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Essay: Hair Dye Start-Up Proposal

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  • Published: 3 October 2022*
  • Last Modified: 22 July 2024
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  • Words: 2,884 (approx)
  • Number of pages: 12 (approx)
  • Tags: SWOT analysis examples

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Executive Summary: The hair colour market is ripe for radical disruption. Established players such as L’Oreal Paris have stagnated as innovation in the hair dye market has declined, and brands have increasingly come to rely upon clichéd celebrity endorsements. New trends such as splat dye and tie-dye – increasingly popular among young women – have taken L’Oreal Paris by surprise. The brand’s current offering for younger consumers only changes hair dye by two shades. As such, there is a clear opportunity for an insurgent brand to disrupt the hair colour market by making a bold new offering to younger consumers. This offering should focus upon the nascent tie-dye and splat dye markets. There is strong evidence, supported by leading publications such as Cosmopolitan magazine, that splat dye and tie-dye are long-term trends rather than mere passing fads. As such, there is a long-term value proposition for any new entrant in this market, especially given the lack of a compelling alternative offer from existing players.

Accordingly, this report advocates an insurgent strategy intended to capitalise on the market niche left unoccupied by L’Oreal Paris. Our offering should offer tie-dye and splat dye products to young urban women in the U.S. and UK, using these segments as a springboard to the rest of the world. It is proposed to build a youthful, edgy, urban brand personality by building up brand awareness using social media, peer-to-peer word of mouth communication, and blogger endorsements. With a highly competitive price point and a young, radical image in an increasingly important new market segment, there is every reason to believe that our offering will enjoy dramatic success.

Hair Dye Start-Up Proposal

1. SWOT analysis for L’Oreal Paris in the hair dye market.

This section applies SWOT analysis to the position of L’Oreal Paris in the hair dye market. SWOT (strengths, weaknesses, opportunities, and threats) is a useful tool for strategy analysis and development (Sarsby, 2016, p. 3). Indeed, Bohm (2009, p. i) suggests that SWOT analysis is ‘one of the most important instruments for the internal analysis of a company’s situation’.

In terms of strengths, L’Oreal possesses a number of clear advantages in the hair dye market. First, it is arguably the established player in the market: two of its brands rank in the top three brands in the world for hair care products – L’Oreal Paris ranks first and holds 7.6 per cent of the market, while Garnier (also a L’Oreal brand) ranks third with 5.1 per cent of the market (Case Study, pp. 2-3). Moreover, the L’Oreal Paris brand focuses strongly on hair dye, whereas the rival Procter & Gamble (P&G) brand (ranking second in the global market for hair care products) includes shampoo, conditioner and styling products but not hair dye. Clearly, therefore, L’Oreal is the standout player in the hair dye market.

Another important strength for L’Oreal is its reputation for research and innovation. Indeed, it was L’Oreal’s founder Eugene Schueller who patented an innovative new hair dye in 1908 and first commercialised hair dye as a product (Haig, 2006, p. 21). L’Oreal also invented bleaching powder in the 1930s, which allowed women to dye their hair more safely. In addition, L’Oreal was integral to the 1950s hair dye revolution which saw the number of steps to dye hair reduced from five to one (Case Study, p. 2). In sum, therefore, L’Oreal possesses a strong reputation for research and innovation.

This leads onto another strength: L’Oreal possesses a sense of heritage and tradition that rival brands in the hair dye market struggle to match. For the L’Oreal brand has historically been founded upon hair dye in a way that the brands of rival firms, such as P&G, have not. The role of Eugene Schueller, for instance, offers a fantastic backstory for marketing purposes. This sense of tradition gives L’Oreal Paris a certain kudos and cachet, which allows it to win a loyal customer base, especially in its home western European market.

For all its undoubted strengths, however, L’Oreal also possesses a number of significant weaknesses. First, its rate of innovation has slowed markedly in recent decades, as scientific progress in the hair dye sector has stagnated. As the case study (p. 4) makes clear, the hair colour market in 2011 ‘lacked sparkle’, with innovations ‘scarce’ and marketing strategies mostly revolving around celebrity endorsements. A reputation for innovation is only useful if it can be sustained, and this is clearly a problem for L’Oreal.

Second, L’Oreal is clearly weaker in certain regions of the world than in others. Although undeniably strong in western Europe, L’Oreal ranks only second behind Unilever’s Sunsilk brand in Latin America. The case study does not mention Asia, but there are likely to be many new consumers in that region who lack brand loyalty to established players like L’Oreal and may instead be more open to rival and relatively less heralded brands. Although L’Oreal is clearly the leading global player, therefore, its position is relatively stronger in Europe than elsewhere in the world.

Finally, and perhaps most importantly, the L’Oreal Paris brand is arguably somewhat staid and out of date. Its most youthful sub-brand, the Casting Crème Gloss brand, targets consumers in their 20s, but only changes hair by one or two shades. As such, it is arguably poorly positioned to capitalise on trends such as sprat dye or tie-dye. On the face of it, L’Oreal’s brand offering has failed to keep pace with changing trends among younger consumers.

In terms of opportunities, there is clearly scope for L’Oreal to leverage its research and brand strengths in order to gain further market share vis a vis its rivals. The hair care market is relatively fragmented, with the top brands all holding less than 10 per cent of the total market. The new hair colour trends, notably ombre, tie-dye and splash dye, thus offer the opportunity for fast-moving firms to take advantage and secure new market share from slower-moving rivals. Change creates opportunity, and consumer preferences do indeed appear to be – so long, that is, as they are genuine trends rather than mere fads – changing.

There are also other notable opportunities. One is the world’s ageing population (United Nations, 2018), which is likely to increase the size of the market for hair colour given that the prime motivation for many consumers to purchase hair dye is to cover grey hair. This is especially true for women over 50, who make up 70-80 percent of the hair colour market (Case Study, p. 3). This market segment will grow as the world’s population ages.

Another opportunity is the male hair colour market. In Europe, 60 per cent of women colour their hair, but only 5-10 per cent of men (Case Study, p. 3). Increasing this proportion of male hair dye users will not be easy given prevailing cultural norms, but there is clear scope to do so, especially given the growth in the size of related segments such as the male cosmetics market (Whipp, 2017). Even if the number of male hair colour users increased to only 15-20 per cent, this would still make a dramatic difference to the L’Oreal bottom line.

As well as opportunities, there are also threats to L’Oreal’s position. One such threat is that changing consumer trends like the growing use of splat dye may leave L’Oreal behind. This is the flip side of L’Oreal’s reputation for heritage and tradition: it arguably lacks the cutting edge and ‘cool’ factors that play an increasingly important role in driving purchases among younger consumers in particular (van den Bergh and Behrer, 2016). This threat of being overtaken by younger, more on trend rivals is arguably accentuated by the growing prevalence of social media and online marketing (Bird and McEwan, 2011; Shankar and Batra, 2009).

2. SWOT Analysis of the Social Media Presence of L’Oreal Paris

L’Oreal clearly has some important strengths in its approach to social media. Notably, it has partnered with Google to research what consumers search online and talk about when looking for information related to hair. This offers the company useful insight into social media activity. L’Oreal’s significant size and plentiful resources clearly enable it to take a proactive and ambitious approach to social media.

Also in terms of strengths, L’Oreal clearly takes social media seriously: its marketing team has undertaken a specific analysis of social media data and sought to identify what added value it can bring to consumers. As well as capability, therefore, L’Oreal clearly also has the intent and willingness to improve its social media presence.

However, L’Oreal’s principal weakness in terms of its social media presence is its relative lack of understanding of how it can leverage social media. It is evident from the Case Study that L’Oreal is struggling to understand how social media can best be leveraged for commercial purposes. The marketing team appears to be very much at the questions stage rather than the answers stage. Indeed, the team is not even sure who it should be talking to – whether, for example, it should engage with hairdressers, consumers, journalists, fashion leaders, or some combination of all of these groups (Case Study, pp. 7-8).

Nor is the L’Oreal team clear how it should use social media to push its brand to consumers. It has floated three options – using social media, consumers, or a peer-to-peer platform for consumers – but has not decided upon any of them. This reflects another weakness: L’Oreal’s marketing strategy needs to work for the entire world, as its new product will be launched worldwide. This makes it less agile than its smaller competitors, who can tailor their messages to a specific market. In sum, therefore, there is as yet no clear plan for how to take L’Oreal forward in the changing social media landscape.

The opportunities created by social media are relatively straightforward. First, social media allows companies such as L’Oreal to find out more than ever before about what consumers want and what they are talking about (de Vries et al., 2012). This might be termed the ‘listening’ aspect of social media. At the same time, secondly, social media also enables L’Oreal to push its message directly to consumers. This is the ‘talking’ aspect. By combining the two aspects, brands such as L’Oreal Paris can interact with consumers more closely than ever before.

In terms of threats, there is a risk that the growing importance of social media will favour smaller, more agile brands rather than major established brands like L’Oreal. It is evident, for instance, that start-ups such as Julep and JolieBox have already stolen a march on L’Oreal Paris through their innovative use of social media for marketing purposes. There is a risk that social media will accelerate the rate of change in the hair colour market in ways disadvantageous to L’Oreal and its brands. The need to craft a global message is likely to slow L’Oreal down still further as it struggles to find a message that works in all regions.

3. Marketing Campaign to Challenge L’Oreal Paris

In light of the above SWOT analyses, it is proposed to adopt the following plan to take on L’Oreal by capitalising on a niche that its brands currently fail to penetrate – namely the splat and tie-dye hair colour market among young women in their late teens, 20s and 30s. The value proposition here is that these markets are much less captured by L’Oreal Paris than the more traditional hair colour products bought by older consumers. None of L’Oreal Paris’s three main brands adequately provide for splat dye or tie-dye, with its most youth-focused product – Casting Crème Gloss – only changing hair colour by two shades. There is thus a clear opening for an edgy new brand to win significant market share among the youth market.

In addition, the tie/splat dye market is highly promising in terms of future growth. Stars with tie-dye colours, like Katy Perry and Nicki Minaj, have received significantly more attention than celebrities with ombre or traditional styles in recent times (Case Study, p. 7). Further, industry publications such as Fashionista.com and Cosmopolitan magazine have also argued that tie-dye, rather than ombre dye, is the future of hair colour. This offers credence to the view that tie-dye and splat dye are trends rather than fads.

The brand personality – which refers to the human-style attributes of the brand (van Gelder, 2005: 41) – of the new product should be overwhelmingly youthful, urban and edgy. The clear aim should be to contrast our exciting new offering with the more staid and traditional offering of brands such as L’Oreal Paris. Our aim is to win market share among young urban women in their late teens and 20s. We particularly aim to target those at the ‘cooler’ end of the style spectrum, willing to make bold experiments with colour in their hair by using splat and tie-dye products.

In line with the above, the geographic focus will be on young women in the Western world, especially Europe and the United States. This is logical for several reasons. First, the splat dye and tie-dye trend is most established in these locations, associated in particular with ‘Anglo’ celebrities such as Katy Perry, Jessie J and Nicki Minaj. Second, these consumers will be easiest to target through new media channels due to their strong social media presence. Third, trends often begin in the U.S. and UK and spread elsewhere anyway, and thus focusing on these markets is the highest value proposition.

The brand will focus overwhelmingly on online communication channels rather than traditional media. The focus will be on generating a bottom-up, grassroots phenomenon whereby our product becomes a cult phenomenon among young urban women. By focusing on online and social media, we can act as an insurgent brand taking on the big established players such as L’Oreal Paris. We aim to contrast our youthful new offering against the more glossy image of brands like L’Oreal, who tend to dominate the advertising space on television and in high-end magazines. Given the strong interest magazines have in being on trend, it is highly likely that our brand will feature in such publications anyway in due course, especially if we are successful in creating a grassroots phenomenon.

In terms of our main message appeals, it is imperative that we craft messages that correspond with the overall youthful, edgy, and urban brand personality. We need to emphasise youth appeal, popularity appeal, and social appeal (Middleton, 2018). The aim is to make consumers feel like they are part of something bigger – a broader youth movement – when they buy our hair colour products. However, this needs to be achieved subtly; it is important not to be seen to be trying too hard to be cool or edgy. Peer-to-peer communication will be useful here since messages will often be more credible if they come from peers rather than directly from a brand.

One obvious method here is to use Twitter, Instagram and Facebook to popularise the brand. This is a highly effective option, according to a study by De Vries et al. (2012). In 2011, more than 50 percent of social media users followed brands on social media (van Belleghem et al., 2011). Further, informative ads are particularly well regarded by consumers – it, for instance, might be possible to devise advertising videos that also convey information about how to use splat dye (Taylor et al., 2011).

Furthermore, it is also recommended that we take two further steps to foster social contagion. First, we ought to find consumers willing to create a buzz about the brand (as L’Oreal Paris have considered doing in respect of their brand). This will help to create the peer-to-peer grassroots brand community we are hoping for (McAlexander et al., 2002; Muniz and O’Guinn, 2001). Word of mouth communication can create social contagion, which is highly desirable for marketing purposes (Chevalier and Mayzlin, 2006; Trusov et al., 2009; Aral and Walker, 2011). Second, we should target online bloggers who can talk about the product and spread awareness. Bloggers are preferable to celebrity endorsements because they are cheaper and arguably more effective (Stewart, 2016). The blogging option has been successfully used by Julep, a start-up similar to ourselves, who have targeted bloggers with free or discounted products and offered them a commission on sales made through their YouTube sites. Targeting consumers and bloggers, rather than traditional media or celebrities, also ties in with the brand’s youthful, insurgent personality.

Finally, pricing should be highly competitive. Given that the target market is young, it makes little sense to charge a premium relative to other, more established brands. Instead, we should look to enter the market at a price that is affordable to our predominantly youthful customer base. Splat dye ranges in price from $8.99 to $19.99 depending on the shade – we should aim to be nearer $9 than $20.

In summary, this report has advocated a cohesive and consistent strategy: to target young urban women with splat and tie-dye products. These consumers are ill-served by major brands such as L’Oreal Paris, and this provides a clear opening for our new product to take the sector by storm.

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