luxury beauty brands - getting communication right between global teams

Preventing the erosion of your luxury beauty brand’s identity:

Getting communication right between your global teams

How to stop the erosion of your luxury brand’s identity

Despite online growth, the retail point-of-sale experience remains critically important for luxury beauty brands.

How can you be confident that across a dispersed and global network of retail outlets, your brand values are always accurately presented?


Page 3



The essence of luxury is about things being choice or costly. It’s about high quality and attention to detail. It’s about style and rarity and about focussing on excellence and not price.


Luxury brands are generally very clear as to the critical importance of maintaining

a consistent and accurate brand image, conveying to the consumer some specific idea,

a collection of attributes, a dream. To opt for Guerlain is to become that chic Paris

woman; to buy Burberry is to let others know that your style is that of an exclusive kind

of Britishness. It’s that dream, resonating at a personal level, which consolidates loyalty

and so encourages future purchasing.

The central marketing team, which is at the heart of the brand, will therefore be extremely

sensitive to protecting the brand and ensuring that it doesn’t become tarnished through

bad presentation. It’s particularly important that any risk of commodification is avoided.

Given the luxury beauty sector is an intensely competitive market with constant threats

from existing competitors and new entrants, a damaged brand image will impact negatively

on sales, quite probably suddenly and dramatically.

Because maintaining this brand image through an exceptional point-of-sale (POS) experience

is so critical, it’s vitally important that what brands do is done supremely well. This isn’t as easy

as it might seem. Good communication is key.


The personal luxury sector as a whole has been growing steadily. The analysts forecast the

global personal luxury goods market to grow at a compound annual growth rate of 7.9% over

the period 2012-20161 and to reach €270bn by 20172, hitting an all-time high and tripling its

size compared with 1995. European production and supply accounts for 70% of the global

market3. The proportion taken by the beauty and fragrances section is now around 20% of

the global whole and is growing particularly rapidly4. According to L’Oréal this market is

expected to double in the next 10 to 15 years5.

A growing market of opportunities

The analysts forecast the global personal luxury goods market to grow at a compound annual growth rate of 7.9%1... and to reach €270bn by 20172...


20%

4%

28%25%

23% Beauty

Other

Accessories

Apparel

Hard luxury

300

147159

170

167153

173192

212 217

245-255

15%

10%

5%

0%

-5%

-10%

8.1% 8.2%6.9%

-1.8%

-8.4%

13.1%

11.0%10.4%

2.4%

250

200

150

100

50

0

-50

-100

-1502005 2006 2007

Market size Growth

2008 2009 2010 2011 2012 2013e 2015e

€ bi

llion

Gro

wth

(%)

Worldwide personal luxury goods market trend

Source: Challenging growth in the luxury and cosmetics sector. The luxury and cosmetics financial factbook 2014 edition, Ernst & Young

Global personal luxury goods market by product type (2013E)


Online sales have also been growing although here it’s generally department stores that make

the running, at least as far as direct selling is concerned. Indeed some 35% of luxury brands

do not sell online at all6 while in contrast some brands, notably Burberry, Prada and Gucci,

have made successful efforts to develop captivating online experiences that link closely to

what consumers might experience in store. Luxury beauty brands’ consumers may well be

sophisticated web users but use the web to mainly research and compare products rather

than buy online. Buying remains a physical act and so one where the POS experience remains

extremely important.

A further complication comes from the rise in tourist spending. Bain & Company points out

that this is a major driver and that in the cosmetics and fragrance sector of the overall luxury

market, airports can be thought of as a “sixth continent”, such is the strength of their retail

sales7. Half of the French luxury sales are made in the tourist market8. Brand owners should

understand, therefore, that the consumer is more important than the location, that it’s a case

of Who? and not Where?

How will luxury businesses succeed in the next decade? Get prepared for Luxury 2.0

1995

100

290

500

2014E 2025F

Luxury 2.0 imperatives

Superior customer experience- Promoter system around the brand- Omnichannel strategy- Innovation marketing

Flawless retail management- Continuous network and Capex optimization- Hospitality culture- Assortment tailoring

People excellence- Talent management- Frontline engagement- Customer centricity

Luxury-goods market, indexed to 1995

Source: Bain & Company | LUXURY GOODS WORLDWIDE MARKET STUDY Fall-Winter 2014 The rise of the borderless consumer


Growth in this sector is desirable for luxury beauty brands but brings its own challenge of

retaining market share and while doing so ensuring that brand consistency is protected, given

that the distribution chain will certainly increase in complexity. This complexity comes not only

from wider geographical distribution but also from an increase in both the number and type

of retail outlets serving the brand. Add to this complex mix, the seasonal nature of the luxury

beauty brand market and the scale of the task of ensuring exceptional POS environments are

always produced becomes significant.

This underlines the vital importance of making sure that communication between all the different participants is of the highest quality so that brand integrity can be maintained.

Page 9



If a global luxury brand owns or franchises the entire distribution and retail network then

good central-local communication is generally less of a problem although issues around

maintaining brand integrity can still arise from matters such as language usage, cultural

factors and a lack of understanding by the centre of specific local matters or opportunities.

More commonly a global luxury brand will work through a chain of suppliers and partners

with products reaching consumers through a dispersed global network of country specific

retailers, covering as many as 180 countries. This introduces a whole new set of brand

management problems and increases greatly the risks of brand distortion or damage because

the interests of the global brand, procurement teams and the local brand teams are not

always aligned. According to the analyst company AT Kearney, British retailers do not value

the brand image at the same high level as in some other countries, instead placing more

emphasis on the perception by the consumer of the retailer rather than of the luxury brand9.

This means more work for the brand management team in ensuring that a local retailer sets

up and delivers the proper POS experience.

Good communication – the key to brand integrity

This brand distortion often arises from communication failure between central and local marketing teams.


Traditionally the brand management team will pass on to the local teams responsible for POS

production and/or implementation, information about brand guidelines and ethos via email

with the necessary documents attached.

This works well for simple communication but becomes difficult to manage as numbers grow

and projects start to overlap by time or region. This is especially evident in merchandising

a luxury beauty brand, who often have as minimum ten seasonal promotions and product

launches a year. Each promotion will require different retailers’ booths and floor set-ups,

so it’s hardly surprising that the parties involved become confused as to what material is

current and often resort to using versions stored on their local drive. As Nicolas Meauzé,

POS category leader at Pernod Ricard, comments, he found “some countries using items that

did not even stick to the core brand colours, let alone the right design, lettering and so on”10.

And although email is a highly convenient communication approach, there can inevitably

be security and audit trail issues inherent in such systems with the global brand team

unsure who has received and actioned which communications.

There’s also the matter of human interaction and consequent misunderstanding. This

may be language based or cultural or it may be because the central brand management

team doesn’t always know the extent and responsibilities of the local teams. Central teams,

with responsibility for brand management and the purse strings, can sometimes appear

far too arrogant and dictatorial in insisting on what needs to be done when developing a

POS environment for a luxury beauty brand. In the absence of good interpersonal relations

between the teams this can be very damaging. The local team will ‘do their own thing’ using

non-approved suppliers to respond quickly to their market’s needs producing POS which does

not always meet the global brand’s guidelines. Crucially, the global brand and procurement

teams will not have visibility over the POS actions at local level and will be unable to confirm

that brand integrity remains intact.

The risks and costs to the brand


The power imposed by the central team over the local team also shuts off a source of

good local information which might well transform a mediocre marketing campaign in

that particular locality to one which has full impact and drives sales.

Brand control for luxury beauty brands has to come from head office; but to be applied

and disseminated successfully across markets, there needs to be scope for feedback and

participation from local markets. Communication needs to be a genuine two way flow and

an important part of the managerial role is to listen and be open-minded about suggestions

from those on the ground locally.

It is only by taking this approach that the highest quality POS environment, one which

properly resonates with the consumer’s expectations and so leads to exceptional sales,

can be brought into being.

Local and central teams must recognise each other’s strengths and central marketing

should appreciate the real value a committed local team can bring over and above

both immediate sales and customers’ tracking. This can be enhanced through good

communication but also dramatically destroyed when communication is poor and

mutual respect limited.


MARKET CONDITIONS

COM

PETITORS

NEW ENTRANTS

THREATS

OPP

ORT

UN

ITIE

S

GLOBAL BRAND AND

PROCUREMENT TEAMS

MARKET RETAILERS

M

ARKET RETAILERS

M

ARKE

T RE

TAIL

ERS

Localteams

Loca

lte

ams

Local teams Local

teams

Local

teams

PRESSURE

PRES

SURE

PRESSURE

PRES

SURE

PRESSUREBrand implementation: The importance of good communication


If luxury beauty brands want to enter new markets or adopt new retail channels, without

suffering any damage to the brand or the luxury experience delivered to consumers, such

risks have to be tackled head on.

One very important strategy is to have regular face to face meetings. This reassures the local

team that they’re important and that their views and concerns are being listened to and taken

as valuable contributions to the whole process. It also means that people can put a face and

personality to their remote colleagues and in doing so enhance mutual respect and loyalty

and make it easier to discuss relevant matters over time.

Setting up local brand workshops and associated training is also very valuable, not only in

developing passion and commitment and in ensuring that local teams fully understand the

brand ethos but also in providing valuable feedback to the central team about local events,

culture or conditions. Of course this can be difficult and costly where there are large numbers

of brand and procurement teams spread over the globe but it is necessary in some form.

One option is to host regional conferences or even use videoconferencing. The diamond

company De Beers, for instance, holds its annual meeting using a very high quality video

conferencing link between its Luxembourg headquarters, London and South Africa with

many hundreds taking part as if they were in the same room.

Whilst these processes help with a local team’s engagement and build trust and respect

between all parties, they do not guarantee that “everyone has the same version of the truth ”11.

Digital Asset Management (DAM) systems are used by some brands, but often with limited

success, as whilst a DAM guarantees the right artwork is being used, it does not handle the

complexity inherent to POS and merchandising.

There is also an increasing number of cloud-based software and service solutions to support

the development and implementation of POS complexity, of which a good example is Geneus,

ProProcure’s Spend Management platform.

Enhancing communication


Geneus: spend management platform

COST AND TIME EFFICIENCIES

COST AND TIME EFFICIENCIES

VISIBILITY OVER W

HO

DO

ES WH

AT VISI

BILI

TY O

VER

WH

O D

OES

WHA

T

JUNE

SUPPLIERS DISTRIBUTORS

CENTRAL TEAM LOCAL MARKETS

Confirmation on what POS should be used and how

POS guidelines on decoration and

construction

Schedule and costs confirmed

Local market intelligence informs

POS design


It is designed to present seamlessly information on as many POS products and services

as the company requires, showing these to whatever level of complexity is wanted. This

means that everyone concerned, including authorised suppliers and distributors, whether

in Berlin, Buenos Aires, Buffalo or Beijing, will see the same up-to-date information in their

own language. The responsible manager at company HQ can then discuss with the local

manager or supplier responsible, in real time, exactly what POS products are to be used

and how. Those involved are able to agree details of construction and decoration, confirm

schedules and costs, consider changes based on local knowledge, and much more, all

in a tight security environment underneath a very easy to use interface and with a full

audit trail of decisions and actions. Effectively everyone concerned with the marketing or

procurement processes whether brand manager, distributor or supplier, can be confident

that the information is accurate, up-to-date and reflects fully what was discussed and

agreed. The risk of misunderstanding and confusion between the centre and the periphery

reduces dramatically and the luxury POS experience is maintained.

Can you afford to get it wrong?

The take outs from this are clear: with the luxury beauty market growing and new markets

and competitors emerging, luxury beauty brands cannot risk getting it wrong at the point-

of-sale, not unless they want to lose market share. To ensure a first class POS experience

which draws on good knowledge of the customers, there has to be close and harmonious

working between teams. And the key to that is timely communication between the centre

and the periphery and between the marketing teams, the sales teams, the suppliers and

the procurement teams.


Page 17



1. “Global Personal Luxury Goods Market 2012-2016” - Researchandmarkets.com

2. Worldwide Luxury Goods Report 2014 - Bain & Company

3. The value of the cultural and creative industries to the European economy,

A report prepared for the ECCIA, Frontier Economics Limited, June 2012.

http://www.aim.be/uploads/news_documents/Thevalueoftheculturalandcreative.pdf

4. Worldwide Luxury Goods Report 2014 - Bain & Company

5. L’Oréal Annual Report 2014

6. Luxury Goods Worldwide Market Study Fall-Winter 2014,

The rise of the borderless consumer, Bain & Company

7. Luxury Goods Worldwide Market Study Fall-Winter 2014,

The rise of the borderless consumer, Bain & Company

8. Global Powers of Luxury Goods 2014: In the hands of the consumer, Deloitte

9. Beauty Only as Deep as the Customer Experience - AT Kearney

10. Pernod Ricard, Procurement gets to grips with global brand collateral

- Peter Smith, Spend Matters/ UK & Europe, 2013

11. L’Oréal and suppliers collaborate in cloud-based Control Tower

- Supply Chain Movement 2013

References


ProProcure tackles the lack of co-operation that commonly exists between procurement

and marketing in global and multi-national companies.

Technology is at the heart of the business. Geneus, the marketing spend management

platform is built to seamlessly integrate with existing business systems and successfully

manages client’s POS complexity giving complete visibility over costs, providing an

unrivalled aggregation solution and ensuring brand compliancy.

For the last 14 years, ProProcure has worked with a number of luxury brands, including

Perrier-Jouët, Mumm, and Martell.

About ProProcure

ProProcure LimitedEuropa Court, Marsham Way, Gerrards Cross, Buckinghamshire. SL9 8BQ United Kingdom

+44 (0) 870 380 1717 | [email protected]

If you wish to discuss the contents of this paper or to find out more about ProProcure, please call Edwige Riou on +44 (0) 870 123 5143 or email [email protected]

For Further Information

luxury beauty brands - getting communication right between global teams

Documents