BOOTS HAIR CARE SALES PROMOTION

Richard Ivey School Of Business Case

Products and services offered by BOOTS

Boots, one of the best-known and respected retail names in the United Kingdom, provided health and beauty products.

Boots had international sales and marketing operations and also developed and Manufactured its own products.

Insurance services and initiatives in dentistry, chiropody, ‘Boots for Men’ stores and‘Internet Services’ were introduced in 1999.

Competition

Retail Competitors

Tesco Sainsbury

Mass Market

Competitors

ALBERTO-CULVER

Haircarecompetitors

Morrison Superdrug Procter &Gamble L’ORÉAL

AIM

To secure market Leadership in U.K in hair-care segment

Objective

Drive sales Volumes and trade-up consumers from lower value brands, while retaining or building brand equity

Target

Current Boot consumers and existing purchasers of Mass-market brands.

Alternatives for the Promotion strategy

1) Get three for the price of two(3 for 2)

2) Receive a Gift with Purchase(GWP)

3) On pack coupon worth 50p

1) Customers get 3 products for the price of 2.2) Revenue is estimated to increase to 300%.3)Increase in customer base as 60% of the revenues were expected from customers who wouldn’t have bought without the offer.4)Most competitors did not have the technology at point of sale to imitate this promotion.

1)Premium products would lose their brand equity and may sound as some cheap promotion.2)Would be perceived as a Stock clearing strategy3)Product partners (Hair dressers) may oppose this strategy for the dilution of their brand equity

Adva

ntag

esDisadvantages

3 for 2

1)customers were given a product sample along with a regular purchase.2)Revenues were expected to grow to 170% of Pre-promotional sales.3)40% of sales would be to Boots shoppers that would not have otherwise purchased without the offer.

1)Adding the sample would cost approx. 90p per unit for the product plus 3p per unit extra to secure the sample to the featured product.2)This is a very common strategy used by most of the retailers and can be easily imitated.

Adva

ntag

esDisadvantages

Receive a Gift with Purchase(GWP)

1)customers would be able to redeem the coupon during their current store visit.2)Estimated that the sales would increase to 150% of non-promotion sales.3)50% of sales would come from Boots customers who would not have otherwise purchased without offer.4)Coupons would enable multiple visits for a single customer.

1)This is a very common strategy used by most of the retailers and can be easily imitated.2)It decreases the brand image in customers mind.3)More of a conservative approach.Ad

vant

ages

Disadvantages

On pack coupon worth 50p

Quantitative Analysis

Data used for the Analysis

1) Average Price of the Premium brands is 3.99£.

2)Premium brands margin is 40%

3)Average price of the Mass-Market is 2£.

4)Margin on Mass-Market Margin is 25%.

Therefore, Cost of Premium brands are 3.99*0.6=2.394 pounds and cost of Mass-market brands are 2*0.75=1.5 pounds.

Cost of GWP Promotion is 90p per unit for the product plus 3p per unit extra to secure the sample =93p=0.93 pounds and Cost of On pack promotion is 50p =0.5£

1£=100p

Alternatives 3 for 2 GWP On pack coupon

All calculations are done for single day

Revenue per unit 3.99 3.99 3.99

Production cost per unit 2.394 2.394 2.394

Promotional cost per unit 0 Sample cost Discount cost

Promotional cost per unit(in Pounds)

0 0.93 0.5

Total cost per unit 2.394 3.324 2.894

No.of units sold 300 170 150

Total revenue 1197 678.3 598.5

Total cost 718.2 565.08 434.1

Net Profit 478.8 113.22 164.4

Analysis for Premium brands

Alternatives 3 for 2 GWP On pack coupon

All calculations are done for single day

Revenue per unit 2 2 2

Production cost per unit 1.5 1.5 1.5

Promotional cost per unit 0 Sample cost Discount cost

Promotional cost per unit(in Pounds)

0 0.93 0.5

Total cost per unit 1.5 2.43 2

No.of units sold 300 170 150

Total revenue 600 340 300

Total cost 450 413.1 300

Net Profit 150 -73.1 0

Analysis for Mass Market Goods

Conclusion

From the above Calculations ,it is clear that ‘3 for 2’ is the best strategy to proceed with.