Mastering Innovation through

New Product and

Service Development

Spring 2011New York University, SCPS

Presented by: VM

Coty Beauty What is Coty Beauty? Coty is the leading fragrance manufacturer in the fragrance

industry. Coty licenses, manufacturers and distributes Prestige Designer fragrances, Mass Celebrity fragrances and Mass and Value Cosmetic brands. Coty’s primary business is fragrance.

Brands are primarily sold through two types of retail channels: Department Store, Specialty Retailer for Prestige brands Mass Merchandisers, Drug Stores for Celebrity and Cosmetic brands

Some of Coty’s brands include: Prestige: Vera Wang, Sarah Jessica Parker, Calvin Klein Celebrity: Halle Berry, J Lo, Baby Phat, Celine Dion Cosmetic : Rimmel London, NYC Color, Sally Hansen, OPI Nail Color,

Philosophy Skin Care, LaCrosse Implements Current Coty Status: Acquisition. In recent years Coty has made strategic

acquisitions intended to increase company presence in the industry by way of a broader portfolio of Prestige and Mass brands and to leverage these acquired brands to receive added distribution through various retail channels.

State of the Fragrance Industry Current Market Status: Saturation. The market is saturated with

numerous fragrance companies that manufacturer and distribute Prestige Designer and Celebrity brands. (Prestige, Niche, Value and Mass Cosmetics brands have also saturated the market.)

Coty’s Competitors include: Prestige Fragrance: Chanel, Christian Dior, Givenchy, YSL, Marc Jacobs,

Donna Karan, Ralph Lauren, Carolina Hererra, Tommy Bahama Celebrity Fragrance: Mariah Carey, Paris Hilton, Usher, Antonio

Banderas, Shakira, Kim Kardashian. Cosmetics: L’Oreal, Revlon, Maybelline, Wet & Wild

Coty’s Challenge: Stay competitive in a saturated market with a portfolio of brands largely dependent on popularity and line extensions.

Fragrance Industry Challenges: Consumer spending is down. Sales are down. A global economy teetering on recovery. Retailers are limiting space and inventory. Retailers are restructuring the in-store experience (CVS 360, Duane Reade

Look Boutique, Sephora and Department Stores revamp). Changing consumer demographics. Changing consumer tastes. Growing consumer awareness of harmful beauty ingredients. Growing consumer awareness of green and sustainable efforts. Niche brands have entered the competitive market Clothing Retailers have entered the market (Gap, Banana Republic)

Coty’s Objective: Develop a new, innovative, and unique fragrance concept considering Coty’s position in the industry and current market challenges.

This is how we do it…

New Product and Service Development Process: Begin with Senior Management

Organizational Strategy: Build and strengthen Coty Beauty as a major player in the Beauty Industry via diversification of product offerings.

Business Unit Strategy: Prestige Fragrances. Create a premium fragrance product independent of designer brands and celebrity. Incorporate current consumer trends, tastes, impressions and demographics while considering the new

retail model/internet selling and competition. Consisting of: C-Level Management: President/CEO, CFO, COO (Operations),

SVP or VP of Marketing, Sales, Packaging

Activity 1: Ideation

Ideation: Innovation Triggers Connect the Dots - Discuss current conditions in the world, economy, industry Cross Pollinate - What’s new in the various Flavors, Packaging, Market Research Role Play - What are retailers wanting and needing? Consumers? Mind Map Ideas – Begin with Fragrance Ideators: NPSD Team, SVP or VP of Marketing, Sales, Packaging, Flavor Developer

Ideation Screen: Internet search of trade magazines and reports Industry reports analysis Trade Association websites Focus Group concept testIf these sources show potential for a new fragrance product/category,then proceed to Activity 2 . Gatekeepers: NPSD Team, SVP or VP of Marketing E

Activity 2: Elimination - Surface

Expansion and Surface Evaluation: Preliminary market assessment of consumer Interest via focus group concept testing Assessment of competitive environment via market research category information Assessment of potential market size, share, growth via demographic and psychographic analysis Assessment of potential profit given competitive pricing for a premium product Cost of raw materials in line with or within 5% of prestige brands Cost of new equipment/machinery/retooling feasibility

Surface Evaluation Screen Salability of fragrance concept to consumers and retailers Market Research must show long term potential Technical feasibility Gatekeepers: Director of Market Research,

Director of Purchasing – Raw Goods, Director of Operations

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Activity 2: Elimination – Detailed

Detailed Evaluation: Market investigation through Market Research and Competitive Analysis In-depth research with potential consumers via Focus Groups Target market analysis clearly defined through demographic and psychographic parameters Clear defined product concept and product strategy Product benefits outlined, Value proposition established Product features, attributes, requirements, specs outlined Manufacturability Cost to manufacture and potential profit analysis conducted

Detailed Evaluation Screen: Market Research must show consumer interest, desire, want Potential market share must be greater than any current

competitor by 10-20% greater share Fragrance should yield 20% profit over costs years 1-3

and 30% profit during years 4-6 Gatekeepers: NPSD Team, SVP or VP Marketing, Sales, C-Level E

You are Here

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Activity 3: Development – Cross Functional Development Cross-Functional Development

Marketing – Develops Marketing Plan – Collateral selling material, Media, PR, Website, Events, Display Sales – Training of Sale Team, Distribution of selling materials, solicitation of orders Creative – Develop all selling materials, artwork Flavor Developer – Ensures stability of product Packaging – Develop Primary and Secondary Packaging Purchasing (Raw Materials) – Source vendors for raw materials goods Operations (Planning and Logistics) – Creates Ops Calendar for all states of development Manufacturing Plant – Provided specs of expected capacity for manufacture Finance – Finalize estimated costs, projected revenue, projected profit

Cross-Functional Development Gate Focus Group Testing –Fragrance, Packaging, Advertising message Flavor Developer – Juice must be stable Packaging – Package must be finalized Manufacturing – Machinery must

produce product accurately Finance – Within 5% of estimates/projected Gatekeepers: Flavor Developer

Packaging, Manufacturing, Operations, Finance

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Activity 3: Development - Testing

Testing: Extensive testing of marketing message with focus groups to gauge acceptance and trial Extensive testing of product manufacturing process Pretest: Trial Sell, Test Market in designated markets, Financial Analysis of Pretest (6 weeks) Further Financial Data Analysis of more concrete costs, potential revenue and profit

Testing Gate: Consumer feedback of extensive testing Quality of testing reviewed, quality of validation Evaluation of Pretest (6 weeks) – Market acceptance and validation of financial success Financial review and analysis of full production and execution Approval to proceed, hold or terminate Gatekeepers: Marketing, Sales,

Flavor Developer, Packaging, Manufacturing, Operations, Finance I I

Activity 3: Development - Deployment

Deployment Begin full run production of product Marketing materials produced in preparation of Launch Tester Unit and Product Displays manufactured in preparation of Launch Coordination and evaluation of micro test

Deployment Gate Confirmation of readiness and preparedness of all elements of CFD Groups Threats for successful launch reviewed insuring desired results. Final approvals for launch. Gatekeepers: Marketing, Packaging, Operations, SVP/VP Marketing,

Sales, Packaging, C-Level

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Activity 3: Development: Launch

Launch Finished goods product received at stores and displayed on shelf Full Scale Marketing Mix Execution at designated times of execution

Post Launch Review Marketing and Sales Review of Sell Thru Volume, Projected vs Actual Sales, remaining inventory. Review Costs, Review Profits Review strengths and weaknesses, what was learned Decision to continue or terminate Establish future date to review

Post Launch Review Gate Review of PLR data Insure decisions are accurate Approval to terminate or continue with product Gatekeepers: SVP or VP Marketing, Sales,

Director of Marketing, Sales and Brand Manager

Thank you