1. Situation Analysis 1.1 Company For over 70 years Max Factor has been selling cosmetics to women in Europe, who want to look and feel glamorous. When they first entered the Spanish market in 1938, this brand was strongly associated to Hollywood and seen as the make-up used by Hollywood stars. Initially, they drove success by their innovative products such as Pan-Cake crème (foundation), and the strong desire of the consumer’s to capture some of the Hollywood starlit. 70 years later, Max Factor still strives to associate itself to a certain degree with Hollywood, and differentiates itself by its bold, flashy and exaggerated colors and techniques. Max Factor focuses on developing products that cater to all skin tones and types, focusing on quality, trendy, affordable, healthy and toxic-free make-up. One of Max Factors strengths is parent company owner, Proctor and Gamble, P&G. With P&G, Max Factor has increased capacity to innovate, access to many distribution channels, and a wider research and development bandwidth. This relationship has leveraged partnerships with European designers and stylists and has opened even more distribution channels given the leverage able strength of its consumer goods collection. Annually, Max Factor brings in $1.2 billion USD for P&G and is a top brand in over twenty countries.i

Max Factor has strong brand awareness in Spain, but there are indications of flaws in the Max Factor business and brand strategy. P&G is, generally speaking to a mass consumer-goods powerhouse, but their experience with make-up brands is limited. P&G has allocated more financial support, resources and pursued more distribution channels for their other brand CoverGirl. Max Factor has been slightly pulling away from its classical “Hollywood” heritage associations and more towards a funky, bright, grunge appeal. In Spain, slowing sales and growing popularity for their competition points to a confused and disjointed strategy. Their recent campaigns appear to have flopped; their print presence has been limited in magazines and the customer buying experience has been inconsistent. 1.2 Collaborators The main Spanish retailer, El Corte Ingles, is a dominant distributor of Max Factor products in Spain. In the field observations at mass retail stores in Spain, Max Factor occupies 2nd row, hard-to-find and out-of-the-way locations. In shops like Corte Ingles, Max Factor has allocated part of their sales floor to erect a makeover station; equipped with lights, a full mirror and a director’s chair. This set-up has potential to play up pampered make-over experience, but during five field studies at two Corte Ingles’, there was no “brand ambassador” to be found for Max Factor. This confuses, given that in this industry, sales people are direct influencers and in part responsible for creating that Max Factor glamour experience. As web presence is becoming a norm in business, Max Factor-Spain has established its presence on websites such as Twitter and Facebook, which are popularly used by their target market. (Exhibit 2.1.2) These accounts have allowed Max Factor to create a more interactive experience and engage in partnerships with other products and websites. Websites like these offer specific information, application and color-coordinating virtual experiences, which has been very receptive among younger make-up users. In order to appeal to make-up enthusiasts and opinion leaders on a larger scale, Max Factor hired internationally renowned make-up artist Pat McGrath as the Global Cosmetics Creative Design Director to direct the new company images. McGrath came with 20 years of industry experience and really compliments the fashion-forward and edgy Max Factor look with her unconventional styles, flair for the dramatic, extremes and bright color techniques. McGrath is responsible for the “creative design and direction of Max Factor´s color trend collections” as well as new product innovations like the recently launched “Xperience” product line.ii The company also uses fashion and beauty magazines periodically to promote their products and new application techniques. These techniques created by McGrath and a larger team of make-up artists define the newest looks for the Spanish market. The famous fashion and style magazine, ELLE, has collaborated with Max Factor annually on their New Talent Make-Up Artist Search competition. Each year, one winner joins this make-up team and flies internationally to promote Max Factor and ELLE in fashion shows in the UK, Italy, France and Spain. Max Factor is further partnering directly with designers to meld the full fashion and beauty look. To push sales among their main young and trendy demographic later this year, Max Factor will collaborate with designers and movie star Savannah and Sienna Miller’s Twenty8Twelve clothing company, scheduled to launch their Spring/Summer 2011 clothing collection exclusively with Max Factor products.

 1.3 Consumers Max Factor cosmetics are sold in more than 70 countries. In Spain, Max Factor leverages its bright colors, heavy and more dramatic textures to a youthful, trend-buying audience. Their primary consumer demographic is middle class, 20-30’s with access to the financial means to purchase their products, for example working women in their 20’s-30’s or mothers purchasing make-up for their teen daughters. On average, Spanish women spend €200 each year on beauty products and make an average of 19 shop visits.iii This indicates that cosmetic consumers are motivated. This industry is known for having high brand product loyalty, but consumers are also known for mixing and matching brands and products and trying the latest products from multiple brands. Marketing hype for new innovations historically results in an increase in sales because consumers are responsive to trying “improved products” claiming better make-up solutions. New trends have emerged among make-up consumers including prioritizing products that are healthy, stop or slow the effects of aging, protect from UV rays and pollution, and prevent and treat skin blemishes. The overarching theme is the quest to look younger and appear healthier. The “natural” and “organic” market is growing but still represents a small niche market. According to CFO Mueller, Max Factor anticipates launching a line of organic products that could capture 1-3% growth given the continually expanding natural and organic segment of the cosmetic market.iv A further trend emerging in consumer products including cosmetics is an appeal to the “socially” conscious consumer. In August 2010, P&G announced their eco-product packaging initiatives. In 2011, select packaging for Max Factor products will use renewable, sustainable, sugarcane-derived plastic, developed with a Brazilian supplier.v This brand possesses very distinct customer perceptions among surveyed make-up users. The findings were supported by a customer interview.vi

The market is aware of the brand and the products they sell. Those who have not tried it, have a clear negative opinion about quality and image, in some cases associated with

unsatisfied product testing and/or negative word of mouth. Some have tried and rejected it because of negatively perceived image and quality issues. Almost all those who have tried and continue to use Max Factor products, are loyal to the brand and can be classified

into: light, regular and heavy users. 1.4 Competition In the Spanish cosmetic market the main low-middle range make-up brands include Max Factor, Maybelline New York, Astor, Essence, Bourjois, Mavala and Rimmel; with L’Oreal Paris as the leading cosmetic brand. Max Factor differentiates itself, apart from quality, with associations to “Hollywood,” “glamour,” “iconic,” “drama” and “diva.” There are some inconsistencies in trademark logo styles, colors, themes and packaging. Market research on cosmetics in Spain indicated consumers considered Max Factor to have reasonably priced products with average quality.vii Depending on the product, these brands have price points from €4 to €40. The brands express quality, affordability, versatility, fun, wear-ability and fashion-forward ideals. For example, Astor mainly positions to 20-year-old and teen users wanting bargain trends in the market. Astor associates itself with new innovating products that are durable and long lasting. Another affordable brand, Essence, is a pro-animal rights advocate and creates colorful products targeting the younger audiences. French brand, Bourjois appeals to users who do not want to spend a lot of money to wear bright colors and capture some of the Parisian style. Rimmel’s slogan “Beauty with Attitude” epitomizes their position to teenagers who are rebellious. Mavala’s couples innovation and social responsibility in the operation of its business. Primarily known for its hands and feet products, Mavala has pulled multiple products in an effort to focus on its big sellers for hands and feet products. Maybelline New York stands to provide versatile products for every individual woman, while focusing on being in every possible store. As the number one selling mid-range make-up producer in Spain, L’Oreal Paris has maintained its leading position even through the slowing economy in part to substantial investment in TV advertising and new product launches. The L’Oreal customer demographic is also much wider; due to its broad product range they supply teenagers as well as a more aging clientele (45 years of age). 1.5 Context Spain is the fifth largest market for cosmetics in the European Union valued at €7.5 billion.viii The last five years have been slow growing for the cosmetics industry in Spain, but in 2009, the cosmetic market grew by 1%.ix These sluggish sales point towards the economic downturn in Spain. In addition all cosmetic brands sold in Spain, including Max Factor have to comply with several regulations enforced by the European Unions and Spanish law outlining the import and sales of products and ingredients have to be approved and certified under Spanish law.x

 Make-up brands have established histories in the Spanish market and brand and product loyalists are prevalent in this industry. Considerable investment is required to bring new products to the market and maintain consistent image and status among the “quick-to-try-new-products “cosmetic buyer group. There is also a high risk of failure in such a competitive cosmetic market. Overall, the make-up market is a relatively mature and developed one but recent trends have inspired companies to pursue new areas for innovation. For example, some products being tailored for “anti” or “preventative” aging and the related surge in natural, organic, nutricosmetics or dietary supplements that will produce cosmetic effects. 1.2 SWOT

2. Marketing Strategy 2.1 Target Group 2.1.1 Interpretation/Perception While there is no clear company statement regarding the target group for the Max Factor brand, an analysis considering the various communication channels used by Max Factor including TV, Magazines, Internet, in-store POS and Posters narrows the scope of target consumers. Max Factor positions itself to target females in their mid-twenties to end-thirties with access to the financial means to make purchases. Consistently, their print and online ads feature associations with power, elegance, trendiness, financial and social independency, sophistication and beauty and are strongly transmitted by using Giselle Bündchen and Carmen Kass as models and brand images. Furthermore topic categories displayed on www.maxfactor.com  emphasize: “Runway-Inspired, make these bold runway-inspired looks your own”, “By Invitation only, you found the perfect dress and heels for the big event (art show, black tie, dinner party, opening night) – here are make-up looks to complement them”, “Night out, whether you are meeting friends for a drink, checking out a new club or going on a late-night dinner date, these looks will inspire your night (nightclubbing, smoky bright eyes, spicy blend).”

 Max Factor has established a presence on Facebook and launched an Amazon-powered application on the social network, which lets people review Max Factor products, and purchase them. “This is an initiative to reach out for a new target group and perform small-scale direct-to-consumer sales.”xi 2.1.2 Field Findings One online survey with 48respondents and five field surveys were conducted in Madrid on January 22, 2011, January 28, 2011, February 21, 2011, March 24, 2011 and March 26, 2011. Five observation studies were conducted in Corte Ingles in the beauty sections close to where the Max Factor stand is located. The second survey was conducted on the street of Fuencarral in downtown Madrid close to female related stores, focusing on young Spanish women. Both surveys somehow contradict the above-mentioned findings and statements.

The majority of the participants appear to be younger and indicated to have restricted financial means. The products are not found in leading cosmetic outlets such as Sephora, Julia and the premium Corte Ingles

Cosmetics section. Rather they can be found together with the more mass-products such as Astor, Mavala, Maybelline and L´Oreal. Point of sale shelving is located together with the above-mentioned brands in the pre-cash-counter section of supermarkets.

There is no information available about the duration of usage. Considering the very clear and precise picture of the customers and the way the brand is perceived in the cosmetic market, we can assume the following:

The company does not directly target younger and lower income customers but the products are sold in locations where a lower income market prefers to shop.

The majority does not perceive the brand as high quality, and hence Max Factor appears to fail to gear the brand in the right direction.

 2.2 Brand Positioning Max Factor’s brand has significantly changed throughout the history of the company. A mother-company ownership change has affected the strategy and positioning of the brand. Max Factor admittedly is moving from the “Hollywood” association, however, in press and print advertisements, wording or the Hollywood start symbol continues to be present. One could argue that the brand’s association of being the make-up brand of Hollywood stars has remained the same.xii This has allowed Max Factor to maintain certain position in the market and have a unique differentiation over its competitors in terms of brand image and perception. Currently, the brand positions itself in the Spanish medium-mass market, targeting women in their 20’s and 30’s. The products, pricing strategies and sales channels also align with this positioning strategy. The brand is mainly perceived as being affordable, colorful and reliable but not of particularly high quality.xiii Pricing is slightly above the average level of most of its direct competitors which, as well as keeping the medium-mass market as target market, creates a pre-purchase impression of having superior quality compared to regular products.xivGiven the point of sale locations in the current Spanish retail channels, Max Factor is not positioned among the high-end Lancôme, Chanel, Olay and Clarins in the luxury segments at prestigious outlets. In Spain and in other European markets however, P&G was more successful in positioning their brand by gearing Max Factor towards the upper end of the medium-mass market. To achieve this, Max Factor used celebrity models like Carmen Electra, replaced by Gisele Bündchen in their 100 year anniversary,xv and earlier Madonna (in the launch of the gold series) in order to appeal to the target audience as a modern, trendy, and up-scale brand. The idea behind using the celebrity models was to link the brand to the popular figures of the time and form a brand perception that is linked with the celebrity model. In general, Max Factor targets the medium mass market, generally younger woman, competes directly with other mass market make-up brands like L’Oreal and sometimes indirectly with high-end brands. The target group still benefits from the brand by having the impression of “using the make-up brand of Hollywood stars.” 3. Brand Analysis Since its origin, the Max Factor brand forged the direct intangible association of cosmetics for Hollywood stars. This association began to erode when Max Factor decided to enter the mass make-up industry; this was in response to competitors targeting supermodels. A lack of focus led the company to a brand dilution and in the 90’s CoverGirl overshadowed Max Factor in US. In June 2009, P&G announced it was dropping its Hollywood-associated Max Factor brand in the US. In Spain, however, the company continues to focus on the cinema-related industry rather than the fashion one.

 Max Factor has developed various brands under its brand umbrella (e.g. LipFinity, Xperience, Masterpiece, etc.) Given the wide range of Max Factor products sold in Spain, this analysis will focus on a single product in order to show the company’s brand strategy in the country. In this sense, the most successful example of the brand strategy was the “LipFinity” campaign launched in Spain in 2003, which won the Euro Effies Award.xviThe campaign was launched in TV and print advertising to generate rapid awareness with the target audience. Television was used to communicate new shades while reinforcing long-wear performance. The campaign, which included 3 ads, focused on building the brand’s intangible association to Hollywood lifestyle by illustrating how a movie star using LipFinity would be able to look elegant and perfectly painted through an evening of eating and drinking. The ads used the glamour of Hollywood parties and the endorsement from respected make-up artists to reinforce Max Factor reliability and credibility. All the ads ended with the slogan “the make-up of make-up artists,” hence displaying the product quality and professionalism endorsement. Max Factor also was able to create a tangible association between LipFinity and its attributes from a utilization perspective. Whereas other lipsticks were applied directly from the tube, LipFinity represented an innovative approach where two steps were required to use the product. First, paint the lips with a colored base-coat. Second, apply a moisturizing topcoat that keeps the lips soft and smooth without dissolving the color. As a result, the color lasts for eight hours. LipFinity also offered a wide range of bright colors, which gave the brand an image of “freshness” and “sexy style.” The successful launch of LipFinity campaign transformed the company’s business in Spain, achieving significant growth and re-defining the lipstick category as a new cosmetic product in itself.xvii In Spain, the LipFinity brand has sustained until today, reaching a real success in the cosmetic industry, where products tend to have short market-life-cycles. Nevertheless, the company has entered the fashion industry as well, where its spokesperson is represented by Estonian fashion model Carmen Kass. 4. Marketing Mix 4.1 Product Max Factor offers a range of cosmetic products for face, eyes, lips and nails. However its key products are foundation, mascara, eyeliner, lipstick and lip gloss (Exhibit 4.1.3). Max Factor offers foundations with different functionalities such as anti-aging, natural look or long lasting effect. A range of foundations depending on the product ingredients (patented formula, natural minerals, etc.) or product effect (color adapt, seamless, etc.) are offered under each of these functionalities and the consumer can choose from up to 6 colors for each of above foundations. Similarly, Max Factor offers a different range of mascaras that emphasize volume, definition, and elevation and are water resistant. These mascaras are available in two colors – brown and black, while the eyeliners give you an option to choose from up to 9 colors (Kohl Pencil). Max Factor´s lipsticks and lip-gloss offer attributes such as moisturizing, long lasting effect without reapplication (LipFinity and Silk Gloss), or simply a range of colors (up to 16 colors are available in the Color Perfection range). Max Factor constantly uses innovation to launch new products. For example, Masterpiece Max Mascara (launched in 2007) uses iFX brush, which makes the eyelashes look voluminous but at the same time gives them a smooth and natural look. It was also chosen as the official mask fashion week in Milan.xviii The lipstick Color Perfection that comes in 16 colors, uses an innovative technology based on gel formula and is claimed to prevent spilling, smearing or cracking of the lipstick. Masterpiece Beyond Length is another interesting innovation by Max Factor that not only used the unique nozzle iFX technology but also gives an option to add a touch of another trendy color to get a small but attractive and impressive finish. They are offered in three shades – blazing black, tanned black and black moonlight. Max Factor recently launched a new Line called Xperience in fall 2010 that includes Xperience Foundation Weightless, Xperience Sheer Gloss Balm and Xperience Volumising Mascara, which give a light and natural look along with sun protection. In late January 2011, Max Factor launched the Xperience capsule collection, which includes all the three Xperience products (as mentioned above) and is still in the introduction/growth stage of the product lifecycle. As of today Max Factor Masterpiece Max products and False Lash Effect Mascara (launched in 2008) are in the maturity stage while products like Max Factor pan stick foundation are on the decline. Max Factor is not only a maker of cosmetic products, but has also developed numerous make-up techniques, both for special effects in film industry and to devise a beautiful look. The principle of transferring knowledge of cosmetic product and application techniques to beauty consultants continues to exist today.xix Max Factor´s product service enables consumers to ask for advice from Max Factor´s in-store representatives. The customers can try Max Factor products in-

 store, thus giving them an opportunity to experience the product before they purchase it (experience attribute). The Secret Factor Club gives an opportunity for the online community to get directly in touch with the Max Factor team and share tips with friends or ask for advice from experts like Lewis or Pat McGrath. On the shelves, several Max Factor products have very different packaged looks, from slick black to pale pink with a gold Hollywood star. The logos are also very different. Some of Max Factor´s products are very popular among women aged between 26 to 35 years. This was confirmed by our online survey results, which show that 27% of surveyed women use Max Factor products. The most popular Max Factor products were foundation, mascara and lipstick or lip Gloss that is used by 60,4%, 66,7%, and 41,7% of the surveyed women. It is to be noted that the online survey does not include an audience younger than 21 years of age. 4.2 Price In the cosmetic industry, traditionally the profit margins are upwards of 50%.xx In Spain, Max Factor products are priced between €4- €30. (Exhibit 4.2.1) For various current distribution channels of Max Factor, prices are decided in line with the customer pool that the stores draw. Max Factor products are slightly more expensive than many of its direct competitors like Maybelline but it is less expensive than most of L’Oreal products. Some Max Factor products are priced up to 90% below big market share leader L’Oreal, but there are also a few products that are priced above L’Oreal. This strategy might aim to capture part of L’Oreal’s market share without losing large margins. Indirect competitors like Chanel and Dior have around 100-200% higher price markup for their products. (Exhibit 4.2.1) Given Max Factor’s punch line – ‘make-up of make-up artists’, Max Factor wants to depict the values of quality and affordability to its customers. Noted from the survey, customers think that Max Factor is affordable. Thus Max Factor has been successful conveying customer value for their product to the product price. Max Factor is seen as one of the market leaders in mascara, lipstick and foundation. Presumably for that reason they also price these products higher than the other products like eyeliner, nail polish, etc. (Exhibit 4.2.2). Therefore it is assumed that Max Factor´s customer loyalty is higher compared to the low-cost brands, since customers many a times measure the quality of a product by its price (i.e. higher price implies higher quality and vice versa). 4.3 Place Max Factor distributes products in a “selective” channel width such as mass distributors and retailers. (see Exhibit 4.3.1) The mass distribution channels in Spain account for almost 50% of total cosmetic and toiletry product sales via El Corte Ingles, and hypermarkets (Carrefour), supermarkets (Eroski, Mercadona, Dia, Caprabo).xxi Max Factor products are also found in some small retail stores like perfumerias. These distribution channels are central, convenient and easily accessible for most Max Factor consumers. For further details please see Exhibit 4.3.2. El Corte Ingles attracts high to medium income customers and is considered of high quality and rather expensive. There are over 31 El Corte Ingles stores in Madrid region. Some of the Max Factor´s stands in El Corte Ingles, allow shoppers to test the products including eye shadows, powders, lipsticks and mascara. However the point of visibility of these stands is sometimes very low and customers cannot see the Max Factor stand until they walk through most of the beauty area and reaches the back of the store. This requires customers to be motivated and search specifically for Max Factor products. Furthermore “brand ambassadors” for L’Oreal’s stands are attending customers. Not so at the Max Factor stand! On five occasions no “brand ambassador” could be located. Select hypermarkets such as Carrefour also have some of the Max Factor products in the category of mascara and lipsticks. They also showcase the competing brands of Max Factor like L’Oreal, Maybelline, Astor, etc. These hypermarkets attract local people from low to medium income. Here often products are not available for purchase and/or not available for testing. Thus it caters to mostly people who are brand loyal to Max Factor and do not need to try the product before purchasing it. Some of the smaller retailers like perfumeries, Max Factor has very small displays. All or most of their products are showcased in a compact amount of space, with limited testing options (primarily foundations and lipstick). These stores have clerks that are helpful, but don’t tend to be loyal to a specific brand. According to recent survey participants, the Max Factor target demographic is not as inclined to make Max Factor purchases online, but through mass and smaller retailers. (Exhibit 1) The Spanish Perfumery and Cosmetics Association

 (Stanpa) reported that in most cases, online buyers are ordering products they already know or own. Max Factor products are also sold online on websites like http://www.shopmania.es (lip gloss and mascara), http://international.drugstore.com/ (lip gloss, mascara, foundation, etc.), http://shop.ebay.es/ (lipstick, nail polish, mascara, etc.). However these sites also showcase various competing brands of Max Factor. Moreover it is not easy to promote a product that is being purchased online using search engines. This is because unless the customer already knows about the product he will not search it on a website. Overall make-up users like to test products themselves or purchase based on production claims, innovation and referrals. Depending on whether a customer wants to test a lot of products or make a repeat (or refill) purchase, it will influence which channel they are shopping through. Thus Max Factor uses an open external distribution system with short channel length. Their channel strategy is to transfer products from the supplier to the retailer to the end customer. (Exhibit 4.3.1) 4.4 Promotion Max Factor follows various communication strategies to promote its products and brand. Max Factor’s slogan says ‘Make-up of make-up artists’. It uses models and celebrities like Madonna, Carmen Kass, and McGrath to endorse its products. Thus Max Factors uses the influence of these celebrities to gain market share and promote quality products. Some of Max Factor’s advertisements also incorporate the problem/solution technique. E.g. Max Factor’s LipFinity was a solution to wearing lipstick all throughout the day without any reapplications. Max Factor advertisements are aired frequently during evenings, when workingwomen would probably be with their family watching television. Max Factor ads are more common than other competitors like Astor or Rimmel. Max Factor also prints out special articles and advertising in beauty magazines in Spain such as Vogue Spain, Cosmopolitan, Elle Spain, etc. Max Factor uses visual merchandising for demand management and has an efficient layout for the Max Factor point of sale. They use a variety of communication methods, and carry out mass marketing through customized marketing vehicles such as: television, billboards, email marketing, etc. (Exhibit 4.3.1) In 2010, Max Factor launched a promotion campaign with a line of make-up brushes and accessories manufactured by one of the leading beauty manufacturer in partnership with make-up artist Caroline Barnes. These are meant to create professional effects with ease. Barnes states, “Professional make-up artists know that premium make-up tools permit advanced make-up application and deliver superior results.”xxii Max Factor also offers their products in collection (e.g. capsule collection), which can act as a nice gift hamper. Capitalizing on the latest anti-aging trends, Max Factor is advertising their use of “natural” ingredients such as acai berry, green tea, black tea, red tea, white tea, grape skin, etc.xxiii The Max Factor Secret Club (Exhibit 2.1.0) is an interesting and new promotion platform that engages Max Factor’s customers. Members can exchange tips, opinions and get the latest updates about all Max Factor products. (Exhibit 4.4.3) Customers can invite their friends to join the club. Using the ‘El Tocador’ simulation tool on the Secret Club you can upload your picture and experiment with MaxFactor products like lipstick, powder foundation, eye shadow, liquid foundation, etc. This simulation tool will enable you to print a customized picture of yourself, which you can later take to a beauty-center and receive advice from the experts. (Exhibit 4.4.1) They also run competitions and select Ambassadors of the Secret Factor Club and thus engage their customers. (Exhibit 4.4.2) The videos of these customers who participate in the competition are even available on youtube.com. In the video for Secret Factor Club Smoky eyes, the participant demonstrates the entire make-up for her eyes using creative tricks.xxiv This generates a buzz among the audience and they too want to try it out and compete, so that even their photos are showcased on Max Factor’s Secret Club website. Max Factor also sends out emails and updates to its members. However, frequency is very low and in order to reinforce the Max Factor brand among customers and maintain their loyalty these web communications could be improved. Max Factor has its own Facebook Page and blogs about it can be found on sites like http://www.makeupandbeautyblog.com, www.trendencias.com, www.regalosyjuegos.com, www.supersavvyme.com and www.proximaati.com. Here, bloggers share their opinions, discuss max factor products and promotions. Max Factor also sometimes runs promotions in which they offer some of their products for a discount. E.g. During the New Year sale at El Corte Ingles, 10% discount was being offered on selected Max Factor products. They also run in-store promotions in which they give out freebees like cosmetic pouches and umbrellas. Thus Max Factor uses almost all channels of communication – personal and non-personal in order to maximize its market share.

 5. Main Issue of Max Factor As mentioned, the positioning of the Max Factor brand does not appear to be consistent and has the potential to confuse consumers. Consequently the message sent does not fully reflect the brand perception among consumers. This can be interpreted as a communication (promotional) problem of the brand. Furthermore, according to the conducted surveys and interviews, the products in general tend to be perceived as not performing in terms of quality and thereby disappointing the customers. When comparing the prices of the products and those of other direct and indirect competitors, Max Factor pricing is generally above brands like Maybelline and lower than L’Oreal which was in line with the brand’s positioning within the market. Besides the brand positioning issues, the main problem that Max Factor is facing in the Spanish market appears to lie within the point of sales or, the distribution channel. This notion is supported by personal experience, surveys and interviews. As discussed in “Place” of the 4P’s, the main sales channels in the Spanish make-up market are department stores, hypermarkets, supermarkets perfumeries and online shopping. Among all these channels, Max Factor’s availability in hypermarkets and supermarkets is not poor and is as present as its competitors. However the positioning of the brand in department stores, mainly El Corte Ingles, is less favorable compared to its direct competitors like L’Oreal, Maybelline and other indirect luxury brands. In addition Max Factor is also missing the opportunity to have a “brand ambassador” on site to provide information and acquire new customers. Compared to the previous mentioned outlets, Max Factor’s availability is even lower in perfumeries and other traditional shops. (Exhibit 4.3.2) The space provided for Max Factor is usually small, even though this applies to other brands too. When analyzing point of sale, Max Factor does not show as much effort to make the products available for the customers to test. (e.g., Carrefour). However, this is a very important issue because in most cases consumers want to try the brand before purchasing it. Consequently, if someone has never tried Max Factor, it is unlikely that experience will result in a purchase. As a result, if Max Factor does not give enough opportunities for consumers to try the products, the brand will mainly sell to loyal customers and the occasional impulse shopper. Moreover, Max Factor’s loyal customers will have much higher chances to try the competitors’ products since they are more available, which may result in switching to competitors. Eventually, this may cause Max Factor to lose market share. Another important finding; the online survey indicates that the main make-up purchase points in Spain are perfumeries and department stores, such as El Corte Ingles. As mentioned, Max Factor lacks some distribution channels with regards to where more potential customers are. The strongest distribution channels of the brand, hypermarkets and supermarkets, are not always preferred points of purchase for all the customers. This again can be directly linked to the limited opportunity for the customers to try the product and make their decisions in these channels. There seems to be a cyclical pattern, the low performance of the brand may have caused the poor availability of the brand in sales points, then the poor sales result in low investment and therefore, continue not to perform. If there is not enough “pull” from the customers in the point of sales, the store management may have decided to provide lower shelve space for Max Factor, since it wasn’t yielding as high returns per square meter for the store as other brands. This may have prevented Max Factor to apply a “push” strategy more than a certain point. Even if so, Max Factor should focus on ways to improve the availability of the brand and, market the product on the point of sales.

6. Recommendations and Solutions Based on the previously mentioned issues that Max Factor is experiencing in the Spanish market, the following implementation strategy is laid out. It is a pity to see a brand like Max Factor with a large potential not performing as it could. It is believed that the entire strategy must be overhauled, by firstly connecting with customers effectively and secondly providing the goods and services through the right points of sale. This entire turn-around will be cost intensive and further test the nerves of some shareholders. Nevertheless, the only way to generate a sustainable brand, especially in the competitive cosmetics industry is by maintaining quality and focus on the long term, rather than being tempted to show quick sales results by pushing volumes. Creating a desire by enforcing the “Points of Difference” with Max Factor is inevitable. 6.1 Connecting with Customers

Segmentation

 There is no need to change the current target group. Younger, successful women in their 20´s to 30´s that like to show that they are successful and feel desired with the financial means to afford these products.

Targeting When looking at the segment attractiveness of the current outlets, clearly the benefits of selling large volumes is given. But selling the brand in the supermarket sections of high-end-outlets such as El Corte Ingles will not open any doors in other prime locations. To establish market growth, clearly volume is only a short-term strategy and will make the brand vulnerable to mass competition. This is not corresponding to the segmentation strategy. Raising prices even closer to its main competitors such as L’Oreal, will lead to higher profits and attract prime locations to list the brand in the long run. A high-end target group will consume and the medium to low-end target group will desire this product too. Special sales can always be conducted on occasional events in large outlets. But they will have to be rare! After all, the high-end consumer segment is large and profitable enough to serve.

Positioning The brand must be repositioned more at the top segment of the high quality cosmetic mass market, which will take considerable investment. Of course the aim is to stay accessible to a wider public, but also at the same time renew the exceptional legacy of the founders. Max Factor is a cosmetics brand, and what better place to sell that than in multi-brand boutiques and department stores such as El Corte Ingles.

The goal is not only to re-establish the brand in the minds of the customers, but also to make it available. 6.2 Point of Sale The 3time-frame turnaround stages.

1st Max Factor should increase efforts to establish the brand in the minds of the customers as high quality. With regards to the organic track and the current market developments, Max Factor Spain could find it difficult influencing this, as this depends on the company´s overall strategy and will not be up to Max Factor Spain to determine. Further Max Factor will distance itself more from the mass market in the supermarkets, by simply increasing prices and eventually cease most of these business activities. Advertising exclusively in high end fashion magazines, and possibly seek exclusive and prestigious appearance at the Spanish Film festivals in San Sebastian, in Valladolid and the Goya awards. This is reestablishing its heritage with actors and the original glamour world of Hollywood. This process should be started immediately and should be up and running within 3 months.

2nd Communication with customers in the chosen points of sale must start immediately and be an ongoing process. So far the active communication with customers in points of sale is not satisfying. In the El Corte Ingles on numerous occasions the team was not able to talk to a representative of the brand. The person was either on lunch break, couldn’t be found or was on her day-off. As from now on, every large display, depending on the budget must come with a full time sales/promotion assistant. Although cost intensive, this does not only benefit the sales and customer relations, but also will make the brand more attractive for the desired points of sale as it increases the quality and service their customers receive. Celebrities like McGrath should visit stores like El Corte Ingles and host makeup sessions for selected customers or other celebrities. This will create a buzz among customers and they would want to try Max Factor products. Moreover Max Factor should also move and redesign its stall in El Corte Ingles so that it is easily visible and attracts customers the moment they walk into the store. Celebrities like Carmen Kass if found shopping at Max Factor stalls will create more brand awareness among customers.

3rdstep is concerned with portfolio splitting and replaced-product-management. For special occasions such as Mother-day, Easter, Christmas and Valentines-day displays can be sold in large supermarket chains. These displays are not equipped with the full and newest top of the range products. The reason for this is to not get into conflict with the desired high-end point of sale partners where all innovations and the top of the range products would be sold exclusively. Top of the range products and also innovations will be solely available in the desired high-end outlets. The same approach applies for discontinued lines and replaced product lines. Based on the success of this strategy, alterations will have to be discussed, but generally the strategy is a long term one and some rough times are expected.

This brand has great potential and it is not too late to redevelop it at the upper segment of the mass market. However overhaul of its strategy and consistency are required and must under any circumstances be enforced. In no less than one to one and a half years a positive and sound market share is expected. Max Factor of course must reach out to new and young potential customers and educate existing customers, but through high quality and good brand associations this is thought to be absolutely possible!

 7. Appendix Exhibit 1.0 - Online Max Factor Survey

 

     

 

  Exhibit 1.1 - Field Surveys 22nd and 28th January 2011

  Exhibit 2.1.0 - The Secret Factor Club … (www.secretfactorclub.com)xxv

  Exhibit 2.1.1 - Max Factor’s Facebook Spain page has around 30,992 followers

 http://www.facebook.com/Max Factor

  Exhibit 2.1.2 –Target Group Diagram

Source: Marketing Management by Kotler, Keller, Brady, Goodman, Hansen p.354, Pearson Education Limited 2009) Exhibit 4.1.3 – Product Mix Comparison – Max Factor vs. L’Oreal

  Exhibit 4.2.1a - Price Value for Direct Competitors of Max Factor

Exhibit 4.2.1b Price of Max Factor products and competitor’s mark up

   Max  Factor  (Price)  

Chanel  (%  Markup)  

Dior  (%  Markup)  

L'Oreal  (%  Markup)  

Mascara   15   93.33333   133.3333   35.66666667  Lip  Gloss   13.9   73.33333   66.66667   9.352517986  Lip  Stick   10   93.33333   106.6667   91  Foundation   28.9   180   193.3333   -­‐29.06574394  Powder   26   180   200   -­‐37.88461538  

Exhibit 4.2.2 - Max Factor Product Pricing Range (in Euros) Foundation   10  –  28  Mascara   14  –  28  Lipstick   7  –  16  Eye  Liner   6  –  12  Lip  Gloss   4  –  12  Nail  Polish   4  –  10  

Exhibit 4.3.1 – Channel Architecture Courtesy Prof Teresa Recio Naranjo at IE Business School

  Exhibit 4.3.2 Retailers

El Corte Ingles Carrefour Perfumeria Eroski Supermarket Hipercor

Max Factor √   √   X/√   X   √  L'Oreal √   √   √   X   √  Maybelline √   √   √   X   √  Astor √   √   √   X   √  Bourjois √   √   √   X   √  Belle X   X   X   √   X  

Exhibit 4.4.1

Exhibit 4.4.2

 Exhibit 4.4.3

Exhibit 4.4.4 - Major Communication Vehicles

                                                                                                                         ihttp://blog.euromonitor.com/2009/06/procter-gamble-rightly-decides-to-pull-max-factor-from-the-us-market.html ii www.Max Factor.com iii Taylor Nelson Sofres, “Spanish Cosmetic Consumer Report” 2010 ivhttp://allrealbeauty.wordpress.com/author/cdrumbeauty/page/36/ vhttp://www.beautypackaging.com viMax Factor Marketing Customer Interview performed April 1, 2011, Group A vii Max Factor Marketing Survey performed January 2011, Group A viii http://www.austrade.gov.au/Cosmetics-and-toiletries-to-Spain/default.aspx ixhttp://www.cosmobelleza.com/resources/en/feria2011/banners/docs/spanishmarket2009.pdf xCommon Customs Tariff (CCT),TARIC xihttp://www.beautypackaging.com/articles/2008/01/pg-our-company-of-the-year xiihttp://blog.euromonitor.com/2009/06/procter-gamble-rightly-decides-to-pull-max-factor-from-the-us-market.html xiiihttp://www.alu.ua.es/v/vc/posicionamiento.htm xivhttp://www.alu.ua.es/v/vc/posicionamiento.htm xvhttp://www.brandsandbranding-online.co.za/branding-beauty-in-an-ugly-economy/ xvihttp://www.alu.ua.es/v/vc/intro.htm xviihttp://www.welovead.com/en/works/details/0e6zinxD xviiihttp://www.Max Factor.es/es/products/Eyes/Mascara/MasterpieceMax/detail.aspx xixhttp://www.Max Factor.es/es/about/aboutmax.htm xxWolf,Naomi “The Beauty Myth: How Images Of Beauty Are Used Against Women” xxihttp://www.austrade.gov.au/Export/default.aspx xxiihttp://www.beanstalk.com/aboutus/pressreleases/2010/beanstalk_092810.html xxiiihttp://eurorscgsocial.com/2011/01/05/trendspotting-the-max-factor-against-aging/ xxivhttp://www.youtube.com/watch?v=E3k-5M5hdp0 xxvhttp://www.secretfactorclub.com/muchomax/video.php?id=258