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Brandstorm 2018 (project work of S&M course)
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- 2. BUSINESS BOUNDARIES DEFINITION The Abell model is a three dimensional tool and it is usually applied in order to analyse the business in which a company operates. The three dimensions of our business are: the customer group we will focus on is the Y-generation (as asked by Brandstorm); we are going to satisfy customer needs/functions related to the actual salon services such as high quality service, the search of a real emotional experience and the need of reducing the purchasing risk; we will satisfy needs through the creation of a new digital environment (technologies). Through these three dimensions, this tool helps defining a real appealing business. We have also to highlight that an alternative, but not effective, technology to meet customers’ needs is the traditional one. We haven’t mentioned it because it is not a valuable solution. When plotted on a three dimensional model, the horizontal axis is taken as the customer groups, the vertical axis as their needs and the inclined axis is taken as the technologies. The most important factors should be closest to the 0 axis and should be given the highest priority. We will list our factors considering this convention meaning that for each category they are in order of importance, from the most important to the least. 1 Customer groups • Millennials Customer needs/functions • High quality service • Emotional experience • Reduction of purchasing risk Technologies • Digital environment: App, platform and website Source: Brandstorm 2018 resource pack Of course other macro segments of potential customers, who have the same customer needs, are the youngest one (Z-generation) and the most responsive one within the adults customer base. This latter customer group would be referred to the ones more open minded and more technology addicted. Both customer groups could be served by the same technology. Therefore, they could be included in our business in the future.
- 3. EXTERNAL ANALYSIS First of all, we want to highlight peculiarities of the competitive arena where we are going to move in. To do that, we have to analyse the geographical area where we would like to implement our idea. We will focalize on the west Europe (because culture of new generation is very similar from country to country), even if we will develop a first pilot project only based on Italy. This is explained by the P.E.S.T.E. analysis as shown below: 2 Political factors In west Europe, legal rules of e-commerce are favorable, so we can affirm that a new platform is not a problem given the actual situation. Economical factors Choosing UE as competitive arena, prevents us form the risk connected to the variability of exchange rate, in addiction it allows us to better manage infra-country transactions. Social factors Among west Europe, we can say that new generations culture is almost the same, they are all inspired by an American lifestyle (which tells how our will be applicable even in USA) and they are all smartphone (or technology more in general) addicted, so they are ready for every kind of tech innovation. An other important social trend is the importance given on the CSR. An ultimate macro trend to highlight is the urbanization which means that people are going to live more and more in metropolitan area. Technological factors Technologically talking, world is becoming more and more digital, technology is spreading in all the activities of each human and a lot of data are available. Ecological factors Nowadays, environment issue is one of the most important aspect behind every kind of decision. Paying attention to this is not only a possible competitive advantage, it’s also a must for each firm due to the legislation. After this analysis, we can see that a valuable idea today, it’s an idea that is based on technology. It also must be ecological and social aware. In order to reach a significant customer base without too much effort, we should develop our business around the main metropolitan cities. The map on the right shows the Italian big cities selected for the pilot project. Source: Brandstorm 2018 resource pack; Eurostat fact sheet 2017
- 4. SWOT ANALYSIS In order to summarize both the internal and external factors, that could affect our business idea, we have run a swot analysis. First of all, we consider as our main strengths the L’Oréal strong brand, well-known almost all over the world, and, on the other hand, the innovative app we developed, which seems to have no previous incumbents. In fact, we want to take advantage of the big opportunity of the rapidly growth of the social-media users, who satisfy all their needs by using social networks, and of the favorable context. We figure out that the weakness, that we want to overcome levering on our points of strength, is mainly our total new concept of the hairdresser service and the connection between this one and a social app (never done in the past): people are still stuck to the traditional view of the hairdresser service. As threats we can identify the possibility that other hairdresser could rebel to our idea or, in an opposite way, other important hair-beauty companies could exploit the advantages of being the ‘second mover’ and improve it offering another app, after seeing the reaction of the market. In addition we have always to take care about the possible problems related to the new laws about e-commerce. All these concepts are reported in the chart below. 3 Strengths: • L’Oréal strong brand • App: disruptive technology with no incumbents (first mover) • Low investments needed for the App Weakness: • Totally new concept of the service Opportunities: • Huge potential market • Hedonistic behaviour • Network effect • Co-creation of value • Higher awareness about CSR Threats: • Low entry barriers for potential new entrants • Problems related to hairdressers’ acceptance of new approach • New legal issues Source: Brandstorm 2018 resource pack, competitive analysis of the hairdressers industry (UKessays)
- 5. SEGMENT TARGET DEFINITION We aimed at adopting a “segment marketing” approach offering ad hoc treatment for each “segment” in order to have the higher customers satisfaction as possible. For this reason, we divided our customers into three segments which are similar internally but different externally respecting the five characteristics of a “good” market segment: measurability, accessibility, homogeneity, importance and duration. Drafting the table, we have sub-divided only west European millennials (20-35 y). 4 SEGMENT SEGMENT DESCRIPTION USER PROFILE MAIN BENEFITS SOUGHT 1-Millennials from rich families They are constantly connected with the web and social network through their smartphone. They will use the App not only for optimizing the service, but whenever they look for a real experience. High expectations in both interactive service and customization. People living in big cities who loves travelling. They are very well economically established. They don’t care about the price, they only search for a top quality experience. Quality, sharing their style, social connections, entertainment, status, relax time and a real valuable experience. 2-Young business men/women People who travel a lot for work or for pleasure and are not so price sensitive. Thy will use the App during their business trips to be ready to face each appointments. High importance in customization and efficiency. They work for valuable companies and so they are quite rich and they travel very frequently. They usually live in big cities near to their HQs. They think that their time is very precious. Quality, time-saving both in the salon research and during their staying, relax time and customized treatments. 3-Trendy middle class People with lower economic affordability. They would use the App for special circumstances to be more similar to VIPs and influencers (their archetype). Lower relevance of customization benefits than economic ones. People of middle class living in big cities. They have lower incomes but they desire having a trendy look at an accessible price. Cost-saving, lower price than the usual through offers and promotion, quality, relax time and convenience. 1 - 2 3 Profitability of segments Compatibility of segments with the company's new strategies and resources L L H H We selected segment 1-2 because of the total compatibility with the strategy drafted and with the high profitability of segments their selves. We also selected segment 3 because, even if they are not so much profitable for the company they could be high compatible with the strategy. In fact, addressing a specific offer to them, it’s possible to increase CSR that could have a positive impact on the brand equity and increase the network number of users. They could be reached only in case of residual resources with a sort of hedging strategy. Since this is a pilot project, we identify only this 3 niche target segments basing our segmentation on a mixed approach (characteristics, behaviours and needs have been taken into account) and we think that such selective specialization could be the most effective approach Source: http://dspace.unive.it/bitstream/handle/10579/8989/850094-1193562.pdf?sequence=2; https://ec.europa.eu/commission/index_en
- 6. STRATEGY DEFINITIONOur idea is to create an innovative paradigm for the hairdressers’ final market through a new disruptive App. In this way we can exploit the opportunity of network effect and the strength of being the first mover. The basic concept is that hair treatments must be a total relaxing moment. Nowadays, most people go to saloons for necessity, not for pleasure. Hairdressers saloons revenues are affected by this trend. From a B2B2C point of view, on one hand we aim to increase profits for L’Oréal hairdressers and L’Oréal itself, on the other hand we want to change perception of this experience in customers’ mind. Our App is created to do these things. We think that it could be a real disruptive innovation which can find a blue ocean within this old industry. Our positioning aims to put this App in the high-end market so it must be perceived as a tool to enter in a luxury world, so we can reach a huge potential market which behaves in a very hedonistic way (see opportunities in slide 3). 5 Of course, during the implementation phase, when we will have to build a brand new control system, we will have to take into account all this objectives, in order to build a balanced scorecard. In fact, we have also thought some KPIs that will not be reported in this set of slides because it’s not linked with the purpose of the project. PERSPECTIVE STRATEGIC GOALS/KSFs HOW? CUSTOMER Increase customer experience Hairdressers move from service providers to experience providers CUSTOMER Sharing beauty around the world Stay tuned with the last trends and share your own beauty through social network INTERNAL PROCESSE & LEARNING Saving time No waste of time for customers and no spare time for hairdressers INTERNAL PROCESSES Increase environmental sustainability less emissions of CO2 in the atmosphere through different methods INTERNAL PROCESSES & CUSTOMER Implement one-to-one marketing approach Thanks to new SW we can profile each user and personalize offers to create a strong relationship FINANCIAL Increase brand awareness Increasing visibility and higher trust in L’Oréal which could drive to an higher value of the whole enterprise LEARNING & GROWTH Standardization and development of competences Continuous improvement to be ready to face every future challenge INTERNAL PROCESSES Implement and manage a huge new platform Our App will be based on API (Application Programming Interface) economy principles, so it will be user-friendly and it will attract more and more customers, at the same time more and more salons will be interested in entering in this network FINANCIAL & INTERNAL PROCESSES Reduce costs Even if quality of service will be higher, it will be cheaper both for consumers and for salon, which means higher profitability for L’Oréal (and for salons) and a reduction of purchasing risk for customers In the end, after the setting of our targets, we can check if our positioning is consistent with all the theoretical CSFs for a good positioning on the market: we can point out that our App is addressed to precise customers’ segments which already exists on the market, which are delimited and defined (and so measurable in a simple way), which are clear to distinguish and which drive us to a very high competitive advantage in a long term perspective (coherent with our strategy).
- 7. VALUE PROPOSITION Our App has to be considered as an intangible asset that of course adds value to the L’Oréal brand equity. In our opinion is a disruptive technology which can totally change the rule of the game. It aims at differentiate L’Oréal offer: in fact with this platform, it’s possible to create an high quality service in every salon of the network that leads to an emotional experience. This experience can touch the irrational side of the mind and it’s able to create a strong and deep sense of satisfaction in customer mind: hair treatment will not be a commodity, but a very awesome experience. In addiction, the network created through this App offers both a tool to standardize competences of hairdresser and detailed information about the artwork of each saloon, which means a reduction of the purchasing risk for customers. All this things create a very high value for customers and, under a customer-based perspective, we can also move the source of value more downstream with a sort of “prosumption”: customers would be allowed to co-create their own personalized offer, so their value (see opportunities in slide 3), based on the information provided by the app (e.g. each photo added is correlated by the description of the hair treatment received by a L’Oréal salon that can be replied again with the same output). In the end we can certainly affirm that the platform, accessible through the App, will create a network where demand and offer will grow more and more over time (benefiting of the network effect, see opportunities in slide 3). Finally, we can affirm that customers will choose our App instead of possible new entrants, because we would be the first mover and, since we have a strong brand to exploit, customers will trust more L’Oréal than others due to its strong brand (see strengths in slide 3). Resuming, the value proposition is based on: a differentiation strategy (high quality service with a very low risk) where value is high thanks to the interaction with customer through the platform (network effect & downstream value). Our offer could be considered as targeted to an high end market. 6 We want to point out that we are affirming that our App can be considered a real disruptive innovation for the following reason: 1- during the first phase of the implementation, the app will be used by only a niche group of customers because it is a totally new concept (see weaknesses in slide 3), but for the following reasons it will not be a relevant problem and it will be overcome; 2- it’s created to reduce costs for salon and to reduce risk and price for users (so it’s cheaper in general terms for all the B2B2C market); 3- since App will be based on API economy principle, it will be user friendly e very easy to use; 4- it will satisfy better and better customers’ needs and it will create new opportunities. This app creates a sort of blue ocean business inside an established business which is not totally customer oriented yet.
- 8. PRODUCT & SERVICE EXPERIENCE Considering the chart on the left, we can see that we want to reposition salon services in customers’ minds. From a necessity made only for appearance, our aim is to innovate them because their goal will be the well-being of people. Customers will undergo to a real experience that will create a sense of relax, satisfaction and desire to repeat it as soon as possible. The repositioning will be possible because, as we can observe in the Strategy Canvas, our App will completely change the rules of the game. It allows hairdressers of the network to outperform in comparison with the traditional ones. Indeed maintaining the same average of treatment price, but reducing the SD due to fixed price lists, salons will increase their saturation and their customer base thanks to the network effect (exploitation of the opportunities in slide 3). In addition, booking mgmt. allows salons to reduce chaos and time spent at salon with a better planning of treatments, SCM software increases sustainability of distribution, training courses lead to a lower variability of the output (due to standardization of competences) and finally the users’ App permits to customize the offer (prosumption approach as explained in slide 6) and to increase the salon visibility (linked to reviews and map inside the App). Resuming we can affirm that the overall customer service increases, it becomes a real experience. We have to highlight that in order to provide this innovative service, salon will be asked to have a tablet for each hairdresser that is working at the moment during all the treatment. Tablets can be provided by L’Oréal or they could be acquired by the salons, it depends on the choice that L’Oréal will have to take about it. We consider L’Oréal’s offer as a mix of tangible products (L’Oréal’s products sold after the treatment) and intangible service (the treatment itself), but after all L’Oréal will offer an experience available only through the platform. Focusing on the service: we highlight that is provisioned in a traditional way, what change is the reduction of its purchasing risk (as described before), the optimization of time for the salon (through standardized competences and mathematical approach based on data provided by L’Oréal to salon) and, most important, the access to it is based on the platform created (which increase brand equity during each transaction) that leads to a higher customer involvement and so to a higher customer satisfaction. In the end we can resume the new service’s features: lower variability, lower risk, higher brand awareness, higher customer centricity, stronger customer relationship and higher profitability for L’Oréal and salons. 7 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Strategy Canvas App Traditional dream creates desire stimulates imagination for well-being long term and holistic benefit necessity indispensable to maintain oneself for appearance immediate and visible benefit Hairdresser Source: Brandstorm 2018 resource pack Value of each attribute has been calculated on our expectations and/or on our market research on the web and are explained below
- 9. DISTRIBUTION & PRICEDistribution Our idea is to implement our project first in Italy, because it’s easier for us understanding habits, lifestyle and mentality of Italian people and for this reason we can better analyse and segment the market. In this way we can focus on the real end consumers of our proposal, avoiding loss of money and time. Nevertheless our innovative idea is well addressable to the west world, taking into account some differences among different countries and customers’ segmentations. In this way we can also establish a valuable worldwide network which is created through the integration of App with physical salons (thanks to an Omni channel approach). This means that, due to the collaboration, we can implement a sort of marketing system which increases both sales of L’Oréal products and the company image equity, in addition it allows customers to perceive the same valuable experience on and offline. Indeed through our App, customers can book treatment and also re order their L’Oréal products, in this way we manage our supply chain in an integrated way also through a SCM software. This latter feature will be very important in order to reduce emissions of CO2 (see slide 12). Through this important feature we can optimize replenishments and better forecast the total production needed (reducing internal cost). Through the App we can even better manage all the salons in different ways: we can assess their performances through the review-based ratings and through statistics; we are able to standardize their competences through training programmes to assure customers that every salon is capable of doing all the portfolio of different treatments available on the platform; we can also be sponsor of internal context among hairdressers to increase their commitment. An important thing to highlight is that, with the platform, L’Oréal will definitely enter in the e-commerce environment, this is a driver for opportunities, but it could lead also to the threat of possible new negative laws, which cannot be influenced by L’Oréal (see threats in slide 3). Price Price for products is fixed (set by L’Oréal), while different guidelines should be provided to salons which belongs to the different groups (based on the brand they provide like Redken, L’Oréal Professional…). In this way we can maintain a not variable price which is linked to the objective of offering the same experience in each salon of the same brand. Initially, since we will be the first mover, L’Oréal may propose two different pricing strategies: on one hand it could suggest a penetration pricing which of course would lead to higher adoption rate, but it would decrease profit and it may affect brand equity, too; on the other hand it could suggest a skimming price. This second strategy would be better, but price shouldn't be too high because during the first phase demand would be elastic. After the first period when majority will have adopted our App, we suggest to let hairdressers to set their own promotion strategies in order to saturate their resources. In addition through push notifications, specific offers will be sent in order to pull demand of certain products (new or established ones). The last thing to highlight is that, when they pay for treatments and/or products, customers will receive points which can be converted into special discounts. 8
- 10. PROMOTION In order to reach the pervasiveness of our app in the target geographical areas and in the target customer segment, we planned an integrated communication, both direct and indirect. The communication process can be divided into three consequential stages, as shown by the tool below from the bottom to the top. Behavioral stage Emotional stage Cognitive stage In this stage we will introduce our App through a small spot on social networks, which describes the concept of the innovative service we want to deliver in order to create awareness. Initially, we will also organize some meetings with the hairdressers explaining them the potential of the app and how to use it (to push demand). For what concern the advertising spot, we thought that it could be very effective and less costly to use, as testimonial, someone already engaged by L’Oréal. With these actions the weakness and the threat about the hairdressers’ acceptance of this new approach will be faced (see right side of SWOT in slide 3). To create desire and interest, we want to promote a positive word of mouth between the early adopters and the other majority of potential customers. In order to do that, we will engage social influencers in each target city, who, posting photos and good recensions, will attract more and more millennials to use the innovative App and underline the potential benefits. Thanks to the speed of social media and social networks, we will be able to reach in a short time also the laggard adopters, exploiting the network effect and the hedonistic behaviour which drives to a effective word of mouth (see opportunities in slide 3). We want to implement a one-to-one customer relationship to drive customers to use more and more the App. Through the recording of data in our integrated database and an algorithm which analyses past purchases and treatments of each customer, we will be able to customize our offer, sending personalized push notifications on each profile or offering different sales promotions. In this way we can pull the demand and create well established relationships with customers, creating an entry barrier avoiding the related threat (see threats in slide 3). Despite the fact that we customized the communication plan, we will guarantee the unitary of the message and image delivered: a total new customer experience usable only through the L’Oréal platform. In addition, we want to highlight that through push notifications we will send to users some customers’ satisfaction surveys to assess the performances of the communication mix and of the service to establish a strong relationship with them. 9
- 11. BUSINESS MODEL CANVAS 10 • Millennials • Business men/women • Trendy middle class • High quality service emotional experience • Reduction of the purchase risk for customers • Downstream value • High customization • Access to the platform network effect • Special offers and promotions • No waste of time Increase revenues for both hairdressers and L’Oréal through treatments and products sold due to the network effect • Platform • Hairdressers’ competences • Database • SW (CRM, SCM, DBMS) • Platform mgmt. • Logistic mgmt. • Data analytics • Marketing mgmt. • Training courses mgmt. • Production mgmt. • Localization Data providers • IOS and Android stores • Salons • App developers • Influencers & testimonial • App development • Platform maintenance • Marketing campaign • Training courses We have App, as channel to enter into the platform, and physical shops to enjoy treatments. So we will simply be in the pocket of our customers in the most effective and efficient way to be used whenever they want Our idea is to implement a one to one mktg. approach through a proper software to establish a long-term relationship. In this way we can customize the offer and collect data to improve our service. We also ask to co- create the tailored experience in a prosumption way from every kind of devices
- 12. April 2018 October 2018 June 2019 October 2019 Launch of the web advertise campaign (see slide 9): it aims at creating awareness about this innovation. It is reasonable to allocate 50 K€ for the realisation of the video content (using as testimonial a person who is already engaged with L’Oréal) and 200 K€ to advertise this video on Facebook and Google networks. Source of the investments required estimation: https://it-it.facebook.com/business; https://www.youtube.com/intl/it_ALL/yt/advertise/ Meeting with salons of the network to explain the business opportunities related to the App: see slide 9. International expansion Launch of the pilot App Social marketing campaign (WOM and influencer): for what concern the direct communication through influencers we can suppose a budget of about 150 K€ to engage approximately two influencers per city. Future release: sales promotion, training course and other new app features. Development of the platform: we may have two different options. We can develop our App internally, but we don’t know if L’Oréal has already the competences, or we can alternatively outsource the implementation of the platform (SW and App). We have already asked for a price quotation to an app developer team (source: NullPointer Apps) and they answered that a platform with our peculiarities will required roughly 4-8 months and cost approximately 20-40 K€, which is an irrelevant investment (see strengths in slide 3). In addition they have told us that in case of outsourcing, they would be available also to manage the platform with an annual fee to concord. Evaluation of the achieved results based on BSC (see slide 5) Improvements and process of adaptation to new markets. IMPLEMENTATION PATH & TIMELINE 11 The Gantt chart above shows the steps to follow to develop our new App. We do not have all the information about the costs so we cannot calculate any financial indicators, but the timeline and the reported costs of investments should be consistent and the months of the milestones should be a good proxy of the real implementation project.
- 13. 12 L’ORÉAL CORPORATE SOCIAL RESPONSABILITY We want to enable also the trendy middle-class to book treatments in L’Oréal salons. On one hand, they could take advantage of the offers with special prices made by the hairdressers when they have a lot of available treatment slots and want to saturate the production capacity, increasing profitability in short term and better distributing fixed costs (and overhead consumptions). On the other hand, the salons could give them the possibility to bring their own L’Oréal products conceding a little discount for the treatments. In this way, not only L’Oréal would be seen as a philanthropist which aims at spreading fashion and beauty around the world with no social barriers, but the usage of private products allows to reduce the salon consumption of plastic avoiding the risk of plastic no-recycling (*since during last years, Italian commercial activities have not well differentiated garbage). *Source: ANSA.it To reduce emissions: first of all, we are optimizing the supply chain, as regards mainly the inventory planning of salons. In fact, they will be able to forecast the average demand, since they will receive in time customers’ booking of treatment and products and better organize the replenishments. Secondly, through the map localisation service inside the app, we want to reduce the distance travelled by customers to reach the salon and also suggest them alternative means of transports (such as bike sharing, public transport systems …) without using private cars. For this purpose, we would like to make a partnership with the mobility as a service provider in each city enjoying this brand new framework. Source: Mobility as a Service, William El Kaim 2016 In addition to the previous objectives, we want to reach another big goal. We are offering not only an attractive service but also a sustainable service to exploit the last trend of higher and higher important about CSR (see opportunities in slide 3) and to be compliant with the corporate strategy (see Brandstorm 2018 resource pack, Progress Report 2016) . Going deeper into the analysis, our two main social purposes are:
- 14. LAYOUT USER’S SIDE 13 In this and in the next slide you can appreciate a first potential rendering of the logo of the app and of its interface on a smartphone and on a tablet.
- 15. LAYOUT HAIRDRESSER’S SIDE 14 The previous pictures are only a way to show potential layouts of the application interfaces, to see the real use case diagram, click on the following link: https://www.dropbox.com/sh/2h1bzh78vpey2ci/AAAqZ7fFcA_K10DCQko0n8Aga?dl=0 (MS Visio is needed for an optimal view) As it is shown on the diagram, we have a relationship between all the software/databases and both the hairdressers and users’ sides of the App. For further details or for any problem with the access, please contact us.