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COSMETICS INDUSTRY.
Term Paper ID:18959
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Economics, prestige goods, marketing, bar coding, distribution, product innovation, foreign markets.... More...
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Paper Abstract:
Economics, prestige goods, marketing, bar coding, distribution, product innovation, foreign markets.
Paper Introduction:
THE COSMETICS INDUSTRY: AN ANALYSIS
The cosmetics industry in the United States produces and markets both cosmetics and toiletries (Royce, 1991). The major players in the industry are Alberto Culver, Avon, Chesebrough Ponds, Faberge, Gillette, International Flavors and Fragrances, Noxell, and Revlon, although not all of these firms are independent entities (Standard & Poor's, 1990).
Industry Description and Structure
The history of the cosmetics industry can likely be traced to some of the very earliest days of civilization. It was in the last half of the nineteenth century, however, when toiletries and cosmetics began to be produced and marketed on a mass scale, as opposed to being concocted in essentially local establishments. In 1880, the country's largest cosmetic firm, Avon, was founded
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Consumer companies attempt todevelop brand recognition. Prestige-goods are typically of a higher quality than are otherproducts in the same genre. (1989). In 188 , the country's largest cosmeticfirm, Avon, was founded (Moskowitz, Katz & Levering, 1985). Industry sales in 199 were $11.4 billion, which represented a 9.6percent increase over the $1 .4 billion of 1989. While many industries dread the furthereconomic unification scheduled for the European Economic Community in 1992,the major firms in the cosmetics industry have bases of operation withinthe Community, and, therefore, expect to benefit significantly from thegreater unification (Standard & Poor's, 199 ). Demand for otherpersonal care cosmetics and toiletries remains strong.Prestige Cosmetics The prestige segment of the fragrance market has been hurt byinexpensive imitation fragrances called knockoffs (Standard & Poor's,199 ). By 1993, industrynet profit is expected to reach 9 percent (Royce, 1991). THE COSMETICS INDUSTRY: AN ANALYSIS The cosmetics industry in the United States produces and markets bothcosmetics and toiletries (Royce, 1991). Significant in the marketing of cosmetics and toiletries are theoperations of companies such as Avon and Mary Kay, which market theirproducts directly to the consumer. Even when the actual quality of prestige-goodsis not higher, there exists a perception of higher quality among thoseindividuals included in the appropriate target market. Conclusion This research has found that the cosmetics industry in the UnitedStates remains strong. Product positioning refers to thelocation of a product in a market from the perspective of consumers.Branding refers to the use of a recognizable and unique name, symbol, ordesign to identify a specific product. Resistance isstrong, however, to the placing of bar codes on product labels, and onpackage tops. For others, it is clearly among the best.The people who are attracted to Mary Kay Cosmetics are likely thoseindividuals requiring a lot of tender loving care, and those who find itpleasurable to make many new friends. San Francisco: Harper & Row. Thecompany lavishes attention and public recognition on members of the salesforce. (1985). Additionally, changes in packaging and distribution processes havecreated some problems for prestige level cosmetics. New York: Standard & Poor's.----------------------- 8 Being discretionary products, demand for cosmeticsremains strong even during economic downturns and the industry isrelatively recession-proof. In most cases, price differences are greater than qualitydifferences. The long-term debt to equityratio in 199 was .46:1, down from a staggering 1.94:1 in 1988. The major players in the industryare Alberto Culver, Avon, Chesebrough Ponds, Faberge, Gillette,International Flavors and Fragrances, Noxell, and Revlon, although not allof these firms are independent entities (Standard & Poor's, 199 ). 2, pp. A 2 .5 percent return on total capital was recorded in 199 , upfrom 16.1 percent in 1987. Operating margins in the industry are relatively high, with 17.5percent being recorded in 199 . The strongest foreign market in the near future, however,is expected to be Western Europe. Moskowitz, M., Katz, M., & Levering, R. These actions have not only increased market share for thecompanies involved, they have increased the size of the total market forthe product categories involved (Royce, 1991).Foreign Markets Expansion in foreign markets is expected to provide for continuinggrowth for the cosmetics industry, which will be more than enough toovercome the saturation developing in the domestic market (Standard &Poor's, 199 ). It is possible that anygains made through increased efficiency at the retail level accruing fromthe use of bar codes on the packaging of these products may be offset--allor in part--by a decrease in product demand, as a consequence of changingconsumer perceptions of the quality/ price relationships of the affectedproducts. Operating margins increased annually from16.1 percent recorded in 1987, and are expected to reach 19 percent by 1993(Royce, 1991). In the cosmetics and toiletries industry, both Gillette and Tambrandshave scored impressive gains through new product introductions in the199 s. In the early-199 s, supermarkets anddrug stores account for a majority of the sales of both makeup and skintreatment products. Englewood Cliffs,NJ: Prentice-Hall. The important components of the corporate culture at Mary KayCosmetics are (1) a sense of belonging, (2) making employees feel that theyare valuable, (3) public recognition of achievements, and the practice ofmass psychology. Product development consists of the efforts of acompany to increase the level of its sales by developing new or improvedproducts for its current markets. The net profit recordedin 199 was 7.5 percent, up from 6.8 percent in 1987. They hope also to develop brand preference andbrand insistence among consumers. Consumer companies wish to avoid thedevelopment among consumers of brand rejection. The overall industry distribution structure (excludingdirect consumer sales) in the early-199 s is as follows: drug stores: 42percent; supermarkets: 37 percent; and department stores (includingdiscount stores): 21 percent (Standard & Poor's, 199 ). H37-H43). Higher quality, orthe perception thereof, is accompanied by a significantly higher price(Kotler, 1989). It has been found that consumers do not generally resist the use ofbar codes on the packaging of premium-brand cosmetics. Whether or not MaryKay Cosmetics is a good company to work for depends a great deal on thepersonality and character of the individual employee. Standard & Poor's. By 1993, the return on total capital isprojected to reach 23 percent (Royce, 1991). References Kotler, P. (199 , August 2). In the contemporary market, skin care products are strongest, whilefragrances are weakest (Standard & Poor's, 199 ). Thus, retailsales are heavily influenced by both advertising and new productintroductions (Standard & Poor's, 199 ). The distribution shift toward mass marketers hasproved to be a boon for mid- and lower-priced cosmetics, and has hurt salesof prestige brand cosmetics, whose market image is linked to upscaledepartment stores. Economic Factors Affecting Industry Performance Cosmetics are by and large discretionary products. Ms. Ash is both a leader and amanager. An appreciation of the marketingapproach of these firms may be gained through a consideration of the MaryKay Company. For some, it wouldnot be a good place to work. The Far East, Latin America, Eastern Europe, the SovietUnion, and China are all considered to be markets with a strong potential(Royce, 1991). Marketing management (8th ed.). A premium-brand cosmetic products refers to those products inthe 95th or higher price percentile. One relatively recent innovation in product packaging is bar coding.One prestige-good group with a high potential to be adversely affected bybar coding packaging is premium-brand cosmetics. Packaging, thus,is an important factor in the marketing of prestige brand cosmetics.Distribution Shifts in the distribution of cosmetics are resulting in changes inthe industry's product mix. Toiletries/cosmetics. As a leader, she provided the vision for the company. By 1993,the long-term debt to equity ratio is projected to be only .32:1 (Royce,1991). (1991, April 19). The industry is moderately leveraged. Thus, such perfumes as "Chanel,""Joy," and "Giorgio's" are included within the definition. Mary Kay Ash has acted as a role model for the salesrepresentatives, and she has personally participated in the publicrecognition and mass psychology activities. Product differentiation throughadvertising is essential in the successful marketing of cosmetics.Cosmetics, however, are relatively recession proof, and demand tends toremain strong during economic downturns (Royce, 1991). As amanager, she established many of the company's essentialoperating procedures. Net profit in the industry is also strong. The industry return on total capital (long-term debt and equity) isstrong. Expansion into foreign markets should alsoprovide for continuing growth in the industry. It has also been found that demand for premium-brandcosmetics would likely suffer to a statistically significant extent if barcoding were placed on product labels and on package tops. Royce, M.M. The campaign isexpected to provide a substantial boost to domestic sales (Royce, 1991).Product Innovation Of the many factors which are important in the marketing of products,new product development, product positioning, branding, and promotionalstrategy are among the key elements in the performance of the marketingfunction for any firm. It is the prestige image created in the collective mind ofthe target markets which cause these price differentials to be feasible.Thus, any innovation in the way business is conducted which may impinge onperceptions by the target market of the quality/price relationship must becarefully scrutinized by marketers of prestige-goods. Everybody's business(3rd ed.). It was in the last-half of thenineteenth century, however, when toiletries and cosmetics began to beproduced and marketed on a mass scale, as opposed to being concocted inessentially local establishments. Value LineInvestment Survey, 815. From 1987 through 199 ,industry sales grew by 34.1 percent, and by 1993 should near $15 billion, again of 31.6 percent over 199 levels (Royce, 1991). Cosmetics distribution was, but a short timeago, dominated by department stores. Personal-care products.Industry Surveys (Vol. The key practices and policies used at Mary Kay Cosmetics toimplement the company's direct sales strategy are (1) rewards, (2)recognition, (3) support, (4) marketing research, and (5) training. Industry Description and Structure The history of the cosmetics industry can likely be traced to some ofthe very earliest days of civilization. Avon has recently developed an innovative and aggressive direct mailcampaign to supplement its door-to-door activities.
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