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Sephora: Company Overview
The beauty business is one of the most changing, fast moving, and profitable industry in the world today. Various participants are prominent because of their involvement with highly esteemed consumer products and brands. In the division of high-end beauty, Sephora Direct is exceptional and famous because of its leadership position as a reputable chain of beauty stores. Dominique Mondonnaud founded the company as Shop 8 in France in 1969. The business changed hands in 1997, when it was bought and rebranded by Louis Vuitton Moet Hennessy (LVMH). Today, Sephora Direct has more than 250 brands and 14,000 products. The company operates more than 750 stores in over 21 countries, including 60 stores in China and 280 stores in the US and Canada. Moreover, it operates mini shops in 270 JCPenny department stores.
Background of the Case and Thesis Statement
Julie Bornstein, Sephora’s Vice President, is seeking to double the funding for social media and other digital marketing initiatives for the next year of 2011. The digital marketing efforts used by Sephora in the last two years have been fruitful. The company desires to intensify the utilization of the social media, online video, and mobile presence with the intention of improving its overall marketing. Julie has to justify the claim for additional funding. Subsequently, she is to determine the distribution of the funds for different marketing platforms. Also, she has to establish effective ways to measure the returns on investment in digital and social marketing strategies.
The aim of the presented paper is to analyze Sephora Direct with a focus on the value proposition, the decision-making process, Sephora’s social media strategy, and partnerships. Also, the paper will review the measures of Sephora’s digital marketing strategies as well as propose the apportionment of the marketing budget.
Value Propositions: Strengths and Weakness
The first strength is self-service approach to cosmetics in Sephora Direct. The company allows its customers to test as many products as possible with the aim of enabling them pick their best preferences. Sephora’s approach is remarkably different from the strategies of other cosmetic stores where customers can only test products with the assistance of sales associates. With limited testing consumers may end up buying products against their wish.
The second strength is that Sephora can track its customers’ buying habits through its website and loyalty cards. The information helps in decision-making regarding targeting strategies through promotions and advertisements. The outcomes are better marketing strategies.
While Sephora Direct enjoys various strengths, it faces some weaknesses, which dictate the need for improvement measures. Firstly, Sephora Direct has little brand recognition among customers living in rural areas. The weakness is coupled with poor print and television adverts. The limited presence hinders potential relationships with clients.
Also notable fact is that Sephora stores are unevenly distributed. Consumers face the challenge of accessibility and thus buy their desired products in alternative stores. Secondly, Sephora Direct stores offer beauty and cosmetic products at a relatively higher price than its competitors. The consequence is the reduced sales as customers seek alternatively cheaper substitutes from other retailers.
Sephora Direct faces competition from various fierce players in the market, which include Ulta Beauty, Amazon, and Gilt Groupe among others. The competitors have different strengths and weaknesses.
The first is Ulta Salon. Its primary advantages include a respected brand name and an efficient supply chain that ensures that there is a 24/7 availability of products. However, its weaknesses of high staff turnover and weak and inefficient management affect the operations.
Second competitor is the Departmental Stores. Their strengths include financial backing, which leads to sufficient capital and easy access to bank loans. Also, Departmental Stores stock unique products compared to other retailers. Weaknesses of the company include poor brand image versus other competitors and flawed customer service.
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Third major competitor is Amazon Stores. The strengths of Amazon Stores are economies of scale because of massive sales and efficient logistics and supply chains, which ensures that the stores are adequately stocked all the times. The major weaknesses of the company are poor publicity and the exclusive operations online; hence no opportunities to interact with customers.
Finally, the Gilt Groupe’s key strengths include reputable investors, which provide adequate funds for operations and reputable brand name. Thus, the company enjoys a first-mover status in the luxury niche. Its weaknesses include off-season merchandise and lack of regular free shipping.
Decision-Making Process: Traditional Media and Digital Media
The consumer decision-making model features five stages. They include information search, need recognition, evaluation of alternatives, purchase decision, and purchase evaluation. Sephora Direct can win the customers at every stage using both the traditional and digital media. The first stage is the information search. When customers want to buy beauty and cosmetics products, they utilize sources such as adverts, television, magazines, and the Internet. Sephora can use traditional media, for example print adverts to provide all information deemed influential on customers’ decision-making processes. Moreover, the company can use digital media such as the Internet, mobile apps, and social media channels to enlighten the customers on the available products. The second stage is need recognition. Sephora hires qualified staffs to serve customers and offer them free beauty advice. The employees try to explain all information passed through digital and traditional media and sway customers to purchasing.
Third step is the evaluation of alternatives. Sephora offers free samples, which customers can test before buying. Therefore, customers prefer to purchase from Sephora, as the alternatives can be analyzed for free. The fourth stage is purchase decision. The customers are allowed to evaluate the different products before making purchase decisions. Through the use of traditional media like printed brochures and digital forms such as the smartphones, Sephora provides the customers with free information and feedback. The final stage is purchase evaluation. Sephora practices a lifetime return policy where a customer can return an unsatisfactory product to a location that does not carry the brand. The process is facilitated by digital media, which help to ascertain that the product was purchased from a Sephora’s outlet. Thus, the customers feel more secure after an acquisition. The stores allow customers to fix any problem with alternative products. Also, the stores facilitate delivery for all products bought online.
Social Media Strategy: Opinion on Sephora’s BeautyTalk
Sephora’s creation of the BeautyTalk platform as a separate strategy from Facebook was a smart move. The rationale for the decision is that not all customers are using Facebook. Therefore, the BeautyTalk would account for all peoples’ opinion, regardless of whether they use Facebook or not. BeautyTalk was aimed at capturing the conversations around beauty as well as the contents and insights from the customer. BeautyTalk has a wider potential market than Facebook.
Business partners are useful in the improvement of business operations and realization of greater profit margins. In the case of Sephora Direct, various companies such as Groupon, ShopSocially, Foursquare, and Shopkick are the potential Internet-based partners. However, ShopSocially is the recommended partner. The basis for the choice is that the company holds a leadership position in social marketing platforms. Sephora’s partnership with ShopSocially would lead to benefits, which include better brands recognition, increased brand loyalty, higher conversion rates, and decreased marketing costs among others.
Other companies are unsuitable for supported reasons. Groupon is unfit owing to its poor performance record in order fulfillment and its specialty in luxury goods. ShopKick is inadequate as Sephora’s partner because of its focus on shopaholics rather than everyday consumers, thus limiting the cooperation utility. Finally, Foursquare is inappropriate as a partner as it is a relatively new entrant, and thus has a limited market share and relatively low physical presence.
Measurement of Sephora’s Digital Marketing
Sephora Direct can use various metrics to measure the success of its digital marketing efforts. Firstly, the company needs to assess the extent of online traffic on its website and social media platforms. Increased number of visits would imply that digital marketing investments are fruitful. Secondly, the rates of conversation, amplification, and applause are effective measurement. The number of audience comments and the number of shares and likes on posts point out the extent of success of the digital marketing efforts employed. Thirdly, the company would analyze its quarterly sales and compare them with sales of previous periods. The method would assist in evaluating the current market share after application of digital marketing. Finally, Sephora would estimate the rates of in-store sales and their connection to digital marketing efforts. Higher sales would indicate that the digital marketing efforts are successful. Read also: Zara marketing plan strategy.
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Assuming Julie Bornstein gets additional funding, I would propose that she allocates the funds based on the importance of the marketing strategies. I would recommend that 30 percent is dedicated to mobile apps, 15 percent to Twitter, 5 percent to Facebook, and 20 percent for YouTube advertising. The remaining funds would be allocated to BeautyTalk with 25 percent and video contests with 5 percent. Facebook receives the least funding as minimal effort is needed to sensitize people. Mobile apps should have the largest share because modern technology has increased the use of smartphones. Mobile apps can be used to reach target groups massively. BeautyTalk has the second highest allotment because considerable efforts are required to track the consumers’ conversations about beauty. Twitter and YouTube advertisements require a significant amount as beauty has acquired popularity among YouTube stars. The company should minimize the use of non-digital marketing strategies such as direct mails, public promotional campaigns, print advertisements, and cross-promotions for it to acquire additional funds.
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