SOLUTION: Strategic Marketing Flare Fragrances Case Study
Task The assignment is an special well-balancedt meditate decombearing of the stanch Flare Fragrances well-balancedt meditate. The expected muniment should hold solutions in an essay format. Please solution the subjoined questions: 1. Enumerate a discourse in which you warrant the forces and weaknesses of Flare’s marketing bearing in the women’s smells communicate. Your discourse should besides drag on immanent outdevelopment strategies fixed on an decombearing of the micro and macro environment. Formalities: - Wordcount: 2100 – 2250 language (Title, Introduction, Discussion, Conclusion). Cover, Table of Contents, References and Appendix are exclusive of the aggregate wordcount. Font: Arial 12,5 pts. Text alignment: Justified. The in-text References and the Bibliography feel to be in Harvard’s passage phraseology. It assesses the subjoined lore outcomes: • Outconclude 1: Understand the settle of the communicateing pur-pose in the balanceall concern pur-pose and dedicate the knowledge on usage. • Outconclude 2: Dedicate the analytical frameworks used to assess the decisions oppositeness communicateing managers as they lowertake to suit organizational goals and media following a while communicate needs and opportunities. • Outconclude 3: Illustrate how to instructor the dynamic changes in the visible environment. • Outconclude 4: Excite and forecast the forthherefollowing needs for media in the inner environment of corporations. 4550 MAY 5, 2010 JOHN A. QUELCH LISA D. DONOVAN Flare Fragrances Company, Inc.: Analyzing Outdevelopment Opportunities It was forthherefollowing December 2008, opportunity for Flare Fragrances Co. to expatiate its conclusive decombearing of 2009 strategic initiatives, and the colcolonization of 10 sales and communicateing employees in the ocean Flare conference room could see by the contempdelayed on her bearing that CEO Joely Patterson was rooted to form 2009 meliorate than 2008 had been. The economic opportunity had taken its tax on Flare’s concernes. End in 2007, sales had erect 12%; now, less than a year subjoined, the CFO’s estimated year-end heap proposed simply 2% outdevelopment in 2008—a meliorate recession incident than some concernes had to judge, but not a deviate that Patterson or the guild founders omissioned to see common in the shortfollowing year. “I felicitate you for existent in a unmanageable economic temperature, and I enrich you for your hard work,” Patterson told the collocation. “Good as we were, now we feel to be meliorate. We are short to discuss the meditate that our consulting collocation, Arlmont Associates, submitted on Monday. As you feel decipher, Arlmont intimateed that different strategic options extend the tallest immanent for outgrowth. At this subject-matter I endurance the two that Arlmont sighted as most promising: one, extension our efforts in the offal treasury agent; two, present a new odor disgrace. Today, we start to excite our options intensively. We can do one, twain, or neither. But if we do neither, we feel to warrant some other idea that can hand at last $7.5 favorite incremental fruits in 2009 and contradiction our abated sales trend. If our manoeuvre works, the founders can meditate induction the guild unreserved. Before we dwell on the forthcoming, though, I omission us to revisal who we are and how we got short, consequently that historical context is significant for determining the verse in which we should crown.” Flare Guild Backgspherical and Diligence Position From its origins in 1955 as a diminutive manufacturer of women’s odor, Flare had confirmed into the No. 4 player in the U.S. women’s smells communicate. The disgrace Loveliest had been presentd in 1975 and was the guild’s one standapex for some opportunity. Starting in 1996 following a while the expatiate of Awash, Flare began introducing a new disgrace whole two to three years, each following a while the Loveliest indicate on its mark. By 2007, almost 93% of Flare’s sales came from the six verses of smells listed in the top row of Exhibit 1. The fostering 7% of sales came from redolenceed fruits fixed on these special ________________________________________________________________________________________________________________ HBS Professor John A. Quelch and writer Lisa D. Donovan disposed this well-balancedt onely as a premise for adjust discourse and not as an endorsement, a source of elementary postulates, or an exemplification of efficacious or inefficacious treatment. The authors enrich the subjoined employees of Estee Lauder Companies, Inc. for their absorbly contributions to the outdevelopment of this well-balancedt: Michelle Liu (HBS MBA 2007) and Stephanie Cheung So (HBS MBA 2007). This well-balancedt, though fixed on express well-balancedts, is fictionalized, and any likeness to express men-folks or entities is coincidental. Tshort are occasional references to express companies in the history. Copyright © 2010 President and Fellows of Harvard College. To prescribe copies or beseech endurance to exhibit materials, allure 1-800-545-7685, write Harvard Concern Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. This unreservedation may not be digitized, photocopied, or differently exhibitd, posted, or communicated, following a whileout the endurance of Harvard Concern School. 4550 | Flare Fragrances Company, Inc.: Analyzing Outdevelopment Opportunities fragrances; such disgrace extensions, sold simply through office treasury agents, interposed fruits such as soaps and saturate gels, which served oceanly to spherical out douceur sets. One of Flare’s tallest strengths was its preponderance in sales of smells through heap agents, chiefly the communicate for “prestige” disgraces. The aggregate U.S. dispose-of communicate for all smells—that is, the aggregate dollars that customers late at dispose-of outlets on smell fruits for twain men and women—was $5.70 billion in 2007. The divide held by women’s smells was $3.80 billion, or 66.6% of the U.S. dispose-of communicate—a percentage that had remained fixed balance opportunity.1 Flare fruits originated 9.5% of that aggregate, exceeded simply by Depuis, Suzanne Weber, and Aromatique, following a while divides ranging from 11.5% to 15.6%. Flare’s 2007 factory sales—that is, its dispose-of sales minus the 40% of fruitss earned by dispose-ofers and intermediaries parallel the distribution company—were $216.8 favorite. Although conclusive heap weren’t yet in, it contemplateed affect Flare would end 2008 following a while $221 favorite in factory sales, or 10% of the dispose-of communicate—a regardable divide of a communicate novelly experiencing a 3% balanceall annual dismiss. But Patterson omissioned Flare end on an upward deviate. For decades Flare had sold its disgraces through twain enhancement and mid-tier office treasurys, (e.g., Saks, Macy’s) and remained an orderly closeness there. In the delayed 1970s, Flare had moved into aside owned pharmacies, and in the delayed 1980s into the heap communicate—including abatement office treasurys affect J.C. Penney and, subjoined, Target, Wal-Mart, and Kohl’s, wshort it became a prominent player. It besides sold through incontrovertible company pharmacies affect Walgreen. The guild was confined to the United States, having eschewed interpolitical communicates consequently the absorbs of gaining a foothold seemed too tall. Exhibit 1 collects a breakdown of Flare’s sales. At the consultation, Marketing Director Bill Charters commented on Flare’s disgrace bearinging. “I’m pleased that the Loveliest smell is oceantaining its 3% divide of a close dispose-of communicate—$77 million. Loveliest is bearinged as a adjustic redolence associated following a while prestige and benevolenceliness, giving us stanch cite unordered women balance age 35. We are increasingly well-positioned in other members. Take our most novel expatiate, Natural—it’s reaching a disregardly younger demographic that is seeking environmentally safer or so-called ‘green’ fruits. It contemplates to do roughly $9.1 favorite in its second full year this year, induction divide from competitors and subjoined a just $7 favorite expatiate in 2006. In combination following a while our other disgraces that target women starting out in their heeders, we now feel a range of odors that cite to the 25–34 demographic. What is the key to all this? It’s the power of Loveliest as an umbrella disgrace.” Patterson nodded in concurrence and then austere the collocation’s attention to the meditate page that presented the postulates in Exhibit 1. The U.S. Women’s Smell Market “Our acuteness offscourings stanch through heap outlets generally, following a while 74% of our sales through those agents—we balance-perform in the heap communicate. Loveliest is one of the best-selling verses of women’s smells in the heap communicate. But Arlmont’s meditate talllighted gaps wshort our sales don’t mirror the balanceall communicate: prestige office treasurys, offaltreasury companys, and other agents including the internet. That’s wshort I reckon we’ll ascertain some meritorious prospects.” Like most diligence professionals, Patterson divided the women’s smells communicate into three groups fixed on absorb subject-matter, placing Loveliest in the intermediate member, as paraden in Table A lowerneath. Many manufacturers competed in multiple members. 1 Datamonitor: “Fragrances in the United States: Diligence Profile,” October 2009. 2 BRIEFCASES | HARVARD BUSINESS SCHOOL Flare Fragrances Company, Inc.: Analyzing Outdevelopment Opportunities | 4550 Table A Eau de Parfum Categories Typical Distribution Channel(s) Description & Example Brands • Repeatedly agent-named • Leading disgraces feel from 1.1% to 2.8% divide Typical Absorb Points • $70 and aloft for 1 oz. member bottle • Majority sold through prestige office treasurys • Besides sold through specialty and douceur treasurys Mid-Tier Brands • Prestige likeness • Considered “prestige” disgraces • Leading disgraces feel 3% 3.5% divide • $30-$60 for 1.7 oz. member bottle • Loveliest $32 • Flare’s other disgraces $30-$36 • Repeatedly spring in office treasurys • Ultimately sold in heap and abatement office stores Mass Brands • Affordable • Repeatedly lower-end extendings by the selfselfsame manufacturers as in the top two tiers Premium Brands • Sold through living, offal, and heap merchandisers and abatement treasurys Patterson then walked through Arlmont’s revisal of ordinary recession-era smell diligence dynamics: Product Selection • Consumers lower economic constraining exchange down from dainty disgraces to heap alternatives • Diminishing exclusivity: mid-tier and enhancement disgraces increasingly beneficial in heap channels • Substitution of lower-priced redolenceed fruits (assemblage washes, members) or forgoing of smells in settle of bark heed creams and fruits from which consumers forebode to see results • Constant hype, though novelly a decverse deviate, of fame and agent smell introductions • SKU and disgrace proliferation (e.g., balance 400 new smells expatiateed in the United States in 2007) Channel Activity • Department treasury abatementing, treasury closings, and detachment of pop-prestige boutiques (e.g., Sephora in J.C. Penney) • Mass communicate evolvement as consumer intercourse enlarges in these treasurys and as they balancehaul benevolenceliness departments by stocking deviateier smells and employing benevolenceliness consultants • Blurring of dispose-of agents following a while upscale swings trickling down and new smells foremost introduced into prestige office treasurys past instantly substance made beneficial in diminutiveer sizes through heap communicate dispose-ofers • Overall communicate deviates parade disregard dismisss in sales through tall-end office treasurys and sales of heap disgraces through the heap agent, opposeded by diminutive percent extensions in sales of prestige disgraces through heap and proportionately stanch sales through mid-tier office stores HARVARD BUSINESS SCHOOL | BRIEFCASES 3 4550 | Flare Fragrances Company, Inc.: Analyzing Outdevelopment Opportunities Patterson asked wholeone, “Do these deviates and our bearinging intimate or delayhold an opportunity to either walk in the offaltreasury agent or expatiate a new fruit as recommended by Arlmont? Keep these in remembrance consequently I’m going to conclude end to them and ask for your input.” Sales and Pricing Since union the guild, Patterson had achieved good-fortune by devoting past media to Flare’s heap colcolonization by hiring and placing managers in offices close key dispose-ofers’ crownquarters. She had besides begun to reconstitute to beget a company offaltreasury sales team following a while past test at the sales treatment plane. While the offaltreasury reps had made some judicious inroads in fruit settlements and extensiond sales, the team’s balanceall deed was interrupted at best as its members were stationary lore how to communicate most efficaciously to this agent. Recently, Patterson had held Flare’s absorbs fixed. Her goal was to succor help Flare disgraces’ cite in the heap agent and secure remaind allegiance unordered its consumers who had confirmed up following a while Flare’s fruits. By oceantaining twain absorb-competitiveness and a prestige likeness, this manoeuvre reflected the avail of capturing new consumers entering the communicate who repeatedly became obedient to a smell balance opportunity, chiefly if the lifephraseology company of the disgrace was stanch abundance. A odor customer typically foremost testd a fruit at a office treasury. Department stores hired consecrated benevolenceliness advisors who were then skilled by Flare to collect information and application intimateions to customers at the treasury opposed. Smell diligence sales were seasonal, concentrated heavily aspherical Mother’s Day and the well-balanceding holidays when twain men and women purchased smells as douceurs. Retailers garnered an diligence-standard 40% extremity from the sale of Flare fruits. They were acquiesced by Flare to oceantain intimateed dispose-of absorbs and typically did so. Flare compensated its totality executives an diligence mean 3% errand on factory sales. Flare inundation exchange concern through exciteances such as douceur-with-purchase (buy one indivisible and receive another playing) and purchase-with-purchase (buy one indivisible and get another at a abatement). Flare did not acquiesce abatementing and did not extend coupons as heap disgraces tended to do. Periodically, Flare extended its fruits to the exchange at exciteanceal absorbs allowing 5%-10% aloft the habitual 40% diligence extremity. Exhibit 2 presents an inconclude proposition outlining Flare’s absorb texture for its fragrances. Advertising, Promotion, and Marketing Communications In the U.S. communicate in 2008 almost 74% of adult women and 75% of teenage girls used smell fruits.2 Following a while such tall acuteness and a very sundry assembly, companies divers their marketing efforts to woo these customers using manoeuvre that ranged from in-treasury demonstrations to interactive websites to redolenceed catalog inserts. Flare’s exciteances typically concerned prepacks featuring a medley of fruits shipped in a impeach of special indivisibles substance featured following a while a buyone-get-one-playing or absorb-abatement for buying a certain appraise of fruit. Flare extended a co-op advertising program, contributing to treasury advertisements that featured Flare fruits. Lower the Loveliest disgrace, Flare sponsored appearance well-balancedts, movie diligence gatherings, informational programs, and television parades. Flare besides settled playing samples in office treasurys and testers at the subject-matter of purchase, which tended to originate endeavor. Flare’s webbearing was basic though interactive, emphasizing Loveliest, communicating different characteristics of each disgrace lower that umbrella, and collecting postulates from bearing visitors who identified up for weekly emails following a while a Loveliest thesis 2 Source: Mintel, “Women’s Fragrances – US – September 2008,” exception titled “Market Drivers” 4 BRIEFCASES | HARVARD BUSINESS SCHOOL Flare Fragrances Company, Inc.: Analyzing Outdevelopment Opportunities | 4550 Flare’s advertising standtelling on appearance and lifestyle, following a while the thesiss of subordinatestanding and fantasy. While targeting women, it besides aimed to swing men who susceptibility be buying douceurs. Flare consecrated the largeness of its advertising budget to Loveliest, as its umbrella disgrace. Following a while the Loveliest indicate on all of its packaging, Flare’s other fruits benefitted from a halo commodities. Each disgrace had its own likeness, although the foremost disgusting that had been presentd following Loveliest—Awash (in 1996), Summit (1998), Essential (2000), and Swept Away (2003)—appealed to the past developed, good-fortuneful mother. Natural, though it besides carried the Loveliest indicate, was Flare’s foremost express lowertake to fathom a younger demographic, concerned in the ordinary sanity and uncooked deviates. Flare’s disgrace bearinging is outlined in Table B lowerneath; a graphical sight of it appears in Exhibit 3. Table B Loveliest Flare’s Other Brands Lower Loveliest Umbrella • Receives 70–80% of Flare’s annual advertising budget • Television and print standpoint • “You are the benevolence in Loveliest” thesis (in use since 1995) • Strongest following a while those space-honored 34–65 o Long-opportunity users o Tend to feel verification redolence o Regular purchasers of douceurs • Besides target men purchasing for women in this age group • Receives 20%-30% of Flare’s annual advertising budget • Furtherance standpoint • Expected halo commodities from Loveliest advertising • Strongest following a while those space-honored 25-34 o Repeatedly beconclude obedient to a new redolence balance opportunity o Willing to try new redolences o Vary redolence dedicated opportunity of day, ghost, outfit o Regular purchasers of douceurs • Besides target men purchasing for women in this age group Charters noted, “Our divide of diligence advertising is abated. We’ve historically late about 19% of our sales on advertising and exciteance, relying on the unwritten force of the Loveliest brand, its meritorious indicate avowal, and its halo commodities on our other disgraces lower that umbrella. However, our wasteing now lags our competitors’ waste planes, which are approaching 23%. They outlate us on all six of our verses in 2007. Any concomitant sales outgrowth, well-balanced excite what a new fruit expatiate susceptibility tend to fruits, accomplish qualify us to adduce ad waste past in verse following a while the industry.” Exhibit 4 outlines Flare’s communications budget. Marketing Director Bill Charters subject-mattered out one past bearing of the dispose-of environment. “Because consumers can now ascertain past enhancement and mid-tier smells in heap communicate dispose-ofers, the Arlmont meditate predicts that unwrittenly taller-end smells following a while prestige likenesss accomplish be the best performers in the shortfollowing years. The most good-fortuneful disgraces accomplish extend an aspirational test for consumers seeking prestige at an affordable absorb. This implies that likeness-fixed advertising and promotions accomplish remain to be momentous. We’ll achieve if our consumer commendations our smell as an expression of her sameness. That is how we accomplish institute twain endeavor and allegiance.” Planning for 2009 When Charters had perfect his revisal, Patterson intimateed they meditate the opportunities that ordinary communicate deviates presented, as talllighted in the consulting meditate paraden in Table C. HARVARD BUSINESS SCHOOL | BRIEFCASES 5 4550 | Flare Fragrances Company, Inc.: Analyzing Outdevelopment Opportunities Table C Product Potential • Originality and reversal accomplish be indispensable to stimulate sales and seize consumers entering the extremely fragmented, close communicate • A prestige likeness should be oceantained consequently consumers in heap treasurys, when dedicated the valuable, accomplish frequently pick-out mid-tier or enhancement balance heap disgraces consequently of their associated prestige and likeness • The Loveliest disgrace should not be fragile too heavily consequently aging consumers are stationary obedient to its likeness and new consumers meditate it adjustic Channel Potential • A meaningful consumer test accomplish stationary be required as smell shoppers accomplish spin in meritoriouser heap to specialty treasurys (such as pop-prestige Sephora boutiques that had begun to unreserved following a whilein J.C. Penney) and heap communicate dispose-ofers • Redeidentified offaltreasury companys following a while upscale, customer service-oriented outlets (such as CVS Loveliness 360) and heap communicate dispose-ofers accomplish invite younger women Patterson said, “With Loveliest’s force in the heap agent, we feel meritorious immanent to fathom excite following a while our material disgraces. But we can’t appropriate that this uneven accomplish enlarge fruits satisfactorily—so I omission to standapex on the two options I mentioned at the outset: expatiate a wellpositioned new disgrace and fathom excite into upscale ...
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