Compiled by Rehana Ismail (I87653)
For IMM (Institute of Marketing
Management)
26 October 2015
Marketing Plan: Lush – Hand Made Cosmetics
REHENA ISMAIL I87653 MARKETING 3 (MAR303)
Executive SummaryThe PastLush emerged from the demise of mail order business Cosmetics To Go,
initially set up by Mark and Mo Constantine and Elizabeth Weir – after working
together creating products for The Body Shop. After CTG collapsed, the same
team dusted themselves off and created a new venture called LUSH.
The first shop opened in Poole in April 1994, with another following in
London’s Kings Road in 1995 and the business has been profitable since day
one.
The PresentToday, seventeen years since its inception, we have over 900 shops in 51
countries across the globe. Lush has since taken the cosmetic industry in
leaps and bounds against animal cruelty, and environmental responsibility.
Lush makes hand-made cosmetics using the finest natural raw ingredients.
Charity and community building is also strongly imbedded in Lush’s culture.
We believe in giving back to communities and making a difference.
The FutureWe aim to improve our products by not make use of synthetics. We will keep
on putting masses of natural ingredients in our products, dreaming up
preservative-free cosmetics, worrying about their environmental impact and
working with our suppliers to minimise that. We choose to give our love (and
money) to suppliers that respect the environment and the animals and people
living there.
We would like to report on our environmental performance on a yearly basis
and make sure we maintain green issues alive in the hearts of our staff,
ensuring that this policy delivers on what it promises.
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Contents
EXECUTIVE SUMMARY..........................................................................................I
1. SITUATIONAL ANALYSIS...............................................................................11.1 POLITICAL / LEGAL SITUATION.......................................................................................11.2 ECONOMIC SITUATION..............................................................................................................21.3 TECHNOLOGICAL SITUATION....................................................................................................31.4 TRENDS...................................................................................................................................31.5 SOCIAL / CULTURAL SITUATION.....................................................................................31.6 ECOLOGICAL SITUATION......................................................................................................41.7 INDUSTRY / MARKET ANALYSIS.....................................................................................41.8 THE MARKETING MIX.........................................................................................................6
2. SWOT ANALYSIS...............................................................................................8
3. STRATEGIC CHALLENGES (CRITICAL SUCCESS FACTORS).............8
4. ASSUMPTIONS...................................................................................................9
5. MARKETING OBJECTIVES............................................................................9
6. TARGET MARKET, POSITIONING PLATFORM AND UNIQUE SELLING PROPOSITION.................................................................................9
6.1 TARGET MARKET STRATEGY ..........................................................................................96.2 POSITIONING PLATFORM ................................................................................................116.3 UNIQUE SELLING PROPOSITION (USP) ........................................................................126.4 GROWTH STRATEGIES .....................................................................................................13
7. STRATEGIES....................................................................................................147.1 PRODUCT STRATEGY (INCLUDING BRANDING) .......................................................147.2 PRICING STRATEGY ..........................................................................................................157.3 PLACE / DISTRIBUTION STRATEGY ..............................................................................157.4 PROMOTIONAL STRATEGY ............................................................................................15
8. ACTION PLAN..................................................................................................16
9. BUDGETS, CONTROLS AND REVIEWS.....................................................179.1 EXPECTED REVENUE & MARKET SHARE...................................................................179.2 HIGH LEVEL BUDGET........................................................................................................179.2 MARKETING EFFECTIVE RATING REVIEW..................................................................189.3 QUARTERLY SALES AUDIT..............................................................................................189.4 BRAND IMAGE AUDIT.......................................................................................................189.5 COMPETITOR INTELLIGENCE TRACKING....................................................................18
REFERENCES...........................................................................................................19
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1. SITUATIONAL ANALYSIS
(A) ORGANISATION AND PRODUCT
Lush is an organisation that makes hand-made cosmetics. There are
approximately 6000 people working for Lush from selling soap on shop floors
to filling presents, to travelling in the jungles looking for fairly traded raw
materials. We pride ourselves on being dynamic, original and progressive.
We Believe
We believe in making effective products from fresh, organic fruit and
vegetables, the finest essential oils and safe synthetics.
We invent our own products and fragrances. We make them fresh by
hand using little or no preservatives or packaging, using only vegetarian
ingredients and tell you when they were made.
We believe in buying ingredients only from companies that do not
commission tests on animals and in testing our products on humans.
We believe in long candlelit baths, sharing showers, massage, filling the
world with perfume and in the right to make mistakes, lose everything
and start again.
We believe our products are good value, that we should make a profit
and that the customer is always right.
We also believe words like fresh and organic have honest meaning
beyond marketing.
(B) MACRO ENVIRONMENT
1.1 Political / Legal Situation Government is planning to regulate South Africa’s fragrance, cosmetics
and toiletries industry, it is currently self-regulated. Under the self-
regulated regime, companies have recourse to the Advertising
Standards Authority (ASA) should they feel that a competitor is making
unsubstantiated claims, using ingredients that are not permitted, or
selling a substandard product.
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The Foodstuffs, Cosmetics and Disinfectants Act control the sale,
manufacture, importation and exportation of cosmetics.
New legislation affecting this industry is the Consumer Protection Act,
which has sections relating to the quality of products in the market;
consumer safety, marketing and communication to suppliers and
customers (including labelling, advertising and promotion).
A steering committee was formed in 2003, spearheaded by Black Like
Me founder Herman Mashaba, to establish a sector-specific BEE
charter for the cosmetics industry.
Lush keeps on top of legislation and welcomes new regulations that
genuinely reduce our impact. Lush also supports environmental groups
that participate in creative action to help change the law.Imrie, K., 2014
1.2 Economic Situation Strikes in the platinum sector, energy supply constraints and slow
spending growth by consumers and businesses are the main reasons
for the projected decrease in growth forecasted.
Volatility of the rand makes imported products and ingredients more
expensive and further interest hikes are expected.
The black middle class is expanding and moving to more expensive
ranges, however, there remains significant demand for affordable yet
effective products.
Although economic factors are likely to reduce consumer spending in
general, there may still be growth in spending on cosmetics because of
“the lipstick effect” where hard-pressed consumers who cannot afford
larger luxury purchases, replace them with smaller ones. Imrie, K., 2014
This is where Lush’s success comes in as our products are guaranteed
to make the user feel great and incorporates the element of being
socially and environmentally friendly.
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1.3 Technological Situation Many companies make use of the online channel for distribution of their
products as technology improves. Online shopping is becoming popular.
Lush is launching a website together with store openings.
Lush is improving technological processes by generating power through
energy on-site to facilitate activities.
Although technology is changing rapidly, Lush would rather employ
more people than machines to do the job.Imrie, K., 2014
1.4 Trends Natural and organic cosmetics are on the rise as more South Africans
are adopting healthier lifestyles.
The male grooming market is growing.
There is an increased demand for healthy living and anti-aging products.
An expanding middle class is creating demand for premium cosmetics.
There is an increased demand for multi-functional products – for
example: beauty balms or blemish balms (BB creams). These do the job
of five or six different products: moisturiser, primer, sunscreen, skin
treatment, concealer and foundation. Imrie, K., 2014
1.5 Social / Cultural Situation South Africans have a healthy lifestyle and Lush embodies that with
using only the finest raw materials and limited amount of safe
synthetics.
Lush created the Charity Pot body cream product to raise money for
charities and other good causes. Monies are given to fund grassroots
organisations working on animal protection, human rights and
environmental issues around the world
Lush is involved in educating of local communities in squatter camps in
and around Cape Town.
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Lush motivates and encourages the youth in Joe Slovo Park and
surrounding townships and make them realise that the future lies in their
hands.
1.6 Ecological People are becoming more environmentally aware and would rather
support organisations that are environmentally friendly. Lush ensures
that all products including packaging etc. is 89% recyclable and bio
degradable and tries not to use packaging for products.
Lush campaigns against the testing of products on animals and
suppliers must sign a statement to that effect.
Environmental issues are at the heart of the company – for example, we
use almond and olive oil – partly because we think fields of trees make
our lives richer than oil fields.
Lush is working to reduce the amount of energy produced.
By making some products solid, for example – shampoo bars, we avoid
using incredible amounts of water.
(C) INDUSTRY / MARKET ANALYSIS
1.7 Competitor Analysis
Porter’s Five Forces Model
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New entrants
Industry competitors
Intensity of Rivalry
BuyersSuppliers
Substitutes
Threat of new entrantsBargaining power of
suppliersBargaining power
of buyers
Threat of substitutes
Figure 1
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Industry competitors – intensity of rivalry
There are many players in the cosmetics and toiletries industry in the South
African market. These include: The Body Shop, Origins, Trilogy, Weleda,
Organixs Cosmetics and Neal’s Yard Remedies. The Body Shop and Origins
are Lush’s main competitors.
Threat of New Entrants
The threat of new entrants is largely dependent on barriers to entry. A
substantial barrier to entry is setting up manufacture is the capital costs. Lush
has overcome barriers to entry by focussing on nice products made from
natural products.
Threat of substitutes
Permanent makeup is seen as a threat for the cosmetics industry, however,
state regulatory agencies haven't kept pace with the growth of the permanent
makeup industry, and there are lots of unqualified people wielding needles. In
the hands of a skilled person, the procedures are generally safe. Skamulis, L., 2004
Home-made cosmetics by customers are also becoming popular amongst the
environmentally aware consumers, however, this is time consuming for most
of the consumers who have busy lifestyles.
Suppliers / Buyers
As Lush is a global company it has bargaining power over its suppliers hence
an opportunity for Lush to obtain their raw materials at favourable prices.
Lush picks their raw materials from jangles to get fairly traded raw materials.
Bargaining power of Customers
Lush’s customers demand good quality for the price they are paying. There is
no threat of backward integration from Lush’s customers. However, Lush
should be concerned about home-made cosmetics becoming popular.
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Distributors
Lush has a very viable distribution process as all their products have a shelf
life of less than six months. They have their own retail stores thus uses
forward integration.
Market
The market that Lush operates in is at the embryonic stage and is poised for
Growth
The market is attractive
Lush is likely to enjoy first mover advantage
(D) INTERNAL ANALYSIS
1.8 The Marketing Mix
Figure 2
Products
Lush’s range of products includes lotions, shampoos, haircare,
perfumes and male grooming products.
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Focus on satisfying customer needs
profitably
Product
Price
Place
Physical Evidence
Processes
People
Promotion
REHENA ISMAIL I87653 MARKETING 3 (MAR303)
The products are made from organic raw materials and fairly traded
ingredients.
Lush differentiates itself from its competitors by using only the best
quality of ingredients.
Most of its products are unpackaged and the scent attracts
consumers to its stores.
Lush constantly comes up with creative and innovative products that
do not require packaging and when packaging is used it is also made
from bio-degradable products.
Price
Lush’s products are at the introduction stage and a premium price is charged
for their products.
Place / Distribution
Lush has six retail stores within South Africa and uses exclusive distribution.
Promotion
Billboards are used for advertising
Public relation activities are used through its Charity Pot concept
Endorsement advertising is used through celebrities such as Halle
Berry, Angelina Jolie and many others who patronise Lush.
Online advertising is used through Lush’s website.
Processes
Lush uses manual systems which it prides in and they would rather employ
more people than machines. As a result their processes are labour intensive.
People
Lush has a team of dedicated, hardworking and experienced people who are
passionate and innovative.
Physical Evidence
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The décor, display, colourful products and scent in Lush shops are evident of
the beautiful, aromatic products they offer.
2. SWOT ANALYSIS
Strengths Weaknesses Strong focus on values,
environmentally friendly and
community uplifting (charity) is at
the heart of the organisation
Innovative teams
Experienced management
Strong commitment to public
relations
Self-financing
Establishment of a supply source
Labour intensive
Low distribution – very few outlets
Not enough brand recognition
Opportunities Threats Bargaining power over suppliers
Expansion in the SA market
Access to raw materials
The opportunity to educate the
youth about how to preserve the
environment and animals
Expansion in the SA market
The banning of refills by the
government
VAT is high
Competitors
Table 1
3. STRATEGIC CHALLENGES (CRITICAL SUCCESS FACTORS)
Increase brand awareness – Lush should invest in marketing
communication.
Increase support for sustainable farming – Lush should continue funding
for sustainable farming to sustain their raw materials.
Increase the rate of stock turnover – Lush should work on reducing
stock turnover from 6 month to 3 months.
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Packaging – Lush should work on maintaining unpacked products so
that the beautiful scent and colours can be maintained.
4. ASSUMPTIONS
Lush will gain more market share as customers become more aware of
their products between 2016 and 2019.
The demand of organic products will continue to rise between 2016 and
2019.
Purchases of Lush products will increase between 2016 and 2019.
The ecological environment over the next 3 years will remain favourable
for sustainable farming.
The economy over the next 3 years will remain stable and people will
have more disposable income to spend.
5. MARKETING OBJECTIVES
To increase the number of campaigns against human and animal testing
by 5% in 2016.
To increase sustainable farming by 20% each year until 2019 in each of
the provinces in South Africa
To segment sustainable farming activities according to each of the
different climates in the provinces – to recruit at least 1000 youths to
work on the projects in each of the provinces in South Africa for the next
3 years.
To reduce unpreserved range of products by 23% each year from 2016
to 2019.
6. TARGET MARKET, POSITIONING PLATFORM AND UNIQUE SELLING PROPOSITION
6.1 Target Market Strategy
Segmentation
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Demographic Segmentation
The market will be split into male and female gender segments
Customers will be grouped according to their occupations and
education levels e.g. business people, celebrities, students, etc.
Customers will be segmented according to age groups 5 to 12; 13 to
18; 19 to 25; 26 to 35; and 36 above.
Customers will be grouped according to income: low income earners
18 to 25 years; medium income earners 25 to 35 years and high
income earners 36 years and above.
Geographic Segmentation
Customers will be grouped according to the areas they reside in
within the provinces of South Africa.
Further segmentation will involve segmenting by characteristics such
as educational attainment, race / ethnicity, predominant age range,
occupational achievements and types of housing.
Psychographic Segmentation
Psychographic segmentation will enable us to group customers by
interests, activities, lifestyles and opinions as follows:
Children will be interested in size and colour
Celebrities for the luxury product
Families who love natural products for a healthy lifestyle
Business people who want to unwind after a stressful day at work
Behavioural Segmentation
Benefit sought – the key benefits that this group of customers seek
are quality, performance, status and freshness.
Usage rate – Lush will categorise its customer into:
Heavy users – the customers who use the products more than
3 times a day
Medium users – the customers who use the products twice a
day and;
Light users – the customers who use the products once a day
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Usage occasion – some products can be specifically used for occasions
for example a special function where one needs to feel unique or after a
sporting game for freshness
A differentiated targeting strategy is recommended to cater for different
customer needs in different geographical areas.
6.2 Positioning platformPositioning of a product means the product occupies a prominent and
favourable place in the mind of customers as opposed to competitors’
products. Lush’s customers will seek benefits such as quality, natural
ingredients, performance and unique features. The following perceptual map
will communicate these benefits to the customers.
Figure 3
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Low
Qua
lity
Non-organic
Hig
h Q
ualit
y
Organic
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6.3 Unique Selling Proposition (USP)
Competitive Strategy
A differentiation strategy will be adopted by Lush in order to meet the needs
of its different customers by offering tailor made products. Lush should
maintain the status of their products by continuing to maintain premium
prices.
Lush’s differential advantage
Products are hand-made. Lush makes use of fresh ingredients
produced from organic raw materials.
Products are based on its unique customised orientated designs for
example their shampoo bar.
Lush’s differential advantage is also based on their bargaining power
over suppliers, which enables them to obtain fairly traded raw
materials at a lower price.
They have the expertise and ability to make use of innovative
advertising.
They cater for a wide range of needs with digital solutions using strong
research and development capabilities.
Anti-animal tested products are guaranteed.
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6.4 Growth Strategies
The Ansoff Matrix
Use social media to promote products and educate customers on the benefits of using organic products
Customer value improvement – increase customer profitability by decreasing cost to serve and increase purchase or usage frequency and quantity by offering a delivery service
Add value to existing products by improving product designs and adding more features for example shampoo can be used as a body wash
Use facilities for online and cash card payments
Develop products that are synthetic free
Target new customers in new geographical areas of South Africa to reach more segments
Create new distribution channels for example – courier services, online purchasing and the use of agents
Diversification into related businesses for example cosmetics
Diversification into unrelated businesses for example electronics for personal grooming
Upstream integration (with suppliers) - get involved in the production process of farming organic materials
Downstream integration (with intermediaries) – retail shops which sell the products in small towns
Table 2
7. STRATEGIES
7.1 Product Strategy (including branding)
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Market Penetration Product Development
Market Development Diversification
Existing New
New
Products
Existing
Mar
kets
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Product Life Cycle DiagramA product strategy is the foundation of a
product life-cycle and the execution plan
for further development. The product
strategy allows the business to zero in
on specific target audiences and draw
focus on the product and consumer
attributes.
Major considerations for products include scent, size, features, shape, colour,
design, product range and the product life cycle:
Continue to source and use the very best and high quality of organic
raw materials.
The shape, colour and design for soaps will differ for different segments.
For the younger generation – small, colourful and toy-like designs will
suit this segment and for the upper end customers special and
professional designs will be more suitable.
Avoid use of palm oil in products.
Avoid use of synthetic in all products.
Bear in mind that colours play an important role on the social cultural
platform.
The product range is very important to ensure variety to customers.
Lush will continue to improve its product line and quality in order to
reach its goals by 2019. The power of a brand cannot be
underestimated – many people buy on the strength of brand alone with
no regard for price or performance.
7.2 Pricing Strategy Differentiation by price – price differs from product to product.
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Figure 4
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Lush products are associated with the highest quality hence the high
price.
Discounts will be offered to agents and distributors buying in bulk.
Skimming price is ideal for the top end customers
Prices will match the features on the product.
7.3 Place / Distribution Strategy Selective distribution to enable coverage in all provinces.
Agents and distributors will be based in all provinces.
Courier services will be used to ensure that products reach customers
timeously.
This distribution strategy will be reviewed periodically until 2019.
7.4 Promotional Strategy Advertising
Advertising will be used to promote the brand and inform customers.
Advertising will include insight about Lush, its success stories, strengths, and
its competitive advantages as well as the key benefits sought by customers.
Public Relations
Interaction with customers will be enabled through public relations and Lush
will use this vehicle to share information and create a platform for customers
to ask questions about the products.
Personal selling
Sales personnel will meet existing and potential customers face to face to
educate and demonstrate the features and use of Lush’s organic products.
Internet
Lush will make use of the internet to disseminate information through the
website so that customers can resonate with the Lush brand.
Sales promotion
Sales promotions will be carried out once new products are launched and to
keep the product fresh in the mind of the consumer thereby increasing sales.
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8. ACTION PLAN
Strategy Who? Does What? By When?
People strategy
Human Resources department
Marketing and Sales department
Finance management
Recruiting
Training and development
Motivating and compensating employees
Performance review and feedback
Succession planning
Ongoing exercises
Physical Evidence Strategy
Marketing and sales department
Operations department
Effectiveness of visible cues
Building effective distributors
On-going corporate branding
Process of production
Marketing and sales department
Customer Care Production
Department - Buying Quality assurance
department
Efficiency of production process
Consistency of service and product quality
Speed of service delivery
On-going
Promotion Strategy
Marketing and sales department
Finance department Public Relations
department
Advertising Sponsorships Public relations Sales promotions Personal selling Setting promotional
budgets and control
On-going
Distribution Strategy
Marketing and sales management
Retail Management - Operations
Logistics management
Finance department management
Technology Officers
Identify franchises and alliances
Identify intermediaries Incorporate transport
requirements. Establish technological
requirements
On-going
Product Strategy
Marketing and sales department
Production manager Quality assurance
Pricing of the products in line with product strategy
New product
On-going
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department development opportunities
Ensure consistency and quality
Target market strategy
Marketing and Sales department
Research team
Segment sizes to be determined
Gauge consumer expectations
Scan the external environment
On-going
Pricing Strategy
Marketing and Sales management
Financial management
Set product pricing Pricing strategy will be
aligned in relation to internal and external environments
On-going
Table 3
9. BUDGETS, CONTROLS AND REVIEWS
9.1 Expected revenue / market share
9.2High level promotional budget
Budgets % AllocationOperational ExpensesRental 10%Salaries and Wages 30%Administrative Overheads 10%
Promotional ExpensesSales Promotion 20%Advertising 10%Public relations 5%Sponsorship 5%
9.3 Marketing effective rating review
Marketing effectiveness rating reviews will be conducted after each promotional activity.
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Market Share2019201820172016
2016 2017 2018 2019012345
Expected Revenue
Expected Revenue
Figure 5
Table 4
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9.4 Quarterly sales audits
Sales audits will be conducted on a quarterly basis.
9.5 Brand image audit
The plan is indicated in figure 6 below:
Figure 6
9.6 Competitor intelligence tracking
Will be conducted on a continuous basis:
Figure 7
REFERENCES
1) [Online] Available at: http://www.lush.com [Accessed: July 2015]
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2) [Online] Available at: http://www.graziadaily.co.za/graziabeauty/oh-so-
lush/ [Accessed: 5 May 2015]
3) Imrie, K., (2014) Research: Manufacture of Cosmetics and other Toilet
Preparations
4) Skamulis, L., 2004 [Online] Available at:
http://www.webmd.com/beauty/makeup/how-safe-permanent-makeup
[Accessed: August 2015]
5) [Online] Available at: https://www.google.co.za/search?
q=competitor+intelligence+examplessa=X&es_sm [Accessed: August
2015]
6) [Online] Available at: http://www.smallbusiness.wa.gov.au/business-in-
wa/about-sbdc/corporate-publications/business-guides/marketing-
product-strategy/ [Accessed: August 2015]
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