Last updated: March 23, 2019
Topic: AutomotiveCommercial
Sample donated:

Introduction

 

This seeks to analyze and discuss the marketing case of L’Oréal, by answering given set of questions. We will find the importance of the new product development as a strategy to the company; we will evaluate whether it has rightfully addressed its problem on R&D – marketing interface, and; we will determine the extent of the new product development screening process of the company.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

 

Questions and Answers

 

1. Why is new product development so important for a company like L’Oreal?

 

New product development is business strategy is to respond to the environment where a given company operates. According to Porter (1980) strategy must take advantage industry opportunity and protect itself from industry threat.  To illustrate, cosmetics, skin care and hair care products are parts of the fashion of the industry which is characterized fast changing taste and preferences, hence players in the industry must be innovative companies or they must have a new product development as an integral part of the strategy for this would in effect takes advantage of the changing of the business opportunities created by new wants and tastes of customers and would also protect the company from threat of being left stagnant or being irresponsive to change.

Theoretically, new product development could be a strategy for different purposes. Churchill, Jr. and Peter (1995) said, “A new product is one that is new to the marketing organization in any way. It may perform a new function, improve performance, provide a new application or function, and be integrated into another product, be downgraded or restyled, have a lower price, or be offered to a new market.” They explained that companies can enhance their chances of success with a new product if they are systematic about developing it.

New product development strategy therefore is a process that begins with an idea generation. Ideas for new products can be sourced from many parties including, customers, the sales force, and other employees and the organization has the responsibility of evaluating the ideas generated and management must meet the objectives of the marketing department and company as a whole in selecting the chosen idea from the many sources. This will be followed by the marketer conducting a business analysis to verify whether predicted sales and costs are acceptable are for chosen idea or ideas. If acceptable, the process continues with development of the product and other elements of the marketing mix. This will be usually followed by the organization testing the markets for the product to see whether it is received and used as expected. Again it if the results of test marketing are acceptable, the development process ends with commercialization (Churchill, Jr. and Peter, 1995) (Paraphrasing made).

Knowing the above theoretical framework, it is now easy to appreciate the importance of new product development of L’Oreal. New product development therefore is a responsive strategy to the business environment and as a way of enhancing its success or improving its financial performance.  What needs to proved is whether the company is adopting such strategy and whether there is evidence that the company faces such industry threats and opportunities.

The proof that the company has chosen new product development as strategy is admitted by the company’s assistant head of haircare products, Nicolas Rosselli, by saying: “Innovation is our driving force. In the salons of our customers who are professional hairdressers, one sees that there is a marked demand for differ­entiation. Each customer wants to be able to offer consumers something that the others do not have.”

The evidence that the L’Oreal faces the characteristics industry threats and opportunities is borne by the case facts that L’Oreal always has to be at the fore­front of fashion and has to have new products and services ready to offer when the market wants them and that new products are part of a strategy to build a dozen or so megabrands that are rooted in a local culture’s sense of beauty, but can also appeal to different segments of a global market. The company is skilful at always bringing innovation to the marketplace and maximising the use of established brand names with new products targeted at these subsegments and niches and L’Oreal supports its products by matching the same with an annual mar­keting budget of about over 30 per cent of sales on its 12 care brands. The company also claims that it streamlines packaging, bulk buys advertising, and gains economies of scale in the aggressive management of these top performing brands which helps provide the resources to plough back into further R&D (Paraphrasing made).

 

 

2. Critically appraise the problems of managing the R&D – marketing interface.  Do

you think that L’Oreal has solved those problems?

 

To answer the question we will have to understand first the theoretical roles of marketing and R&D and whether they are done in practice as applied in the case of L’Oreal.    R & D department is normally interested in the technical requirements of the product including compliance with safety requirements but Marketing department occupies the primarily of role of getting ideas from customers on what benefits and features must be incorporated in the development of new products, hence the need of the two departments to coordinate and worked hand in hand accordingly. Churchill, Jr. and Peter (1995) supported this coordination of the departments by saying, “The work of developing a new product is typically handled by employees from various departments in the organization. Often it involves representatives from external organizations such as advertising agencies and research laboratories. For new products to succeed, these diverse people must be organized is such a way that there efforts can be coordinated and directed toward achieving compatible goals.”  The authors added that organizing is specially challenging for global marketers. Thus there is a need to ask whether the company should keep its costs down by conducting all product development at a single facility or whether it should stay more in tune with customer needs by having these activities take place in each country it serves (Paraphrasing made).

 

On the above theoretical bases, we could infer that departments involved in the process of new product development must have their efforts and objectives coordinated. In the case of L’Oreal, there appeared to be a lack of synchronization between the marketing needs and what R&D can do in some cases.    Case fact supports this observation, when it provided, “Some new product ideas are initiated by marketing and R&D then has to be responsive in coming up with a formula. Marketers had noticed, for instance, that young Japanese people were fed up with having black but had found that hair colourings used in the West gave very poor results on their hair. R&D took the problem and developed a product that began by bleaching the hair to prepare it to take the desired colour. The resulting Feria range was an instant success.  There is not always a quick response, however. Marketers wanted a natural fruit-based shampoo range for the European market but it took R&D 10 years to come up with the formulae for the Fructis range! As well as working on ideas initiated by mar­keting, it is important for the scientists to have some freedom to work on their awn long-term ideas and projects, even if there is no immediately obvious commercial application, which can then be patented to protect them from the competition.”

 

In other words, the problem of R&D and marketing interface lies in the fact that ideas coming from marketing and going to R&D and R&D were responded do in certain cases but quick response is not available all the time. Hence there are cases that Marketer wanted something but the R&D could take longer than expected in number of years to come up with the formula.

 

As to how the company solved the problem, L’Oreal recognized the delicate balance to be struck between ‘creative’ R;D, promising long-term solutions, and ‘marketing led’ R&D, by maintaining the impetus to keep launching new commercially viable products, which L’Oreal has tried to find through a three-level structure which is explained as follows:

 

First, by advanced research – The company considers this as  the ‘creative’ level taking the longer-term view thus it is critical for advancing knowledge in the skin, hair and nails areas relevant to L’Oreal; for developing new ingredients; for better understanding and improving the effectiveness of new ingredients and products; and for better understanding their toxicological effects (Case facts, Paraphrasing made).

 

Second, by applied research- Under this level the company takes over ideas from both L’Oreal’s own advanced research and from what has been done outside the company to refine new raw materials and to put new technology into practice.  What was observed under this level was that it does not take very long to develop and synthesise a molecule, but it takes a lot longer to evaluate its effectiveness, mix it with other ingredients to create a usable product, find the means of making it on a commercial scale and get it accepted by the regulatory bodies.  As experienced under this arrangement, it took three full years to develop and launch one of its product called Ambre Solaire Children’s Sun Lotion due to the need to come up with a formula that offered maximum protection to children’s delicate skin while being water- and sand-resistant and in addi­tion, it had to be easy to apply and give confidence to parents applying the protection (Case facts, Paraphrasing made).

 

The third level of the arrangement is product development, where at this level, formulae are further refined and the products, including the packaging, actually created. It is reported that development is especially important as the interface with market­ing, and development staff and marketers work closely together (Case facts, Paraphrasing made).

 

After knowing the three levels, we can now evaluate its results on whether it as promoted the cooperation and coordination of marketing and R &D.  Based on the three levels of structure and the claim of the company, it appeared that the company was able to solve the problem of R&D and marketing by promoting cooperation and coordination between the two departments.   There appears great evidence to confirm this observation as case facts say, “Underlying the development work is a clear focus and the product, thanks to continual exchanges between R&D and marketing. It is important that researchers do not lose sight of industrial reality, especially at the applied research and product development levels. Informal contacts are encouraged and it is not unusual to see scientists participating in product launch activi­ties. But there are also more formal contacts.”

 

Another proof that there was a success of the process is what case facts told us: “The reward for all this effort can be very high. The Fructis range, for example, took 10 years to develop and when the tests showed spectacular results on the qual­ity of hair, it was launched in France in July 1996. Within the first six months alone, it had sold nearly 5 million units and since then it has helped L’Oreal capture 28 per cent of the European shampoo market by being rolled out into international markets, not only in Western Europe but also in Scandinavia, Russia and Chile.”

 

3.  To what extent does L’Oreal follow a new product development screening process?

 

We define the new product development screening process as the way the company evaluates its given choices along the processes or steps involved in product development from the generation of the idea to commercialization of the new product when it has passed the product development stage. To understand the process, we have to know first what the steps are in the product development cycles.    Kotler (1994) gives them to us as follows: idea generation, idea screening, concept development and testing, marketing strategy development, business analysis, product development, testing and commercialization.

 

It could be observed that the end or purpose of product development is commercialization of new product, but we could analyze from the steps of the process as described above that before developing the product and product mix, there must generation of ideas for new products and evaluation of the same ideas, followed by the conduct of business analysis to determine profitability of the product. Hence, this must the first point to evaluate on how the company screens the process in its product development. We therefore ask: Does the company evaluate and screen ideas?  To answer this question, we should say that the company does make the screening of ideas. This is proved by case facts: “Although it does not take very long to develop and synthesise a molecule, it takes a lot longer to evaluate its effectiveness, mix it with other ingredients to create a usable product, find the means of making it on a commercial scale and get it accepted by the regulatory bodies. It is important that every new L’Oreal product is exciting, offers a new and clear benefit and proves itself acceptable in use… In addi­tion, it had to be easy to apply and give confidence to parents applying the protection…. About 1,000 arrive every year, and between 700 and 800 of them are examined in minute detail by about 20 people who do nothing else.”  Based on quoted case facts, the R&D develops and synthesizes a molecule before evaluating its effectiveness. There is thus an experimentation stage, which may be considered as screening, along the process where product must be evaluated for effectiveness.  Afterwards, this will be followed by mixing it usable products. This again is a screening stage, where the product must be evaluated with usefulness or benefits to customers. Afterwards, this will be followed by finding the means of making it on a commercial scale. At this point, it would appear that there is no conduct of business analysis first whether the new product is profitable or not.  Business analysis is not mentioned in the case facts and it would seem there is no determination of screening made as to which product is profitable.

 

The company also have its product approved by regulating agency after commercialization. This is risky because in case of disapproval, the company could destroying large part of inventory and could cause the company litigation cost from complaining customers.  Another step that is not being practiced by the company is the stage or step when there is a need to developing product and marketing mix. This stage will include the pricing, promotion and distribution needed but the case facts it silent about this part of the process of product development. There is however mention in the case facts about the company making the sale of its product developed but there is no mention as to profitability hence, there is basis to conclude that the company’s extent of new product development screening may have neglected the determination of profitability.

 

Conclusion:

 

We have found L’Oréal to be a company needing new product development as strategy to its industry to survive competition and as demanded by the changing wants in the fashion industry.  Being part of the bigger fashion industry, having new products is a necessary strategy.  In appraising the problem of managing the R;D – marketing interface, L’Oreal may appear to have solved those problems by its adoption of the three level-structures of advanced research, applied research and product development.  But it would seem there is no conduct of business analysis that would project sales and cost in order to determine the profitability of every new product development before they are brought to commercialization. It is not enough that there is benefit derived from the product, it is essential that the company must also earn for every new product developed before the product is eventually commercialized. The need to know the profitability of every new product development must therefore be an integral part of the new product development screening process. This process adopted by company of having the approval by the regulatory agency approving after commercialization may involved great risk of eventually being disproved by said the regulatory agency because seeking approval it done as the last part after commercialization stage.

;
References:

;

Alexandre (1998); Edmondson et al. (1999); Hendarwan (2001); L’Oreal (1998), Morals (2000); Shamoon (2001), L’Oreal Case facts  {www document} URL http://www.loreal.com, Accessed December 29, 2006

Churchill, Jr. and Peter (1995), Marketing, Creating Value for Customers, IRWIN, Sydney, Australia

Porter (1980), Competitive Strategy, Techniques for Analyzing Industries and Competitors, London, UK

Kotler (1994), Marketing Management, Analysis Planning, Implementation and Control, Prentice Hall International, Inc., London, UK