the consumer market can find it difficult to understand the difference between the two. One of Daily Naturals’ unique selling points is that it is a salon quality product that is sold outside of salons.
To visualize how brands are positioning themselves, we have created a perceptual map based on product quality and the emphasis on ethics. This is shown in figure 9.
Figure 9 - Perceptual Map
To accurately target our specific market segments, it is essential to identify the attributes that describe the typical persona of our target market. This analysis has helped us form a picture of who would purchase Daily Naturals. The regular customer is a female living in the Eastern suburbs aging between 20 and 34 years. This woman lives actively by her values and enjoys spending time with the people around her. She cares about the goodness in the world and spreads love through her everyday actions. When standing in- between two choices, she will always choose the more sustainable option. Labels such as cruelty-free,
vegan and all-natural catch her eye, but she is also the kind of consumer that is willing to check more into the labelling. She is conscious of her impact on the world, and would therefore also be willing to pay a bit more for a product that is in-line with her personal beliefs. She uses social media daily, and Instagram is a vital source of inspiration for her. As for exercise, she mainly enjoys doing this outside. Running, yoga, surfing, swimming and going for bush walks are all on her list. She thinks it is vital that her everyday activities do not harm nature. Considering she spends much time in rough environments, she is also in need of hair products with high performance and quality. She has not given herself any dietary restrainments and therefore does not fall into any specific group such as “vegan" or “vegetarian”.
2.4. MACRO ENVIRONMENTAL ANALYSIS
Daily Naturals is looking to make their products available to all Australian residents, exploring a market that is large and holds many significant competitors. The following PESTEL analysis (figure 10) is set in a national context, examining how external factors may impact the business.
Figure 10 - PESTEL Analysis
2.4.1. POLITICAL
According to IBIS World, “the cosmetics, perfume, and toiletries manufacturing beauty industry do not receive any significant assistance”. The general Australian chemical sector does not receive any protection or assistance other than what is offered by falling tariff barriers, where the maximum tariffs are 5% (IBISWorld, 2017). The lower tariff barriers have allowed an increase in imported raw materials and therefore made it cheaper for companies to manufacture goods.
2.4.2. ECONOMICAL
Australia is a developed country with a high-income level per capita and an annual GDP growth of 2.77%. This has a positive effect on the marketplace, especially for businesses in the growth and development stages of the business lifecycle. The level of inflation of consumer prices has decreased over the last three years and was in 2016 at 1.277% (Michigan State University, 2018). With stable growth in the beauty industry in the past few years, the manufacturers are estimated to reach a revenue of $1.83 billion by the year 2023/2024 (IBISWorld, 2017). Retailers in the beauty industry had a revenue of $4.16 billion in 2018/2019 and are predicted to increase to $4.53 billion by 2023/2024. According to IBIS World (2017), the revenue growth for both manufacturers and retailers is anticipated to be consistent for the next five years, with varying annual results (Appendix 7). This growth is mostly driven by “export earnings and the introduction of new value-added, multifunctional, complex age-specific products and premium organic and eco-friendly products”. Especially the ongoing development of natural, organic and environmentally friendly products will increase the demand.
2.4.3. SOCIOCULTURAL
New South Wales is the state with the largest population, with Sydney being the largest city at over 4.8 million residents ("2016 Census QuickStats: Greater Sydney", 2017). The rise of ethically and environmentally conscious consumers are leading to new trends in the use of organic, cruelty-free and natural products (IBISWorld, 2017). Ethical consumerism in Australia has had significant growth in recent years, as consumers are more aware of the moral, social and environmental consequences of their actions. Therefore natural products are increasing and continuing to grow into larger markets instead of only being sold in niche markets. It is also expected an increase in trends surrounding organic, eco- friendly, fairtrade and local products (IBISWorld, 2017). There has been a shift in consumer purchasing behaviors with a preference for products that aren’t tested on animals. The consumer is more conscious, and they demand transparency before buying a beauty care product. This entails a higher demand for all natural products that are free from petrochemicals (IBISWorld, 2017).
2.4.4. TECHNOLOGICAL
Technological advancements in the beauty industry pave the way for new products with innovative and advanced ingredients. Moreover, technological advancements in social media and e-commerce have affected the downstream activities of manufacturers. For instance, some players are integrating their Facebook presence into their e-commerce platforms. Digital technology will become a big part for manufacturers so they can reach target markets directly. More brands will also be positioned as digital brands. As players adapt their traditional promotional activities to digital marketing, it is crucial that Daily Natural even enter the digital world (IBIS World 2017). The importance of handling an Omni channel is increasingly vital, as users value accessibility and convenience. The overall implementation of using digital technology is to improve control and the effectiveness of new marketing.
2.4.5. ENVIRONMENTAL
Environmental awareness has increased a lot the past few years. For instance, addressing sustainability issues is becoming a significant competitive force in this industry.
Companies compete on new product developments to retain consumer interests, which is natural, eco- and cruelty-friendly products. Dresslier actively engages in many of these areas, which also impacts on Daily Natural’s value proposition. There is a big focus for every player to improve its manufacturing processes to increase its environmental sustainability. This has given more awareness of the types of packaging used, thus encouraging to change it to biodegradable packaging. Moreover, the fact that Australia is a vast country, having manufacturing operations in or close to the major cities gives you the opportunity for more efficient supply chain management. Manufacturers can reduce time and transport costs, which also provide a positive impact on the environment (IBIS World 2017).
2.4.6. LEGAL
There are current mandatory standards for the labelling of cosmetics ingredients, which has to be labelled under Trade Practices Regulations 1991. Every manufacturer must adhere to the state laws on poisons (IBIS World 2017). Due to strict pricing regulations, Daily Naturals can recommend a retail price, but cannot force a retailer to sell the product at that price. A retailer can further set prices and discounts on their products as long as they set their rates independently of their competitors. It can be illegal to set price below cost, depending on the circumstances (ACCC 2018). Approximately all cosmetics ingredients defined as "natural", such as oils, extracts, and essences of plants are regulated as industrial chemicals under the Industrial Chemicals Act 1989. New ingredients to the country must be assessed by National Industrial Chemicals Notification and Assessment Scheme (NICNAS 2018).
3.0. SWOT ANALYSIS
The SWOT analysis (Figure 11) is a useful tool used to evaluate the company's strengths, weaknesses, opportunities, and threats. The study is based on both internal and external factors that may influence the company's objectives.
Figure 11 - SWOT Analysis
3.1. STRENGTH
Dresslier has been in the industry for 80 years and has developed a well-established range (Davroe), management team and existing production and distribution system. Having one of the members of the Sloan family in the group helps to make sure that Dresslier keeps track of the company vision. Together, this can be utilized in a beneficial way for Daily Naturals and gives them a high level of trustworthiness and credibility. The offering of a salon quality hair care product is Daily Naturals´ main unique selling point. Being a natural, certified cruelty-free and all Australian product further creates a differentiation from its competitors. Dressier is currently in a good financial position, which gives Daily Naturals a great starting point expanding from the new product and growth stages to the mature stage.
S W
O T
Well established brand and management team Major experience and knowledge
Salon quality product
Existing production, distribution system and business partners
Lack of strategic direction Poor bottle design Limited online presence Low brand recognition Rapid market growth Environmental awareness NSW - largest population New technological advancements Improved product information
Addressing sustainability issues is becoming an important competitive force in this industry
No protection or assistance from government Consumer trends
New direct competitors
3.2. WEAKNESS
Daily Naturals´ main weakness is that strategic direction is lacking, regarding not explicitly specifying how it is differentiated from Davroe other than place. It seems that the embodiment of attitudes and goals within Daily Naturals is building on the same principles as Davroe, and therefore is not mutually exclusive on its own. There is a limited online presence, which makes it difficult for potential customers to research the product, and at the moment no market strategy on how to change this. Although Daily Naturals already has been placed at some chemist stores in the Eastern Suburbs in NSW, there is low brand recognition. Consumers do not recognize the product, and it does not stand out from its competitors. According to our qualitative research, the bottle is seen as a “cheap” bottle design and does not perform to the values and standards Dressier has set for it.
3.3. OPPORTUNITY
With rapid marketing growth in the beauty industry, it is safe to say there are countless opportunities to strengthen Daily Naturals position in the market available. Increased environmental awareness in the Australian population has heightened the product awareness of eco-friendly products. This could be an opportunity for Dresslier to expand the Daily Naturals product line to fulfil this gap in the market space.
NSW has the largest population in Australia with multiple socio-cultural groups focused on “clean living”
making NSW and Sydney an ideal area to expand. Another opportunity that Dresslier has not capitalized on is technology. The Internet is commonly to research hair care products before purchase. By having an online presence, it can increase brand awareness, share product vision and highlight product information.
Product information is essential especially when you want to position your product as a prestige performance product.
3.4. THREAT
When planning to increase market share and strengthen the Daily Naturals product line, positioning is essential to consider threats existing and possible threats that can occur in the future. The beauty industry is a highly competitive market, due to rapid changes in trends and therefore consumer’s purchase decisions. Competing companies are continually expanding and improving their product lines, which puts pressure on Daily Naturals as well. New direct competitors also pose a threat, and the government does not provide any protection or assistance in this industry if the company falls into financial trouble.
3.5. KEY ISSUES
Key Issue 1: Differentiation with Davroe range
One of the primary critical issues identified is in regards to the differentiation between Daily Naturals and sister brand Davroe. Daily Naturals needs to develop specific strategies to target markets where Davroe is not strongly represented. It is vital that the two brands be mutually exclusive and recognizable as high- performance products, without cannibalizing the other. The two brands appear very similar regarding design and packaging, which sends mixed signals to consumers. Also regarding the percentage crossover of ingredients, this causes more confusion in regards to whether the products are the same after all.
Key Issue 2: Expansion into a new market.
The second key issue that will affect Dressier involves expanding into a new and unknown market.
Despite the experience in the industry, expansion into a new market can be a complicated process that can be unsuccessful due to many factors. Dresslier needs to identify and reach the target market that will generate the highest revenue and allow for long-term stability. The new market may react differently to other markets, so it is crucial that the Daily Naturals range be able to meet the needs and wants of the market. Furthermore, decisions regarding the distribution of the product need to be addressed. The current manufacturing plant is based in Adelaide which may limit the distribution due to transportation costs and the longer time to reach the new market on the east coast.
Key Issue 3: Highly competitive market
When launching a new product through a retailer, it is essential to acknowledge the separation of power:
today, the retailer has increased power regarding which products lives or dies. The primary goal of a new product is to look attractive on the shelves and flaunt its unique selling point. Much effort is required in this area to get both retailer and customers to recognize this. In this highly competitive market, where the customer is exposed to an abundance of choices, the primary objective is to get the customer to favor the product again, and again. Daily Naturals faces a challenge concerning firstly breaking into the market and then attracting market share.
4. MARKETING OBJECTIVES
In order to take advantage of the opportunities in the industry and strengthen the response to the threats, Dressier will be given three main objectives. The objectives are based on the selected issues in part 3.5 regarding the current situation of the company, and the introduction of Daily Naturals into Priceline stores in Greater Sydney. This is because even though Dresslier initially wants Daily Naturals distributed across Australia, it is not realistic given the timeline and implementation budget. However, it is realistic as a part of Dresslier’s long-term goal, see 7.7. Using the S.M.A.R.T goal setting criteria, the objectives are made for the forthcoming 12 months, commencing 1. July 2018.
4.1 SALES OBJECTIVE
The primary objective is for Daily Naturals is to increase their sales revenue in-store by AU$502.320 within the next 12 months. At the end of June 2019, their total sales revenue will reach AU$644.070 from in-store sales, which includes the predicted 5% increase from National Pharmacies in 2018 (figure 3 Daily Naturals growth). This target equals an increase of 85.260 units produced and sold, including those sold in National Pharmacies in South Australia. The numbers are based on the calculations shown in appendix 8.1, where the aim is for at least 40 Priceline stores in Greater Sydney to sell approximately 35 units per week during the first year.
Although a slow sales growth is usually expected when a new product being introduced into a new market, Dresslier has the financial resources and production capacity available to sustain and push for a high growth.
4.2 MARKET SHARE OBJECTIVE
Daily Naturals currently has a market share of 0.46% in South Australia (appendix 8.2). The market in New South Wales is a highly competitive market and is according to IBISWorld 27.6% larger than the
Increase sales revenue in-store by AU$502.320 by the end of June 2019
Gain 0.4% market share in NSW by the end of June 2019
South Australian market (IBISWorld, 2018). With an expected sales revenue of AU$502 320 in NSW, a market share of 0.4% can be expected within 12 months. As the industry is highly competitive, this justifies to staying on a one level distribution channel where Dresslier can push more product information onto the retailers and increase their product experience as sellers.
4.3 MARKETING OBJECTIVE
Achieving an additional 10% revenue from online translates to an additional sales revenue of AU$64.407 and an additional 8.526 units manufactured and sold (appendix 8.3). Although this extra revenue is not significant, it will establish and help Daily Naturals differentiate itself from Davroe, as an online channel can be a good source of information for the customers. It will also help give Daily Naturals a greater brand recognition and create more awareness about the brand.
5.0 TARGET MARKET & POSITIONING
Daily Naturals main positioning and target market needs to be the end consumer. Through our customer analysis (2.3) we identified four possible segments for Daily Naturals. Further analysis of our recorded survey answers identified three clusters (appendix 9). The target segment that will give Daily Naturals the highest revenue and allow for long-term stability is females aged 20-34 years living in Greater Sydney.
5.1 TARGET MARKET
5.2.1 B2CThrough the cluster analysis, cluster one and two have been identified as the main target for Daily Naturals. These are women living in the Greater Sydney area. As shown in appendix 9.2, they gain knowledge about the products mainly from their hairdresser, online, social media and friends. They purchase their shampoo and conditioner when their current bottle is empty, approximately every one to three months, through supermarket, pharmacies and hair salons. This makes the target market ideal, based on Daily Naturals package size. According to the survey, they strongly agree with the statement “using
Achieve an additional 10% revenue from online by the end of June 2019.
natural products makes me feel good.” The most important attributes for this target market, according to our survey, is;
1. Not tested on animals
2. No animal/bianimal ingredients 3. Chemical free
4. Price 5. Smell 6. Size
7. Product feature 8. Design
(appendix 6.3 & 10)
As previously described in figure 8, 2.3.1 targeting, the size of the female target market aged 20-34 in Greater Sydney, is estimated at approximately 565.375 women. They are increasingly accessible through online channels. The chosen target market is ideal for Daily Naturals as they value product quality, ethical sources and product availability. As they may go to the hairdresser to dye and cut their hair, they
appreciate hair products that do not strip away color or reduce the quality or feeling of their hair.
However, they still purchase their shampoo and conditioner from supermarkets and pharmacies. The segment is not too price sensitive, as it is willing to pay more for sustainable, high-quality products.
5.2.2 B2B
Daily Naturals is currently sold primarily through National Pharmacies in South Australia. Daily Naturals was made mainly for this market and should, therefore, continue and further expand into this market.
Priceline has been identified as the most promising pharmacy to expand into for Daily Naturals in the Greater Sydney area. Priceline Pharmacy is Australia’s leading cosmetics and toiletry retailer, with 7.5%
market share in Australia (IBISWorld, 2018), more than 50 stores in Greater Sydney as well as more than 7.1 million members in its Sister Club loyalty program as of August 2017. They are dedicated to “helping women look good, live well and feel great” (Australian Pharmaceutical Industries Ltd, 2018). The focus is on being Australia’s leading beauty and wellbeing retailer. As they are also dedicated to specialist advice and best prices, they appeal to a different market than Davroe. This market has excellent potential for Daily Naturals as their customers are a part of Daily Naturals target market, and they focus on the wellbeing, beauty, and their customer’s feelings.
5.2 POSITIONING
As Daily Naturals’ price is significantly higher compared its main competitors, as described in part 2.2.1, it will be positioned as a premium product with high quality and performance. The target market appreciates products that are not tested on animals, does not include animal ingredients and is chemical free. Daily Naturals needs to position itself as a salon quality product that can be purchased through pharmacies. This will target the people that value high quality, but that does not purchase their products from their hairdressers. It is important to differentiate themselves from their main competitors like Sukin and A’kin by focusing on their product being “Australian made, natural and high performance”, see figure 9 - perceptional map. The bottle design must be altered to be able to position itself further from Davroe and its competitors.
6.0 KEY STRATEGIES
The key strategies described below are based on 3.5 key issues and 4.0 key objectives.
6.1 KEY STRATEGY OPTION 1
DISTRIBUTION STRATEGY
Currently, Daily Naturals is only available for customers through National Pharmacies in South Australia.
Daily Naturals main objective will be achieved through the launch of the product into Priceline, in the Greater Sydney Area. Priceline is, as described in 5.2.1, the most promising pharmacy and retailer for Daily Naturals to expand into in this area. As explained in the key issue, this will give the retailer control over marketing and sales. Dresslier must also train and educate the distributor about Daily Naturals, as they will be in direct contact with the customers.
Key issue: Expansion into a new market
Objective: Increase sales revenue by AU$502.320 within the next 12 months
6.2 KEY STRATEGY OPTION 2
MARKETING STRATEGY
For Daily Naturals to be able to reach its sales revenue and market share in New South Wales, Dresslier must invest in marketing the product. Marketing strategies include advertisement made through Priceline, both in-store and online. Further research on in-store consumer behavior will help Dresslier to address Daily Naturals ideal shelf position and unique selling point. Dresslier must also take advantage of their in- house marketing team to create an integrative marketing plan for Daily Naturals. Emphasis on the key attributes will give the brand higher value. Advertisement on billboards in Sydney is another way to attract attention.
PROMOTIONAL STRATEGY
Dresslier has already experienced the effects of promotional efforts like the use of sachets, as it has proven to give a great return and create awareness to their brand Davroe. Therefore, such efforts must also be used for Daily Naturals. Exclusive offers for Priceline’s Sister Club loyalty programs 7.7 million members is another great way to create awareness for Priceline’s customers.
6.3 KEY STRATEGY OPTION 3
CREATE AN E-COMMERCE STORE
For Daily Naturals to reach their goals, they must be present online. This is one of the most important places that customers gain knowledge about products. A web site will allow Dresslier to be in full control of the content, as it is a direct channel to its end customers. Making sure that the two brands are not connected online is crucial for the differentiation. Make sure that when the customers are searching online for either that the other does not show up is therefore essential.
Key issue: Highly competitive market
Objective: Gain 0.4% market share in NSW by the end of June 2019
Key issue: Differentiation with Davroe range
Objective: Achieve an additional 10% revenue from online by the end of June 2019
CREATE A SOCIAL MEDIA PLATFORM
A social media is another platform for Daily Naturals to reach its target market. Presence on social media like Facebook and Instagram will create more awareness around the brand. Considering Dresslier already have their own in-house marketing, social media and IT that updates social media for Davroe, they already have the resources to make one for Daily Naturals. However, it is important that the content is not similar to Davroe. That is because the content on social media is another way for Daily Naturals to differentiate itself from Davroe. An advertisement campaign can be done on Instagram, Facebook and Google AdWords.
COMMUNICATION STRATEGY
Dresslier needs to communicate effectively and clearly define Daily Naturals difference between both Davroe and its competitors. This will be done through its new online channel, but also through the change in bottle design and removal of the Davroe name (made by Davroe) from websites and bottles. Even though “design” is the least important attribute according to our survey, Dresslier’s products can easily be mistaken for the same as they visually look identical. Modifying the design into a new distinctive design for Daily Naturals will increase the brand recognition, differentiate it from competitors, and therefore, create more attention. The information on the products must be informative and include its most important attributes.
7.0 KEY RECOMMENDATIONS
7.1 DISTRIBUTION STRATEGY
Daily Naturals main objective will be achieved through the launch of the product into at least 40 of Priceline’s stores in the Greater Sydney Area. Although Priceline has 53 stores in Greater Sydney, aiming for 40 is the most realistic. This will be done by creating and signing a contract first thing during Q1. This is essential for Daily Naturals goals and objectives to be achievable. Educating Priceline and its
employees is a key factor, and will enable Dresslier more control of the information given to its
customers. This will be done by training at least three employees, including the store manager, from each of the chosen Priceline stores, not long after the contract with Priceline is signed. It is also an opportunity for Dresslier to give samples of the shampoo and conditioner for them to take home and try. The total estimated cost for the training program is therefore AU$150.240, excluding samples estimated at AU$1.794 (appendix 11).
7.2 MARKETING STRATEGY
Priceline will be in control of its own in-house and online advertisement, in order for them to reach their sales numbers. However, Dresslier can help to motivate Priceline and help them with information about the products and marketing programs. Dresslier needs to take advantage of their in-house marketing, social media, and IT team. They will have the responsibility of undertaking a consumer behavior analysis about consumer behavior inside the store in order to find the shelf position, display, and representation, with the highest probability of purchase. This will help Dresslier effectively position Daily Naturals inside the Priceline stores. Developing an integrative marketing plan will create an effective and precise marketing plan for Daily Naturals, and must be done before advertising the product. Billboard advertising is, according to (The 360 Degree Marketing Group Blog , 2014), one of the leading and most effective ways to advertise in Sydney. Using this twice a year, at an estimated cost of AU$8.000 a month, comes to AU$16.000 (appendix 11).
7.3 PROMOTIONAL STRATEGY
Sachets, containing 15ml of shampoo or conditioner, can be used as a sales promotion technique. Some of the benefits are exposure, customer trial, and feedback as well as awareness. It is also cost-effective, as a sachet only costs around AU$0,10. The cost for 40 Priceline stores to give away 1000 sachets each campaign is approximately AU$4000 (appendix 11). The promotional campaign should run twice a year, once in Q1 and Q3. Exclusive offers can also be given to Priceline’s Sister Club loyalty members in Q3.
7.4 E-COMMERCE STORE
Creating a presence online is vital for Daily Naturals to reach its target market. An online store has no geographic or time limits and is therefore available for everyone, anywhere at any time. Dresslier needs to use a web designer that can create a visually attractive website that will appeal to the chosen target market, in order to captivate its audience. This will result in a 10% increase in online sales (objective 3).
The strategy can be measured by the number of units sold, which should at the end of 12 months’ reach 8.526.
7.5 SOCIAL MEDIA PLATFORM
The social media platforms will be created by Dressier’s in-house marketing and social media team, which will reduce the cost of potentially hiring consultants. Running ads throughFacebook and Instagram is both cost-efficient and will increase brand awareness and recognition. The price per month is
approximately AU$4.984 for Facebook and AU$2.492, with a reach of 500.000 people on each platform per month. The monthly advertisement should run 3-4 times respectively throughout the next 12 months, with possible extensions. Daily Naturals should aim for at least 5.000 followers within the next 12 months. It is essential to test whether the different social media campaign objectives are being met, by for example split tests (Cain, 2018). Therefore, Daily Naturals campaign through other marketing channels like Google AdWords during the months where paid Facebook and Instagram ads are not used.
Approximately costs for the use of AdWords assumed to be AU$75.000 per month (Shewan, 2018).
7.6 COMMUNICATION STRATEGY
Dresslier’s in-house marketing, social media, and IT teams need to create content for Daily Naturals new online channels. This will enable Daily Naturals to educate and communicate why Daily Naturals is sulphate and paraben free. However, the most important communication strategy will be the product design. As explained in the key strategy, this will help differentiate Dresslier’s two brands and
communicate to their end customers the difference between them. First of all, “made by Davroe” must be removed from all online pages, including National Pharmacies online store, as well as the labelling and design. Even though our survey included questions regard design and smell, further research must be conducted before changes are made. However, CCF’s “cruelty-free” rabbit (appendix 13) was recognized in both the in-depth interviews and focus groups and is therefore recommended to be added to the bottle labeling. This process should start as early as possible as a complete rebrand process can take up to 12 months, and tone and labeling change up to 4-6mnths.
7.7 FUTURE RECOMMENDATIONS
A long-term goal for Daily Naturals is to be distributed and accessible across all of Australia. However, because of limitations such as time, resources and money this was not realistic throughout this research.
Future research on segments such as young professionals and families should also be conducted, as these can be possible target markets for Daily Naturals. Retailers and pharmacies including Chemist Warehouse
is another opportunity that requires further research and future consideration. As the presence of the product increased in-store and online, Dresslier should consider the use of influences on social media.
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APPENDIX
APPENDIX ONE
IN-STORE PRODUCT COMPARISON
To gain some insight of what products the pharmacies and chemists today offer and how they showcase the products toward the consumer. We decided to go to six different chemist and pharmacy chains to see what products they offer in-store, how they showcase the different products and what the different prices are. The chemists we visited was Blooms the Chemist Coogee, Priceline Central Park, Chemist Warehouse Haymarket, Centennial Plaza Pharmacy, Chemistworks Broadway and Market City Pharmacy.
Blooms the Chemist, Coogee
Blooms is the only chemist we visited who already have Daily Naturals in-store, they also have A’kin which is a direct competitor with Daily Naturals offering the consumers Australian made vegan and cruelty free hair products. Blooms also offer a variation of other competing hair products which does offer some of same characteristics but not all.
You can also see that Blooms offer their brands good spacing with many shelves being occupied by only one brand. Daily Naturals are placed on two shelves on the lower half, this placement can be considered out of eyesight and Daily Naturals may lose sales to A’kin considering A’kin is occupying the shelfs in direct eyesight when you look at the shelfs.
