UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business --------------oOo--------------- MASTER OF BUSINESS ADMINISTRATION BRAND POSITIONING IN LG VINA COSMETICS LTD NGUYEN THI THANH TRUC Ho Chi Minh City – 2016 TIEU LUAN MOI download : skknchat@gmail.com CONTENTS ABSTRACT. 1 CHAPTER 1 PROBLEM IDENTIFICATION .3 The definition & importance of the problem .4 Justify the existence of the problem .5 Potential causes of the problem and the justification. 10 Company strategy & Limited budget. 19 Ineffective activities planning.
19 Lack of qualified brand in charge person. 21 Wide target image. 23 Cause and Effect Map. 19 CHAPTER 2 ALTERNATIVE SOLUTIONS.
20 Re-define the target image of Essance and measure the effectiveness of MKT activities. 20 Hiring new Brand Manager. 29 CHAPTER 3 ACTION PLAN. 42 TIEU LUAN MOI download : skknchat@gmail.com LIST OF IMAGES Image 1.1: Essance turnover over 2013-2015.2: Number of buyers Essance compared to other rivals in 2015 .3: Share of Essance decreased over 2015 .4: Essance penetration compared to Maybeline’s .5: Essance customers’ age compared to its competitor, Maybeline .6: Value growth of Mainstream segment over 2015 .7: Value contribution channels in Mainstream 2016 .1: Nine functional areas of a brand manager.
24 LIST OF TABLES Table 1.1: Branding activities of Essance vs its competitor, Maybeline .2: Pricing comparison Celebrity .1: Estimated cost for measuring MKT activities .2: Estimated cost for hiring Brand manager. 29 TIEU LUAN MOI download : skknchat@gmail.com 1 ABSTRACT This research is to find out what problems are affecting Essance’s low performance in brand health & sales results in LG Vina Cosmetics Ltd. Using data from in-depth interviews with marketing manager and target customers, besides reports of Kanta Worldpanel about some Key Performance Indicators (KPI) of Essance over 2015, the research found out that the ineffective execution of Essance positioning strategy is the central business problem which leads to the low brand performance, indicating through low indicators of brand health check and low sales performance as well. Next, in deeper analyze of the potential causes of the problem, the researcher found that the Company strategy & Limited budget, Ineffective activities planning, Lack of qualified brand in charge person and the Wide target image are root causes leading to the wrong execution of positioning strategies of Essance.
Forwards, the paper suggested solutions relating to Re-defining brand image target and measuring the effectiveness of Marketing activities besides hiring new brand manager to improve the execution of brand positioning strategies in LG Vina. Finally, the action plan with detailed steps was presented to implement this strategy. TIEU LUAN MOI download : skknchat@gmail.com 2 CHAPTER 1 PROBLEM IDENTIFICATION 1.1 Company background The Vietnamese full name: Công ty TNHH Mỹ phẩm LG VINA The English name: LG VINA Cosmetics Ltd. Address: 138-142 Hai Ba Trung Street, District 1, HCM city.
Website: http://www.vn/ Staff: Over 500 employees. LG VINA Cosmetics Ltd is a combination of LG Household & Health Care Korea and Vietnam Vegetable Oils Industry Corporation (Vocarimex). LG VINA does business in two main areas: Household goods (hair care, body care, oral care) with brands as Double Rich, Bamboo & Cosmetics (Makeup, Skin Care, Functional food) with The history of Whoo, O HUI, Beyond, VOV, Essance, E'Z up, Lacvert… The process of formation and development of LG VINA: - 1996 - 1997: Explore the Vietnamese cosmetics market as well as the needs of women in Vietnam - 22/10/1997: LG Household & Health Care Korea and Vocarimex signed the agreement establishing LG VINA. - 3/2000: Become the first cosmetics company has a factory producing products in VN - 7/2008: Continue to develop and expand the business areas by building factories toothbrush - 9/2001: Achieved ISO 9001 certification for quality products TIEU LUAN MOI download : skknchat@gmail.com 3 - 11/2002: Achieved ISO 14001 certification for quality environmental management.
- 6/2009: Whoo Spa, which is the most luxury spa in Korea, firstly came to Viet Nam. Cosmetic division is divided into 3 segments: Super premium (Whoo, OHUI), Premium (Beyond, VOV) and Mainstream (Essance, E’Z up, Lacvert) which are both taken care by Marketing manager. The focus of this paper is on the Essance brand of Mainstream segment, which are in charge of four persons: 1 general Marketing manager cum the position of Brand manager, 1 trade category manager, 1 assistant trade category manager and 1 brand executive. To have more information about this segment, Mainstream is contributing around 30% to the total turnover of Cosmetics division of LG Vina and Essance is holding 80% of Mainstream segment.
It can be said that Essance is the core brand of Mainstream segment. In term of competitive market, Maybeline is their most potential competitor as they target the same segment and have a similar business kind with Essance (major focus on Make-up). Other rivals are ZA, Hada Labo, POND’S….who both contribute to a competitive picture of mainstream segment.2 Problem Symptoms To find out the problems causing low brand performance, the research carried out initial in-depth interviews with Mr. Ngan, Marketing Manager of LG Vina, Cosmetics department, who is cum brand manager of Essance at the present.
According to the interview result as well as the data he shared, Essance witnessed a decrease in brand performance over the period of 2013 – 2015. The turnover sharply decreases from 2013 – 2015 and could not reach target over these years. TIEU LUAN MOI download : skknchat@gmail.com 4 Essance 2013 2014 2015 (Unit: 000 vnd) Target 158,792,327 184,127,193 182,084,600 Actual 160,957,591 137,490,596 131,894,859 % Reach target 101% 75% 72% 190,000,000 190,000,000 180,000,000 170,000,000 170,000,000 160,000,000 Target Actual 150,000,000 150,000,000 140,000,000 130,000,000 130,000,000 2013 2014 2015 Image 1.1: Essance turnover over 2013-2015 Source: Kantar Worldpanel – Households Panel – Urban 4 key cities- 52 w/e The decreasing turnover goes along with falling indicators about brand health of Essance. According to that, number of Essance customers is decreasing over 2015 and around 100,000 people, just higher than Hada labo in mainstream segment.
TIEU LUAN MOI download : skknchat@gmail.com 5 500 Buyers (000)-Actual Yr on 400 300 Yr 200 100 0 Essance Maybelline Pond'S Hada Labo Image 1.2: Number of buyers Essance compared to other rivals in 2015 Source: Kantar Worldpanel – Households Panel – Urban 4 key cities- 52 w/e Essance market share, one of the most important indicators of a brand health, is decreasing by 33. It is also obvious that Essance’s portion is not high in the whole category, compared to its rivals (Maybeline 3. Product % of Category % Change Hada Labo 78.3: Share of Essance decreased over 2015 Source: Kantar Worldpanel – Households Panel – Urban 4 key cities- 52 w/e TIEU LUAN MOI download : skknchat@gmail.com 6 Besides, Essance experienced a decreasing penetration level over 2015 with a higher lost market percentage and lower new customers and repeaters. 15 MAYBELLINE ESSANCE penetration % penetration % 15 10 10 5 Repeaters 3.8 New market (5) (10) 28-Dec-14 3-Jan-16 (10) 28-Dec-14 3-Jan-16 Image 1.4: Essance penetration compared to Maybeline’s Source: Kantar Worldpanel – Households Panel – Urban 4 key cities- 52 w/e Essance is losing its ability to recruit new buyers while Maybelline is speeding up.
Source: Kantar Worldpanel – Households Panel – Urban Vietnam 4 key cities - Mainstream Essance & Maybelline- 52 w/e. Especially, there is a gap between Essance real customers’ age and targeted ones. According to the brand positioning strategy, Essance’s targeted customers are 18-25 years old whereas the real customers who account for big portion in Essance’s revenue are over 40 years old. TIEU LUAN MOI download : skknchat@gmail.5: Essance customers’ age compared to its competitor, Maybeline Source: Kantar Worldpanel – Households Panel – Urban 4 key cities- 52 w/e Buyers of Essance is more skewed to the older group (40+) while buyers of Maybelline is younger (< 30 yo).
Source: Kantar Worldpanel – Households Panel – Urban 4 key cities- 52 w/e Among these four symptoms above, it can be concluded that the issue of positioning in the 4th symptom is the central problem which has connection with the remaining issues. Through a gap between targeted customers’ age and real ones, the problem in Essance positioning is indeed an issue to be solved as the major of Essance customers now (the old ones) come from the existing customers, which is proved by the fact that this brand could not recruit new customers over 2015 (the 3rd symptom). Therefore, in the long term, these existing customers will be supposed to be aging, and leave Essance since they are no longer suitable with the brand image; whereas Essance cannot recruit new young customers at the present. Hence, it will lose share & revenue to their rivals and disappear as a certain result.
Therefore, in the extent of this thesis, the writer will choose the problem of Essance positioning strategy as the main issue for deeper analyzing. TIEU LUAN MOI download : skknchat@gmail.3 The definition & importance of the problem According to Perreault and McCarthy, (1) positioning is how customers think about a brand in a market or how it is perceived in the minds of consumers, relative to competitor brands. William (2) claims that brand positioning is a tool for companies to build a sustainable competitive advantage on product attribute in customers’ perspective. Positioning a brand is regarded as a fundamental marketing objective.
The act of positioning a brand is thought to be a key marketing objective, with the premise that each brand is just suitable with a certain position. The characteristics of a good position for the brand are perceived as uniqueness, strength and prevalence. Bhat and Reddy (3) state that companies could possibly harm the perceived positioning of a product when choosing the wrong positioning and decrease sales performance as a result. They also found that creating a brand’s position takes long time and vast investment, especially in advertising.
Besides, Crawford (4) also argues that brand positioning focuses on perceptions of consumers about a firm’s products or brands. Davis et al. (8) claim that interaction with customers plays a major role in the actual brand positioning, and the brand image is formed from every interaction between a firm and its customers. Therefore, the whole organization has to become aware of the intended brand positioning strategy and demonstrate it consistently when interacting with customers.
In term of Essance case, we have already defined the problem lies in the gap between target customers and real customers. This issue, a distinction between intended and actual brand positioning, used to be mentioned by Fuchs and Diamantopoulos. (5) According to them, actual brand positioning is which the company intends the brand to be perceived by customers, and actual brand positioning is actually presented to customers through marketing communication. According to that, positioning appear to be controlled by the purpose of TIEU LUAN MOI download : skknchat@gmail.com 9 choosing the position that bring the highest benefit for customers, touching the largest or most profitable customer segment, or being well differentiated from competitors.
Fuchs and Diamantopoulos (5) also stated that the brand performance will be negatively affected if the intended positioning is well chosen but its execution (i. the actual positioning) fails to result in an effective perceived positioning by consumers. Thus, positioning effectiveness can be compromised by choosing the wrong positioning strategy (poor intended positioning) or by poorly executing a sound strategy (poor actual positioning).4 Justify the existence of the problem The next step is to find out whether the issue comes from the execution of positioning strategy (1) or it was initially wrong when choosing the inappropriate segment of customers (2). In term of (1), it is evident that the major customers (over 40 years old) who are buying Essance now are not newly recruited by Essance.
They are all existing customers as the fact that Essance could not recruit new customers (symptom 3_Image 1. In other words, this old segment cannot make sure to say that it is more beneficial and potential with Essance.