Analysis of the Marketing Communication Strategies of Sephora in the Czech Republic
UNIVERSITY OF NEW YORK IN PRAGUE
European Business Administration
ANALYSIS OF THE MARKETING
COMMUNICATION STRATEGIES OF
SEPHORA IN THE CZECH REPUBLIC
2018 DINH HAI TRIEU
UNIVERSITY OF NEW YORK IN PRAGUE
European Business Administration
ANALYSIS OF THE MARKETING
COMMUNICATION STRATEGIES OF SEPHORA IN
THE CZECH REPUBLIC
2018 MENTOR: WILLIAM PATTISON
Statutory Declaration
I, Dinh Hai Trieu, declare that the paper entitled:
“The Analysis of Marketing Communication Strategies of Sephora in the Czech Republic”
was written by myself independently, using the sources and information listed in the list of references. I am aware that my work will be published in accordance with § 47b of Act No. 111/1998 Coll., On Higher Education Institutions, as amended, and in accordance with the valid publication guidelines for university graduate theses.
Prohlašuji, že jsem tuto práci vypracoval/a samostatně s použitím uvedené literatury a zdrojů informací. Jsem vědom/a, že moje práce bude zveřejněna v souladu s § 47b zákona č. 111/1998 Sb., o vysokých školách ve znění pozdějších předpisů, a v souladu s platnou Směrnicí o zveřejňování vysokoškolských závěrečných prací.
In Prague, 27.4.2018 Dinh Hai Trieu
Acknowledgments
My three years at the University of New York in Prague are considered by of the most valuable journeys I ever had the chance to take.
I would like to pay special thankfulness, warmth, and appreciation to the persons below who made my research successful and assisted me at every point to cherish my goal:
My mentor, Professor William Pattison for his vital support and assistance. His encouragement made it possible to achieve the goal, help and sympathetic attitude at every point during my research helped me to work in time.
My Mom and Dad, family members and friends, without whom I was nothing; they not only assisted me financially but also extended their support morally and emotionally.
I take this opportunity to express gratitude to all of the Department faculty members for their help and support.
Table of Contents Introduction ...... 1 1. Literature Review ...... 2 1.1. Development of the cosmetics industry ...... 2 1.2. The role of marketing in the cosmetics industry ...... 5 1.3. Marketing communication...... 7 1.4. Marketing Mix and the 4Ps of marketing ...... 7 1.4.1. Product ...... 8 1.4.2. Place ...... 8 1.4.3. Price ...... 9 1.4.4. Promotion ...... 11 2. Industry analysis of the Czech cosmetics market ...... 13 2.1. Czech cosmetics market ...... 13 2.2. PEST Analysis ...... 14 Political factors ...... 14 Economic factors ...... 14 Social demographic factors ...... 15 Technological factors ...... 16 2.3. Competition on the Czech cosmetics market ...... 18 3. Sephora and its Marketing Communication Strategies ...... 22 3.1. Company overview ...... 22 3.2. Sephora in the Czech Republic ...... 25 3.3. Range of goods ...... 26 3.4. Selected marketing communication strategies of Sephora in the Czech Republic ...... 27 3.4.1. Advertising ...... 27 3.4.2. Public relations ...... 31 3.4.3. Personal selling ...... 32 3.4.4. Direct marketing ...... 34 3.4.5. Online communication – Social Media ...... 36 3.4.6. Press Events ...... 39 4. Primary Research ...... 41 4.1. Research method and its objective ...... 41 4.2. Methodology ...... 42 4.3. Results of the research ...... 47 Place ...... 47 Habits, behavior, and decision – making ...... 48 The perception of the brand ...... 48 Loyalty program Sephora Club ...... 50 Suggestions for improving marketing communications ...... 51 4.4. Conclusion of the research ...... 52 5. Evaluation and Recommendations ...... 55 Conclusion…………………………………………………………………………………………………………………..Er ror! Bookmark not defined.
Abstract
The aim of this research is to present a detailed and thorough analysis of major marketing communication trends in the cosmetics industry, specifically focused on the impact Sephora in the Czech Republic. In order to properly analyze Sephora and its role in the Czech Market, this thesis will first outline a literature review of marketing communication and describe how the industry has developed from the nineteenth century until now, presenting a detailed history of the evolution of the cosmetics industry. Next, the thesis will provide a detailed industry analysis of Sephora in the Czech Republic and give examples of Sephora's marketing communication activities, providing in-depth critiques of the strengths and weakness of Sephora’s marketing strategies and contrasting them with their major competitors, both those in direct sales and online outlets. These strategies will also be analyzed in terms of their effectiveness in engaging with customers across different income brackets. Finally, the thesis will analyze the results of a focus group conducted to gain a better understanding of the average customer’s perception of Sephora, patterns of shopping behavior, and receptivity to the marketing communications strategies of Sephora. Finally, the thesis will present its findings, evaluations, and recommendations concluding in a summary of the same.
Introduction
This thesis aims to display the marketing communication strategies of Sephora in the
Czech market. This topic was selected to demonstrate the vital importance of marketing communications strategies when dealing with non-essential, that is today, luxury good—in this case, cosmetics. For the analysis of marketing communication in the cosmetics industry, this thesis will focus on Sephora - one of the leading cosmetics companies in the world. The cosmetics industry, as it is perceived today, has experienced significant growth over the years. The domestic manufacture and production of cosmetics products transformed into a real industry in the nineteenth century. This evolution led to an exponential increase in the variety of products, sales channels, and increased competition. Additionally, it began to influence the ways in which business owners reached out to their customers. People were subjected to the first rudimentary forms modern marketing techniques and strategies that would become the contemporary style and standard of communications for most current cosmetic brands. This chapter, therefore, will serve as an introduction to the context of this period, describing how selected marketing communications have gradually evolved into an integral part of the modern luxury cosmetics industry. However, it should be noted that, for the purpose of this thesis, only specific types of marketing communications will be explained: basic marketing tools and strategies in common use throughout the cosmetics industry, those marketing tools and strategies that have recently become very significant within the cosmetics industry, and those that have undergone a profound change within the cosmetics industry. Attention will then be paid to the marketing mix and the 4Ps, the consequence and importance of its changes within the cosmetics industry, the role of marketing specialists, and an analysis of marketing communications with a specific emphasis on the various
1 cosmetics competitors in the Czech market. A focus group was conducted for this and will be presented as the primary research. This research will show how to effectively produce marketing communication strategies that positively impact the company’s image and profits and engages with said company’s customers.
1. Literature Review
1.1. Development of the cosmetics industry
The global cosmetics industry permeates our lives, overtly and subtly influencing consumer standards for beauty, changing how consumers personally perceive what it is to be pretty. Companies such as Estée Lauder, L'Oréal, and Shiseido have shaped the business and created beauty for the public (Jones, 2011). The development of the cosmetics industry began during the Industrial Revolution at the turn of the 19th century. Up until that time, people had produced traditional cosmetics products by themselves with the help of product recipes. It is, therefore, not surprising that entrepreneurs who were trying to sell these homemade cosmetics products had to market them to customers as finished, packaged products to distinguish them from those produced at home. (Jones, 2011)
Increasing competition made the resellers wanted to differentiate themselves from their competitors. This created an ideal space to develop marketing communications in the cosmetics industry. Seizing on this opportunity, business owners, with the help of pharmacists, tried to sell harmless and health-friendly cosmetic products in an effort to demonstrate to customers that the purchased products would be safer and better than the self- made products (Jones, 2011).
And, of course, the development and accessibility of the media had a significant
2 influence on the communication activities of cosmetic brands and on the way in which society viewed women's beauty (Taran, 2015). The earliest and foremost essential instruments of media dissemination that dramatically helped to spread the first advertising messages in the cosmetics industry were women's magazines, the importance of which remains to this day and cannot be overstated. The first advertisements for cosmetics in newspapers were recorded in France in 1750 (Taran 2015).
As the power implicit in the printed media and its impact on economic profit became apparent, many entrepreneurs took note and began to invest in similar printed media promotions (Taran, 2015). For example, in 1935 Revlon made its first New Yorker advertisements in the value of the entire annual budget of the company allocated to advertising (which then represented less than a thousand US dollars). And this investment has grown steadily. Forty years later, the annual amount spent on advertising in New Yorker cost Revlon a total of $75,000. ("International directory of company histories", 2004).
As the cosmetics market gradually grew, sales conditions and distribution channels changed. Suddenly, the products were available in both specialized stores and department stores with a broader range of products. These specialized retailers provided their customers with services that have become an essential part of luxury cosmetics retail. For example,
Helena Rubinstein would personally oversee the training of workers in her shop. And this was by no means an isolated phenomenon. Considerable emphasis was also placed on how products should be presented and marketed in retail stores (Tungate, 2012). This undoubtedly set the foundations for today's in-store marketing, which is one of the top priorities for marketing communication strategies in luxury cosmetic brands.
3 Entrepreneurs began to work strategically with the price of products. They were aware that their perfumes and creams became luxury items for which people were (and still are) willing to pay a lot of money. At the same time, they understood that discounts should not undermine the value of their cosmetics. The business owner who introduced the standard for this particular issue was Estée Lauder. She was convinced that her customers were more than willing to spend a lot of money on luxury products. Therefore, she decided to raise the original price of the products and give free samples to customers. Today, this strategy is a common practice used in the industry (Taran, 2015).
As mentioned before, in addition to location and price, many brand owners have begun to think about how to support their products, whether they turned to advertising agencies or provided their own advertising, some especially spending ever increasing amounts of money on them (Jones, 2011). Marketing communication strategies have drastically evolved from their early beginnings. One way to guarantee brand awareness and increase public appeal was to cooperate with celebrities. For example, Helena Rubinstein collaborated with celebrities and offered them free services in exchange for their endorsement. Elizabeth Arden and Max Factor also cooperated with film studios to put out their brand name within the industry. As the market changed, entrepreneurs started to develop their own portfolios of products. Customers’ wants and desires were carefully considered, and entrepreneurs tried to accommodate them and meet customer demands. This transformed the whole range of products offered on the market (Tungate, 2012).
Seasonal and limited editions appeared on the market for the first time to promote sales and to increase the brand's prestige. The design and packaging of the product became an essential part of marketing, through which beauty, luxury, and uniqueness were once again
4 highlighted. The purpose of this was not only to attract customers but also to create a desire to own the product. Entrepreneurs wanted to ensure that their products were not overlooked and, thus, worked hard to make them unique at first sight (Tungate, 2012).
As previously described, cosmetics owners at the turn of the century began to constructively and carefully set the foundations of marketing as we know today (Jones,
2011). To correctly set the price of products and services, business owners wanted to ensure that a variety of media supported the brand, that customers enjoyed the products, and that the products met the needs and wishes of their customers (Taran, 2015).
1.2. The role of marketing in the cosmetics industry
The cosmetics industry, as we perceive it today, has undergone a lot of changes. These transformations have brought not only an extended, wide range of products and sales channels but also increased competition and changed the communication methods used to reach customers. This chapter describes selected basic marketing elements that have gradually evolved into an important part of the modern cosmetics industry.
Nowadays, the cosmetics industry is characterized as a competitive global environment where marketing communications should not be forgotten, and is, in fact, essential to success in the market. Marketing specialists focus on market research and analyzing patterns of consumer buying behavior, because, in such a highly competitive market, companies are challenged to respond to the current market to satisfy customers’ wants and perceived needs. Their responsibility is to turn any concept into a desirable and unique product that consumers will understand and, ultimately, want. It is not surprising that marketing specialists have found their place in the industry. The cosmetics industry
5 constantly seeks to develop and adopt effective ways with which it can better engage its audience. To that end, companies within in the cosmetics industry use communication strategies to discern and interpret customer trends and figure out the right way to target that market base (Jones, 2011).
Technology changed the cosmetics industry with the advent of advertising on television, magazines, and other forms of media that have become ubiquitous since then.
Cosmetics manufacturers started to think about how to visualize their products and create marketing strategies. The Industrial Revolution forever changed how producers understood the entirety of the cosmetics industry and enabled the mass production of cosmetics. The first well-known products at that time were lipstick, powder, and eyeshadow (Tungate, 2012), and, in the1920s, mass marketed products became financially viable. As cosmetic products were already being sold and marketed, business owners started to compete with each other.
To succeed, they had to use their business ideas and skills to convince customers of the superior qualities of their products:
And where profit can be found, there is the will to market and sell it. Photography,
cult of film actors and big marketing campaigns soon brought the fall of traditional
Victorian fashion, enabling women of all ages to start wearing cosmetic products in
the public. Early decades of cosmetics popularity in the west brought us many
inventive products, such as Lip Gloss by Max Factor, synthetic hair dye and sunscreen
by L'Oréal, suntan and red nail polish by Coco Chanel, and others” ("Detailed View
of History of Cosmetics", n.d.).
6 1.3. Marketing communication
Marketing communication is about how marketers communicate with their target markets, specifically dealing with the process of communicating with existing and prospective customer bases. The elements of the marketing communication are advertising, promotion, direct marketing, PR, and special events (Kotler and Armstrong, 1999). “In its simplest form, integrated marketing communication can be defined as the management process of integrating all marketing communications activities across relevant audience points to achieve greater brand coherence” (Bird, 2004).
According to Varey, the definition of marketing communication is a process which “involves the management and organization of all ‘agents’ in the analysis, planning, implementation and control of all marketing communications contacts, media, messages, and promotional tools focused at selected target audiences in such a way as to derive the greatest enhancement and coherence of marketing communications effort in achieving predetermined product and corporate marketing communications objectives” (Varey, 2011).
1.4. Marketing Mix and the 4Ps of marketing
After deciding on its overall marketing strategy, the company is ready to begin
planning the details of the marketing mix, one of the major concepts in modern
marketing. The marketing mix is the set of controllable marketing tools that the firm
blends to produce the response it wants in the target market (Kotler and Armstrong,
1999).
Marketing communication is made of the 4P's: Product, Place, Price, and Promotion. The next portion of this thesis will utilize the concept of the marketing mix that includes “all of
7 the marketing decisions and actions taken to ensure the success of the product, service or a brand in its market” (Kotler and Armstrong, 1999).
1.4.1. Product
“Product stands for the firm’s tangible offer to the market, including the product quality, design, features, branding and packaging” (50MINUTES.COM, 2015). In 1924,
Proctor & Gamble established first internal market research departments ("P&G Heritage includes Market Research, Brand Building and Profit Sharing", 2018). As cosmetics companies began to realize the importance of packaging, they began to come up with appealing names of shades of colors for their products. There was a significant effort by cosmetics companies to make their products desirable to the general public. Suddenly, emphasis was placed not only on the product itself but also on its packaging and brand name.
Over time, different humorous or appealing names began to appear for the variegated shades of lipsticks and other decorative cosmetics. There was a concerted effort to attract customers and to stimulate in said customers the desire to own the product. The best entrepreneurs of that time were very well aware of these changes in the market and they all used them to their advantage (Varey, 2011).
1.4.2. Place
“Place stands for the various activities the company undertakes to make the product accessible and available to target customers” (Lee, 2000). Or, in other words, being poised in right place at the right time makes it possible to target the right audience. An example from a history is Max Factor – a cosmetics line founded in Poland in 1909 by Maksymilian
8 Faktorowicz. Later, Faktorowicz decided to move from Poland to the United States because he saw the opportunity to offer theatrical make-up for the film industry in addition to his usual line of cosmetics. His plan worked, and he became a successful, leading distributor of theatrical make-up manufacturers ("Our Heritage | Max Factor", 2018).
Another example is Helena Rubinstein who also realized the importance of the location. She emigrated from Poland to the United States, and, in 1915, she established a cosmetics company, Helena Rubinstein Incorporated. Because of her previous business experience, she insisted on personally overseeing the training of sales assistants. Moreover, she emphasized the importance of the placement of products in the store. Today, this strategy is called in-store marketing and it is one of the main priorities of luxury cosmetic retail chains
("The Brand", 2018).
And the last example is Elizabeth Arden who moved from Canada to the United States in search of better opportunities. She opened her first salon in 1910. The company expanded internationally and became the new face of cosmetics for women. In that time, people associated makeup with prostitution. However, Elizabeth Arden reversed this pejorative view of makeup with the help of her successful marketing campaigns, and, resultantly, makeup became socially acceptable for all women, thus propelling Elizabeth Arden into domestic and international markets as a leading distributor of cosmetics (Arden, 2018).
1.4.3. Price
“Price stands for the amount of money that customers need to pay for the product.”
(Lee, 2000). Helena Rubinstein was one of the most talented, skilled businesswomen and marketers of her time. Her career began with a family recipe for a cream with a low price
9 point. Her financial advisor recommended that she sell the cream for a price that was seven times lower than the one she wanted. Despite his advice, she decided to set a high price and thought that customers would purchase her cream because they would believe the more expensive product to be superior to the rest of the creams on the market. Helena Rubinstein, by exaggerating the price of her product, created a general pricing strategy for future luxury brands: higher cost translates to higher quality ("The Brand", 2018).
Promotions are done mainly by using a nominal discount. The reason remains the same – the price should not be too low. If the rates are too low, the customer may suspect that the quality of the product is not as promoted ("Value-based pricing", 1993). That's why retail stores often offer discounts of buy one get one free, a gift, or a free service. This way a customer will feel that he/she has purchased a valuable product with an added value for the same price. Cosmetics customers are less sensitive to discounts than other categories of customers because as they run out of a product, they will just continue to purchase the product again and again ("Customer loyalty and customer loyalty programs", 2003).
However, cosmetics chains still offer short-term discounts that motivate customers to indulge in impulse shopping. These discounts are often used to encourage customers to become a part of a loyalty program of the cosmetics chain. Cosmetics chains then have an assurance of more purchases with lower prices because this is more beneficial than fewer purchases at full price.
In this way, cosmetics chains also get valuable data through their database which can be used to support sales. Another method used to improve sales is to offer promotion coupons. As companies send direct emails and SMS messages, they can build a relationship with customers and make them feel special by receiving a “special” coupon just for them
("Customer loyalty and customer loyalty programs", 2003).
10 1.4.4. Promotion
Last but not least, the marketing mix also includes promotion – this includes all activities aimed at acquainting the customer with the product and purchasing it. The main point is to pass on to the potential customer information about both the product and the brand, get them to remember the product and the brand, and convince them to buy the product and return to the brand (Lee, 2000).
Celebrity marketing
Connecting cosmetics brand with a celebrity is one of the ways how companies achieve this desired degree of product awareness. When people see celebrities in advertisements promoting a company’s products, the audience is more likely to buy the products (Thamaraiselvan, Arasu & Inbaraj, 2017). Max Factor was one of the first pioneers to use celebrities in cosmetic advertising campaigns. When Hollywood was looking for film makeup distributors, Max Factor signed contracts with film studios to promote Max Factor’s products. In exchange for supporting their latest films, Max Factor could use any film actress for their commercials (Tannen, 1996).
Free Sample Marketing
Cosmetics pioneer Estée Lauder founded her first department store in 1947 and had a career breakthrough. Her products sold out in two days. Estée Lauder did not have enough money for marketing campaigns, so she came up with the idea of free samples. Today, cosmetics retail chains are still using the “free sample with a purchase” strategy (Bannerman,
2004).
11
Influencer Marketing
YouTube celebrities are influencing the online community more and more. Beauty
“YouTubers” with a huge followship base are turning into entrepreneurial makeup enthusiasts (Beirne and Ford, 2014). Cosmetics companies noticed that partnering with these beauty “gurus” can have a positive impact on their own campaigns. Consequently, they have started collaborating with YouTubers for advertising campaigns and product placements.
Moreover, companies also collaborate with YouTubers to create new makeup products for people as well. The power of YouTubers is increasing and has considerable potential for market expansion in the cosmetics industry.
In – Store Marketing
Cosmetics chains with actual stores use a form of marketing communication called in-store marketing which encompasses sales promotions at a retailer’s store with the help of sales assistants. They offer expert advice, exclusive discounts, demonstrate product use, etc.
Customers expect an added value in the experience they receive in the store because they can get the same products online at lower prices. It is the customers’ choice whether they will buy a product online or go to the store to get the “in-store” experience (Jones, 2011).
12 2. Industry analysis of the Czech cosmetics market
2.1. Czech cosmetics market
Europe is the largest market for cosmetics products in the world. In comparison with other European countries, the Czech Republic is doing well (“The European cosmetics market slows down in 2016”, 2017). Positive economic development has positively impacted sales and strengthened the buying power of consumers in the Czech Republic. Additionally, research of the period 2014 - 2017 has shown that the Czech market has increased tremendously. The estimated value of the cosmetics industry is 1.78 billion U.S. dollars.
Since 2014, the industry has had an increase of 19 million U.S. dollars ("Cosmetics: market size in the Czech Republic 2014-2017", 2017). Overall, the Czech market has great potential, and it is expected that, as the economy continues to grow, the value of the Czech cosmetics market will increase as well ("Cosmetic, Perfume and Toiletry Market in the Czech Republic to 2020 - Market Size, Development, and Forecasts", 2016).
Czech customers look for the best value for money when deciding what products to buy. Price promotions and limited deals are therefore going to continue playing a necessary role in the Czech Republic. Various product innovations have been introduced within the beauty and personal care industry in the Czech Republic. Furthermore, the marketing support for future innovations will require larger promotion and advertising budgets. Generating hype for, or interest in, a certain product innovation is, and will continue to be, challenging because of the competitive environment and increased advertising expenses ("Beauty and personal care in the Czech Republic", 2017).
13 2.2. PEST Analysis
A commonly used and immensely valuable technique for analyzing the external
environment is a PEST analysis. PEST divides the overall environment into four areas
and covers just about everything that can affect an organization. The four areas are:
Political, Economic, Social and Technological (Gregory, 2000).
Political factors
The political factor that influences Sephora's business in the Czech Republic is membership in the European Union. Because of this membership, Sephora has to follow the legislation of the European Parliament – specifically, the regulations directing the safety standards of cosmetics in the EU which regulate the safety of products placed on the market.
These regulations also require distributors to verify the compliance of the cosmetic products before they are placed on the market. Besides respecting EU legislation, Sephora in the Czech
Republic must also meet the requirements for doing business in the Czech Republic at the national level as defined by the Czech legislature for a limited liability company.
Economic factors
The next essential factors are the economic factors. The country's unemployment rate may affect the profits of the company. If people do not have jobs, they will not have the money to spend on the luxury cosmetics. The unemployment rate in March 2018 was only
3.5% which is the lowest rate for the last two years. Therefore, Unemployment in the Czech
Republic is not a problem for Sephora ("Nezaměstnanost v ČR, vývoj, 2018 rok 2018 – 5 let,
Míra nezaměstnanosti v %", 2018).
14 Another economic factor is the rate of inflation. If the price level rises, then we can buy less for the same amount of money. It is then clear that the indicator of the inflation rate, i.e., the percentage change in inflation, must affect the sale of luxury cosmetics. Luxury cosmetics are very sensitive to price trends because they are a lot of cheaper substitutes. The inflation rate, as expressed by the increase in the average annual consumer price index, was
2.3% in March 2018 ("Inflace - 2018, míra inflace a její vývoj v ČR - 5 let", 2018).
For similar reasons, the average income rate in the Czech Republic is important too.
The average income of people is increasing. In the 4th quarter of 2017, the average gross monthly nominal wage per employee employed in the national economy grew by 8.0% compared to the same period of the previous year, an increase of 5.3%. The median wages were CZK 27,320. This average should not be a threat to our analysis ("Mzdy - vývoj mezd, průměrné mzdy 2018 - 5 let", 2018).
Social demographic factors
Increasingly, Sephora places more and more affordable brands in their portfolio, and, subsequently, attracts more and more potential customers. In the Czech Republic, women are the main target group for the purchase of cosmetics products.
There are over five million women in the Czech Republic ("Aktuální populační vývoj v kostce | ČSÚ", 2018). However, only a portion of them are relevant for Sephora because not all of them can afford luxury cosmetics products. For example, women such as children, pensioners, and women who can not afford luxury cosmetics cannot be included in Sephora's targeted group. Therefore, it is essential to take into account the age and education of the target customer group. Education not only affects the future salary of a person but also
15 individual social needs. For example, a laborer does not need makeup every day, but most college women and college students need make-up or other cosmetics to maintain a respectable look.
The age distribution of the Czech population is, therefore, a major factor to consider.
The proportion of Czech citizens with higher education is on the rise. In the past twenty years, the number of women with a university education has increased.
With a wide product portfolio that includes products for different age groups, both women and men, one might assume that the Sephora target group is really broad (or that the target groups are set more broadly within the company concerning the individual brands included in the company portfolio). However, if one were to take a closer look at the targeting in this industry, it is women ages 20-50 that can be considered as the primary target group focused on by industry standard brand communication strategies. It can also be concluded that this subsection of women are interested in caring for their looks and can afford luxury goods
("Aktuální populační vývoj v kostce | ČSÚ", 2018).
Technological factors
In the Czech Republic, the number of social media users has increased significantly in recent years. It is not only Facebook, but Instagram, Twitter, and Pinterest that continue to garner more and more attention from Czech consumers.
16 Forecast of social network user numbers in the Czech Republic from 2015 to 2022 (In million users)1
This statistic displays a forecast of the development in social network user numbers
in the Czech Republic from 2015 to 2022. In 2022, the number of monthly active
social network users is projected to reach 5.4 million individuals. This would be an
increase of over 570,000 new users from 4.83 million users in 2016 ("Czech
Republic: number of social network users 2015-2022 | Forecast", 2018).
The cosmetics industry has experienced a huge boom through blogs and “beauty”
Youtube channels. The increasing use of these technologies is translating into great opportunities for manufacturers and retailers of cosmetics. YouTubers regularly receive packages from cosmetic brands for review and routinely get suggestions for sponsored videos. Cosmetics companies communicate not only with the YouTubers but with their followers as well. The steady growth in the popularity of YouTube in the Czech Republic is a big opportunity for the cosmetics market to expand (“Jak se daří jednotlivým sociálním sítí
1 https://www.statista.com/statistics/568761/forecast-of-facebook-user-numbers-in-the-czech-republic/
17 v České republice?”, 2017). Instagram as a social media platform is ideal for direct communication with customers, primarily because it uses visual influence allowing potential customers to see photos of the cosmetics distributors products.
Overall, online communication is very important and this method of marketing communication is an important strategy for Sephora's customers—particularly the so-called
“millennial” generation. This generation of people, between the ages of 18 and 24, is becoming economically active and, at the same time, fully maximizing the potential uses of the internet, social networks and other technologies. For that reason, it is necessary to account for their potential purchasing power and use it to exploit these technologies ("How
Millennials Like Their Makeup | The New Yorker", 2017).
On the other hand, the Internet, mobile apps, and other technologies have become a threat to cosmetics retailers and distributors. Online perfume and cosmetics stores are a popular place to buy, especially thanks to lower prices. This problem has already been mentioned in the chapter dealing with Sephora's competition.
We must not forget the growing use of the Internet and mobile apps in the list of technological factors.
2.3. Competition on the Czech cosmetics market
Because the Sephora range of products is made up of luxury cosmetics, their competitors can be defined as offering the same goods or focusing on the same range of products. Sephora’s main direct competitors are Douglas, FAnn Parfumerie, and Marrinoaud.
All of them offer a variety of perfumes and cosmetics. Each of them offers products that others have as well, but also offer exclusive products that the other competitors do not have.
Therefore, consumers have the advantage of choosing where they prefer to buy a product.
18 Moreover, all of these brands sell products online which makes it even easier for a consumer to decide where to purchase the desired product.
Sephora also has online internet stores among their competitors because they run an online store in the Czech Republic as well. Additionally, online stores, or E-shops, are increasing in popularity. The largest online stores offering perfumes and cosmetics are
Notino.cz (currently Sephora's biggest Czech online competitor and the largest online cosmetics retail store in the Czech Republic), Elnino.cz, and Prodejparfemu.cz. These online stores/E-shops can provide customers with better prices for products than a retail store without having the additional costs associated with the operation of a store. For example, a cosmetic product LANCÔME Teint Idole Ultra Wear 24H is offered at notino.cz for 1081Kč2 but on the Sephora store, it is offered for 1360Kč3.
FAnn Parfumerie
The company, FAnn Parfumerie, was established in 1991. FAnn is the oldest retail chain of beauty stores in the Czech Republic. They are one of the main competitors of
Sephora in the cosmetics business, serving over 800,000 customers every year. At their Brno headquarters, they have 200 employees. It is a Czechoslovak company with stores in the
Czech Republic and Slovakia. In 2000, the company opened its first ever online cosmetics shop in the Czech Republic. In the same year, the company launched its FAnn Bonus Club program, Loyalty Program for Customers ("O nás - FAnn Parfumerie", 2018)
2 https://www.notino.cz/lancome/teint-idole-ultra-wear-dlouhotrvajici-make-up-spf-15/ 3 http://www.sephora.cz/Liceni/Plet/Makeupy/Teint-Idole-Ultra-Wear-24H-Dlouhodrzici-makeup-SPF- 15/P2831007
19 Marrinoaud
In 1984, Marcel Frydman bought his first perfume and brought in his concept of more affordable prices. He started his chain of French perfumes: Marionnaud. The year 2000 was the first year that Marcel Frydman also bought several companies in other European countries. This decision proved to be very successful. In 2002, Marionnaud became the leader in the French perfume retail market and expanded into Italy, Spain, and Portugal
("Marionnaud Parfumeries", 2018).
Douglas
The history of the perfumery, Douglas, began in Germany; it is named after Scottish immigrant, John Sharp Douglas, who founded the first soap and perfume factory in Germany in 1810. Douglas first expanded its market to Austria and then to other European countries.
In the 1980s and 1990s, the company came to the Netherlands, France, Italy, Switzerland,
Spain, and Portugal. Since 2001, it has expanded to other European countries, including the
Czech Republic. Douglas operates in nineteen European markets. Today, Douglas has over
1,700 shops worldwide ("Douglas Corporate: Über uns", 2018).
Company Sales Margins
Sephora 580 879 000 Kč 277 078 000 Kč
Douglas 274 960 000 Kč 101 430 000 Kč
Marionnaud 418 673 000 Kč 150 498 000 Kč
20 Data taken from Annual reports of 2011 4.
Graph: Comparison of Sephora’s Sales and Margins with its competitors
(Source: Author’s work)
Branded stores offering the same products as those found in Sephora can also be considered competition or even substitutes for a specific brand. For example, Clinique products are available for sale in Sephora, Douglas, Marrinoaud, and Fann Parfumerie but also directly in Clinique brand stores as well. Other similar examples are Bobbi Brown,
MAC, Estee Lauder, Lancôme or NYX. These brands are offered not only in the stores of their main competitors (as mentioned above), but these brands have their own boutiques as well.
4 https://or.justice.cz/ias/ui/vypis-sl-detail?dokument=17038305&subjektId=508485&spis=152708 page 11 https://or.justice.cz/ias/ui/vypis-sl-detail?dokument=17240596&subjektId=700653&spis=170594 page 13 https://or.justice.cz/ias/ui/vypis-sl-detail?dokument=16754138&subjektId=279468&spis=176869 page 1
21 3. Sephora and its Marketing Communication Strategies
3.1. Company overview
Sephora is one of the most successful perfume chains in the world. Dominique
Mandonnaud, the founder of Sephora opened his first store in France in 1969. The unique concept was that customers could personally see the products and try them on individually
("About Us | Sephora", 2018). This model changed the whole idea of how retail stores with cosmetics and perfumes marketed to their customers. In 1997, Sephora became a part of the largest group of luxury goods in the world – the Moët Hennessy Louis Vuitton. “Today
Sephora operates in 30 countries and has more than 1,750 points of sale generating revenues in excess of $4 Billion by my estimate” ("Forbes Welcome", 2013).
Sephora offers a large variety of products divided into three categories: exclusive brands available only in Sephora (Nars, Benefit, Too Faced, etc.), selective brands (Dior, Lancôme,
Clinique) and their own Sephora line called “Made in Sephora.” Moreover, Sephora also offers additional cosmetics services for their customers (makeup lessons, free consultation of skin, etc.) Currently, Sephora has over 2300 stores spread out in 33 countries. In 2013, the estimated generated revenue of Sephora was $4 billion. Thus, Sephora continues to expand its worldwide network ("Report: YouTube Generated $4 Billion in Revenue In 2014", 2015).
Sephora believes every stroke, swipe and dab reveals possibility, and we share our
client’s love for the confidence that our products, services, and expertise brings to
their life every day. In every store, clients unlock their beauty potential at our Beauty,
Skincare and Fragrance Studios through intuitive technology and guidance from the
most knowledgeable and professional team of product consultants in the beauty
industry ("About Us | Sephora", 2018).
22 Sephora stores
Sephora operates approximately 2,300 stores in 33 countries worldwide, with an
expanding base of over 430 stores across the Americas. Sephora opened its first U.S.
store in New York’s Soho neighborhood in 1998, and its first Canadian store in
Toronto in 2004. The Sephora Americas headquarters and Innovation Lab are located
in San Francisco, with corporate offices in New York, Mexico City, Montreal,
Toronto and São Paolo ("About Us | Sephora", 2018).
Sephora online shop
Sephora.com - Launched in the U.S. in 1999 and Canada in 2003, the foremost
prestige beauty site on the Internet is also Sephora's largest North American store and
is where clients can engage with an inclusive beauty community on our award-
winning Beauty Board, and interactive Beauty Talk.” In the Czech Republic, the
company launched the online store – sephora.cz in July 2016 ("About Us | Sephora",
2018).
Sephora PRO
The Sephora PRO Team is an elite group of makeup artists handpicked for their
superior skill, unprecedented creativity and ability to inspire through education. The
Sephora PRO artists are among the industry's most knowledgeable in beauty expertise
and application, lending their aptitude and know-how to product ideation and
development, sharing beauty education tips on Sephora’s social channels, speaking
on behalf of the retailer to media, and applying their industry prowess at a variety of
23 national and local client events. Each Sephora PRO artist is a permanent appointee
and based in a specific region, broadening their influence across the Americas”
("About Us | Sephora", 2018).
The Pro member of the Czech Republic is Adela Bartáková.
Adéla Bartáková – member of the Sephora Pro Team5
5 http://www.sephora.cz/Presentation-de-la-Pro-Team/R295500007
24 3.2. Sephora in the Czech Republic
In the Czech Republic, Sephora was founded in 2001 as a limited liability company
(Sephora s.r.o.). Currently, there are 20 stores, but most of them are located in Prague. Other stores are located in Karlovy Vary, Plzen, Pardubice, Liberec, Brno and Ostrava. According to annual reports 6 sales have increased steadily over the period 2010 – 2015.
2010 2011 2012 2013 2014 2015
Sales 499431 580879 633500 678968 712468 795420
Margins 227562 277078 303523 333271 357674 409661
In thousands Kč*
From the publicly available annual reports of the company, Sephora has been doing well in the Czech Republic in recent years. Especially in the last monitored seasons, growth in both sales of goods and margins.
6 Annual Report 2010 https://or.justice.cz/ias/ui/vypis-sl- detail?dokument=14299223&subjektId=700653&spis=170594 page 10 Annual Report 2011 https://or.justice.cz/ias/ui/vypis-sl- detail?dokument=16689892&subjektId=700653&spis=170594 page 10 Annual Report 2012 https://or.justice.cz/ias/ui/vypis-sl- detail?dokument=17240596&subjektId=700653&spis=170594 page 14 Annual Report 2013 https://or.justice.cz/ias/ui/vypis-sl- detail?dokument=20740598&subjektId=700653&spis=170594 page 15 Annual Report 2014 https://or.justice.cz/ias/ui/vypis-sl- detail?dokument=41663782&subjektId=700653&spis=170594 page 15 Annual Report 2015 https://or.justice.cz/ias/ui/vypis-sl- detail?dokument=46970529&subjektId=700653&spis=170594 page 13
25
(Source: Author has conducted a graph based on the data from the Annual reports
From 2010 – 2015)
3.3. Range of goods
Sephora offers luxury products for men and women, hair care products, toiletries, and cosmetics. The company also owns a private label, Made in Sephora, which it offers to its customers exclusively in its stores, marketing it as an attractive innovation, following the latest beauty trends. Made in Sephora focuses on both the quality and the availability of its products, it is an entirely different price strategy than other luxury cosmetics brands.
("Sephora - Společnost Sephora", 2018).
26 3.4. Selected marketing communication strategies of Sephora in the Czech Republic
3.4.1. Advertising
TV Ads
It is to be expected that if large amounts of money are invested in TV commercials that they will intermittently appear on television screens. Unfortunately, no metric data concerning the commercial advertising of Sephora (or the other companies mentioned) is available to the public to verify the frequency with which these commercials appear, the timeslots that they appear in, or the specific focus of these advertisements as they appear.
However, it is clear from direct observation that Sephora TV commercials are often primarily linked to the promotion of a specific product.
For Sephora, using advertising and communication channels is important because it supports brand awareness. Sephora’s TV spots are connected with promoting a specific product, but at the same time, the company focuses on building its image. The TV advertisements usually appear before Christmas. Every year, there is a different theme.
27 Sephora TV spot – “Wonder Christmas” campaign (2016)7
Sephora TV spot – “Where Beauty Beats” campaign (2015)8
Sephora TV spot: “Xmas Gift Ocean” campaign (2014)9
7 https://www.youtube.com/watch?v=otTASqsVNcg 8 https://www.youtube.com/watch?v=R17XjWZzVo0 9 https://www.youtube.com/watch?v=wov6MNVDoTI
28 The next advertisement seen on TV is the “Excessive Colors” advertisement. This spot is promoting products from the private label Made in Sephora. The commercial is about experimenting with the colors. It is a very stylish spot with appealing music in the background.
The Excessive Colors Advertisement10
10 https://www.youtube.com/watch?v=kzWb-HHOaHg
29
Printed Ads
Sephora invests in outdoor advertising too. Below are some examples of printed Ads.
Printed Ads on train seats – České dráhy.11
Printed Ad in front of Palladium shopping center. (Source: Author’s photo).
11 http://zpravy.e15.cz/byznys/doprava-a-logistika/ceske-drahy-se-zbavuji-reklamni-spolecnosti-railreklam- odkoupi-ji-skupina-bigboard-1339429
30 3.4.2. Public relations
According to Kotler, public relations is defined as “gaining favorable publicity and creating a favorable company image and has a great potential for building consumer awareness and preference” (Kotler and Armstrong, 2011).
Sephora engages in cooperative PR with magazines to raise its brand awareness.
For example, unlike paid advertising spaces in magazines and newspapers, these cooperative advertisements represent products that the editor of the publication has personally recommended. A small example of PR Sephora would be Sephora's products recommendation in the Elle magazine.
Sephora collaborated with ELLE and sponsored the Color Run in Prague 4.6.2016.12
12 http://www.elle.cz/volny-cas/jaka-byla-elle-zone-na-the-color-run
31 3.4.3. Personal selling
Building a relationship through personal selling is what creates a great shopping experience for customers. Black and white stripes are iconic for Sephora. Consequently, those colors dominate every Sephora store combination with a bright element. But overall, the in-store marketing looks elegant, clean, and sophisticated. In-store marketing is as important as sales assistants offering customers their help because it is the environment that makes customers enjoy the shopping experience and return to the store. It is interesting to note the sales environment that was in place before Dominique Mandonnaud introduced what is now the usual way of selling cosmetics in his stores today. Before then, products were kept behind the counters and carefully controlled by sales assistants. Mandonnaud started the practice of letting customers actually touch, feel, and try the products. This practice has become an essential marketing tool in the Sephora stores to create an atmosphere that makes the customer feel comfortable while shopping in the store.
Source: Facebook page @sephoraczechrepublic
32
In-store Ad on the digital screen in Sephora store in Nový Smíchov shopping center.
(Source: Author’s photo)
33 3.4.4. Direct marketing
The loyalty program not only offers customers promotions and discounts, but it also provides an advantageous means of collecting data that can later be used for other marketing purposes, such as direct marketing.
Another way in which Sephora approaches customers is with help of direct marketing which includes direct SMS, delivered, printed offers, and direct emails.
Direct SMS announcing the Black Friday and its 20% discount.
(Source: Author’s photo)
34
Direct email announcement.
(Source: Author’s photo)
Direct email announcement.
(Source: Author’s photo)
35 3.4.5. Online communication – Social Media
Social Media has made it possible for companies to connect with their customers and interactively communicate with them. It is then no surprise that Sephora has capitalized on this social media trend and uses their Facebook page (account @sephoraczechrepublic and
Instagram (account @sephoraczechrepublic) as direct communication channels to their customers.
The immediate advantages of this are prompt reactions by potential customers and easily collected metric data regarding how many customers have been reached. These platforms present new products, brands, events, promotions. Moreover, they provide information about new or popular products, and also show short video tutorials about makeup, cooperation with bloggers and YouTubers. Sephora also seeks to increase customer engagement by asking questions about customers’ favorite products, opinions, experiences, etc. ("Inside cosmetics brand Too Faced's winning Instagram strategy - Digiday", 2018).
Facebook page of Sephora Czech Republic
36 (Source: Facebook @sephoraczechrepublic)13
Instagram account of Sephora Czech Republic
(Source: Instagram @sephoraczechrepublic)14
13 https://www.facebook.com/sephoraczechrepublic/?hc_ref=ARQRIgT7128VHTVRn7ewmaZEJTtaRXwonHr 8KC7EtppmLQRf_R_DuOXge0cZRx1-ePs&fref=nf&brand_redir=16453004404 14 https://www.instagram.com/sephoraczechrepublic
37
Sephora sent to a beauty Instagrammer new products from their exclusive brand.15
YouTuber GetTheLouk was sponsored by Sephora and used sent products in her video.16
15 Source: https://www.instagram.com/karlaskalova.makeup/ 16 https://www.youtube.com/watch?v=ZETmICMvxxU)
38 3.4.6. Press Events
Event marketing is fast emerging as a promotion catalyst vis-à-vis the traditional
marketing communication tools. The increasing corporate disillusionment with
traditional media due to increased clutter, escalating costs and reduced efficiency has
created opportunities for event marketing. Event marketing allows a company to
break through the advertising clutter, and target an audience by enhancing or creating
an image through an association with a particular event while reinforcing the product
or service, and driving sales (Gupta, 2003).
Sephora holds press events for their new product launches. Beauty influencers and other relevant people are invited. The goal is to enhance their brand image through these events. One example is the launch of the new products of Sephora. The press event for this launch was held on the 12th of April 2018 in Jalta boutique hotel.
(Source: Author’s photo.)
39
Press event: Launch of summer products 2018 (12/4/18)
(Source: Author’s photos)
40 4. Primary Research
4.1. Research method and its objective
Following the secondary research and analysis of Sephora’s competition in the Czech
Republic, an evaluation was conducted to see how the company’s marketing communication activities influence its sales, and how both existing and potential customers perceive the brand. Another line of inquiry to be pursued is whether or not it is effective for Sephora to invest money in campaigns and in-store communication. The primary issue is not whether or not the management of the company is capable and willing to issue large amount of money for these activities; but whether the way that Sephora communicates is relevant to the target audience and achieves the desired results. To evaluate the effectiveness of Sephora's marketing communications to its customers, a focus group was conducted to ascertain the effectiveness of Sephora’s marketing communication strategy.
The research examined the effectiveness of Sephora’s marketing communications, analyzed the brand's perception, weighed the positive and negative attributes of the brand, contrasted the effectiveness of competing brands, and evaluated the loyalty of customers.
These research questions focus on modern communication marketing tools. In the following paragraphs, the qualitative research and its attendant key findings will be presented.
Moreover, this thesis will explain the research methods utilized and how the results of these methods translate into reasons for both existing and potential customers to visit Sephora stores and eventually buy Sephora brand products. This research will show how to effectively implement marketing communication strategies that will positively impact both the company’s profits as well as customer perception of the brand.
41 This qualitative method of research evaluates the effectiveness of business communication strategies by testing hypotheses. The following hypotheses were tested:
Hypothesis 1: Respondents do not shop at Sephora due to the high prices of products.
Hypothesis 2: Respondents shop at Sephora because it offers a wide range of products.
Hypothesis 3: Respondents use online shopping much more frequently than direct shopping.
Hypothesis 4: Respondents who joined the loyalty club tended to show more loyalty to the company than those respondents who did not.
4.2. Methodology
As mentioned before, to obtain information for this thesis’ primary research, a qualitative method, the “focus group”, was used. According to Kotler, a focus group is
"interviewing that involves inviting six to ten people to gather for a few hours with a trained interviewer to talk about the product, service, or organization. The interviewer "focuses" the group discussion on important issues" (Kotler and Armstrong, 2011). Kotler and Armstrong also highlight that the moderator should focus on the process to get more in-depth information, capture important contexts during the interview, have direct contact with respondents, and track their reactions to include non-verbal communication, such as body language.
42 The focus group took one hour and consisted of eight respondents. A group of eight people was chosen according to following criteria:
Nationality: Czech (or a non-Czech who lives in the Czech Republic more than 5
years)
Age: 20 – 50
Gender: It was decided that only one participant in the group should be male. The rest
of the respondents were women because Sephora’s portfolio is mainly focused on
products for women.
Participants had to be familiar with the brand, at least enough to recognize Sephora
and know basic information about the company.
Participants had to have visited a Sephora store at least once.
Participants had to have bought at least one thing from Sephora’s portfolio.
Participant Profile (occupation, age) Relationship to cosmetics
Vanda Kabrtová Office manager, 24 Uses high-end products, usually shops for
cosmetics at Sephora.
Anja Duričič Advertising Assistant Open to trying new cosmetics products.
Does not really care about where the
products are from.
Tiep Nguyen Telecom. Specialist, 22 Buys a lot of cosmetics for his girlfriend,
and for himself as well. Likes to try new
products. Shops mainly in Sephora.
43 Zoe Bajzik Marketing Assistant, 20 Loves skincare products. Sometimes shops
at Sephora, but she prefers Douglas.
Anna Gajdošová Sales Specialist, 22 Open to trying new cosmetics products.
Does not really care about where the
product is from. Wants to get to know new
trends.
Hang Nguyen Student, 20 Open to trying new cosmetics products,
Does not really care about where the
product is from.
Nina Nikoličová Receptionist, 21 Does not really like to experiment.
Purchases replacement products as soon she
runs out. Tends to stick to products that
have worked for her in the past.
Lesanka Student, 21 Open to trying new cosmetics products.
Barbuščáková Does not really care about where the
product is from. Wants to get to know new
trends.
44
The moderator of the focus group was the author of this thesis. Firstly, the author welcomed the group, then introduce the context of the focus group, and explained the purpose of the focus group. Next, participants were informed about the questions and materials prepared for them. And lastly, the moderator wrapped up the focus group by thanking the respondents for their participation and telling them how will data be used.
The focus group was held in March 2018 at the University of New York in Prague.
During the group interview, respondents had refreshments and snacks to ensure a pleasant atmosphere during the focus group. Questions were organized so the author could test the participants’ memory, recognition, competence, likes/dislikes, empathy with marketing communications, and questions posed by the moderator.
45 Questions asked during the focus group:
1. Where do you usually buy cosmetics products? If online, do you shop on Czech or
foreign websites?
2. What are the advantages of shopping at Sephora?
3. What are the disadvantages of shopping at Sephora?
4. What is the atmosphere like in Sephora stores?
5. Regarding product availability, are you satisfied with the range of products offered at
Sephora?
6. Have you joined the Sephora club, or do you have the Sephora loyalty card?
Do you use the discounts Sephora offers, either direct marketing or SMS messages?
7. Do you have an Instagram account? Do you follow @sephoraczechrepublic If so,
why?
Regarding Facebook, do you follow Sephora’s Facebook account as well? If so, why?
8. How do you think Sephora should improve their marketing communication?
46 4.3. Results of the research
Place
The majority of the respondents (five out of eight respondents) answered that they mainly shop for cosmetic products in Sephora, the remaining three respondents stated that they prefer to shop online, but only from Czech websites such as sephora.cz - Sephora's official online store, douglas.cz, sephora.cz, and notion.cz.
Even though shopping for cosmetics on the internet is more and more popular, the research shows that the majority of respondents prefer to buy products in Sephora stores rather than shop online (sephora.cz). The reason for this is that Sephora's online store
(sephora.cz) has the same prices as in the stores, where the customer can enjoy the in-store experience with additional services.
However, all of the respondents live in Prague which is a factor in the respondents’ preference for going to the actual store. It is not surprising that most of the respondents do not use online shopping that often. Most of the Sephora stores are located in Prague.
However, there are also a limited number of stores outside of Prague. Sephora offers many exclusive brands, and potential customers who do not live near any of the stores might find
Sephora's online store more convenient.
Only two respondents said that they purchase products online regularly; the rest said that they only make infrequent online purchases, or that they have never bought a cosmetic product online. Two respondents also mentioned drugstores: DM, Rossmann, and TETA.
Since cheaper products continue to increase in quality, it seems reasonable to include drugstore chains too. Even though drugstores do not offer luxury products like Sephora does,
47 the quality of some of their products are almost comparable. Not surprisingly, respondents like to shop at the drugstores as well.
Habits, behavior, and decision – making
Five out of eight participants responded that they tend to stay with the same products and do not like to experiment with new products. Respondents also mentioned that they appreciate touching and trying the product personally and getting help from beauty consultants. However, even after getting the in-store experience, half of the respondents still tend to purchase the cosmetics products somewhere else afterwards (online, other stores where they can find it at a cheaper price).
One respondent added, "If I have doubts about whether I should buy anything or not, the price is the key thing I look at." Another respondent added: "Exactly! Price-performance ratio is what I am looking for!" Respondents also shared the same opinion about beauty consultants. They all like to decide for themselves and decide whether they want to purchase the product or not on their own. They do not like the sales pressure of beauty consultants influencing their decision.
The perception of the brand
Respondents of the focus group shared different opinions about their perception of the brand. Respondent 1 said, “I don’t like the atmosphere in the store. There are always so many people. There’s too much stuff, and it takes a long time to find what I need. It is too much.” Respondent 2 added to this opinion, “Exactly. For example, when I go to Douglas, it is much easier to find what I need. I find that they organize products better than Sephora
48 does. The atmosphere is more relaxed; the lighting is better than Sephora's lighting. I find
Sephora’s black and white stripes unpleasant because it makes the store dark.”
However, Respondent 3 had the opposite opinion. She said: “Really? Oh, I find Douglas or
Marrionaud more …posh. I think that Sephora does what it’s supposed to do. I admit that the store is overloaded with a lot of products. But that is a good thing for consumers, isn’t it? So people can choose from a wider variety of products.” Respondent 4 added, “I agree. But I think that Sephora in the Czech Republic is still kinda late. In the US people have a significantly larger range of products. We are still missing a lot of products in the Czech
Republic. I would appreciate it if Sephora could expand their portfolio in our country as well.”
The discussion continued with a comment by Respondent 5 who thought that Sephora in the Czech Republic probably cannot reach the same high sales that it does in the US, and, therefore, Czech Sephora cannot afford to have as many products as in the US.
Overall, half of all the respondents found their perception of the brand to be positive, while the other half found it to be negative. Some respondents thought that Sephora was cheap, while other respondents thought that Sephora was more expensive. Other positive aspects that respondents identified in the brand were: range of products, an organized layout of the products, good quality customer service, and services that were perceived to be better than their competitors.
The research suggests that the main advantage of Sephora is the wide range and high quality of products. Research has also shown that in-store marketing is important for customers too. Moreover, the majority of respondents found that Sephora has more events and discounts than their competitors—discounts such as two-for-one, 25% off for their exclusive products, etc.
49 The research has shown that Sephora's main disadvantage is that both existing and potential customers consider the price of products to be relatively high. Respondents also mentioned that if they left the store without buying anything, it was because they found the products to be too expensive. The other negative aspect that respondents identified was that
Sephora is not available in some large and smaller cities in the Czech Republic, which they consider a weakness of the brand.
Loyalty program Sephora Club
Four out of eight respondents had the Sephora Club loyalty card; one of them also had loyalty cards from Sephora's competitors (Marrionaud and Douglas). These respondents joined the club(s) with the expectation of receiving discounts for their purchases. The loyalty program includes discount actions sent via SMS to customers. Respondents mentioned that by becoming a member of the loyalty club, they regularly receive direct SMS messages with discounts and invitations for upcoming events.
Applying these discounts is part of a good marketing communications strategy, encouraging customers to visit the store and potentially purchase products.
Only three respondents said that they do not use discounts. The remaining one respondent noted that she is not a member of any loyalty club, but she occasionally uses her friends' discounts to buy products (but only when she needs something).
50 Suggestions for improving marketing communications
Respondents mentioned that they have experienced poor customer service from beauty consultants and did not like their attitude and motivation to work. Therefore, respondents suggested that the company needs to improve training and qualifications for their employees.
They also mentioned that the staff sometimes watches the customers too much, making the customers feel uncomfortable and unreceptive to the experience of shopping. For that reason, the respondents think that the staff should change their approach to customers.
One respondent said that she would like to receive more free samples. Four respondents showed an interest in discount events because of the high prices of products.
51 4.4. Conclusion of the research
This subchapter summarizes the results of the primary research. The following lines offer not only answers to each individual hypotheses, but also provide significant, detailed findings for this research.
Hypothesis 1: Respondents do not shop at Sephora due to the high prices of products.
This hypothesis was confirmed. The main negatives that existing and potential customers recognize in Sephora are the high prices of products. Sephora attempts to bring its customers closer and at least partially shift their perception of the brand from "expensive" to
"more accessible" through discount promotions. Whether its discount cards with a discounted percentage paid by the hostesses or one-plus-one types of events free of charge or by the action benefits of membership in a loyalty club, Sephora is trying to motivate customers to buy.
As mentioned in the first chapter, discounts are not always the most appropriate marketing tool; it is important to note the research indicating that Sephora's discounts do not noticeably diminish the premium of its assortment. Most customers view the products as quality items. Research has also shown that customers do not perceive discounts as the most enticing motivator for them to buy cosmetics in the marketplace. However, although roughly half of its customers admit that Sephora is "expensive," there are still some stronger positive factors that appeal to customers even more than discounts.
52 Hypothesis 2: Respondents shop at Sephora because it offers a wide range of products.
This hypothesis was confirmed. Research has shown that the main reason for customers to visit Sephora is the wide range of products. The style of communication through which new and exclusive products (or services) of the highest quality can be emphasized could further enhance Sephora's marketability. This is evidenced by the large percentage of customers that believe the quality and broader range of products together with superior service are the main advantages of Sephora—advantages that its competitors lack.
Customers who see no difference between Sephora and its competitors should be better informed about the brands’ respective qualities.
Another factor that makes Sephora attractive to customers is its in-store marketing. This includes both services and a positive attitude. It is clear, then, that marketing and communication activities in stores are crucial to Sephora. The research has shown that in- store marketing is an essential factor for customers trying to deciding whether or not to purchase a product.
In the future, it would be beneficial for Sephora to focus on marketing and further improve its marketing strategies. Based on this research, it may be advisable to give some attention to the diffusion of fragrance in the stores (some customers find the fragrances in the shop to be overwhelming), simplicity (the space is too crowded and colorful), sounds and lighting (some respondents said that they find the music to be too loud and that the fluorescent lamps to be unpleasant).
53 Hypothesis 3: Respondents use online shopping much more frequently than direct shopping.
This hypothesis was confirmed. Purchasing online is one of the most frequently used methods of shopping. For members of the loyalty club, this is the second most commonly used shopping platform. For non-members of Sephora clubs, buying online is the number one choice. The main finding was that, all participants of the focus group who buy luxury cosmetics online prefer Czech Internet shops to foreign ones.
Hypothesis 4: Respondents who joined the loyalty club tended to show more loyalty to the company than those respondents who did not.
This hypothesis was confirmed. If the research results are generalized again, Sephora loyalty club members are likely to remain faithful to their brand, and they will most likely buy in Sephora stores. Conversely, in the case of non-members, there is virtually no chance for Sephora network stores to become the most common place for them to buy luxury cosmetics and perfumes.
The research, therefore, suggests that it would be best for Sephora to focus on its primary base, namely, its loyalty club. It would be worth the brand’s time and money to further invest in, and promote, this loyalty program to maximize its performance. Loyalty
Club Sephora is becoming an important marketing-communication tool that can be addressed on a regular basis by existing customers. Benefits resulting from membership naturally become a motivating factor for non-members to become members.
54 5. Evaluation and Recommendations
The right target group is essential to define the right marketing strategy. Sephora includes more and more available quality brands into its product range and extends the portfolio for potential customers with a lower income to be able to afford their products. In the Czech Republic, the main target group is still women. Since men still do not pay enough attention to cosmetics, we cannot include them as a part of the target group.
Internet stores offer a big part of Sephora's product portfolio for significantly lower prices. This is a major threat to Sephora. However, Sephora’s great advantage is the guarantee of quality, prestige, and name. Some online stores cannot guarantee the product quality and authenticity of the offered brands. This fact has been confirmed by some of the participants of the focus group who said that they were not satisfied with their internet purchases.
Therefore, it is relevant to build marketing communications strategies based on the quality of the product and guarantee of authenticity. Another threat mentioned in the research is the growing competition of drugstores, their lower prices, and the increasingly higher quality of the products offered. Sephora still lacks emphasis on its product quality.
One of the disadvantages of Sephora shops that was repeatedly expressed during the focus group surveys were complaints about the staff. It was not about the lack of attention shown to the customer, but rather about too much attention shown to the customers. Sephora applies its strategy globally, and the staff is trained the same way in the Czech Republic as in the United States. However, we have to consider the cultural differences between those two countries. Sephora should adapt its employee behavior strategy to the location where it operates. In the Czech Republic, people do not seem to connect with strangers, and outgoing behaviors from strangers may be perceived as strange, annoying, or offensive. Therefore, the
55 author suggests Sephora adapt its staff training to accommodate the Czech mentality.
The research has shown that the loyalty program has a positive influence on the consumer's buying behavior. Respondents said that they do use discount and promo codes.
Therefore, Sephora should focus on the loyalty benefits more, as customers seem to appreciate them. The focus group primary research also showed that some respondents said that they would like to be more informed about new products and other offers. Another recommendation would be to send free samples to the loyal customers of the Sephora Club.
Adding samples of new products to the catalog which Sephora regularly sends will most likely increase sales and customer loyalty. If it is not possible to send the free samples for logistical or technical reasons, the alternative solution could be to send customers vouchers, so they can pick up free samples up in any Sephora store. Customers will be more likely to visit the stores and potentially use other services too.
The next suggestion regarding the loyalty program would be to give customers a voucher to get a free service. These vouchers will increase regular visits to Sephora's stores and give customers the ability to further influence the purchase of products. Sephora now offers more services, but not all services are available at all stores. Sephora's website claims that the brand offers six services. The first is the Color Profile service, which determines the customers’ optimal shade of makeup for their skin. Sephora also offers a Make-up Bar service where customers can choose from four makeup styles for free. The company also organizes
VIP days in cooperation with a particular brand. The Benefit brand offers eyebrows and facial hair treatments at some branches, for a fee specified by the service's specifications. The last service is a gift packaging service.
56 As mentioned before, the services are limited regarding the location and quantity. A suggestion would be to extend the number of services (i.e. offer more makeup services free of charge). VIP days are a useful service and marketing communication tool. Unfortunately, even the members of the loyalty program often do not know about these events. It is recommended that Sephora communicate about these events more actively and give greater attention to their loyal members using direct marketing tools.
Even though the main target group actively uses social media platforms, not all of them follows the Sephora social media accounts because they do not know about them.
Sephora should communicate and draw more attention to their social media accounts so they can participate in competitions, be informed about company news and provide valuable feedback on all aspects of the company's business.
57 Conclusion
This thesis confirmed the importance of marketing communications strategies in the cosmetics industry. The industry has undergone huge developments over the years, and its marketing communication has become a vital part of this large enterprise.
The beginnings of, what are now, current marketing practices in the cosmetics industry were evidenced at the turn of the last century. New communication channels, such as women's magazines, started to be used, thanks to the development of media and technology.
Department stores utilized their spaces to explore new methods of in-store marketing, whose primary goal today is to provide added value in the form of an enhanced customer experience.
For the first time, the price of luxury cosmetics worked in favor of the distributors, and discounts were viewed as an inadequate tool for customers who equated price with quality.
Investments in sales promotion began increasing, and brands started to strategically associate themselves with the names of celebrities and other prominent personalities.
Currently, these practices can also be enhanced with targeted support for selected online communities and beauty influencers. The image and PR of brands also started to be watched.
The main focus was on the product itself, especially its packaging. For example, there were limited editions to increase the appeal of the brand, and great attention was placed on the needs and wishes of customers. Today, the needs and wishes of customers are the base for marketing strategies and are constantly monitored through market research and analyses of buying behavior.
The research has also shown that cosmetics market in the Czech Republic has potential for growth as the economy prospers. It is expected that the market will grow even faster in the coming years.
58 The research has also identified main competitors of Sephora. Because the Sephora range of products is made up of luxury cosmetics, their competitors can be defined through their distribution of the same goods or focusing on the same range of products. Sephora’s main direct competitors are Douglas, FAnn Parfumerie, and Marrinoaud. All of them offer a variety of perfumes and cosmetics. Likewise, while all of them offer products that their competitors have as well, they also offer exclusive products that other competitors do not have.
Because Sephora is running an online store in the Czech Republic, it also has internet stores among its competitors, of which Sephora's biggest Czech online competitor is
Notino.cz, the largest online cosmetics retail store in the Czech Republic. The research shows that Czech online stores have become one of the most frequently used sales channels. The research has also shown that respondents of the focus group prefer Czech online stores rather than the online stores from abroad. Even though Sephora is constantly faced with a lot of competition, as mentioned in Industry Analysis, according to annual reports sales have increased steadily over the period 2010 – 2015. Its success is undoubtedly due to its marketing and communication activities.
The next effective marketing communication is the loyalty club, the importance of which the research presented in the last chapter of the thesis. It is in the loyalty club that there is also a relatively common practice for direct marketing. The research, therefore, suggests that it would be best for Sephora to concentrate primarily on its loyalty club base. The brand would find it worthwhile to invest in this loyalty program and promote its performance.
Loyalty Club Sephora has become an important marketing-communication tool that can be accessed on a regular basis by existing customers. Benefits resulting from membership naturally become a motivating factor for non-members to become members.
59 The research has shown that Sephora's main disadvantage is that both existing and potential customers consider the price of products to be relatively high. Respondents of the focus group also mentioned that if they left the store without buying anything, it was because they find the products too expensive. The other negative aspect that respondents identified was that Sephora is not available in some large and smaller cities in the Czech Republic, which they consider to be a weakness of the brand.
This qualitative research itself has shown, among other things, that when choosing cosmetics, respondents are often conservative and rely on tried or recommended brands.
Customers' professional advice from sales consultants and direct contact with the product are very welcome. Conversely, a factor that can discourage the purchase is too much pressure to buy from the consultants. Last but not least, it has been confirmed that the deciding factor in the choice of place of purchase is clearly the price. Respondents also mentioned that they see
Sephora's unavailability outside Prague as a disadvantage. Sephora's attitude to design and image varied among focus group respondents. It has been proven that Sephora's key positives are high quality, wide range, and in-store marketing. Positives were mainly indicated by the variety of services offered at stores.
In conclusion, Sephora has a clear commitment to integrated marketing communication, which is very important. The Sephora communication style has been objectively evaluated as dramatic, but quite simple, consistent, and constant. Sephora also has a long-standing support infrastructure for image building. The qualitative research itself has shown, among other things, that when choosing cosmetics, respondents are often conservative and rely on tried or recommended brands. Last but not least, it has been confirmed that the deciding factor in the choice of place of purchase is clearly the price.
Respondents also mentioned that they see Sephora's unavailability outside Prague as
60 problematic. Sephora's attitude to design and image varied among respondents. The research showed that Sephora's key positives are high quality, wide range, and in-store marketing.
This thesis has described the marketing communication of Sephora and its effectiveness on the Czech market and identified the habits and behaviors of the customer.
61 Bibliography
50MINUTES.COM. (2015). The Marketing Mix: Master THE 5 Ps OF Marketing.
Aktuální populační vývoj v kostce | ČSÚ. (2018). Czso.cz. Retrieved 13 April 2018, from
https://www.czso.cz/csu/czso/aktualni-populacni-vyvoj-v-kostce
Bannerman, L. (2004, Apr 26). Estee lauder - queen of cosmetics who began her business in
kitchen; marketing mogul created billion dollar global brand. The Herald Retrieved
from https://search.proquest.com/docview/332997822?accountid=17238
Bannerman, L. (2004, Apr 26). Estee lauder - queen of cosmetics who began her business in
kitchen; marketing mogul created billion dollar global brand. The Herald Retrieved from
https://search.proquest.com/docview/332997822?accountid=17238
Beauty and Personal Care in the Czech Republic. Euromonitor.com. (2017) Retrieved 15 April
2018, from http://www.euromonitor.com/beauty-and-personal-care-in-the-czech-
republic/report
Beirne, K., & Ford, J. (2014, Nov 15). How YouTube is taking a bite out of TV. Financial
Times Retrieved from
https://search.proquest.com/docview/1636344479?accountid=17238
Biography - Helena Rubinstein - Australian Dictionary of Biography. Adb.anu.edu.au.
Retrieved 15 April 2018, from http://adb.anu.edu.au/biography/rubinstein-helena-
8293/text14535,
Bird, S. (2004). Marketing Communications. Juta and Company Ltd.
62 Customer loyalty and customer loyalty programs. (2003). Journal Of Consumer
Marketing, 20(4), 294-316. http://dx.doi.org/10.1108/07363760310483676
Czech Republic: number of social network users 2015-2022 | Forecast. (2018). Statista.
Retrieved 13 April 2018, from https://www.statista.com/statistics/568879/predicted-
number-of-social-network-users-in-czech-republic/
Detailed View of History of Cosmetics. Historyofcosmetics.net. Retrieved 14 April 2018, from
http://www.historyofcosmetics.net/cosmetic-history/history-of-cosmetics/
Detailed View of History of Cosmetics. Historyofcosmetics.net. Retrieved 14 April 2018, from
http://www.historyofcosmetics.net/cosmetic-history/history-of-cosmetics/
Douglas Corporate: Über uns. (2018). Corporate.douglas.de. Retrieved 15 April 2018, from
http://corporate.douglas.de/de/ueber-douglas/unternehmensprofil/ueber-uns/
Elizabeth Arden. Biography. Retrieved 13 April 2018, from
https://www.biography.com/people/elizabeth-arden-9187777
Forbes Welcome. (2018). Forbes.com. Retrieved 13 April 2018, from
https://www.forbes.com/sites/walterloeb/2013/04/18/sephora-department-stores-cannot-
stop-its-global-growth/
Gregory, A. (2000). Planning and managing public relations campaigns. London: Kogan Page.
Gupta, S. (2003). Event Marketing: Issues and Challenges. Pdfs.semanticscholar.org.
Retrieved 15 April 2018, from
https://pdfs.semanticscholar.org/3835/3446664bc4dc06dbbc0f9c06998d853eb727.pdf
63 Helenarubinstein.com. (2017). Helena Rubinstein - Power Beauty Since 1902. [online] Available
at: http://www.helenarubinstein.com/ [Accessed 30 Nov. 2017].
How Millennials Like Their Makeup | The New Yorker. (2017). Newyorker.com. Retrieved 13
April 2018, from https://www.newyorker.com/magazine/2017/09/25/how-millennials-
like-their-makeup
Inside cosmetics brand Too Faced's winning Instagram strategy. (2018). Digiday. Retrieved 13
April 2018, from https://digiday.com/marketing/inside-cosmetics-brand-faceds-
winning-instagram-strategy/
International directory of company histories. Volume 63 (eBook, 2004) [WorldCat.org].
(2004). Worldcat.org. Retrieved 13 April 2018, from
http://www.worldcat.org/title/international-directory-of-company-histories-volume-
63/oclc/433314860
International directory of company histories. Volume 63 (eBook, 2004) [WorldCat.org].
(2004). Worldcat.org. Retrieved 13 April 2018, from
http://www.worldcat.org/title/international-directory-of-company-histories-volume-
63/oclc/433314860
J. R. Poynter, 'Rubinstein, Helena (1870–1965)', Australian Dictionary of Biography, National
Centre of Biography, Australian National University,
http://adb.anu.edu.au/biography/rubinstein-helena-8293/text14535, published first in
hardcopy 1988, accessed online 1 December 2017.
64 Jones, G. (2011). Beauty Imagined: A History of the Global Beauty. New York and Oxford:
Oxford University Press, 2010. xiv + 412 pp.$45.00, cloth. Administrative Science
Quarterly, 56(2), 314-316. http://dx.doi.org/10.1177/0001839211430078
Kotler, P., & Armstrong, G. (1999). Principles of marketing. Upper Saddle River, NJ: Prentice
Hall.
Kotler, P., & Armstrong, G. (1999). Principles of marketing. Upper Saddle River, NJ: Prentice
Hall.
Lee, O. (2000). Internet Marketing Research: Theory and Practice.
Lorenc, J. (2017). Jak se daří jednotlivým sociálním sítí v České republice?. cz.linkedin.com.
Retrieved 13 April 2018, from https://cz.linkedin.com/pulse/jak-se-
da%C5%99%C3%AD-jednotliv%C3%BDm-soci%C3%A1ln%C3%ADm-
s%C3%ADt%C3%AD-v-%C4%8Desk%C3%A9-republice-jakub-lorenc
Marionnaud Parfumeries. (2018). Marionnaud.cz. Retrieved 15 April 2018, from
http://www.marionnaud.cz/o-nas.php
Miller, L. (2003, Apr 05). Powder puffs, lipstick and mascara at dawn the dual biography of
helena rubinstein and elizabeth arden is also a sociology of beauty, says lucasta
miller. The Daily Telegraph Retrieved from
https://search.proquest.com/docview/317728891?accountid=1723
Mzdy - vývoj mezd, průměrné mzdy 2018 - 5 let. (2018). Kurzy.cz. Retrieved 13 April 2018,
from https://www.kurzy.cz/makroekonomika/mzdy/
65 Nezaměstnanost v ČR, vývoj, 2018 rok 2018 – 5 let, Míra nezaměstnanosti v %.
(2018). Kurzy.cz. Retrieved 15 April 2018, from
https://www.kurzy.cz/makroekonomika/nezamestnanost/
O nás - FAnn parfumerie. (2018). Fann.cz. Retrieved 15 April 2018, from
https://www.fann.cz/o-nas
Our Heritage | Max Factor. (2018). Maxfactor.com. Retrieved 13 April 2018, from
https://www.maxfactor.com/uk/our-story/our-heritage
Sephora - Společnost Sephora. (2018). Sephora.cz. Retrieved 13 April 2018, from
http://www.sephora.cz/entreprise/entreprise.jsp
Statista. (2017). Market size for cosmetics and toiletries in the Czech Republic from 2014 to
2017. Retrieved from https://www.statista.com/statistics/710018/market-size-for-
cosmetics-and-toiletries-czech-republic/
Stone, C. (2013). Helena Rubinstein, the penniless refugee who built a cosmetics empire.
Retrieved from https://www.express.co.uk/life-style/style/384696/Helena-Rubinstein-
the-penniless-refugee-who-built-a-cosmetics-empire
Suttner, C. M., Akridge, J. T., & Downey, W. D. (1993). Value-based pricing (part 3).
AgriMarketing, 31(9), 20. Retrieved from
https://search.proquest.com/docview/214009323?accountid=17238
Tannen, M. (1996). The Man Who Made the Faces Up. Nytimes.com. Retrieved 13 April 2018,
from https://www.nytimes.com/1996/12/29/magazine/the-man-who-made-the-faces-
up.html
66 Taran, Z. (2015). Branded Beauty: How Marketing Changed the Way We Look. Journal Of
Consumer Marketing, 32(4), 305-306. http://dx.doi.org/10.1108/jcm-09-2014-1123
Thamaraiselvan, N., Arasu, B. S., & Inbaraj, J. D. (2017). Role of celebrity in cause related
marketing. International Review on Public and Non - Profit Marketing, 14(3), 341-357.
doi:http://dx.doi.org/10.1007/s12208-017-0176-0
The Brand. (2018). Helenarubinstein.com. Retrieved 13 April 2018, from
http://www.helenarubinstein.com/int/brand-page.html
The European cosmetics market slows down in 2016. (2018). Premium Beauty News. Retrieved
13 April 2018, from http://www.premiumbeautynews.com/en/the-european-cosmetics-
market,11804
Toiletry, cosmetic and perfume market 2020 - industry size, growth and forecasts report by
radiant insights,inc. (2016, May 03). M2 Presswire Retrieved from
https://search.proquest.com/docview/1785931336?accountid=17238
Toiletry, cosmetic and perfume market 2020 - industry size, growth and forecasts report by
radiant insights, inc. (2016, May 03). M2 Presswire Retrieved from
https://search.proquest.com/docview/1785931336?accountid=17238
Tubefilter. (2017). Report: YouTube Generated $4 Billion In Revenue In 2014. [online]
Available at: http://www.tubefilter.com/2015/02/26/youtube-2014-revenue-four-billion/
[Accessed 30 Nov. 2017]
Tungate, M. (2012). Branded Beauty. London: Kogan Page.
67 Varey, R. (2011). Marketing communication. Johanneshov: TPB.
68