UNIVERSITY OF NEW YORK IN PRAGUE - ANALYSIS OF THE MARKETING COMMUNICATION STRATEGIES OF SEPHORA IN THE CZECH REPUBLIC - UNYP eLearning
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
UNIVERSITY OF NEW YORK IN PRAGUE
European Business Administration
ANALYSIS OF THE MARKETING
COMMUNICATION STRATEGIES OF
SEPHORA IN THE CZECH REPUBLIC
2018 DINH HAI TRIEU
UNIVERSITY OF NEW YORK IN PRAGUE
European Business Administration
ANALYSIS OF THE MARKETING
COMMUNICATION STRATEGIES OF SEPHORA IN
THE CZECH REPUBLIC
2018 MENTOR: WILLIAM PATTISON
Statutory Declaration I, Dinh Hai Trieu, declare that the paper entitled: “The Analysis of Marketing Communication Strategies of Sephora in the Czech Republic” was written by myself independently, using the sources and information listed in the list of references. I am aware that my work will be published in accordance with § 47b of Act No. 111/1998 Coll., On Higher Education Institutions, as amended, and in accordance with the valid publication guidelines for university graduate theses. Prohlašuji, že jsem tuto práci vypracoval/a samostatně s použitím uvedené literatury a zdrojů informací. Jsem vědom/a, že moje práce bude zveřejněna v souladu s § 47b zákona č. 111/1998 Sb., o vysokých školách ve znění pozdějších předpisů, a v souladu s platnou Směrnicí o zveřejňování vysokoškolských závěrečných prací. In Prague, 27.4.2018 Dinh Hai Trieu
Acknowledgments My three years at the University of New York in Prague are considered by of the most valuable journeys I ever had the chance to take. I would like to pay special thankfulness, warmth, and appreciation to the persons below who made my research successful and assisted me at every point to cherish my goal: My mentor, Professor William Pattison for his vital support and assistance. His encouragement made it possible to achieve the goal, help and sympathetic attitude at every point during my research helped me to work in time. My Mom and Dad, family members and friends, without whom I was nothing; they not only assisted me financially but also extended their support morally and emotionally. I take this opportunity to express gratitude to all of the Department faculty members for their help and support.
Table of Contents
Introduction.................................................................................................................. 1
1. Literature Review ...................................................................................................... 2
1.1. Development of the cosmetics industry ..................................................................... 2
1.2. The role of marketing in the cosmetics industry .............................................................. 5
1.3. Marketing communication.............................................................................................. 7
1.4. Marketing Mix and the 4Ps of marketing......................................................................... 7
1.4.1. Product ............................................................................................................................. 8
1.4.2. Place ................................................................................................................................. 8
1.4.3. Price .................................................................................................................................. 9
1.4.4. Promotion....................................................................................................................... 11
2. Industry analysis of the Czech cosmetics market ....................................................... 13
2.1. Czech cosmetics market ................................................................................................ 13
2.2. PEST Analysis ............................................................................................................... 14
Political factors ......................................................................................................................... 14
Economic factors ...................................................................................................................... 14
Social demographic factors ...................................................................................................... 15
Technological factors................................................................................................................ 16
2.3. Competition on the Czech cosmetics market ................................................................. 18
3. Sephora and its Marketing Communication Strategies ............................................. 22
3.1. Company overview ....................................................................................................... 22
3.2. Sephora in the Czech Republic ...................................................................................... 25
3.3. Range of goods............................................................................................................. 26
3.4. Selected marketing communication strategies of Sephora in the Czech Republic ............ 27
3.4.1. Advertising...................................................................................................................... 27
3.4.2. Public relations ............................................................................................................... 31
3.4.3. Personal selling ............................................................................................................... 32
3.4.4. Direct marketing ............................................................................................................. 34
3.4.5. Online communication – Social Media ........................................................................... 36
3.4.6. Press Events .................................................................................................................... 39
4. Primary Research ..................................................................................................... 41
4.1. Research method and its objective ............................................................................... 41
4.2. Methodology ............................................................................................................... 42
4.3. Results of the research ................................................................................................. 47
Place ......................................................................................................................................... 47
Habits, behavior, and decision – making.................................................................................. 48
The perception of the brand .................................................................................................... 48
Loyalty program Sephora Club ................................................................................................. 50
Suggestions for improving marketing communications........................................................... 51
4.4. Conclusion of the research............................................................................................ 52
5. Evaluation and Recommendations............................................................................ 55
Conclusion…………………………………………………………………………………………………………………..Er
ror! Bookmark not defined.
Abstract The aim of this research is to present a detailed and thorough analysis of major marketing communication trends in the cosmetics industry, specifically focused on the impact Sephora in the Czech Republic. In order to properly analyze Sephora and its role in the Czech Market, this thesis will first outline a literature review of marketing communication and describe how the industry has developed from the nineteenth century until now, presenting a detailed history of the evolution of the cosmetics industry. Next, the thesis will provide a detailed industry analysis of Sephora in the Czech Republic and give examples of Sephora's marketing communication activities, providing in-depth critiques of the strengths and weakness of Sephora’s marketing strategies and contrasting them with their major competitors, both those in direct sales and online outlets. These strategies will also be analyzed in terms of their effectiveness in engaging with customers across different income brackets. Finally, the thesis will analyze the results of a focus group conducted to gain a better understanding of the average customer’s perception of Sephora, patterns of shopping behavior, and receptivity to the marketing communications strategies of Sephora. Finally, the thesis will present its findings, evaluations, and recommendations concluding in a summary of the same.
Introduction
This thesis aims to display the marketing communication strategies of Sephora in the
Czech market. This topic was selected to demonstrate the vital importance of marketing
communications strategies when dealing with non-essential, that is today, luxury good—in
this case, cosmetics. For the analysis of marketing communication in the cosmetics industry,
this thesis will focus on Sephora - one of the leading cosmetics companies in the world. The
cosmetics industry, as it is perceived today, has experienced significant growth over the
years. The domestic manufacture and production of cosmetics products transformed into a
real industry in the nineteenth century. This evolution led to an exponential increase in the
variety of products, sales channels, and increased competition. Additionally, it began to
influence the ways in which business owners reached out to their customers. People were
subjected to the first rudimentary forms modern marketing techniques and strategies that
would become the contemporary style and standard of communications for most current
cosmetic brands. This chapter, therefore, will serve as an introduction to the context of this
period, describing how selected marketing communications have gradually evolved into an
integral part of the modern luxury cosmetics industry. However, it should be noted that, for
the purpose of this thesis, only specific types of marketing communications will be explained:
basic marketing tools and strategies in common use throughout the cosmetics industry, those
marketing tools and strategies that have recently become very significant within the
cosmetics industry, and those that have undergone a profound change within the cosmetics
industry. Attention will then be paid to the marketing mix and the 4Ps, the consequence and
importance of its changes within the cosmetics industry, the role of marketing specialists,
and an analysis of marketing communications with a specific emphasis on the various
1
cosmetics competitors in the Czech market. A focus group was conducted for this and will
be presented as the primary research. This research will show how to effectively produce
marketing communication strategies that positively impact the company’s image and profits
and engages with said company’s customers.
1. Literature Review
1.1. Development of the cosmetics industry
The global cosmetics industry permeates our lives, overtly and subtly influencing
consumer standards for beauty, changing how consumers personally perceive what it is to be
pretty. Companies such as Estée Lauder, L'Oréal, and Shiseido have shaped the business and
created beauty for the public (Jones, 2011). The development of the cosmetics industry began
during the Industrial Revolution at the turn of the 19th century. Up until that time, people had
produced traditional cosmetics products by themselves with the help of product recipes. It is,
therefore, not surprising that entrepreneurs who were trying to sell these homemade
cosmetics products had to market them to customers as finished, packaged products to
distinguish them from those produced at home. (Jones, 2011)
Increasing competition made the resellers wanted to differentiate themselves from
their competitors. This created an ideal space to develop marketing communications in the
cosmetics industry. Seizing on this opportunity, business owners, with the help of
pharmacists, tried to sell harmless and health-friendly cosmetic products in an effort to
demonstrate to customers that the purchased products would be safer and better than the self-
made products (Jones, 2011).
And, of course, the development and accessibility of the media had a significant
2
influence on the communication activities of cosmetic brands and on the way in which
society viewed women's beauty (Taran, 2015). The earliest and foremost essential
instruments of media dissemination that dramatically helped to spread the first advertising
messages in the cosmetics industry were women's magazines, the importance of which
remains to this day and cannot be overstated. The first advertisements for cosmetics in
newspapers were recorded in France in 1750 (Taran 2015).
As the power implicit in the printed media and its impact on economic profit became
apparent, many entrepreneurs took note and began to invest in similar printed media
promotions (Taran, 2015). For example, in 1935 Revlon made its first New Yorker
advertisements in the value of the entire annual budget of the company allocated to
advertising (which then represented less than a thousand US dollars). And this investment
has grown steadily. Forty years later, the annual amount spent on advertising in New Yorker
cost Revlon a total of $75,000. ("International directory of company histories", 2004).
As the cosmetics market gradually grew, sales conditions and distribution channels
changed. Suddenly, the products were available in both specialized stores and department
stores with a broader range of products. These specialized retailers provided their customers
with services that have become an essential part of luxury cosmetics retail. For example,
Helena Rubinstein would personally oversee the training of workers in her shop. And this
was by no means an isolated phenomenon. Considerable emphasis was also placed on how
products should be presented and marketed in retail stores (Tungate, 2012). This undoubtedly
set the foundations for today's in-store marketing, which is one of the top priorities for
marketing communication strategies in luxury cosmetic brands.
3
Entrepreneurs began to work strategically with the price of products. They were
aware that their perfumes and creams became luxury items for which people were (and still
are) willing to pay a lot of money. At the same time, they understood that discounts should
not undermine the value of their cosmetics. The business owner who introduced the standard
for this particular issue was Estée Lauder. She was convinced that her customers were more
than willing to spend a lot of money on luxury products. Therefore, she decided to raise the
original price of the products and give free samples to customers. Today, this strategy is a
common practice used in the industry (Taran, 2015).
As mentioned before, in addition to location and price, many brand owners have
begun to think about how to support their products, whether they turned to advertising
agencies or provided their own advertising, some especially spending ever increasing
amounts of money on them (Jones, 2011). Marketing communication strategies have
drastically evolved from their early beginnings. One way to guarantee brand awareness and
increase public appeal was to cooperate with celebrities. For example, Helena Rubinstein
collaborated with celebrities and offered them free services in exchange for their
endorsement. Elizabeth Arden and Max Factor also cooperated with film studios to put out
their brand name within the industry. As the market changed, entrepreneurs started to develop
their own portfolios of products. Customers’ wants and desires were carefully considered,
and entrepreneurs tried to accommodate them and meet customer demands. This transformed
the whole range of products offered on the market (Tungate, 2012).
Seasonal and limited editions appeared on the market for the first time to promote
sales and to increase the brand's prestige. The design and packaging of the product became
an essential part of marketing, through which beauty, luxury, and uniqueness were once again
4highlighted. The purpose of this was not only to attract customers but also to create a desire
to own the product. Entrepreneurs wanted to ensure that their products were not overlooked
and, thus, worked hard to make them unique at first sight (Tungate, 2012).
As previously described, cosmetics owners at the turn of the century began to
constructively and carefully set the foundations of marketing as we know today (Jones,
2011). To correctly set the price of products and services, business owners wanted to ensure
that a variety of media supported the brand, that customers enjoyed the products, and that the
products met the needs and wishes of their customers (Taran, 2015).
1.2. The role of marketing in the cosmetics industry
The cosmetics industry, as we perceive it today, has undergone a lot of changes. These
transformations have brought not only an extended, wide range of products and sales
channels but also increased competition and changed the communication methods used to
reach customers. This chapter describes selected basic marketing elements that have
gradually evolved into an important part of the modern cosmetics industry.
Nowadays, the cosmetics industry is characterized as a competitive global
environment where marketing communications should not be forgotten, and is, in fact,
essential to success in the market. Marketing specialists focus on market research and
analyzing patterns of consumer buying behavior, because, in such a highly competitive
market, companies are challenged to respond to the current market to satisfy customers’
wants and perceived needs. Their responsibility is to turn any concept into a desirable and
unique product that consumers will understand and, ultimately, want. It is not surprising that
marketing specialists have found their place in the industry. The cosmetics industry
5constantly seeks to develop and adopt effective ways with which it can better engage its
audience. To that end, companies within in the cosmetics industry use communication
strategies to discern and interpret customer trends and figure out the right way to target that
market base (Jones, 2011).
Technology changed the cosmetics industry with the advent of advertising on
television, magazines, and other forms of media that have become ubiquitous since then.
Cosmetics manufacturers started to think about how to visualize their products and create
marketing strategies. The Industrial Revolution forever changed how producers understood
the entirety of the cosmetics industry and enabled the mass production of cosmetics. The first
well-known products at that time were lipstick, powder, and eyeshadow (Tungate, 2012),
and, in the1920s, mass marketed products became financially viable. As cosmetic products
were already being sold and marketed, business owners started to compete with each other.
To succeed, they had to use their business ideas and skills to convince customers of the
superior qualities of their products:
And where profit can be found, there is the will to market and sell it. Photography,
cult of film actors and big marketing campaigns soon brought the fall of traditional
Victorian fashion, enabling women of all ages to start wearing cosmetic products in
the public. Early decades of cosmetics popularity in the west brought us many
inventive products, such as Lip Gloss by Max Factor, synthetic hair dye and sunscreen
by L'Oréal, suntan and red nail polish by Coco Chanel, and others” ("Detailed View
of History of Cosmetics", n.d.).
61.3. Marketing communication
Marketing communication is about how marketers communicate with their target
markets, specifically dealing with the process of communicating with existing and
prospective customer bases. The elements of the marketing communication are advertising,
promotion, direct marketing, PR, and special events (Kotler and Armstrong, 1999). “In its
simplest form, integrated marketing communication can be defined as the management
process of integrating all marketing communications activities across relevant audience
points to achieve greater brand coherence” (Bird, 2004).
According to Varey, the definition of marketing communication is a process which “involves
the management and organization of all ‘agents’ in the analysis, planning, implementation
and control of all marketing communications contacts, media, messages, and promotional
tools focused at selected target audiences in such a way as to derive the greatest enhancement
and coherence of marketing communications effort in achieving predetermined product and
corporate marketing communications objectives” (Varey, 2011).
1.4. Marketing Mix and the 4Ps of marketing
After deciding on its overall marketing strategy, the company is ready to begin
planning the details of the marketing mix, one of the major concepts in modern
marketing. The marketing mix is the set of controllable marketing tools that the firm
blends to produce the response it wants in the target market (Kotler and Armstrong,
1999).
Marketing communication is made of the 4P's: Product, Place, Price, and Promotion. The
next portion of this thesis will utilize the concept of the marketing mix that includes “all of
7the marketing decisions and actions taken to ensure the success of the product, service or a
brand in its market” (Kotler and Armstrong, 1999).
1.4.1. Product
“Product stands for the firm’s tangible offer to the market, including the product
quality, design, features, branding and packaging” (50MINUTES.COM, 2015). In 1924,
Proctor & Gamble established first internal market research departments ("P&G Heritage
includes Market Research, Brand Building and Profit Sharing", 2018). As cosmetics
companies began to realize the importance of packaging, they began to come up with
appealing names of shades of colors for their products. There was a significant effort by
cosmetics companies to make their products desirable to the general public. Suddenly,
emphasis was placed not only on the product itself but also on its packaging and brand name.
Over time, different humorous or appealing names began to appear for the variegated shades
of lipsticks and other decorative cosmetics. There was a concerted effort to attract customers
and to stimulate in said customers the desire to own the product. The best entrepreneurs of
that time were very well aware of these changes in the market and they all used them to their
advantage (Varey, 2011).
1.4.2. Place
“Place stands for the various activities the company undertakes to make the product
accessible and available to target customers” (Lee, 2000). Or, in other words, being poised
in right place at the right time makes it possible to target the right audience. An example from
a history is Max Factor – a cosmetics line founded in Poland in 1909 by Maksymilian
8Faktorowicz. Later, Faktorowicz decided to move from Poland to the United States because
he saw the opportunity to offer theatrical make-up for the film industry in addition to his
usual line of cosmetics. His plan worked, and he became a successful, leading distributor of
theatrical make-up manufacturers ("Our Heritage | Max Factor", 2018).
Another example is Helena Rubinstein who also realized the importance of the
location. She emigrated from Poland to the United States, and, in 1915, she established a
cosmetics company, Helena Rubinstein Incorporated. Because of her previous business
experience, she insisted on personally overseeing the training of sales assistants. Moreover,
she emphasized the importance of the placement of products in the store. Today, this strategy
is called in-store marketing and it is one of the main priorities of luxury cosmetic retail chains
("The Brand", 2018).
And the last example is Elizabeth Arden who moved from Canada to the United States
in search of better opportunities. She opened her first salon in 1910. The company expanded
internationally and became the new face of cosmetics for women. In that time, people
associated makeup with prostitution. However, Elizabeth Arden reversed this pejorative view
of makeup with the help of her successful marketing campaigns, and, resultantly, makeup
became socially acceptable for all women, thus propelling Elizabeth Arden into domestic and
international markets as a leading distributor of cosmetics (Arden, 2018).
1.4.3. Price
“Price stands for the amount of money that customers need to pay for the product.”
(Lee, 2000). Helena Rubinstein was one of the most talented, skilled businesswomen and
marketers of her time. Her career began with a family recipe for a cream with a low price
9point. Her financial advisor recommended that she sell the cream for a price that was seven
times lower than the one she wanted. Despite his advice, she decided to set a high price and
thought that customers would purchase her cream because they would believe the more
expensive product to be superior to the rest of the creams on the market. Helena Rubinstein,
by exaggerating the price of her product, created a general pricing strategy for future luxury
brands: higher cost translates to higher quality ("The Brand", 2018).
Promotions are done mainly by using a nominal discount. The reason remains the
same – the price should not be too low. If the rates are too low, the customer may suspect
that the quality of the product is not as promoted ("Value-based pricing", 1993). That's why
retail stores often offer discounts of buy one get one free, a gift, or a free service. This way a
customer will feel that he/she has purchased a valuable product with an added value for the
same price. Cosmetics customers are less sensitive to discounts than other categories of
customers because as they run out of a product, they will just continue to purchase the product
again and again ("Customer loyalty and customer loyalty programs", 2003).
However, cosmetics chains still offer short-term discounts that motivate customers to
indulge in impulse shopping. These discounts are often used to encourage customers to
become a part of a loyalty program of the cosmetics chain. Cosmetics chains then have an
assurance of more purchases with lower prices because this is more beneficial than fewer
purchases at full price.
In this way, cosmetics chains also get valuable data through their database which can
be used to support sales. Another method used to improve sales is to offer promotion
coupons. As companies send direct emails and SMS messages, they can build a relationship
with customers and make them feel special by receiving a “special” coupon just for them
("Customer loyalty and customer loyalty programs", 2003).
101.4.4. Promotion
Last but not least, the marketing mix also includes promotion – this includes all
activities aimed at acquainting the customer with the product and purchasing it. The main
point is to pass on to the potential customer information about both the product and the brand,
get them to remember the product and the brand, and convince them to buy the product and
return to the brand (Lee, 2000).
Celebrity marketing
Connecting cosmetics brand with a celebrity is one of the ways how companies
achieve this desired degree of product awareness. When people see celebrities in
advertisements promoting a company’s products, the audience is more likely to buy the
products (Thamaraiselvan, Arasu & Inbaraj, 2017). Max Factor was one of the first pioneers
to use celebrities in cosmetic advertising campaigns. When Hollywood was looking for film
makeup distributors, Max Factor signed contracts with film studios to promote Max Factor’s
products. In exchange for supporting their latest films, Max Factor could use any film actress
for their commercials (Tannen, 1996).
Free Sample Marketing
Cosmetics pioneer Estée Lauder founded her first department store in 1947 and had
a career breakthrough. Her products sold out in two days. Estée Lauder did not have enough
money for marketing campaigns, so she came up with the idea of free samples. Today,
cosmetics retail chains are still using the “free sample with a purchase” strategy (Bannerman,
2004).
11Influencer Marketing
YouTube celebrities are influencing the online community more and more. Beauty
“YouTubers” with a huge followship base are turning into entrepreneurial makeup
enthusiasts (Beirne and Ford, 2014). Cosmetics companies noticed that partnering with these
beauty “gurus” can have a positive impact on their own campaigns. Consequently, they have
started collaborating with YouTubers for advertising campaigns and product placements.
Moreover, companies also collaborate with YouTubers to create new makeup products for
people as well. The power of YouTubers is increasing and has considerable potential for
market expansion in the cosmetics industry.
In – Store Marketing
Cosmetics chains with actual stores use a form of marketing communication called
in-store marketing which encompasses sales promotions at a retailer’s store with the help of
sales assistants. They offer expert advice, exclusive discounts, demonstrate product use, etc.
Customers expect an added value in the experience they receive in the store because they can
get the same products online at lower prices. It is the customers’ choice whether they will
buy a product online or go to the store to get the “in-store” experience (Jones, 2011).
122. Industry analysis of the Czech cosmetics market
2.1. Czech cosmetics market
Europe is the largest market for cosmetics products in the world. In comparison with
other European countries, the Czech Republic is doing well (“The European cosmetics
market slows down in 2016”, 2017). Positive economic development has positively impacted
sales and strengthened the buying power of consumers in the Czech Republic. Additionally,
research of the period 2014 - 2017 has shown that the Czech market has increased
tremendously. The estimated value of the cosmetics industry is 1.78 billion U.S. dollars.
Since 2014, the industry has had an increase of 19 million U.S. dollars ("Cosmetics: market
size in the Czech Republic 2014-2017", 2017). Overall, the Czech market has great potential,
and it is expected that, as the economy continues to grow, the value of the Czech cosmetics
market will increase as well ("Cosmetic, Perfume and Toiletry Market in the Czech Republic
to 2020 - Market Size, Development, and Forecasts", 2016).
Czech customers look for the best value for money when deciding what products to
buy. Price promotions and limited deals are therefore going to continue playing a necessary
role in the Czech Republic. Various product innovations have been introduced within the
beauty and personal care industry in the Czech Republic. Furthermore, the marketing support
for future innovations will require larger promotion and advertising budgets. Generating hype
for, or interest in, a certain product innovation is, and will continue to be, challenging because
of the competitive environment and increased advertising expenses ("Beauty and personal
care in the Czech Republic", 2017).
132.2. PEST Analysis
A commonly used and immensely valuable technique for analyzing the external
environment is a PEST analysis. PEST divides the overall environment into four areas
and covers just about everything that can affect an organization. The four areas are:
Political, Economic, Social and Technological (Gregory, 2000).
Political factors
The political factor that influences Sephora's business in the Czech Republic is
membership in the European Union. Because of this membership, Sephora has to follow the
legislation of the European Parliament – specifically, the regulations directing the safety
standards of cosmetics in the EU which regulate the safety of products placed on the market.
These regulations also require distributors to verify the compliance of the cosmetic products
before they are placed on the market. Besides respecting EU legislation, Sephora in the Czech
Republic must also meet the requirements for doing business in the Czech Republic at the
national level as defined by the Czech legislature for a limited liability company.
Economic factors
The next essential factors are the economic factors. The country's unemployment rate
may affect the profits of the company. If people do not have jobs, they will not have the
money to spend on the luxury cosmetics. The unemployment rate in March 2018 was only
3.5% which is the lowest rate for the last two years. Therefore, Unemployment in the Czech
Republic is not a problem for Sephora ("Nezaměstnanost v ČR, vývoj, 2018 rok 2018 – 5 let,
Míra nezaměstnanosti v %", 2018).
14Another economic factor is the rate of inflation. If the price level rises, then we can
buy less for the same amount of money. It is then clear that the indicator of the inflation rate,
i.e., the percentage change in inflation, must affect the sale of luxury cosmetics. Luxury
cosmetics are very sensitive to price trends because they are a lot of cheaper substitutes. The
inflation rate, as expressed by the increase in the average annual consumer price index, was
2.3% in March 2018 ("Inflace - 2018, míra inflace a její vývoj v ČR - 5 let", 2018).
For similar reasons, the average income rate in the Czech Republic is important too.
The average income of people is increasing. In the 4th quarter of 2017, the average gross
monthly nominal wage per employee employed in the national economy grew by 8.0%
compared to the same period of the previous year, an increase of 5.3%. The median wages
were CZK 27,320. This average should not be a threat to our analysis ("Mzdy - vývoj mezd,
průměrné mzdy 2018 - 5 let", 2018).
Social demographic factors
Increasingly, Sephora places more and more affordable brands in their portfolio, and,
subsequently, attracts more and more potential customers. In the Czech Republic, women
are the main target group for the purchase of cosmetics products.
There are over five million women in the Czech Republic ("Aktuální populační vývoj v
kostce | ČSÚ", 2018). However, only a portion of them are relevant for Sephora because not
all of them can afford luxury cosmetics products. For example, women such as children,
pensioners, and women who can not afford luxury cosmetics cannot be included in Sephora's
targeted group. Therefore, it is essential to take into account the age and education of the
target customer group. Education not only affects the future salary of a person but also
15individual social needs. For example, a laborer does not need makeup every day, but most
college women and college students need make-up or other cosmetics to maintain a
respectable look.
The age distribution of the Czech population is, therefore, a major factor to consider.
The proportion of Czech citizens with higher education is on the rise. In the past
twenty years, the number of women with a university education has increased.
With a wide product portfolio that includes products for different age groups, both women
and men, one might assume that the Sephora target group is really broad (or that the target
groups are set more broadly within the company concerning the individual brands included
in the company portfolio). However, if one were to take a closer look at the targeting in this
industry, it is women ages 20-50 that can be considered as the primary target group focused
on by industry standard brand communication strategies. It can also be concluded that this
subsection of women are interested in caring for their looks and can afford luxury goods
("Aktuální populační vývoj v kostce | ČSÚ", 2018).
Technological factors
In the Czech Republic, the number of social media users has increased significantly
in recent years. It is not only Facebook, but Instagram, Twitter, and Pinterest that continue
to garner more and more attention from Czech consumers.
16Forecast of social network user numbers in the Czech Republic from 2015 to 2022
(In million users)1
This statistic displays a forecast of the development in social network user numbers
in the Czech Republic from 2015 to 2022. In 2022, the number of monthly active
social network users is projected to reach 5.4 million individuals. This would be an
increase of over 570,000 new users from 4.83 million users in 2016 ("Czech
Republic: number of social network users 2015-2022 | Forecast", 2018).
The cosmetics industry has experienced a huge boom through blogs and “beauty”
Youtube channels. The increasing use of these technologies is translating into great
opportunities for manufacturers and retailers of cosmetics. YouTubers regularly receive
packages from cosmetic brands for review and routinely get suggestions for sponsored
videos. Cosmetics companies communicate not only with the YouTubers but with their
followers as well. The steady growth in the popularity of YouTube in the Czech Republic is
a big opportunity for the cosmetics market to expand (“Jak se daří jednotlivým sociálním sítí
1
https://www.statista.com/statistics/568761/forecast-of-facebook-user-numbers-in-the-czech-republic/
17v České republice?”, 2017). Instagram as a social media platform is ideal for direct
communication with customers, primarily because it uses visual influence allowing potential
customers to see photos of the cosmetics distributors products.
Overall, online communication is very important and this method of marketing
communication is an important strategy for Sephora's customers—particularly the so-called
“millennial” generation. This generation of people, between the ages of 18 and 24, is
becoming economically active and, at the same time, fully maximizing the potential uses of
the internet, social networks and other technologies. For that reason, it is necessary to
account for their potential purchasing power and use it to exploit these technologies ("How
Millennials Like Their Makeup | The New Yorker", 2017).
On the other hand, the Internet, mobile apps, and other technologies have become a
threat to cosmetics retailers and distributors. Online perfume and cosmetics stores are a
popular place to buy, especially thanks to lower prices. This problem has already been
mentioned in the chapter dealing with Sephora's competition.
We must not forget the growing use of the Internet and mobile apps in the list of technological
factors.
2.3. Competition on the Czech cosmetics market
Because the Sephora range of products is made up of luxury cosmetics, their
competitors can be defined as offering the same goods or focusing on the same range of
products. Sephora’s main direct competitors are Douglas, FAnn Parfumerie, and Marrinoaud.
All of them offer a variety of perfumes and cosmetics. Each of them offers products that
others have as well, but also offer exclusive products that the other competitors do not have.
Therefore, consumers have the advantage of choosing where they prefer to buy a product.
18Moreover, all of these brands sell products online which makes it even easier for a consumer
to decide where to purchase the desired product.
Sephora also has online internet stores among their competitors because they run an
online store in the Czech Republic as well. Additionally, online stores, or E-shops, are
increasing in popularity. The largest online stores offering perfumes and cosmetics are
Notino.cz (currently Sephora's biggest Czech online competitor and the largest online
cosmetics retail store in the Czech Republic), Elnino.cz, and Prodejparfemu.cz. These online
stores/E-shops can provide customers with better prices for products than a retail store
without having the additional costs associated with the operation of a store. For example, a
cosmetic product LANCÔME Teint Idole Ultra Wear 24H is offered at notino.cz for 1081Kč2
but on the Sephora store, it is offered for 1360Kč3.
FAnn Parfumerie
The company, FAnn Parfumerie, was established in 1991. FAnn is the oldest retail
chain of beauty stores in the Czech Republic. They are one of the main competitors of
Sephora in the cosmetics business, serving over 800,000 customers every year. At their Brno
headquarters, they have 200 employees. It is a Czechoslovak company with stores in the
Czech Republic and Slovakia. In 2000, the company opened its first ever online cosmetics
shop in the Czech Republic. In the same year, the company launched its FAnn Bonus Club
program, Loyalty Program for Customers ("O nás - FAnn Parfumerie", 2018)
2
https://www.notino.cz/lancome/teint-idole-ultra-wear-dlouhotrvajici-make-up-spf-15/
3
http://www.sephora.cz/Liceni/Plet/Makeupy/Teint-Idole-Ultra-Wear-24H-Dlouhodrzici-makeup-SPF-
15/P2831007
19Marrinoaud
In 1984, Marcel Frydman bought his first perfume and brought in his concept of more
affordable prices. He started his chain of French perfumes: Marionnaud. The year 2000 was
the first year that Marcel Frydman also bought several companies in other European
countries. This decision proved to be very successful. In 2002, Marionnaud became the leader
in the French perfume retail market and expanded into Italy, Spain, and Portugal
("Marionnaud Parfumeries", 2018).
Douglas
The history of the perfumery, Douglas, began in Germany; it is named after Scottish
immigrant, John Sharp Douglas, who founded the first soap and perfume factory in Germany
in 1810. Douglas first expanded its market to Austria and then to other European countries.
In the 1980s and 1990s, the company came to the Netherlands, France, Italy, Switzerland,
Spain, and Portugal. Since 2001, it has expanded to other European countries, including the
Czech Republic. Douglas operates in nineteen European markets. Today, Douglas has over
1,700 shops worldwide ("Douglas Corporate: Über uns", 2018).
Company Sales Margins
Sephora 580 879 000 Kč 277 078 000 Kč
Douglas 274 960 000 Kč 101 430 000 Kč
Marionnaud 418 673 000 Kč 150 498 000 Kč
20Data taken from Annual reports of 2011 4.
Graph: Comparison of Sephora’s Sales and Margins with its competitors
(Source: Author’s work)
Branded stores offering the same products as those found in Sephora can also be
considered competition or even substitutes for a specific brand. For example, Clinique
products are available for sale in Sephora, Douglas, Marrinoaud, and Fann Parfumerie but
also directly in Clinique brand stores as well. Other similar examples are Bobbi Brown,
MAC, Estee Lauder, Lancôme or NYX. These brands are offered not only in the stores of
their main competitors (as mentioned above), but these brands have their own boutiques as
well.
4
https://or.justice.cz/ias/ui/vypis-sl-detail?dokument=17038305&subjektId=508485&spis=152708 page 11
https://or.justice.cz/ias/ui/vypis-sl-detail?dokument=17240596&subjektId=700653&spis=170594 page 13
https://or.justice.cz/ias/ui/vypis-sl-detail?dokument=16754138&subjektId=279468&spis=176869 page 1
213. Sephora and its Marketing Communication Strategies
3.1. Company overview
Sephora is one of the most successful perfume chains in the world. Dominique
Mandonnaud, the founder of Sephora opened his first store in France in 1969. The unique
concept was that customers could personally see the products and try them on individually
("About Us | Sephora", 2018). This model changed the whole idea of how retail stores with
cosmetics and perfumes marketed to their customers. In 1997, Sephora became a part of the
largest group of luxury goods in the world – the Moët Hennessy Louis Vuitton. “Today
Sephora operates in 30 countries and has more than 1,750 points of sale generating revenues
in excess of $4 Billion by my estimate” ("Forbes Welcome", 2013).
Sephora offers a large variety of products divided into three categories: exclusive brands
available only in Sephora (Nars, Benefit, Too Faced, etc.), selective brands (Dior, Lancôme,
Clinique) and their own Sephora line called “Made in Sephora.” Moreover, Sephora also
offers additional cosmetics services for their customers (makeup lessons, free consultation
of skin, etc.) Currently, Sephora has over 2300 stores spread out in 33 countries. In 2013, the
estimated generated revenue of Sephora was $4 billion. Thus, Sephora continues to expand
its worldwide network ("Report: YouTube Generated $4 Billion in Revenue In 2014", 2015).
Sephora believes every stroke, swipe and dab reveals possibility, and we share our
client’s love for the confidence that our products, services, and expertise brings to
their life every day. In every store, clients unlock their beauty potential at our Beauty,
Skincare and Fragrance Studios through intuitive technology and guidance from the
most knowledgeable and professional team of product consultants in the beauty
industry ("About Us | Sephora", 2018).
22Sephora stores
Sephora operates approximately 2,300 stores in 33 countries worldwide, with an
expanding base of over 430 stores across the Americas. Sephora opened its first U.S.
store in New York’s Soho neighborhood in 1998, and its first Canadian store in
Toronto in 2004. The Sephora Americas headquarters and Innovation Lab are located
in San Francisco, with corporate offices in New York, Mexico City, Montreal,
Toronto and São Paolo ("About Us | Sephora", 2018).
Sephora online shop
Sephora.com - Launched in the U.S. in 1999 and Canada in 2003, the foremost
prestige beauty site on the Internet is also Sephora's largest North American store and
is where clients can engage with an inclusive beauty community on our award-
winning Beauty Board, and interactive Beauty Talk.” In the Czech Republic, the
company launched the online store – sephora.cz in July 2016 ("About Us | Sephora",
2018).
Sephora PRO
The Sephora PRO Team is an elite group of makeup artists handpicked for their
superior skill, unprecedented creativity and ability to inspire through education. The
Sephora PRO artists are among the industry's most knowledgeable in beauty expertise
and application, lending their aptitude and know-how to product ideation and
development, sharing beauty education tips on Sephora’s social channels, speaking
on behalf of the retailer to media, and applying their industry prowess at a variety of
23national and local client events. Each Sephora PRO artist is a permanent appointee
and based in a specific region, broadening their influence across the Americas”
("About Us | Sephora", 2018).
The Pro member of the Czech Republic is Adela Bartáková.
Adéla Bartáková – member of the Sephora Pro Team5
5
http://www.sephora.cz/Presentation-de-la-Pro-Team/R295500007
243.2. Sephora in the Czech Republic
In the Czech Republic, Sephora was founded in 2001 as a limited liability company
(Sephora s.r.o.). Currently, there are 20 stores, but most of them are located in Prague. Other
stores are located in Karlovy Vary, Plzen, Pardubice, Liberec, Brno and Ostrava. According
to annual reports 6 sales have increased steadily over the period 2010 – 2015.
2010 2011 2012 2013 2014 2015
Sales 499431 580879 633500 678968 712468 795420
Margins 227562 277078 303523 333271 357674 409661
In thousands Kč*
From the publicly available annual reports of the company, Sephora has been doing well in
the Czech Republic in recent years. Especially in the last monitored seasons, growth in both
sales of goods and margins.
6
Annual Report 2010 https://or.justice.cz/ias/ui/vypis-sl-
detail?dokument=14299223&subjektId=700653&spis=170594 page 10
Annual Report 2011 https://or.justice.cz/ias/ui/vypis-sl-
detail?dokument=16689892&subjektId=700653&spis=170594 page 10
Annual Report 2012 https://or.justice.cz/ias/ui/vypis-sl-
detail?dokument=17240596&subjektId=700653&spis=170594 page 14
Annual Report 2013 https://or.justice.cz/ias/ui/vypis-sl-
detail?dokument=20740598&subjektId=700653&spis=170594 page 15
Annual Report 2014 https://or.justice.cz/ias/ui/vypis-sl-
detail?dokument=41663782&subjektId=700653&spis=170594 page 15
Annual Report 2015 https://or.justice.cz/ias/ui/vypis-sl-
detail?dokument=46970529&subjektId=700653&spis=170594 page 13
25(Source: Author has conducted a graph based on the data from the Annual reports
From 2010 – 2015)
3.3. Range of goods
Sephora offers luxury products for men and women, hair care products, toiletries, and
cosmetics. The company also owns a private label, Made in Sephora, which it offers to its
customers exclusively in its stores, marketing it as an attractive innovation, following the
latest beauty trends. Made in Sephora focuses on both the quality and the availability of its
products, it is an entirely different price strategy than other luxury cosmetics brands.
("Sephora - Společnost Sephora", 2018).
263.4. Selected marketing communication strategies of Sephora in the Czech Republic
3.4.1. Advertising
TV Ads
It is to be expected that if large amounts of money are invested in TV commercials
that they will intermittently appear on television screens. Unfortunately, no metric data
concerning the commercial advertising of Sephora (or the other companies mentioned) is
available to the public to verify the frequency with which these commercials appear, the
timeslots that they appear in, or the specific focus of these advertisements as they appear.
However, it is clear from direct observation that Sephora TV commercials are often primarily
linked to the promotion of a specific product.
For Sephora, using advertising and communication channels is important because it
supports brand awareness. Sephora’s TV spots are connected with promoting a specific
product, but at the same time, the company focuses on building its image. The TV
advertisements usually appear before Christmas. Every year, there is a different theme.
27Sephora TV spot – “Wonder Christmas” campaign (2016)7
Sephora TV spot – “Where Beauty Beats” campaign (2015)8
Sephora TV spot: “Xmas Gift Ocean” campaign (2014)9
7
https://www.youtube.com/watch?v=otTASqsVNcg
8
https://www.youtube.com/watch?v=R17XjWZzVo0
9
https://www.youtube.com/watch?v=wov6MNVDoTI
28The next advertisement seen on TV is the “Excessive Colors” advertisement. This
spot is promoting products from the private label Made in Sephora. The commercial is about
experimenting with the colors. It is a very stylish spot with appealing music in the
background.
The Excessive Colors Advertisement10
10
https://www.youtube.com/watch?v=kzWb-HHOaHg
29Printed Ads
Sephora invests in outdoor advertising too. Below are some examples of printed Ads.
Printed Ads on train seats – České dráhy.11
Printed Ad in front of Palladium shopping center. (Source: Author’s photo).
11
http://zpravy.e15.cz/byznys/doprava-a-logistika/ceske-drahy-se-zbavuji-reklamni-spolecnosti-railreklam-
odkoupi-ji-skupina-bigboard-1339429
303.4.2. Public relations
According to Kotler, public relations is defined as “gaining favorable publicity and
creating a favorable company image and has a great potential for building consumer
awareness and preference” (Kotler and Armstrong, 2011).
Sephora engages in cooperative PR with magazines to raise its brand awareness.
For example, unlike paid advertising spaces in magazines and newspapers, these cooperative
advertisements represent products that the editor of the publication has personally
recommended. A small example of PR Sephora would be Sephora's products
recommendation in the Elle magazine.
Sephora collaborated with ELLE and sponsored the Color Run in Prague 4.6.2016.12
12
http://www.elle.cz/volny-cas/jaka-byla-elle-zone-na-the-color-run
313.4.3. Personal selling
Building a relationship through personal selling is what creates a great shopping
experience for customers. Black and white stripes are iconic for Sephora. Consequently,
those colors dominate every Sephora store combination with a bright element. But overall,
the in-store marketing looks elegant, clean, and sophisticated. In-store marketing is as
important as sales assistants offering customers their help because it is the environment that
makes customers enjoy the shopping experience and return to the store. It is interesting to
note the sales environment that was in place before Dominique Mandonnaud introduced what
is now the usual way of selling cosmetics in his stores today. Before then, products were kept
behind the counters and carefully controlled by sales assistants. Mandonnaud started the
practice of letting customers actually touch, feel, and try the products. This practice has
become an essential marketing tool in the Sephora stores to create an atmosphere that makes
the customer feel comfortable while shopping in the store.
Source: Facebook page @sephoraczechrepublic
32In-store Ad on the digital screen in Sephora store in Nový Smíchov shopping center.
(Source: Author’s photo)
333.4.4. Direct marketing
The loyalty program not only offers customers promotions and discounts, but it also
provides an advantageous means of collecting data that can later be used for other marketing
purposes, such as direct marketing.
Another way in which Sephora approaches customers is with help of direct marketing which
includes direct SMS, delivered, printed offers, and direct emails.
Direct SMS announcing the Black Friday and its 20% discount.
(Source: Author’s photo)
34Direct email announcement.
(Source: Author’s photo)
Direct email announcement.
(Source: Author’s photo)
353.4.5. Online communication – Social Media
Social Media has made it possible for companies to connect with their customers and
interactively communicate with them. It is then no surprise that Sephora has capitalized on
this social media trend and uses their Facebook page (account @sephoraczechrepublic and
Instagram (account @sephoraczechrepublic) as direct communication channels to their
customers.
The immediate advantages of this are prompt reactions by potential customers and easily
collected metric data regarding how many customers have been reached. These platforms
present new products, brands, events, promotions. Moreover, they provide information about
new or popular products, and also show short video tutorials about makeup, cooperation with
bloggers and YouTubers. Sephora also seeks to increase customer engagement by asking
questions about customers’ favorite products, opinions, experiences, etc. ("Inside cosmetics
brand Too Faced's winning Instagram strategy - Digiday", 2018).
Facebook page of Sephora Czech Republic
36You can also read
