BOOTS: HAIR-CARE SALES PROMOTION

Situation

Boots, A best known and respected retailer and provider of health and beauty product in UK

primary objective was to drive sales volumes and trade-up consumers from lower-value brands, while retaining or building brand equity

Competitors

Mass market brands-P&G, ALBERTO-CULVER (UNITED KINGDOM), L’ORÉAL

Hair care product retailer- Tesco, Sainsbury’s and Morrison’s

Major hair care competitor- Superdrug

Consumers Not very brand loyal • Brands produced better results than continually using a single brand

• Trends in buying behaviour led to changing preferences

• It was difficult for consumers to identify meaningful differences between the various brands available in any given store

Questions

Decision Options

To redeem a coupon for getting 50p off on any product purchased

consumers to buy two hair-care items at regular price and receive one free

will be given a product sample for free along with a regular purchase.

Possible Criteria

• Driving Sales volumes in the current season

• Trade up Current consumers from low-value brands

• Maintaining Profits from the current promotions

• Secure market leadership in Hair care Retail segment ultimately.

Hypothesis

3 for 2 would be the best option for the promotional strategy selection

Offer type

Estimated Percentage increase in sales per day

Approximate Percentage of sales to customers

3 for 2 300 60

Gift With Purchase (GWP)

170 40

50p off per product.

150 50

Type of product

(A)

Offer type

(B)

Average pre-promotional price

(C)

Retailer Margin in per cent

(D)

Average Cost incurred per product(E)

Average cost incurred to boots for the items in offer. (F)

Price Paid after the promotion

Profit per product(H)= {(G)-(F)}

Premium

3 for 2 3.99 40 2.39 7.17 (per 3)

7.98 (per 2)

+0.81

Mass Market

3 for 2 2.00 25 1.50 4.50 (per 3)

4.00 (per 2)

- 0.5

Premium

GWP 3.99 40 2.39 2.39+0.9+ 0.03 =3.32

3.99 +0.67

Mass market

GWP 2.00 25 1.50 1.5+0.9+ 0.03 =2.43

2.00 -0.43

Premium

50p off 3.99 40 2.39 2.39 3.99-0.50 = 3.49

+1.10

Mass Market

50p off 2.00 25 1.50 1.50 2.0-0.50= 1.50

+0.00

Proof & Actions

The profit per product is 0.81£ in 3 for 2 promotion strategy.Per day profit= 300*0.81£ =243£For total December= 243*31days =7533£ (considering

consumers will go for only premium products due to offer season.)

Even if we consider there would be atleast one mass market product out of 3, the 300% percent increase in sales and 60% new consumer attraction would offset this.

Moreover, the firm has an advantage of pioneering technology which keeps the competitors from copying the strategy and this proves to be a huge advantage for Boots.

• The profit per product is 1.10 £ in 50p coupon off promotion strategy.•Per day profit= 150*1.1£ =165£

•For total December= 165*31days =5115£ (considering consumers will go for only premium products due to offer season.)

•In this case even if more number the consumers go for mass market products(0p loss per product), there is no chance of the retailer going into loss but it may result in decrease of profit.

•Although it may bring in 50% new customers, This strategy can be easily copied by competitors

• The profit per product is 0.67£ in Gift with purchase promotion strategy

•Per day profit= 170*0.67£ =113.9£

•For total December= 113.9*31days =3531£ (considering consumers will go for only premium products due to offer season.)

•In this case if more number the consumers go for mass market products(43p loss per product), it can push the firm into losses as there is no rule regarding least expensive product as in case of 3 for 2 option.

•Although it may bring in 40% new customers, This strategy can be easily copied by competitors.

Action PlanAfter calculating estimated profits and analyzing market share potential, The preference order of the implementing the 3 strategies would be: 1) 3 for 2

2) 50p off coupon

3) Gift with purchase

Summary

Situation QuestionsPossible criteriaHypothesisProofs & Action

Disclaimer

This presentation is prepared by Arvind Patel, student

of IIT Bombay, under the guidance of Professor Sameer Mathur, IIM Lucknow.