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WAYS OF MEASURING THE SUCCESS OF SEPHORA’S DIGITAL EFFORTS

The success of a marketing plan is certainly more authentically measurable through numbers in the form of sales figures, revenue and profits but there are several other methods which talk about the success of a project too.

For instance, with the increase in ecommerce specifically the use of social media, are sales figures and numbers the only way of measuring the success of a marketing plan?

That would have made more sense if the world was restricted to in store shopping experiences only where the number of sales would have been a clear indicator of whether the brand was doing well or not.

The team at Sephora wants to allocate a bigger budget for marketing through the digital channel and for accessing whether the campaign and marketing plan has been successful so far, we can take a look at the following points as discussed in the case.

Increase in Sales Turnover

So far only 5% of the total marketing budget has been allocated to social media, mobile and video, in short, digital efforts of promoting the brand. However, looking at the increase in sales in Exhibit 6, we can see how 37% of people between the ages of 25-44, the major target market of Sephora, have increased their purchase of the brand.

From Exhibit 6, we can further see how the increase in sales has shown a significant rising trend especially as 48% of the buyers use the web to search for products so the digital media has positively contributed to the rise in revenue figures since these 48% may have contributed to an increase in the sales revenue. TheCaseSolutions.com is the leader in providing assignment writing experts’ help to the students to complete their homework. Our team of assignment writing experts is available 24×7 for HBR case study solutions.

Speculated Revenue Growth

There has been an estimated revenue growth of 18% for the brand from 2009 to 2010 which is specifically the time when digital efforts have started increasing in marketing the brand. That clearly shows how the digital efforts may have contributed positively in creating repeat sales and brand recognition. So, a $47.2 million net income is expected for 2010 compared to a $40 million figures in 2009 and a positive increase in revenue generation is always a positive point for a brand which is already surviving in a market where there are thousands of competitors fighting for market share. TheCasesolutions.com offers case study help, finance assignment help and marketing assignment help. We are best when we are solving Harvard Case Studies, Ivey Case Studies and Darden Case Studies. Our case writing experts are the best guys in the world for producing customized assignments and case study solutions. We never  copy-paste.

 

Increase in website traffic

Digital efforts have proved to be a success so far as Sephora’s online website for prestige products has 30% of the US online market share which is a significant figure when it comes to comparisons with other brands.

Another way of evaluating the success of a marketing plan is through the website traffic and the digital efforts have managed to increase the website traffic for Sephora dramatically as shown by Exhibit 6, where 2010 has a 32% increase in the website visits compared to 2009 where as if we look at the bars for 2006 and 2007, we can see how the  number of visits were much lesser in the previous years and it was majorly after the digital efforts that website traffic has also shown a positive trend. By 2010 Sephora’s web page had about 310000 visits per day with 11 page views per visit which is evident that digital efforts have managed to provide convenience to the user along with creating awareness in him for further exploring the content of the websites. Once the case solution is ready, our case writers and assignment writing expertsalso go through the case solution all over again and double check it/ evaluate it to make sure everything has been done correctly. Only when the assignment writer experts are satisfied with the case solution then the assignment is delivered to you.

 

Increased Participation in Marketing Programs

Participating in marketing programs also shows the success of a marketing plan. Sephora’s Beauty Insider- Customer Loyalty Program has managed to retain 9 million out of the 15 million participants in the plan which again shows how the digital efforts have been successful in contributing to the success of the program.

Cross-Branding Demand

Sephora can also access the success of the digital efforts through the fact that other brands want to make use of cross-branding through Sephora’s website. They are even willing to pay for getting a chance to make use of the website for branding and marketing purposes. This clearly shows that the competitor has also realized the importance of Sephora’s publicity and is willing to pay for using the website.

Increase in Facebook Fans

The Facebook fan growth rate shown in Exhibit 8 also shows how the digital efforts have managed to increase the fan base in practically six months from March to October 2010 dramatically. The rising trend in the bars shows how the fan base is expected to grow further with the increase in investment in digital efforts.

 

Positive Customer Reviews

Another method of accessing the success of the digital efforts is through the client satisfaction ratings and responses. Even in that case Sephora has managed to have positive reviews from customers on its Facebook and Twitter accounts.

Given all these aspects where we have the quantitative and qualitative methods of measuring customer satisfaction, Sephora should go ahead and increase the marketing budget for digital efforts as they have managed to reach the target audience successfully while creating the desired impact.

 

 

SEPHORA DIRECT : SWOT ANALYSIS
The SWOT analysis for Sephora Direct would help in separating the ‘Strengths’, ‘Weaknesses’, ‘Opportunities’ and ‘Threats’ of the program as a whole and would help in evaluating whether it is worthwhile to invest further in Sephora Direct or not.

The Strengths and Weaknesses in a SWOT analysis focus on the internal positives and negatives of a brand or firm etc. and in Sephora Direct’s case, the following ‘Strengths’ and ‘Weaknesses’ have been identified:

STRENGTHS

Lower overhead costs: Being an online selling initiative, Sephora direct has lower overhead costs. This is a major strength for the brand since it can achieve higher profit margins through sales and can offer discounts if it has to without incurring high overheads.

Strong Leadership: Another major strength of Sephora Direct is Julie Bornstein, the Senior Vice President of Sephora Direct. Before joining this post she had a solid prior experience at Urban Outfitters and Nordstrom where she was handling the web and catalogue divisions and e-commerce programs respectively and her experience can be highly positive for Sephora.

Low cost communication channel: The Program promises a mode of easy and low cost communication channel between the potential/actual customer and the seller and so promises convenience along with efficient time management.

Time Management/Saving: Sephora Direct gives the ability to keep track of several reviews at the same time which can save a lot of time as giving special attention to individual customers would require a lot more effort,

WEAKNESSES:

Absence of physical shopping experience: One of the weaknesses of the program is what all online shopping experiences have that they fail to give a physical shopping experience to the shopper which is basically one of the reasons why some buyers shop.

Sephora Direct fails to give the retail and merchandising experience of Sephora’s retail outlets where customers can come and try out the cosmetics and play with different colors. The online experience would be more focused towards the number of viewers and actual sales rather than providing the direct experience of feeling the actual brand.

Absence of Merchandizing at the point of sale: Sephora Direct cannot be used to convince customers to buy at the point of sale through the efforts of experts who can be used to give personalized advice to customers. In the case of Sephora Direct, customers may not be willing to ask personal questions from online experts.

Maintenance of online database of user reviews: Too much effort is being contributed towards maintain a database of reviews and feedback from customer and most of it is repetition of reviews and are non-productive. Some viewers only take it as a social platform for communication as evident from the Exhibits showing Facebook and Twitter pages.

Increased Direct Cost: The program has increased the direct costs of Sephora through the introduction of the Sephora Claus wish list and $50000 has to be paid in the form of promotion and staff time.

The ‘Opportunities’ and ‘Threats’ in a SWOT analysis talk about the external factors which may prove to be in the form of emerging markets or potential external setbacks for the company under question. In the case of Sephora Direct, the following Opportunities and threats can be identified:

OPPORTUNITIES

Investment in mobile applications: Sephora Direct provides the opportunity of investing in further mobile applications and although so far Sephora has focused majorly on the iphone users, it can work towards the development of applications for android users.

Selling through other sites: There is a further opportunity of selling through other sites which can be integrated in Sephora’s network. This would help in reaching a different group of customers such as offering discounted products to those customers who would otherwise not be buying through Sephora’s website.

Using Brand Ambassadors: Using Jennifer Aniston as a brand ambassador for launching a new perfume offers another opportunity to Sephora Direct as now the brand can make use of a celebrity and market the products online through public selling.

Emerging markets: Sephora Direct is able to get through to areas where Sephora does not have a physical presence such as in emerging markets in developing countries where the brand has not been introduced yet.

THREATS

Direct Competition from Ultra: The cosmetic brand Ultra acts as a major threat to Sephora Direct as it is focusing on the exact same age group as Sephora. Then there is the 44+ year age group which is brand loyal to Ultra and it would get difficult to drive competition from that segment of the market.

Dependency on iphone/itouch: There is too much dependence on iphone and itouch devices which can pose to be a threat in the future in case there is a greater inclination towards the use of android applications. In that case, the heavy investments that have already been made in the form of $100000-$200000 would not be worthwhile.

 

 

PORTER’S FIVE FORCES ANALYSIS FOR SEPHORA DIRECT

Porter’s five forces are used to do an industry analysis on the basis of the buyer and supplier power, the threat of new entrants and substitutes and the overall rivalry in the industry.

In Sephora’s case, the cosmetics market is concentrated with a large number of buyers backed by a large number of suppliers especially if we look at the online market.

The Supplier’s Bargaining Power : If we look at the overall concentration of the industry, the number of brands selling cosmetics would be numerous making this a sort of monopolistic competition and monopolistic competition does not leave the supplier with much power as there are various other suppliers selling heterogeneous products. However, if we look at Sephora’s case, the brand has tried to create differentiation in the form of selling products aimed at different target markets and through channels which are constantly creating a competitive edge in the market. The supplier, which is Sephora in this case is also keeping products of other brands on the shelves so it has created shelf space not only for its own products but also for those of other brands.

Sephora has its own retail stores as well so distributors may be threatened by the fact that the supplier is not totally dependent on them for stocking the products on shelves in convenience stores for forward integration had already happened in this case. In the case of Sephora Direct, the online channel is already an example of forward integration as there is no dependency on a distribution channel.

Bargaining Power of the Buyer: Since Sephora is a strong supplier because of its own retail outlets, direct selling methods in the form of Sephora Direct and supplying to stores, buyers may not have too much power. However since Sephora has opened a direct channel for its buyers to give open reviews and comments through social media, the buyer has enough influence to affect the brand image of Sephora. This is a common practice in almost all of the cosmetic industry that buyers have been given the opportunity to communicate through direct social media and change the image of the product.

The brand has targeted three different sort of markets. There are the 25 to 34 olds who are equally catered by another brand, Ultra, which provides similar types of products but at lower prices, targeting the lower end of the market. Then there are the 44 year plus women who seem to show brand loyalty to. Thirdly there are the younger females who have not started using cosmetics regularly and would prefer to try it out in person. The brand loyal buyers may have a lot more power over the supplier as the cosmetic brand has to be in a constant check about maintaining quality for this segment for the market.

Where it’s the 25 to 44 year old market, Sephora again is not targeting the group which is looking for convenience but is targeting the high end customer. The younger target market is not consistent in their purchases and so in any case the brand may not be too worried about their brand switching as they would be looking more for experimentation rather than brand loyalty.

 

Threat of substitutes: Looking at the threat of the substitutes in the market, there are substitutes of all sorts available in the cosmetics market. Sephora has substitutes in the form of MAC cosmetics in the high end segment, substitutes like Ultra in the 25 to 44 year old market and various substitutes in the departmental and convenience stores in the form of the shelf products.

When it comes to the buyers’ inclination to brand switching, it may be very rare in the case of those who are brand loyal to Sephora. The price sensitive customers are in any case not buyers of Sephora and the brand is not targeting customers who are dependent on discounted prices. So the brand does not feel threatened by the actions of substitutes which are using price discounting techniques.

Threat of New Entrants: The cosmetic market with its brand loyal customers and large number of sellers with an online and physical presence, does not really leave room for new entrants to snatch away customers. The initial setup and creating trust amongst the customers is not easy for new entrants so they may not pose a threat for Sephora.

However, if we consider the online selling method of Sephora Direct then there is always a threat of new entrants who would be targeting the market segments looking for convenience and online buying methods.

Generally it’s the intense rivalry in the cosmetic industry that keeps innovation alive and in case of this industry, trust and brand loyalty play a big role in keeping the rivalry in check…..

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