Abstract
Lush, a cosmetic company established in the United Kingdom, has seen great success internationally. Lush has witnessed success through their sale of organic and ethically sourced products. Furthermore, the organization has committed to advocating for environmental and social improvements. As a result, they have become an emerging leader in the cosmetic industry. Although they are rapidly growing, they must continue to adapt to changing consumer preferences and competition through product diversification, organic marketing, and in-store customer engagement.
Lush Cosmetics
Lush Cosmetics was founded in 1995 in Poole, United Kingdom (Lush, 2018). The organization was actually the third company founded by Mark Constantine and Rowena Bird after two failed business attempts. However, when Lush was created, they developed a philosophy centered around fresh ingredients and “naked” products. The concept of “naked“ products was centered around reducing the environmental footprint and reducing the costs relating to product packaging. The most notable product of Lush was the revolutionary bath bomb (Manga, 2013). The organization quickly gained support due to its goal of sustainability and eccentric products. Currently, there are more than 250 Lush stores throughout North America, and more than 650 stores throughout the world. In 2016, Lush had worldwide sales of 900 million dollars (Loeb, 2017). Moreover, in terms of store design, little has changed since the organizations conception (Lush, 2018). The consistency leads one to believe that Lush has nearly perfected the brick-and-mortar experience for its consumer base.
The mission of Lush is to produce handmade products that are made of natural ingredients and no preservatives. Furthermore, Lush is a strong advocate against animal testing. In some cases, the organization has refused to purchase supplies from suppliers who have a track record of animal testing or unethical sourcing (Kwan, 2018). Furthermore, Lush is committed to developing impoverished communities throughout the world through careful resource procurement and many other charitable efforts. Lush funds many of their charitable operations through their “Charity Pot” products. When “Charity Pot’ products are purchased, Lush donates 100% of profits to charitable causes (Lush, 2018).
Another important environmental cause Lush has recently gained momentum through is their refusal to use palm oil in their products. The cultivation of palm oil is considered to be one of the most detrimental factors in terms of deforestation and carbon emissions throughout South America. Lush has decided to be proactive in finding sustainable alternatives resulting in a great deal of media attention in recent years (Ritschel, 2018). Because Lush has become an industry leader in terms of environmental friendliness they often are the choice of millennials and generation Z.
The Vision of Lush is difficult, yet a worthy cause consumers seem to support quite passionately. The organization seeks to end all animal testing, reduce their carbon footprint, and embrace ethics. In a recent interview, the Ethics Director of Lush, Hilary Jones, noted that the organization has a vision of what their perfect company would be. However, they may never make it (Lush, 2018). Ultimately, she was implying that the organization is not perfect, and will never be. However, they are constantly trying to do the right thing. Therefore, the vision of Lush is to be an environmental and socio-ethical leader. With the millennial generation, the support for Lush’s visions are widespread. Also, the amount of support increases in urban areas (Pomarici & Vecchio, 2014).
Lush specializes in the sale of all-natural beauty and self care products (Crain’s New York Business, 2007). The most popular Lush products are bath bombs, shower bars, face masks, and cleansers (Steen, 2017). All of the products that Lush sells are handmade and use sustainably procured resources. Furthermore, because they have less chemicals and preservatives, Lush products are often able to be used by consumers with varying levels of skin sensitivity (Lush, 2018). Lush products have no preservatives resulting in shorter product life cycles. As a result the consumer often gets a sense that the products are more fresh and natural than competitors (Lush, 2018).
Just as stated with the vision, Lush’s goals are complicated and diverse. A few of their stated goals are to make the world cleaner, have fun, and ensure the fair treatment of animals (Lush, 2018). To begin, Lush has reduced their packaging to minimalistic packaging which both works as a marketing tool and achieves the goal of a smaller carbon footprint (Lush, 2018). Furthermore, their use of direct-sale method allows them to streamline their logistics system resulting in less waste in terms of transportation (Saltzman, 2017). Having fun is the ultimate goal of the Lush company, and can be seen all over their public statements and website. As a result, they are constantly emphasising the need for their sales associates to be upbeat and charismatic. Primarily, the key goals of the organization are to produce an organization that has a minimal impact on the environment.
Another noteworthy goal of Lush is their goal to grow their brick-and-mortar store success to match their rapidly expanding online presence. Some ways the organization is doing so is through the expansion of stores, increased interaction, and demonstrations (Saltzman, 2017). Currently, Lush stores are small and only allow a minimal amount of customers to enter at a time and interact with associates. As this store expands, it may make the consumer feel more comfortable. Consumer comfort is often directly involved with the environment of the store (Hunneman, Verhoef & Sloot, 2015). Consequently, the size of the store may actually increase sales. Both increased interaction and product demonstrations will likely increase customer satisfaction. Increased interaction through more associates will increase the level of customer service. Product demonstrations will allow the customer to see what they are getting before making a purchase. Through these combined efforts, Lush hopes to find strong growth in terms of profits and organic marketing.
Some core competencies for Lush include experienced management, influential brand values, and customer engagement. Lush’s original founder, Mark Constantine, is still extremely involved in the organization and its vision development (Sander, 2018). Furthermore, as stated previously, Mr. Constantine has started two companies in the same industry previously. As a result, he has developed a great deal of practical experience which is beneficial for the entire organization.
The values that are portrayed by the Lush company are embraced by consumers quite strongly. Since lush is a leader in the movement for cosmetic companies to be environmentally friendly and protect animal rights, consumers often choose them over other brands (Saner, 2018). Consequently, the organization can use its role as an industry ethical leader as a competitive advantage. Furthermore, the competency is more than sustainable due to their adoption of new causes regularly. Some causes that have been recently adopted are unethical police practices, the transgender movement, and denouncing the wrongful imprisonment of individuals based on ethnic identity (Saner, 2018).
Consumer engagement is by far one of the greatest competencies the Lush brand has. When entering a Lush store, one would quickly find friendly and helpful service, an intriguing space, and the ability to interact with the products in depth before making a purchase. Furthermore, the competency will become even greater after the initiatives the company has adopted are established. For example, the use of product demonstrations will only increase the consumer satisfaction and make product value expectations better match actual product value. It is also important to note that these product demonstrations allow associates to further interact with customers as they enter. As a result, the organization will experience a stronger stance in their competition with other organizations.
The products that are sold by Lush are all relatively unique to the industry. The organization specializes in handmade self care products made from all natural ingredients. Some products sold by lush include organic hair care products, skin care products, and fragrances (Lush, 2018). Furthermore, these products often are seasonal, leading to new version of the product being released often. Moreover, there are causes linked to many of the products such as the charity pot, which helps support impoverished communities throughout Africa (Lush, 2018). As a result, Lush often has higher earnings relating to these campaigns that are linked to charity contributions. It is proven that American consumers will often pay higher prices for the same product if it contributes to a charitable cause (Elfenbein & McManus, 2010). Consequently, Lush’s sales have benefited greatly from their focus on supporting emerging causes and creating unique products to further identify with them.
Apart from creating unique products to match current trends, Lush has successfully developed a strong pricing strategy. Lush charges prices many times higher than competitors. On average, the price of a bath bomb or shower bar ranges from four to fifteen dollars (Lush, 2018). However, because of the exceptional in-store experience and ethical campaigns, consumers are more than willing to pay those premium prices. To continue, because the organization has products that are often so unique that they can not be acquired elsewhere, they have limited direct competitors.
In terms of advertising, Lush has established a goal in which they do not spend money on advertising (Lush, 2018). However, the company continues to grow its consumer base as a result of in-store conversations, satisfied customers being converted into brand advocates, and online conversations as a result of these advocates. Lush’s in-store experience does a great job of further supporting this initiative through its use of in store demonstrations and unique store displays. Often, these in-store demonstrations create a great environment for customers to take photos and post on social media exposing potential customers to the organization.
When a consumer is ready to purchase a Lush product, their options are actually relatively limited. Lush limits the locations in which they sell products in order to adhere to their sustainable objectives. They believe by using third party stores, they would be wasting valuable resources and failing the environment through increased packaging and emissions relating to logistics (Trotter, 2017). Although it may limit the exposure of Lush products, the limited outlets actually grant the organization better control over their customer interactions. As a result, they are better able to increase customer satisfaction, positive interactions, and maintain their goal of less waste on packaging. To defend Lush’s strategy, it has been proven that extending access to stores in terms of retail spaces and hours of operation is a risk in times of financial recession (Miller, Yan & Calamari, 1990). Consequently, Lush can benefit by being more efficient than other retailers who offer more stores, hours, and third-party department stores.
In terms of the people involved in the organization, Lush does an excellent job of creating an environment for employee satisfaction. Consequently, customers tend to have high regard for in-store experiences. Furthermore, the Lush company’s motto is “Happy People, Happy Soap” (Lush, 2018). As a result, the organization has built all of their operations and goals around the idea of both being happy and improving the lives of others around them. The organization most definitely has developed the commitment and satisfaction of employees into a core competency. Furthermore, a lower turnover rate allows the organization to better develop employees, save money on recruitment costs, and improve customer satisfaction (Zuber, 1997).
Understanding the Lush SWOT Analysis
In terms of a Strengths, Weaknesses, Opportunities, and Threats analysis (SWOT) (Figure 1), Lush appears to be in a both complex and opportunistic position. Some noted strengths the organization has includes products, brand ambassadors, sustainability, and its handmade concept (Lush, 2018), (Saltzman, 2018). Weaknesses impacting the Lush company includes high retailing costs and low sale volumes (Trotter, 2017). Opportunities for the brand are the growing organic movement and fear of harmful chemicals in products (Lush, 2018). Growing threats to the organization are competition and brand loyalty (Loeb, 2017). All of these factors will definitely play a role in the development of the Lush company in the near future.
The Lush company’s strengths of products, brand ambassadors, sustainability, and handmade products most definitely have placed it in a leadership position in the industry. To begin, Lush’s products offered are unlike any other in the industry (Jones & Manktelow, 2017). As a result, there is no direct competition in terms of product alternatives. Another strength the organization has is its vast numbers of brand ambassadors through organic marketing. Because of their strong orientation to social media and use of younger individuals in terms of advertising, they have successfully grown their market share while spending nothing on advertising (Jones & Manktelow, 2017). Estée Lauder, one of Lush’s competitors, spent 965 million USD on advertising in 2017 (Statistica, 2018). As a result, Lush has quite the comparative advantage in terms of advertising costs resulting from organic marketing. Sustainability is a growing concern for younger generations. Specifically, as generation Z begins to get more involved in the consumer space, they are beginning to ask more of businesses in terms of sustainable operations (Sulima, 2018). Lush is doing an excellent job of taking advantage through their sustainable operations and products. Furthermore, since everything the company makes is handmade, it grants a sense of personalization for consumers. These strengths have definitely proven beneficial for the organization, and will continue to as long as the organization maintains their position as an innovation leader.
Lush’s two primary weaknesses include high retailing costs and low sales volume. Due to the goals the company has undertaken to further improve customer experiences in stores, the cost of operating these larger and more interactive spaces will most definitely increase operating costs. Consequently, it will likely have an impact on profits. Furthermore, due to their commitment to sustainability and controlling customer experiences, the organization has limited its sale of products to its own stores and online space (Lush, 2018). As a result, without developing more stores or expanding its online base, Lush is unable to increase its sales volume to further compete with other brands.
The growing interest in organic products and focus on what chemicals are in products is becoming more of a concern currently, and is projected to continue (Fiorletta, 2015). As a result, it is believed that the organization has a great deal of growth to come. The 100% organic component of the organization is definitely a competitive edge and opportunity for the organization to advertise. Currently, many of Lush’s competitors still use harmful chemicals, and even test them on animals (PETA, 2018). Consequently, as these concerns continue to grow, Lush will continue to overcome other brands in its space.
Due to the fact that Lush is still a relatively young company, it is much smaller than others in terms of product diversification. Consequently, as consumers begin to seek out new products to add to their routines, Lush may be unable to keep up with other industry titans such as Estée Lauder. Furthermore, brand loyalty in the cosmetic industry is in decline (Pitman, 2015). Because of decreasing loyalty, Lush could possibly be at risk of losing consumers if they do not continue to develop along with the desires of the consumers. Although these threats do exist, the organization could turn them into opportunities if they continue to be agile in the industry as they were with the online movement in previous years.
The Cosmetic industry is complex and specific companies environments are heavily impacted based on the product portfolio they possess (MarketWatch, 2018). The fastest growing category in the cosmetic industry is currently the skin care category, which will grow by 20.1 billion USD between 2014 and 2019 (Statista, 2018). Lush is one of the emerging companies in the cosmetic industry, and within the sector of skin care. Lush’s development into an emerging leader can be seen in its growing profits. In 2017, its pre-tax profits grew by 50% (Halliday, 2018). However, Lush has a great deal of growth to come if it hopes to one day compete with larger organizations in the industry.
The three largest companies in the Cosmetic industry are L’Oréal, Olay, and Avon (Forbes, 2018). These organizations benefit from scale of economy, huge product portfolios, and established consumer loyalty due to their longer history. L’Oréal for example has been operating since 1907 and has sales of 29.4 Billion (Forbes, 2018). When comparing those numbers to Lush’s sales, L’ Oréal’s sales were a vast 31.6 times higher than Lush’s in 2017 (Loeb, 2017). However, in terms of growth rate, Lush is by far the industry leader with the previously noted 50% profit growth in 2017 (Halliday, 2018).
In terms of gross profit margin, L’Oréal has a higher profit margin of 73.1% as opposed to Lush’s 70.4%. Likely, this is due to Lush’s limited outlets in which they sell their products when compared to L’Oréal’s use of third party retailers. As a result, it is important to take into account the specific strategies the companies are using. Moreover, these organizations do little to compete in terms of individual products. Rather, they likely compete for consumers limited discretionary income.
Consumer Profile
When looking at Lush, it is also important to understand who their customers are and how they behave. Lush’s consumers are primarily between 12 and 34. Furthermore, they are almost completely female (Numerator, 2018). As a result, the organization found a huge advantage in organic marketing through the strong development of sharing-worthy store environments. These individuals are extremely technology oriented. Consequently, they can serve as brand advocates if loyalty can be developed.
Other demographics that require consideration are education level and discretionary spending. Customers of lush are often extremely educated and wealthy. The average lush consumer has a college degree or higher, has no kids, and makes over one hundred thousand dollars a year (Numerator, 2018). Because these individuals are extremely wealthy and have no kids, they have the ability to spend more money on what they wish. Consequently, Lush has found success with these individuals. Likely, it is a result of the premium products they offer and the strong focus on giving back and caring for the environment. An interesting note is that the consumer profile relating to Lush is quite similar to those who buy organic food. For example, purchasers of organic foods are primarily women, are wealthy, and concerned about the environment and social causes (Davies, Titterington & Cochrane, 1995).
Because the primary consumer base for Lush is young females who are concerned about both the environment and social causes, the organization has seen great success by aligning themselves with these concerns. Furthermore, the organization could see expansion by further pushing into this group through organic marketing. The average Lush customer spends $33.20 with a purchase cycle of 102.4 days (Numerator, 2018). Therefore, Lush must take steps to draw current customers in more often in order to increase sales while also attracting new customers. Consequently, the organization must take steps to further develop their retailing strategy for an increase in sales.
Product Positioning Strategy
Recommendations
The greatest threat to lush also represents the greatest opportunity for the organization’s growth. Lush currently has a limited amount of products to offer consumers. Consequently, the organization should take steps to diversity their product portfolio to compete with larger competitors in their industry. However, because their current products have no real direct competition, these products would provide a great base for their expansion as they are secure and established. If the organization does choose to expand their product portfolio, they would likely be able to reduce the consumer purchase cycle, which would in turn increase the potential for increase profits and average transaction value.
Furthermore, an interesting note to consider is that most Lush customers actually divide their products up to increase how long they last (Mcbride, 2017). As a result, the organization is actually seeing that the customers are buying fewer products, and less often. Some ways to solve this problem would be to actually step in and assist customers with the cutting and storage solutions relating to these products. Some examples would be tools to cut bath bombs and air tight containers to store these cosmetics. If the organization were to do this, they would likely be able to make up for customers making products last longer. The primary goal should be to increase customer involvement with the organization no matter what choices they make after making purchases.
Along with an increase in products that are offered, the organization should commit to sustaining their commitment to handmade and organic products. As a result, they would maintain their edge through “premium” products when compared to other organizations. Then, Lush would be able to maintain the loyalty of environmentally and socially conscious consumers. The expansion of products also would entice these wealthy individuals to further transfer their purchases to this organization as it may take the place of an organization who merely fulfills a product need but does not align with their ethical beliefs such as L’Oréal.
Beyond merely establishing these products, Lush should maintain their premium pricing in order to target the individuals they have found success with previously. Because the products are handmade and organic, consumers are more than willing to pay for these labels (Abraben, Grogan & Gao, 2017). Furthermore, it allows the consumer to feel as if they are “pampering’ themselves by spending lavishly on these products. Consequently, by charging customers prices significantly higher than competitors, it actually gives them an edge in terms of marketing in this case.
Promotion is by far one of the greatest strengths the Lush cosmetics company has. The organization successfully generates social media presence through organic marketing. Furthermore, they spend significantly less than any other organization. Consequently, the goal for Lush is to maintain this competitive advantage in the future. The most likely options are to continue with their efforts to create a more interactive in-store experience. If the stores host more product demonstrations and more showy displays, customers will take more pictures and share their experience more often. As customers begin to share their positive experiences in the stores, the individuals around them will be introduced to Lush. Potentially, this increased social media presence could lead to growth over time.
When addressing Lush’s distribution channels, it is clear that it has become one of their most recognizable points in terms of marketing and sustainability. Lush has successfully created an environment in which they limit packaging and third party retailers in order to reduce their carbon footprint. Therefore, to make any drastic changes in the distribution channels of the company would begin to conflict with the values and beliefs of the organization. By distributing to third party retailers, Lush would have to increase the packaging of products resulting in decreased environmentally friendly business practices. Ultimately, it would lead to the organization possibly alienating their customers who have developed such strong loyalty for them based on their environmental awareness.
Importance of Understanding Consumer Behavior
Understanding the behaviors of Lush customers is extremely important to the success of the organization. Furthermore, understanding how these consumers respond to the products and services that are offered can help organizations improve their results (Hosany & Martin, 2011). It is important to understand the consumer behavior profile because of the fact that such as specific segment accounts for a majority of Lush’s sales. Moreover, the ability of an organization to monitor and understand the behaviors of their target consumer, the more likely it is that they can predict future trends in the industry (Hofman, Lahaie, Pennock & Watts, 2010). The success of an organization is dependant on their ability to understand who their customer is and how they interact with their products.
Another important note regarding the necessity of understanding consumer behavior in this marketing plan is because it will be the only way to monitor its success. For example, the consumer that Lush is targeting enjoys social media. Consequently, it is quite important for the organization to ensure they are monitoring for organic marketing through social media. Also, the consumers behavior is what dictates the type of marketing the organization will conduct as it is defining where the individual is most open to advertising. Therefore, an organization’s success will be dependent on their ability to engage their target consumer.
As stated previously, by understanding consumer behaviors, a marketer is better able to reach their audience. The marketer gains the ability to develop a message that resonates with the consumers beliefs and attitudes. Moreover, the marketer is able to reach the consumer exactly where they are. With Lush, this likely will be through their social media strategy. However, it eventually is dictated by the organization’s ability to develop a meaningful conversation with its consumer base.
Biblical Application of Consumer Behavior
By utilizing the consumer behavior information that is gathered and applying it, it could be said that it honors God. To begin, we are called to try our best to do exceptional work (Proverbs 13:4, English Standard Version). By being diligent and doing research, one would be fulfilling the calling of doing exceptional work to honor God. In terms of consumer behavior, one would not being doing an honorable job if they were to make a marketing plan without taking into consideration who their customers are. Furthermore, they would not be successful.
Another important note regarding consumer behavior and a biblical application is the fact that Christians should try to provide the best product possible. Since our work is indeed intended to honor our God, it should be impressive and effective. Understanding consumer behavior allows individuals to create the best product they possibly can. Since consumer behavior allows an organization to understand what happens in the day to day life of a customer, it could potentially allow them to help solve the customers problems. As a result, they could both improve their product offerings and develop customer loyalty by meeting the interests and needs that the customer actually has.
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