marketing plan for japan
TRANSCRIPT
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Miessence Organics:
A Marketing Plan in Japan
Wing Yu Wong
University of Wollongong, Australia
October 2009
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Table of Contents
1. Executive Summary ........................................................................................................................ 4
2. Introduction ..................................................................................................................................... 5
2.1 Miessence background ............................................................................................................ 5
2.2 Choice of Japan ....................................................................................................................... 5
3. Situation analysis ............................................................................................................................. 6
3.1 Macro-environmental (PEST) analysis ................................................................................... 6
3.1.1 Political ............................................................................................................................ 6
3.1.2 Economic ......................................................................................................................... 6
3.1.3 Social ............................................................................................................................... 7
3.1.4 Technology ...................................................................................................................... 8
3.2 Micro analysis ......................................................................................................................... 8
3.2.1 Consumers ....................................................................................................................... 8
3.2.2 Competitors ..................................................................................................................... 9
3.2.3 Market size ...................................................................................................................... 9
3.2.4 Market trends ................................................................................................................. 10
3.2.5 Product trends ................................................................................................................ 10
3.2.6 Target market trends and preferences ............................................................................ 11
4.3 SWOT analysis ...................................................................................................................... 12
4.3.1 Strengths ........................................................................................................................ 12
4.3.2 Weaknesses ................................................................................................................... 124.3.3 Opportunities ................................................................................................................. 13
4.3.4 Threats ........................................................................................................................... 13
5 Market segments to targeted and positioning ................................................................................ 13
5.1 Product segmentation ............................................................................................................ 13
5.2 Product Positioning ............................................................................................................... 14
5.3 Expected Sales and Profits .................................................................................................... 15
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6 Marketing mix strategy 4Ps ........................................................................................................... 15
6.1 Product .................................................................................................................................. 15
6.2 Price ....................................................................................................................................... 15
6.3 Place ...................................................................................................................................... 16
6.4 Promotion .............................................................................................................................. 17
7 Conclusion ..................................................................................................................................... 17
8 References ..................................................................................................................................... 18
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1. Executive Summary
Miessence is an Australian organic skin care and cosmetics company that primarily trades in
Australia and New Zealand. Presently, the company is seeking a business opportunity abroad
for business expansion. Japan is considered to be the best alternative compare with European
countries – France, Spain and Italy. The decision of selecting Japan is based on its advanced
technological facilities, constructive government supports on foreign business, large market
size, positive consumer preferences on organic products and strong purchasing power that
resulted in a great business environment.
The report is conducted in three main stages which are starting with an observation of
Japanese market by employing macro and micro situation analysis method, and then followed
by SWOT analysis to identify major limitations, advantages and overall company situation in
Japan, which allows Miessence to recognize its strengthen components and further investigate
particular issues. The final stage has recommended several marketing strategies in order to
enter into the market and advertise the brand successfully.
There are three major finding in the report. Firstly, most Japanese females sense the
obligation to impress others in order to “survive” in the society which creates a strong
demand of investing in appearances. Secondly, Japanese men cosmetics and skin care market
became one of the strongest in world while they are very energetic in being stylish and good
looking so as to attract women. Lastly, significant numbers of Japanese consumers have
realised the harmful effects from traditional cosmetics ingredients, which pushed them to look
for more pure and natural cosmetics and skin care products. More findings will be explored in
the report.
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2. Introduction
2.1 Miessence background
Miessence is the 100% Australian owned Skin Care Company that developed by the “Organic
and Natural Enterprise group” (ONE group). It was found by Ms. Narelle Chenery and
established in 2003. Most people should be able to remember its simple slogan “Organic skin
care products so pure you could eat them!” The company uses above 95% of natural and
chemical-free ingredients to produce the series of skin care, hair care, essential oils, perfumes,
cosmetics and baby products. With this wide range of product availability, customers can
possibly find everything they need for their bodies.
Miessence sources the raw materials from organic farmers globally, and then develops and
manufactures its unique organic products in the factory which is located in Queensland. The
company aims to create positive brand name by refusing to use misleading advertisements,
unethical business secrets and harmful ingredients. All these elements facilitate the truthful
and trustful business culture and benefit in attracting customers who desire the products from
honest and ordinary company.
Miessence is trading in Australia and New Zealand, as well as online sales services.
Currently, Miessence is seeking an opportunity to expand the business abroad. Japan is
considered to be the best choice compare with countries in Europe (France, Italy and Spain
will be mainly focused in the analysis). The reasons of selecting Japan are discussed in the
following section.
2.2
Choice of Japan
Japan is one of the largest cosmetics markets in the world. The Japanese Ministry of Economy
(2009) indicated that Japanese market value in cosmetics industry has reached AU$12.5
billion in 2006, and it is expected to expand constantly and reach 12% sales growth by 2010.
In term of customer behaviours, Japanese tend to concern on both skin care and cosmetics,
whereas European tend to more interest in cosmetics (Farquharson, 2009). This traditionally
tendency has made the larger skin care and cosmetics segment in Japan. Besides, during the
global economic crisis, Japanese government is willing to ease the imported cosmetics
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standards to attract foreign investments, while Europe countries especially Germany and
France had resisted the larger trade surpluses rearrangement (Council on Foreign Relations,
2009). As a result, it will be less costly to enter Japanese market with its larger potential
customers and fewer legal restrictions. The key motivations of developing business in Japan
are further analysed in the following sections based on the Macro and Micro environment.
3. Situation analysis
3.1
Macro-environmental (PEST) analysis
3.1.1 Political
While the amount of trades grows in one competitive country, it will build up the political
pressures in other countries because of their market loss. Due to the recession of Japanese
economy in 2008 and increasing global competition, Japan‟s international trade has become
more liberated and it has eased the imported cosmetics standards to attract foreign
investments. AusTrade (2009) stated that Japanese Government has deregulated the policies
on cosmetics industry, which eliminated the procedures and costs to obtain prior approval andlicenses for products. As a result, it became less costly to entry into Japanese cosmetics
market while government has imposed beneficial tariff regulation to support foreign
investment.
Moreover, in term of the country safety, Japan is ranked fifth in the world and first in Asia by
Global Peace Index Rankings 2008 (see Figure 1). This ranking is based on numbers of
crimes, potential for terrorist incidents and stability of political situation etc. According to
Cateora et. al. (2009) “the quality of an infrastructure directly affects a country‟s economic
growth potential and the ability of an enterprise to engage effectively in business.” This safety
circumstances provides good business environment and beneficial in business growth.
3.1.2 Economic
In order to resolve the economic crisis in 2007, Japanese government employed some
strategies to encourage consumer spending in an attempt to increase the level of demands and
supplies for economic growth, as well as expanding money supplies to ease deflation. Cleaver
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(2007) reported that “the Bank of Japan has pumped up money supplies. The monetary base
has increased between 4 and 5 percent per annum. Deflation has at last ceased and after years
of falling household incomes there are now signs of growth and of fragile optimism for the
future. The depression has at least bottomed out.” Those actions facilitate more demands in
the market and therefore lead to GDP growth and create more jobs for unemployed workers.
The unemployment rate has fallen from 5.7% in August 2009 to 5.3% in October 2009 which
is the lowest in last four months (Global Economic Research, 2009).
Japanese economy has begun to grow again since mid 2009. The ABC Premium Newsreported that the Japanese economy has grown by 0.9% in three months time from April to
June 2009, which has finally pulled the country out of its worst economic crisis since 2007-
2008. Meanwhile, the Japanese exchange rate has significant dropped since October 2009 (as
shown in Figure 2) while the Euro exchange rate has the tendency to growth (see Figure 3).
Lower exchange rate will help Miessence to lower the operation costs. The writer of European
Currency Forecast, Millet (2009) noted that “many economic forecasters believe that Japan‟s
economic situation is beginning to get better, whereas Europe economy continues to falter.”
At the moment, Japan has the more contented economic circumstances compare to Europe.
3.1.3 Social
Japan is now facing the critical dilemma of rapidly aging population growth. Glosserman
(2009) pointed out that “21.5% of Japan‟s population is above aged 65, and it will expand to
39% by 2050. And while Japanese now enjoy a life expectancy of 81.25 years, the population
is shrinking as fewer children are born.” Nowadays, Japan has the population of 127 million,
but due to the low birth rates, it is expected to drop to 89 million by 2055. The average age is
expected grow from 41.5 in 2000 to 45.8 by 2020. It will seriously affect the economic
growth, tax revenues and government budgets. In turn, the costs of operating business will be
higher because less local skilled workers and sources available.
Although government and society have worried the steady fallen on birth rate, some business
may find an unexpectedly opportunity. While the average numbers of children in one family
has dropped from 3.65 in 1950 to 1.29 in 2004, the parents tend to spend more money or
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provide more pocket money to their children which led to the substantial growth in children
and teenagers markets (Sato & Kato, 2005). Besides, the overall consumption confidence in
Oct 2009 is fairly positive (Figure 4). Generally, high consumer confidence indicates low
unemployment rate and high GDP growth, which lead to high level of optimistic
consumption. As shown in Figure 4, there is constantly growth from the lowest of 26.7% in
Jan 2009 to the highest 40.7% in Oct 2009, it represents consumer spending is growing
stronger.
3.1.4 Technology
According to International Telecommunication Union (ITU), there are about 73.80% of
population using internet in Japan and
Figure 5 shows that Japanese internet providers offer
the lowest ADSL services rates and highest speed compare with U.S., U.K., France and
Germany. With the support of superior ADSL quality, Japanese became the most frequent
internet shoppers with respectively 99 % online purchases in 2008 (Jones, 2008). This
enormous proportion of internet users is greatly beneficial for online sales.
JETRO (2008) pointed out that “Japan is backed up by its world leading technological
capability; it is strong in all stages of the product development process, from R&D to design
and production. The scale of the market is enormous, and it is growing steadily” (JETRO,
2008). The world class developed technological facilities in the market allows Miessence to
communicate with customers and retailers more effectively with lower costs and less time
consuming.
3.2 Micro analysis
3.2.1 Consumers
Japanese tend to be collectivism which means people are integrated as a strong and cohesive
group, also more awareness of others as a whole and value equality. While Japanese care how
other people think of themselves, they constantly seek ways to impress others. In turn,
Japanese sense the obligation and essential to attract others in order to “survive” in the
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society. As a result, most Japanese invest a lot of money and time on their appearances, and
wearing make-up for self-confidence is very common and acceptable in the society.
Hennessey (2007) mentioned that "Japanese consumers constantly need innovation, as they
are always looking for something new, extreme and strange. Presently, it's by reinventing
ancient beauty practices by giving them a new high tech edge." Since Japanese are interested
in seeking new products for enrichment and they are also the quick adapters to new foreign
brands and latest technologies.
Miessence will have great potential market in Japan because of its strong need of wearing
make-up and the need of self-esteem. The economic crisis and unemployment does not
significantly affect the desire and willingness of purchasing cosmetics.
3.2.2 Competitors
In the domestic market, there is significant growth of 21% in using organic cosmetics and
skin care products (Hallgold International, 2009). The most popular Japanese brands such as
Shiseido, Kanebo and SK-II have realised the need to produce their products with naturalingredients. They are now seeking ways to turn their traditional chemical formulas into more
natural recipes. At the moment, they provide products with seaweed, rice bran and ground
beans ingredients to adapt the new market trend (Hennessey, 2007). More natural product
lines are expected from them in the near future which will make Miessence face more
intensive competition.
3.2.3 Market size
70% of Japanese females wear make-up to demonstrate the precision of their appearances, as
it is part of the personal common duties and concrete social cultures. Yet, skincare products
possess more than 60% of total cosmetics sales which contributes AU$13.5 billion sales while
the colour cosmetics make about AU$6 billion sales in 2005 with 4% growth annually
(Davies, 2005). Japanese concern about skincare as well as make-up because they believe
skincare is an important process to boost perfection of appearances.
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Surprisingly, there are also growing numbers of Japanese men notice the importance of
wearing make-up, more than 50% of men think they should improve and invest their
appearances as it comes to the era that men need to attract women. The Japanese male skin
care market is currently one of the biggest in the world that makes AU$ 3 billion sales,
accounting for almost one-fifth of men's cosmetics consumption (NZPA, 2007). Men
cosmetics market has been rapidly growth in last three years, the overall market have
expanded to 3.6% in 2005 and it is expected to continue growth to 7% in 2010.
3.2.4 Market trends
Nowadays, more Japanese prefer foreign brands except the local big five – Shesido, Kose,
Kao, Kanebo and SK-II. They also prefer good quality items with smaller product sizes and
weights so they can try more different types of cosmetics in a short period until they found the
most suitable one. Moreover, Japanese consumers practically concern about the ingredients of
cosmetics and skin care products, so they can use the right product that fit their skin types. In
brief, Japanese consumers became pickier, wiser and tougher to the product they use in terms
of its quality, price, packaging and reputation.
AusTrade (2009) has stated that men and babies market became more energetic, that the new
trend for men is being more stylish, clean, attractive, and masculine. The recent social trends
in Japan are aimed to become a wealthy society and strengthen women power. Izuma (2006)
has quoted an interesting statement from Professor Diabo, “women gained power, men
became like a pet. Men started wanting to have good appearance to attract women." Women
nowadays have the power to force men improving their appearances, and most likely by
wearing better outfits, using facial lotions and face scrubs, or wear cosmetics for instance
foundation and lip gloss. The desire of more good-looking men in the society will relatively
bring positive effects on skin care sales.
3.2.5 Product trends
Growing concerns on health and safety of traditional cosmetics have driven the recent
booming of organic and natural skincare products. Metz (2008) noted that “The cosmetic
industry is facing a new paradigm, driven by increased consumer awareness and the growing
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understanding of the importance of improving health. To meet market demands, the industry
needs to better understand how cosmetic ingredients can beneficially interact in the human
body at the molecular level.” The products made by organic raw materials are set to grow
rapidly. A consumer research report, Packaged Facts, found that “the key areas of product
growth have been in non-chemical based toothpastes, deodorants, anti-aging products,
shampoo and make-up.” The new environmental and user friendly trends have pushed organic
products to be the one of the mainstreams in the cosmetics industry.
3.2.6
Target market trends and preferences
Our organic brand will target at the working women and teenagers by promoting the approach
of skin maintenance and protection with natural ingredients.
About 20% of mid-aged Japanese prefer natural products for the better outcomes of
maintaining vitality and youthfulness (Hallgold international, 2009). Rather than using anti-
aging products to repair the fine lines, Japanese tend to work harder on the preventing the
aging skin. Besides, the demand of organic cosmetics is due to high numbers of Japanese
have sensitive and problem skins. Cheryl (2002) stated that, “30 percent to 50 percent of adult
Japanese women have sensitive skin characterized by a variety of objective and subjective
reactions to exogenous factors.” Japanese prefer cosmetics with mild flavours and fragrances
in order to avoid possible cosmetic irritation.
Consumers appreciate using certified organic ingredients instead of synthetic ingredients, as it
creates a make-up that acts more like skin care (Salemme, 2009). Look past the artificial
cosmetics that made through lab experiments, organic cosmetics are the new natural option
for customers. One of the major purposes of wearing make-up is to hide those scars, dark
circles or pores; nowadays, Japanese can apply organic cosmetics as thick as they want
without the synthetics or chemicals in there which likely cause irritation or skin damage.
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4.3 SWOT analysis
4.3.1 Strengths
The current Australian certifiers such as Australian Certified Organic (ACO) and Biological
Farmers of Australia (BFA) accredit the products that made by at least 95% of organic
ingredients. According Kaplan (2008), “Miessence is the first range of skin care and
cosmetics certified organic by Biological Farmers of Australia (BFA).” Its certified label
strengthens the trust from buyers about the quality of products. Moreover, Miessence has
close connections with framers which secure the quantity of ingredients needed.
Most customers generally cannot understand all the long names on the labels, such as most
popular harmful ingredients Sodium Lauryl Sulfate (SLS) and TEA (Triethanolamine),
Laureth Sulfate, which can construct serious health problems. These ingredients are being
used in car washes, garage floor cleaners and engine degreasers and dreadfully, also in 90% of
personal care foaming products (Miessence, 2009). There are increasing numbers of people
aware of the threats, they rather choose less destructive products that can guarantee safe for
long-term use. Miessence products supply what the public need and also embraces product
differentiation from Japanese biggest brands which apply variety of chemical and
preservation. Miessence has strong ethical values and customs to provide the safe and good
quality products to the locals, and it would help the sales expand productively.
4.3.2 Weaknesses
Austrade (2009) mentioned that “cosmetics become out-of-date quickly and companies
should improve existing products and launch new products every season.” Due to the natural
sources limitation, Miessence may have fewer choices of colour cosmetics available and may
undertake longer period on developing new products compare to other competitors.
Consequently, Miessence may not be able to catch up the new trend as quick as the
competitors. Moreover, all the Miessence products are made without preservation and have
the expiry period of 18 months, any delay in transportation or poor storage conditions from
retailers will seriously affect the quality of the products and results in buyers dissatisfaction.
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4.3.3 Opportunities
One of the advantages of Japanese market is that consumers are always active in discovering
new products, and the new generations do not vigorously resist foreign brands In addition,
Austrade (2009) mentioned that there are only about 12 Australian cosmetics brands in the
Japanese market, Miessence will have less competition from the same country.
According to One Group (2009), “The Japanese are the largest per capita consumers of
organics in the world and are substantial importers of organic consumer products. Japan had a
market value of AU$1.5 billion in 1998 and has a current estimated value of AU$3.2 billion”
(One Group, 2009). The large amount of market value for natural cosmetics and personal care
items are due to growing numbers of people desire and energetic in wearing make-up
healthily. Currently, there is 21% growth annually in Japanese organic market that made
Japan turn out to be largest consumption on organic products around the world. The organic
market value was growing from AU$1.5 billion in 1998 to AU$3.2 billion in 2002 (Chenery,
2009). This demanding movement provide superior business opportunity for Miessence.
4.3.4 Threats
The top three local cosmetics brands Shiseido, Kanebo and Kao have held 10-15 percent of
domestic market, which equivalent to AUS$1.4 billion, and about 63.3 percent are overseas
cosmetics products. As mentioned, those big brands have realised the need to produce their
products with natural ingredients, Miessence will face intense competition in Japanese
organic market. Therefore, Miessence need to build up the brand reputation promptly before
the big brands entry into the organic market, in order to stay strong in the Japanese market.
5 Market segments to targeted and positioning
5.1
Product segmentation
Lloyd (2004) stated that „the product mix is roughly 60 percents of skincare, 30 percents of
cosmetics and 10 percents of fragrance in Japan. The heaviest female users group of
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cosmetics products in Japan are between 18 and 40 years old.‟ Miessence will target on the
teenagers including males and females and working women.
Teenagers‟ cosmetics market has contributed about ¥3– 4 billion per year. Sato (2005)
mentioned that “A Japanese Management Association (JMA) survey has shown 82.7% of
teenagers have used make-up.” It is gratituded to the Japanese teenagers‟ magically six
pockets – parents and four grandparents, which allow them to consume in the market
impressively (Sato, 2005). However, the JMA survey also indicated that 30% of parents are
not pleased about their children wearing make-up due to common perception of non-naturaland damaging skin. Miessence organic products will positively attract those parents to
encourage their children consuming the products. Besides, while there are more independent
Japanese working women who tend to get married later, they have more spare money to spend
for themselves.
5.2
Product Positioning
Austrade (2008) stated that “the cosmetics market has divided into two separate markets in
recent years, a high end market which is historical situated and low budget market which has
just expanded in recent years” (Austrade, 1008). The cosmetics in higher end market are
usually sold in department stores, cosmetics and the counters in shopping mall with trained
make-up professionals. The lower budget level market is usually presented in supermarkets,
convenience stores, discount stores and drugstores where the products are self-displayed only.
Usually, only local cosmetics brands are able to market in market segments as they have large
enough sales to cover both markets and the additional costs (AusTrade, 2008). If a foreign
brand wants to gain recognition on its initial entry, it is better to sale the products in lower
budget level market to gain word of mouth of the public first and then expand afterward.
Moreover, sales at convenience stores have been rising and already possessed more than 5%
of total cosmetics sales, so it is the good place to entry into the market.
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5.3
Expected Sales and Profits
I. Gain the brand awareness in 5% of Japanese teenagers market in year one; Continue promoting
brand name to achieve 10% of Japanese teenagers market and 5% of working women market in
year two
II. Entry into at least 50 department stores in late 2009
III. Increase the online sales by 15% of the whole market. Increase sales by 20% from the target
market
IV.
Gain 5% market share at the end of year one and maintain sustain gradually growth in thefollowing years
6 Marketing mix strategy 4Ps
6.1 Product
Miessence line consists 39 personal care products including deodorants, shampoos and tooth
paste and 35 skin care products such as moisturizers, powders and blush. (Meditskos, 2005).According to Kaplan (2008), “The Miessence products are cold-extracted from organic fruit,
beeswax, honey, avocado oil, nuts, seeds and herbs, and is never exposed to heat during
formulation.” It is an innovative production method to maximize the level of vitamins from
raw materials. The quality raw materials are sourced and selected from global farmers to
produce fresh products. Miessence will focus on marketing the process of manufacturing to
emphases its clean and pure image.
6.2
Price
The Misessence products‟ prices range is from the cheapest Jaffa Lip Balm AU$7.95 to the
most expensive Ambrosia Essence skin soother AU$98.95. These prices are greatly
affordable compare to the top famous Japanese brands such as Shiseido, Konebo and Kose,
those price range is about AU$30 for the lip gloss to AU$220 for the concealer foundation.
Therefore, Miessence has large price gap to be adjusted when needed.
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To entry the Japanese market, Miessence will set the product prices based on the quantity of
the products. For single product and gift set sales, the prices will be set AU$ RRP+10% in
order to cover extra costs such as transportation and management. For bulk purchases, the
prices will be discounted to encourage consumers buy more at one time, the discount range is
shown in Table 1.
6.3
Place
When big brands mostly appear in drugstores and department stores, some 'mid-level' brands
are usually available in convenience stores. Since Miessence is not attempting to compete
with those local famous brands and is aiming to position the brand as „mid-level‟ products,
Miessence will distribute the products to health-food shops and convenience stores Seven-
Eleven Japan Co. Ltd.
Seven Eleven is around the world but the style of Seven-Eleven Japan Co. Ltd is different
than the standard. It is the largest convenience store chain with about 12,000 company-owned
and franchised stores in Japan. It sells much more types of products such as alcohol, software,
fast food and other non-food products. Therefore, Seven-Eleven in Japan is very popular as it
provides most basic need items.
The chosen stores will be mainly in the capital city Tokyo where the population is hitting 13
million in 2009. The population of Tokyo can be divided into 3 main group – 11.9% of
children aged from 0-14, 70.9% of working adults aged from 15-64 and 17.1% of elderly
people from aged 65 and above (Asiarooms, 2009). Miessence targeted market is mainly on
working group, therefore, Tokyo provides optimistic opportunity to effectively promote the
brand.
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6.4
Promotion
The use of media and the image of organic lifestyle will be Miessence‟s major promoting
schemes. Since our products are new to all the Japanese consumers, Miessence need to notify
consumers about the brand and organic product lines. Miessence will promote the brand to
teenagers and middle-aged women by commercials advertisements on television after 6pm
(non-office hours) and during serial dramas, teenagers‟ magazines, loyalty discount on repeat
purchases, posters in the train stations and fast food. Besides, Miessence will present the
brand as part of organic lifestyle - from eating healthy food to using organic products. The
slogan will be "Your skin care ingredients are food for your skin, it should be pure enough to
eat. If you can't eat it, don't put it on your face".
Furthermore, the main concept to promote our organic brand will focus on the drawbacks of
using chemical cosmetics, as well as the high portion of Japanese enduring skin problems and
to be environmental and user friendly. For instance, advertisements will indicate that using
some cosmetics and skin care products can cause skin cancer and problem skin, in contrast,
using Miessence fragrance-free and chemical-free skin care products will optimistically help
preventing the condition of rash, allergic and itchiness.
Free gift sets will be provided to first time buyers which encourage them to try different types
of products.
7 Conclusion
Nowadays, living naturally with non-chemical and non-preservation products is the acceptedand admired aspiration around the world. The Japanese cosmetics market is apparently ready
for organic products while there is rapidly growing population aware of unsafe ingredients in
cosmetics and personal care products. However, Miessence must constantly put efforts on
educating consumers about the advantages of mineral ingredients as well as shortcoming of
traditional cosmetics in order to underpin consumer preferences and business opportunities.
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8 References
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