The primary marketing challenge at Flare Fragrances is to develop an appropriate and competitive marketing strategy for the new Savvy brand to be launched in 2009. The specific issues in this challenge include the question of whether to launch Savvy in the first place, whether to distribute it through conventional or through new channels, and whether to associate it with the Loveliest umbrella brand or to give it a separate identity.
The industry is experiencing a decline because of the economic crisis and sales at Flare Fragrances grew by only 2% in 2008 although overall performance was average given the economic challenges. Improving performance in the coming years will require a significant improvement in sales, either through existing or new products. Advertising expenditure is also a major question to be addressed. A major competitor, Aromatique, plans to introduce Dulcet, a product similar to Savvy for the same target market in the coming year, increasing the challenge for Flare.
Analysis of the Current Situation
Stable financial performance with 2% annual growth during a period of recession
Prestige value and customer loyalty towards the Loveliest brand
Established presence in mass outlet department stores
Lack of orientation towards drugstore chains
Low advertising spending (19% of sales) compared with competitors (23%)
Exclusive reliance on the Loveliest brand
High demand for prestige brands expected at mass outlets
Growth through high-end drugstore chains
Evolving customer needs make room for new products
Increased competitor activity in a fragmented market
Decline in industry sales due to economic recession
Analysis of the Macroenvironment
In the political environment, the results of the 2008 presidential elections may bring new policies on fair trade and competition. The economic growth in 2008 was -8.7 (Trading Economics, 2012) which might become worse in the coming years. In the social environment, consumers might become conservative in their spending and might spend less on prestige or luxury brands. New technologies might develop enabling businesses to reach out to their customers and promote their products in new and interesting ways. Globalization and declining local growth may make export a reasonable option.
Analysis of the Microenvironment
The competitors compete within a fragmented market and have to develop innovative products, distribution channels and means of communicating with their consumers. Scientists and researchers are also an important stakeholder group (IFRA, 2012). Competitors reach out aggressively to customers. Each product will need to attract a sizeable consumer segment to be economically feasible. Customers in the higher age group have greater brand loyalty than lower age group, who switch brands often. Retailers may require greater support from manufacturers for in-store promotions and higher margins because of limited resources during the economic recession. The industry is mostly self-regulated but the FDA has some jurisdiction over fragranced products (Netcom, 2012).
The size of the retail market for men and women fragrances was $5.70 billion in 2007. The industry was fragmented with a large number of players each owning a relatively small share of the market. The size of the women's fragrances segment was 66.6% of the $5.70 billion market. Out of this, Flare products owned 9.5% making it the fourth largest player in the industry. The industry is a competitive one and is based on frequently introducing new products and developing innovating and convincing promotional programs to align the products with the self-concept of the consumers. Traditional channels include mass outlets, high-end and mid-tier department stores and pharmacies. Drugstore chains are an emerging new distribution channels. Competition in the industry is not based on price competition. The market is segmented on the basis of age and lifestyle of consumers. Flare divides the market into segments of women aged 18-34 and 35 and above.
The women fragrances industry is not price competitive. Therefore, competitors invest resources towards new product development and identifying niches. Flare itself brings out a new product every two to three years. The most recent product Natural was introduced in 2006. Promotional activities are geared towards increasing identification of consumers with the product. Flare Fragrances is the fourth largest player in the industry. Its other major competitors are Aromatique, Depuis and Suzanne Weber. These competitors hold market shares ranging between 11.5% and 15.6%. Therefore, there is not much difference in the size of the largest companies in the market. Because of the fragmented nature of the industry, competition is based on developing new products and channels. Scent branding is a new competitive strategy that is sweeping the industry (Morgan, 2010). Aromatique is developing a new product named Dulcet in the mid-priced category. It is expected that competitors will also exploit the new channel of drugstore chains and develop innovative advertising and promotional programs.
The market for women fragrances is divided into segments based on age and lifestyle preferences. The fragrances may be further divided into flowery, citrus, oriental and other categories (IFRA, 2012). On the basis of age, the market can be divided into women in the 18-34 years category and those who are 35 years and above. Women in the former category are younger, usually students or women starting out in their careers. They are more social and are involved in a wide range of activities, i.e. shopping, college, work, recreation throughout the day. Women in the latter category are oriented towards their career and seek both personal and professional growth. They have greater brand loyalty than the younger females and prefer prestige brands. On the other hand, younger females have a heightened sense of environmental awareness. The market can also be segmented on the basis of income groups. Depending on their economic circumstances and affordability, consumers prefer mass brands, mid-tier brands or designer premium brands. In addition to women, men also purchase women fragrances as gifts.
Flare Fragrances targets both these important consumer segments by offering a different range of products for each and by appealing to their specific needs. The 35 and above age group has been the traditional favorite of the company and has developed a loyalty towards the brand. Flare Fragrances is well-tuned into the needs and aspirations of this segment and most of its products such as Loveliest, Awash, Swept Away and Essential are targeted towards this segment. Changing demographics have made it necessary for the company to target the emerging 18-34 age segment. In recent years, the company has started focusing on product and promotion strategies to exploit this segment as well.
Since the Loveliest brand is values by both the segments targeted by Flare Fragrances, the company uses the brand name in all its existing fragrances. However, the products are positioned differently to cater to the specific needs and values of each segment. Older brands such as Loveliest, Awash, Swept Away and Essential are positioned as classic and elegant fragrances and some of the names such as Summit and Essential are aimed at satisfying the achievement needs of the career women in this age group. The younger age segment has different needs and newer products are being positioned accordingly. In recent years, the company has increased its focus on the lower age segment by developing products catering to their needs. Natural was promoted as being an environmentally-safe and natural product and less as a classic fragrance. Savvy is also being promoted to cater to both segments but the consideration of giving it a separate brand identity reflects its orientation towards the younger market segment who may not be as loyal to the Loveliest brand.
Identification of Alternative Solutions
Introduction of Savvy through Drugstore Chains
The first alternative solution that Flare Fragrances can consider is to launch Savvy as an independent brand in 2009 through drugstore chains, while existing products an be carried through mass outlets. Drugstore chains are emerging as a major new distribution channel even though only 20% of the focus group participants said that they purchase fragrances from drugstore chains. It is expected that competitors will also launch their products through drugstore chains in future. New customers can be reached through the drugstore chains and sales can be increased in the coming years. The advantages and disadvantages of this alternative are compared below:
Distinct brand identity through a new distribution channel
Innovative targeting and positioning achieved for a younger market segment
Catering to high-end consumers
Inadequately skilled sales force for the drugstore channel
Need for greater advertising
Highest growth expected in mass outlets
Risk of losing established consumers
Introduction of Savvy through Mass Outlets
The second alternative solution for Flare Fragrances is to launch Savvy under the umbrella brand Loveliest and to launch it through mass outlets and mid-tier department stores. A greater segment of the market will be reached through these distribution channels. The company could partner with retailers to launch in-store promotions for the launch of the brand and to highlight its environmentally-friendly aspects. Support could be obtained from the established Loveliest brand.
Credibility gained through the Loveliest brand
Greater access to the target market and increased sales