Group 3

Marketing Application & Practices

Team Members

Aeshna Ambardar Esha Shah Kedar Amladi Namrata Shah Rahul Patil Amit Kumar Singh

Ankit Kumar Gaurav Bagla Piyush Kadoo Vibhuti Mhatre Rohan Jadhav Shraddha Sonawane Saiprasad Sale

Indian Beauty Services Market

Higher disposable incomes of the middle class Women becoming more and more beauty conscious Availability of more retail solutions Rising penetration of Indian beauty salons Competition from both Indian and International players Fitness Center, 1500 Branded Salons, 1500 Spas, 200

Cosmetics and Skincare, 7750

Estimated Size (Rs. Crore)

Market Drivers

Indian Beauty Services Market

India's per capita consumption of branded cosmetics and toiletries is only $0.68, much lower than Hong Kong ($40), Malaysia and Taiwan ($10 each) [Assocham] Between 1995 and 2005, household spending on personal care products doubled from 4% of total income to 8% and is expected to grow to 11% by 2025 [McKinsey] 84% of Indians felt greater pressure to look better than the generation before them [Nielsen] 77 million Indians will enter the working-class population between 2005 and 2015 [Census] Indians will be richer and younger
Source: Outlook India

Salons In India
Size: Rs 1,500 crore Growth Rate 25% per year Avg. Customer Spend: Rs 1,000-1,500/visit
Source: Industry Reports

Indian Market in Perspective

Lakme Hub Services & Spoke Market Model Indian Beauty

C V

The HUB & Spoke chakra

All urban SEC E SEC D SEC C SEC B SEC A 0%

52% 48% 53% 54% 52% 57% 20% 40%

13% 13% 12% 13% 15% 14% 60%

20% 22% 20% 20% 20% 18% 80%

14% 17% 14% 14%

All urban SEC E SEC D SEC C

3% 97%

5%
95% 3% 97% 2% 98% 3% 97% 2% 98% 0% 20% 40% Female 60% Male 80% 100%

13% 11% 100% 120% SEC B SEC A

Up to 1 lakh

above 5 lakh

1 to 5 lakh

Metros

All urban
SEC E SEC D SEC C SEC B SEC A

6%

23%

68%
81% 68% 71% 60% 65% 40% 60% 80%

3%
3% 2% 2% 3% 3% 100% 120%

6% 10% 6% 7% 7% 6% 0% 24% 20% 30% 26% 20%

34% of spare cash was spent on Holidays and vacations

31.5% of the spare cash was spent on spent on New clothes

Single/unmarried Married with children

Married without children Others

40% usually does something with other members of the family 38% prefers to go out with other members of the family

Consumer Behavior

1.2 billion people Housewives have higher family

567.3 million women
Women students Working maidens Working wives Working moms Housewives Housewives moms

than households with working w

Housewives show better SEC profiles segments

Self-education 168 million Status/fame Health 75 million Children education Family 280 million Children education

Brand & trend conscious

Price conscious

Working wives have the lowest self perceptions of their attractiveness and claim to use the beauty products the least The Indian Women segment segment The Indian Women

BEAUTY INDUSTRY CURRENT TRENDS

OPPORTUNITY

Opportunity for up-gradation at a relatively lower LSM (SEC B) is huge as number of women in that strata is large. The number of women in LSM 8+ to LSM 12 is ten times that of LSM 12+

RESULTS
Up-gradation of women from unorganised sector to branded salons More women looking at salons as centres of expertise and authority Women expecting salons to work with product lines which are professional New retail destinations adopting salons to address customer footfall
Being a service business, customer retention is driven largely through quality of experience, products used and specific operators towards whom customers have loyalty hence, huge scope for customer loyalty programs

TRENDS
Evolved lifestyle The explosion of Media Growing availability of salons offering basic and innovative hair and skin services

THE BEAUTY SALON MARKET

LAKME SALON CURRENT SCENARIO

Market leader in organised beauty services -Lakme Salons and Lakme Studios across 130+ centers in 25 cities Mix of franchisee salons (105) and company salons (25) Grown at a (CAGR) of over 35% for the past 4 years, ahead of market growth, estimated between 25 to 30%. The growth of Lakme is made up of an average organic growth of 20 % with the rest coming from inorganic addition Currently Lakme Salons and Studios interact with more than 150,000 active customers every year The majority (90%+) of the customers are in the bracket LSM 10+ and 70% are in LSM 12+ (SEC A+) STRENGTH
Established presence High Brand Recall Customer Loyalty Programs

WEAKNESS
High employee training & education cost

OPPORTUNITY
Leverage Unilevers Pan India Presence LSM 8+ to LSM 12 untapped market

THREAT
Vast Un-organized Beauty market International Boutique Salon Chains Continuous escalation in real estate costs Attrition

CURRENT MARKET POSITION-SWOT

LAKME SALON SERVICE PORTFOLIO SALON SERVICE

Hair Hair style Massages Hair Therapy Skin Face Treatments Full Body Massage Hands & Feet Specialized Pedicures &Manicures Bridal Services Catering to Nine Cultures Co created with Make up experts

CUSTOMER LOYALTY PROGRAMS :

Lakme Salons has a mix of owned and franchised outlets In non-metros, the lakme 'adopts' unbranded outlets once they reach a certain size as franchise partners They then help them with training and to achieve the look and feel of a Lakme Salon Loyalty program are run to help serve customers better and discount cards offered Such repeat walk-ins constitute as much as 80% of the customer base of Lakme Salon

LAKME ABSOLUTE SALON The premium services offering customized beauty packages

LAKME ACADEMY Lakm Academy offers certification in courses ranging from foundation to Masters Level in hair and beauty

LAKME IVANA Lakm Ivana for grooming, skin and hair care services to both, men and women

CURRENT SERVICE PORTFOLIO

Indian Pyramid

Income Analysis Concentration of Disposable Income

1800 Home dcor and furnishing, 5% Communication , 11.40% Beauty,Personal and Healthcare, Footwear, 4.90% 38.40% 1600 1400 1200 1000 800 600 400 Cloting and textiles, 21.70% Household appliances, 24.80% 200 0 2010 Equipment,pap er & Stationery, 29.70% 2011 2012 2013 2014 2015 500 635 806 1024 1301 1652

Why I prefer my neighborhood saloon?

The Market

For every branded salon, there are 4 neighboring salons present

Neighborhood salon Typical spend 500 rs Branded salon Typical spend 1000 rs Footprint in a branded salon 15 to 40 Footprint in a neighbor salon 10 to 15

2000 rs

10000

Beauty Services - Expectations

Mean Score : 10
10 8 6 4 2 0
8.3 7.7 6.5

6.2

Affordable service

Professional authority
Expertise Information

Cleanliness

Branded service

Sample size 70

Well-maintained Prim & proper staff No frills dcor Good equipments

Primary Research

Beauty Services Need Gaps

Mean Score : 10
10 8 6 4 2 0
8.1 7.4 6.3

Lack of convenience
No service @ home Proximity of the store Flexible hours

Expensive services
Price Lavish set-up

Lack of standardization

Flash Promotions for Salons

Online flash sales in India are the next big thing after e-commerce Population in India is techsavvy with around 100 million online shoppers Huge market potential for Lakmes salon service

Secondary Research

Flash Promotions for Salons - Research

Ahmedabad Baroda Jodhpur Pune Jaipur Nasik

40 35 30 25 20 15 10 5 0 Baroda Ahmedabad Jodhpur Jaipur Nasik

40

30
15-17 yrs 17 -19 yrs 19-21yrs 21-23 yrs 20 10

Student Employed Entrepenuer Home maker #REF!

Source Indian Journal of Marketing nov12

The graph shows the population sampled - age wise

Pune

23-25 yrs

The graph shows the population sampled - occupation wise

Flash Sales a New Arena for promotions

Qualitative research Steps

1. Word association test 2. Sentence completion test 3. Depth interviews

Conclusions
Young Indian female consumers are eager to experiment with the flash sales 15-17 yrs. group decisions influenced by their parents and friends Increased awareness about technology is a good sign for online flash sales Responses to cosmetics prevalent

Lakme Salon presence - Ahmedabad

Competitor Analysis
Major Competitors of Lakme Salon

Started by famous Shahnaz Husain Hair and Beauty Salon industry in India is estimated at beautician Rs 7,000 crore Started by renowned hairstylist Jawed Habib 200 Salons all over the world A total of 322 outlets in 83 cities of India market share However, current of Over unorganized sector is 77 % Leader and pioneer in herbal care providing Has very highThus, brandapart loyalty especially in established tier 2/ from major players, local beauty parlors are also a herbal beauty treatments tier 3 cities serious competition to Lakme

Brand LOreal has high recall and people instantly connect with the brand Hair care, makeup, skin care all are provided by expert beauticians Expanding into smaller cities providing quality services at affordable prices

Fastest growing salon chain in India popularizing the concept of Unisex salons A total of 114 salons and at-least 4 new branches getting operational every month Has a strong foothold in South India and recipient of Best Salon chain in India award

Competitor Analysis
Bangalore Mumbai Delhi Hyderabad Chennai Lucknow Ahmedabad Gurgaon Kolkata Pune Secunderabad Amritsar Chandigarh Indore Kanpur Ludhiana Noida Thane Agra Allahabad Baroda Bhatinda Dehradun Ghaziabad Guwhati Jaipur 28 23 18 12 11 4 3 3 3 3 3 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1

Delhi Hyderabad Mumbai Kolkata Bangalore Patiala Agra Ahmedabad Lucknow Ludhiana Jammu Jaipur Udaipur Goa Nagpur Baroda Surat Mathura Chandigarh Panchkula Bhatindar Jalandar Sonepat Hissar

22 13 12 8 4 3 3 3 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1

LAKME

Yamuna Nagar Karnal Panipat Faridabad Gurgaon Gobind garh Ajmer Kota Bikaner Patna Varnasi Vishakapatnam Vijayawada Mysore Chennai Cochin Anand Navsari Rajkot Bharuch Gandhi nagar Indore Latur Nasik Pune Bhilai Bilaspur

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Mumbai Delhi Bengaluru Kolkata Hyderabad Pune Chennai Guwahati Ahmedabad Gurgaon Chandigarh Jaipur Lucknow Patna Ambala Faridabad Sonipat Goa Amritsar Bhatinda Jalandhar Ludhiana Patiala Phagwara Coimbatore Meerut Noida Varanasi

20 13 10 9 8 8 4 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

HABIBS

Rajamundry Vijaywada Vizag Jorhat Muzzafarpur Bhilai Bilaspur Raipur Anand Rajkot Surat Baroda Karnal Panipat Yamuna nagar Jammu Mysore Calicut Cochin Trivandrum Bhopal Gwalior Indore Jabalpur Aurangabad Kohlapur Nagpur Nasik Shillong Udaipur

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Madurai Pondicherry Tirupur Trichy Agra Aligarh Allahabad Bareilly Ghaziabad Gorakhpur Kanpur Mathura Muradabad Haridwar

1 1 1 1 1 1 1 1 1 1 1 1 1 1

Unisex

Geograph ical Footprint

Challenges faced by Lakme

Discounts and promotional vouchers offering combo deals can be used to gain foothold in smaller cities Beauty Salon market dominated by Unorganized sector Indian consumer is becoming more beauty conscious and hence a major shift is expected fro m unorganized to organized beauty salons

Gaining a foothold in smaller cities and towns

Low entry barrier for new players

Challenges
Making services affordable by lowering prices to some extent can attract more customers and help in widening consumer base

Lakme should leverage on its positive brand image and high credibility to gain edge over new entrants

Price war with other established players leading to lower margins

Many Multinationals like Jean Claude Biguine seeking entry into Indian market

In-order to compete with them, Lakme should ensure it has competent staff and equipments at par with competitors

Access to target market On-the-spot decisions Demanding more value with price consciousness
Price Sensitivit y
Competi tion from unorgani zed players

Customers need differs restricting standardized offerings

Regional differenc es

Investm ent costs and Lag in brand creation & Payback period oyalty with long gestation period

Key Factors Increase in input costs

Shortag e of skilled people

Rentals, advertizing & promotion

Lack of integrated strategy and motivation

Key Factors affecting Lakme Brand in Mumbai

250 200

35 30 25 20 15 10 5 0

20
15 10 5 0

150
100 50 0

50 40 30 20 10 0

5000 4000 3000 2000 1000 0

4
3 2 1 0

Lakme Vs Competition in Franchising

Analysis of 27 leading franchisors of beauty care Salon Services

Territory rights Given by 60% of Franchisor Performance Guarantees NOT given by 70% of Franchisor Operating Manuals Given by 70% of Franchisor Franchise training options Mumbai, New Delhi, Centralized, In Field Assistance Given by 90% of Franchisors Head Office assistance Given by 90% of Franchisors

Big ticket Idea Visual Merchandising Lakme Beauty Wall at salons The Lakme products visual merchandising The SKUs should be made available in small packages to increase the trials

Big ticket Ideas

Happy hours for Housewives Franchise to local players and after that training the staff there in lakme academy Franchise related financial accountability issues ERP system implementation Online booking from the salons so that the data is sent to the data center (the main salon in the city ) the moment a customer pays his/her bill Better performing franchises should be given incentives A customer availing 500 Rs. Worth of services should be given discounts on lakme prouct purchses

Implementation Plan
Build core competencies
Grow distribution network Identify additional product attributes Identify promotion channels

Customer Management
Classify salons into different priority groups based on sales potential Up-sell and Cross-sell/ Convert

Increase Brand visibility

Brand Lakme Salon as a complete range of salon solutions Leverage on the product range

Market Drivers

Franchise Model

Converting existing local salons Opening new company owned Salons

There are currently 122 Lakme Salons in India which includes 10 Lakme studios Jawed Habib Hair & Beauty Salon operates 322 salons across India which is 3 times of Lakme Lakme needs to concentrate on opening more studios in tier 1 cities and salons in tier 2 cities

Franchise Selection Criteria

Selection Criteria
Essential Criteria Situational Criteria

Past experience (>3 years) Type of business associated with (beauty, wellness, grooming, cosmetics) Location (catchment area, sync with brand imagery, cost-benefit)

Financial strength Investment capacity Reputation Attitude (service & growth oriented)

Certification levels Number of professionals Size of the store (600sq ft+) Services Equipments

Evaluation of Franchise

Phase-1 (Inception) Objective: Awareness & trial generation Spontaneous awareness Number of activations/ hoardings Quality of displays

Phase-2 (Verve) Objective: Acceptance Metrics Revenue Number of customers Number of complaints Speed of handling complaints

Phase-3 (Permanence) Objective: Retention & customer acquisition through the retained base Metrics Number of retained customers Number of lapsers

Lakme Elite Program

Need for new clientele Need for specialty training Need for growth

Need for personal growth Need for Autonomy Need for career path

160000 unorganized salons 38000 beauticians every year Unorganized Salon owners Lakme Salon Penetrated all tier locations 80% of states with beauty courses Average existence Average Yrs of Experience Employees come from Have a loyal set of consumers 6 8 years 4 6 years lower tier cities

Operational Model 1 Operational Mo Invite and engage Salon owners to Invite and engage Lakme employees to get endorsed by the Lakme Elite Brand be entrepreneurs under the Lakme Elite Brand Access to professional products Access after 5 years of service Niche and Specialty training Incentive to reduce attrition Marketing efforts Continuity in career path In Store Branding Reduction in training costs Access to personnel Brand ambassadors Access to CRM Ease in increase of footprint Access to upgradation to Studio/Salon

Lakme Elite Program

Manpower Sourcing Second Year Fourth Year

Sign them up with management education courses, provide percentage of profits based on the number and the quality of the clients

First Year
Pickup folks from tier 2/3 colleges who teach fashion and beauty 1 month stuff training program regarding soft skills, quality standards etc

Fifth Year

Empower them with more training and courses based on their interest

Given them entrepreneuri al opportunity

Five Year Plan

Service Mix: Product

All basic & a few specialized services

Store-services & limited home-services

(daytime, fewer customized services)

A balanced mix of trendy & classic offerings

Service Mix

Service Mix: Places & Price

2 Levels of stores (Platinum, Silver) PRICE:

Criteria
Number of trainees & junior stylists Advanced stylists/beauticians

Platinum 8 6

Silver 6 3

Affordability Basic services:

Key value indicators at reference prices E.g.: eyebrow, waxing etc.to be provided at competitive prices

Experienced/senior stylist/beauticians
Manager Areas (sq ft) Services (in addition to all basic services)

2
1 1000+ 8+

1
1 600700 <5

Specialized services:
Slightly higher than reference prices

Home services:
5% extra over the final bill value Minimum order of Rs.400

A Platinum store can be COCO/FOFO, rest FOFO Location Analysis Criteria: Catchment Area, Sync with brand imagery & Cost-Benefit

Service Mix

Service Mix: Promotions

Phase-1 (Inception)
Objective: Awareness & trial generation Ms. Confidence campaign, Campus & Mall activation Local celebrity storevisit OOH hoardings, Pamphlets/Coupons

Phase-2 (Verve)
Objective: Acceptance Testimonials on OOH hoardings, in-store display & magazines communicating expertise & service efficiency to build confidence PR activities

Phase-3 (Permanence)
Objective: Retention & customer acquisition through the retained base Loyalty cards (confidence card) Testimonials

Service Mix

Implementation Plan Service Mix: Process

Guideline/Service manuals
Clearly laid down guidelines for franchise to follow

Employee
Database of employees (Lakme Elite network) across all geographies Rotation Between some-services & store services To ensure bond with the organization, and not personal bonds

Work hours
2 shifts : 10 am 6 pm & 12 noon 8 pm Flexibility for employees Leveraging peak afternoon hours

Customer relationship management

Loyalty cards Permission marketing

Service Mix

Service Mix: People as Confidence Agents

Current talent pool in the town New recruit through Lakme Academy

Staff Profile

Training

3-4 workshops in town for entry level-trainees & professionals, organized every 3 months Higher level professionals to visit for further training

Compensation

At par with the organized competitors Additional motivation due to flexibility (working hours) & job security owing to the Lakme Elite network of stores across geographies

Service Mix

Branding: Other Opportunities

Bundled Product: HUL products under other brands shall be bundled with Lakme products which have complimentary usage and promote salons through offers Product Example: Moisturizer with soaps Packaging Theme: Indian Actress with Western Looks Tagline: Lakme Celebrating the Gorgeous Indian Women Coupons to visit Lakme Salon: We care for You HUL is trying hard to promote sustainability and have developed system to convert plastic into fuel oil. Collection of containers in lieu of coupons, as loyalty program for customers

Bundled products to attract customers

Referral schemes to bring new customers and retain old

Different Strategies for Different Seasons to sustain equal employee contribution throughout year

A proper strategy to locate salons in areas with maximum reach

Branding: Other Opportunities

Brand Referral Schemes and Brand Recalls- A focus on the importance of Word of Mouth in Beauty services; reaching towards lower strata in the Pyramid, by bundling other Unilever brands with Lakme Products and spreading awareness about Salon Referral and Feedback System: Activate website login to have beauty tips New login only by: Invitation from existing user By visiting salon Customer Engagement by offering benefits to star participants
Different Strategies for Different Seasons to sustain equal employee contribution throughout year A proper strategy to locate salons in areas with maximum reach

Bundled products to attract customers

Referral schemes to bring new customers and retain old

Branding: Other Opportunities

Salons are used mostly during marriages which under Hindu culture do not occur all the year around Generally marriage months do not coincide with rainy seasons, and autumn festival season We will have to identify lean periods where most of the offers shall concentrate, rest of the times there shall be a premium to the services This will ensure utilization of employee contribution throughout the year

Bundled products to attract customers

Referral schemes to bring new customers and retain old

Different Strategies for Different Seasons to sustain equal employee contribution throughout year

A proper strategy to locate salons in areas with maximum reach

Year Planner for Offers 2013

Major Summer Wedding Season
24th April 4th June

2013

2013 Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2013

Marriage Season Start 1/16/13 Offers for: Summer Offers Valentines Day Womens Day Special College Fests Bridal Make-up; a Lohri focus on hot and humid Indian Summers
Seasonal Offers Bridal Make-up Offers

Advertisements on: Harmful effects of rain on hair Special skin Treatment in Salon Offers During Festive Season: Navratri Premium on: Dussehra Steam Deepawali treatments Moisturizing treatments Heena w/o cold effect Rainy Season/ Autumn Festival
Winter

End of Wedding Season for the Year

Financials (Staff Requirement & Investments)

Details of Staff Required
Hired at Amount (in Rs.) 20000 20000 15000 5000 Radiance Silver Nos 1 1 3 6 11 Total Radiance Total Amount Platinum Nos Amount 20000 1 20000 20000 2 40000 45000 5 75000 30000 8 40000 115000 16 175000

S.No 1 2 3 4

Position Manager Experienced/senior stylist/beauticians Advanced stylists/beauticians Number of trainees & junior stylists TOTAL

Salary Range 25000 - 10000 20000 - 15000 15000 - 10000 5000 - 4000

INVESTMENTS
Radiance Silver
Space Required (in sq. ft) Rent per sq. ft per month Capital Investments Machinery and Equipments Project Cost (Renovation, Furniture, Fixtures and Fittings) (Rs. 800 per square feet) Licensing Fees Working capital Total (in Rs.) 8,00,000 4,80,000 3,00,000 3,00,000 18,80,000 12,00,000 8,00,000 5,00,000 3,00,000 28,00,000 600 40

Radiance Platinum
1000 40

Financial Summary

Financials Summary: Lakme Elite

Summary
2011 Net Sales from 1 Lakme Elite Silver Net Sales from 1 Lakme Elite Platinum Average Revenue for Lakme from Royalty Average Revenue from Franchises 4220040 6471240 48110760 320738400 2012 4666044 7148364 62025642 413504280 2013 5160248 7897700 77694795 457028208 2014 5708013 8727145 98159079 577406347 2015 6315316 9645486 127686414 638432072 IRR NPV 822552 995936

40% 37%

Estimated IRR in 5 Years

Positive NPV and IRR

Year on Year Reciepts

Please refer to financials attached for more details.

Year Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 TOTAL

Cash Inflow

Cash Outflow Net Cashflow 1880000 -1880000 657948 747374 970774 1127981 1419603 3043680

6,57,948 8,05,059 10,34,587 11,98,589 14,97,748 51,93,932

57685 63813 70608 78145 2150251

657948 1405322 2376096 3504077 4923680

IRR NPV

37% Rs. 7,19,641.08

Financial Summary