FIT Capstone: 2004

Graduate students tackle beauty

By Stephan Kanlian, Contributing Editor

Now in its fourth year, the Fashion Institute of Tech­nology’s special leadership training program for emerging executives in the beauty industry took a major step toward cementing its reputation as a think tank for new leadership. This year’s Capstone projects, which address current issues in the industry through the trained eyes of the graduating students in FIT’s Master’s degree program, were staged as a major event in FIT’s Katie Murphy Amphitheater, underwritten by Procter & Gamble Beauty. Over 200 executives from the beauty industry came to hear the findings of the Master’s Program Class of 2004 on issues ranging from ethnic marketing, to new definitions of luxury, and from the male consumer to emotional branding. In the week prior to this year’s Capstone event, the students and alumni of the FIT program were asked to submit their thoughts on similar topics for Fairchild’s Beauty CEO Summit, the theme of which was “Beauty’s Next Wave,” focusing on new leadership in the industry. Quotes from the student essays were printed in the program of the Summit and projected during the Summit’s three panel discussions as inspiration for discussion. The voices of the next wave of leadership in the industry were heard by senior executives in both forums.

An Audience of Experts

This year’s Capstone was again the culmination of two years of study by the seventeen talented young professionals in the Class of 2004, whose backgrounds cover the full spectrum of activities in the industry. Serving as faculty for the Capstone were the Program’s Chair, Professor Stephan Kanlian, as well as three members of the Program’s permanent faculty: Mary Manning and Janice Levine of Manning Abelow, and Mary Tumolo. Throughout the Capstone exercise, experts and senior executives, including: Neil Fiske, chief executive, Bath & Body Works; Jack Mitchell, chief executive, Mitchells and Richards; Warren Christopher, style director, Men’s Fitness; Donna Hernandez, editorial director, Shape Espanol and Talia; Timra Carlson, president, NPD Beauty Trends; Wendy Liebmann, president, WSL Strategic Retail; Andrew Cavanaugh, Sr., vice president, The Estée Lauder Com­panies; Jenny Fine, editor-in-chief, Beauty Biz; and Peter Born, executive editor – Beauty, Women’s Wear Daily, shared comments related to the four Capstone project topics with the students.

The findings of the four Capstone groups are summarized below for the readers of Cosmetic Packaging and Design. The Class of 2004’s ideas and suggestions concerning current opportunities and challenges faced by beauty marketers were received with great enthusiasm by the industry executives assembled at FIT for the presentations.

Ethnic Marketing

The Group: Rachel Deutsch, global marketing manager, Maybelline New York/L’Oreal USA
Madeleine Madrid, public relations, Iman Cosmetics, Connie Martinez, fragrance marketing manager, Chanel, Jonathan Roman, executive director – internet and CRM, marketing, Origins (Group Leader)

The group studying the marketing of beauty products to ethnic segments of the population focused on a segment of tremendous market opportunity: the Hispanic sector.

Demographically Speaking

The group’s research uncovered the changing face of the U.S. population. Rachel Deutsch pointed out some indicators of this trend, saying, “Over 7 million Americans now identify with more than one race, intercultural marriages have doubled in the past 20 years, 42% of multi-racials are under 18 versus 25% of the general population, all of which are resulting in new dilemmas for marketers.” Ethnic groups want to be recognized for their unique customs, values and lifestyles, but not be isolated as consumers, and this is what is most misunderstood by those who market beauty products.

Underscoring the importance of the topic is the fact that the Hispanic community grew in the 2000 U.S. census to a population of 38 million, larger than that of Canada and representing more than half the total ethnic market in the U.S. Madeleine Madrid underscored another key statistic, explaining, “The Hispanic population will grow 19% while their income levels will grow 62% by 2010.”

There are 10.1 million Latinas in the U.S., who are potential beauty consumers. They are especially interested in hair products, color cosmetics and fragrance. Chanel’s Connie Martinez pointed out that research shows Latinas purchase more lipstick, lip gloss, nail polish and skin care than the general population. She stated, “They use more hair styling products and wash their hair more often. In fragrance, they spend $40 more annually than mainstream consumers and26% more Hispanics purchase fragrance three times per year compared to the average consumer.”
In addition to demographics, the media has also played a role. In the past 10 years, the number of U.S. Spanish language media outlets has soared, print magazines and newspapers are up 777% from 60 to 526; yet the beauty industry traditionally advertises to this market in English even though Spanish language advertising has been proven more effective, even with bilingual Hispanics.

What Drives Latin Consumers?

In terms of marketing communications, the group uncovered several emotional drivers that are common to many ethnic segments: chief among them love, family, friends and hope. Family is perhaps the most important aspect of Hispanic life and represents an opportunity for making an emotional connection between brands and this important consumer. Community is also an important concept in the Hispanic community. Local efforts in neighborhoods, churches, community partnerships and charitable tie-ins have also proven to be successful brand communication strategies. For example, to support education, a key concern for Hispanic families, Verizon sponsored a $200,000 grant to support a nationwide reading program for Latino children and awarded $100,000 in scholarships to Latino students recognizing their contributions to community and scholastic achievement.

Other examples of successful marketing to the Hispanic consumer from outside the beauty sector include:

• Allstate Insurance developed relationships with prospective clients through letters from local agents rather than national company executives, generating a sales rate 86% higher than the general market and a referral rate three times higher than the general market.

• Hershey has used 'transcreation', the process of converting advertising, collateral material and product portfolio to a voice that resonates with traditional values and culture, even transcreating classic product offerings with a new twist that reaches a chord with Hispanic consumers.

• Johnson & Johnson recognized that 50% of Latinas are lactose intolerant compared to 15% of the general population. They developed an Hispanic marketing program that increased awareness of the Lactaid brand by 49% and category awareness by 22%.

• Ford Motor Company has introduced multi-cultural advertising and marketing campaigns with every new product launch, utilizing Spanish and English television, radio and print ads, along with the automotive industry’s most comprehensive and integrated Spanish language website.

They adjust the message along with the language, for example, the Ford Focus is marketed to the general population as a car for new college students, while it is positioned as a family car to the Hispanic population.

Hispanic beauty brands have not been successful to this point in reaching this consumer. “They are seen as isolating the segment, lacking strong advertising budgets and shelf space, suffering problems with distribution and lacking an ability to service their consumers adequately,” pointed out the group’s leader, Jonathan Roman. To reach these diverse consumers, mainstream brands must present an inclusive brand image, coupled with a culturally relevant marketing plan.

The group developed several ideas to couple these concepts with specific opportunities for marketing fragrance to the Latina consumer.

• Using popular Hispanic artists to commission limited edition perfume bottles.

• A line of home fragrances and candles based on fruits, flowers, and aromas native to various Hispanic countries.

• Dual purpose packaging to further develop usage patterns, such as fragranced body gloss and a roller ball, or using the same dual packaging to layer scents throughout the day.

• Events that would center on national festivals in the Hispanic community or the important Mother/Daughter relationship.

• Outposts in popular shopping centers or trend influencers as hosts of in-home events, which would also resonate in the Latina community.
The value inherent in this message is that mainstream brands have perhaps an even greater opportunity to reach this segment, and, when the connection is made, the Hispanic consumer has proven very brand loyal.

Trading Up: The New Definition of Luxury

The Group: Kate Foster, public relations director, Victoria’s Secret Beauty, Swan Cheng, field operations, Lancôme USA, Lisa Pankiewicz, director of research and development, Chanel, Sheron O’Brien, associate manager international operational, marketing, Cosmopolitan Cosmetics, Alexandra Yetter, director of special events, Dior/LVMH (Group Leader)

Focusing on the concept of “new luxury,” the group studied one of the most important new buzz phrases in business. Kate Foster of Victoria’s Secret Beauty explained, “Pam Danzinger, author of Why People Buy Things They Don’t Need, defines new luxury as the consumer experience, while old luxury is about the thing. New luxury is aspiration made available to an expanded consumer base.” New luxury goods are priced at a premium, but not so high as to be out of reach of America’s middle market consumer. Sales of these goods are driven by perceived value as consumers will selectively purchase goods and services that are meaningful to them. What sets new luxury apart from old luxury, according to the group’s finding, is experience, whether through packaging, shopping environment or customer service. It is the experience, which will motivate the consumer to trade up to a more desirable option.

Trading Up, the book authored by Bath and Body Works chief executive Neil Fiske and his former Boston Consulting Group colleague Michael Silverstein, describes consumer’s selective shopping patterns.

“It can be as simple as shampoo—moving from a $5 bottle of Pantene to a $12 bottle of Aveda, or as complex as a major purchase like going from a Honda to an entry level Mercedes,” pointed out Foster, “but there is a double edged sword to this phenomenon, as consumers begin to selectively bargain shop in categories that do not carry as much meaning to their personal values.” New luxury creates opportunities at both ends of the retail spectrum.

The trend toward new luxury also coincides with other current cultural phenomena: demographic shifts in the consumer base, changing priorities, increased discretionary income, uncertainty in the economy, corporate ethics, and the stresses of modern life.

New luxury must help mitigate these factors as the consumer will shop in any channel or destination that will lead her to products that will enhance her new values or new lifestyle priorities. More interestingly, product location no longer seems to impact brand equity. Marketers must recognize that they are competing for the same consumer dollars across product categories and across multiple distribution channels.

“New luxury makes the old value equation obsolete, adding experience to price and quality as key determinants in purchase behavior,” noted group member Swan Cheng. “New luxury goods are sold at prestige price and mass volume, a change to the traditional down-sloping demand curve.”

In order to market at premium price, New luxury goods and services have added value in terms of new technology, unique delivery systems or ingredients. New luxury goods are also high in quality with a ladder of genuine benefits, which create a perception of value through innovation, performance, emotional reward or customization. Sharply defined benefits help to create a distinct point of difference that maintain a competitive edge for the marketer.

Some outside-beauty industry examples of New luxury are well-known, such as Starbucks’ successful strategy of converting coffee from commodity to luxury.

The New luxury opportunity for the beauty industry is to apply the new value equation to new retail arenas, approaching the venue like an outsider. Examples and inspiration from abroad, as well as new technology may be avenues of opportunity for reinvigorating the tired retail formats of beauty.

Innovative ideas based on the theory advanced by the group were:

• Niche Pharmacy Chain: a combination of the European apothecary and American pharmacy, featuring doctor’s skin care lines, clinically-focused mass lines and an array of pharmacy products. A clean, clinical environment, combined with excellent customer service from both pharmacist and licensed skin care specialists, would be a new channel of distribution for the U.S. market.

• Mass Brand Boutique: Favorite mass brands could be brought to life in freestanding retail format, inspired by boutiques in Europe and Asia as well as nail bars in New York City. The mass boutique enables the consumer to experience the brand in an innovative, multi-sensory environment. Express makeup appli­cations and manicures would add to the consumer’s ability to connect with the brand beyond the blister packs of mass retail chains.

• Hybrid Flower Fragrance: Created by a botanical garden, the unique flower could be planted by a Tuscan vineyard and harvested every two years and bottled in a luxurious crystal flacon. “The fragrance would become an artisan floral essence and one-of-a-kind ‘reserva.’ It would become a high end collectible, to be distributed in limited quantities every two years,” explained the group’s leader Alexandra Yetter.

New luxury is entirely dependent on the experience created for the consumer, whether it is product innovation or excellent customer service. As beauty marketers, we must identify the new priorities of our consumer and address them with engaging new products or retail outlets. New luxury experiences enhance a brand’s identity, while expanding its business. The development of engaging New luxury concepts is essential to moving the beauty industry forward in the future.

The Men’s Market

The Group: Kristin Finn, beauty features editor, Women’s Wear Daily, Larissa Jensen, manager of global operations, Bobbi Brown Cosmetics,Michelle McCabe, manager of product development, Avon Future (Group Leader), Kim Rogan, manager of product development, Matrix

Significant sociological trends over the past five years including: more intense competition for jobs, later marriages and competition in the singles scene caused by higher divorce rates, have contributed to a boom in the men’s market for beauty products. Men are also concerned with maintaining a youthful appearance. “The media has also carried this message,” pointed out Larissa Jensen of the Estée Lauder Companies, with magazines like Cargo and Details, or through television with Queer Eye for the Straight Guy and Spike TV.

“In the four years between 1999 and 2003, over 800 toiletry items containing some variation of the word man or men, have appeared on the market,” noted Kim Rogan. New prestige men’s brands such as Clarins Men and Zirh have joined classics including Aramis and Clinique Skin Supplies for Men (those classics together hold nearly 70% of prestige men’s product sales). In the past three years, mass brands have also created excitement, such as classic brand Old Spice signing Nascar driver Tony Stewart as a spokesperson.

Rogan added, “New brands like Adidas, developed with athletes in mind, have also brought excitement to the category. And the launch of the first anti-aging treatment for men at mass, Nivea Revitalizing Lotion Q10, and Gillette Moisturizer with SPF 15, the only moisturizer for men recommended by the American Cancer So­ciety also got lots of attention.”

The group believes the growth potential for men’s products is at mass, where the new male customer, the “Average Joe” is shopping. In 2003, sales of mass skin care products reached $326.4 million, or more than six times the size of the prestige market in that sector.

The group specifically identified two groups of male demographics with significant potential as beauty consumers. The High Use Male, age 18-30, who lives in urban areas, uses five to seven grooming products and represents 21% of the U.S. population is one. The High Use Male is already a strong beauty customer, even patronizing Spa services.

However, the greater opportunity, according to the group, lies with Average Joe, a customer 30-50 years old, who lives primarily in suburban areas, uses an average of four grooming products, shops in mass channels and represents 38% of the U.S. population.

Fairchild’s Kristin Finn emphasized that “grabbing the attention of the “Average Joe,” atretail requires convenience, simplicity, value and a non-intimidating environment.”

CVS, which began merchandising men’s grooming products together in its stores last year, is playing on the trend that 73% of men now prefer shopping for these products for themselves. Other factors that appeal to this consumer are masculine product names, fewer sku’s, and larger product size.

Another possibility is to market portable, smaller size packaging for the gym, golf bag or business travel.

Finn identified mass market brands that have authority with this consumer and could translate into the beauty sector as licensing or brand extension opportunities. Brands like Arm and Hammer, Irish Spring, Lever 2000 and Vaseline Intensive Care could increase their shelf space at mass with new product offerings.

Outside the personal care sector, the group identified brands that have resonance with the everyday male consumer that might translate into opportunities for beauty products. GNC, a destination many male consumers visit monthly for vitamin supplements would be one possibility. Swiss Army, which offers protective, multi-tasking lifestyle products (and already has men’s and women’s fragrances) is another for which a men’s grooming division would be a natural next step. It could extend the safety element of the brand into moisturizers and anti-aging products with protective sunscreen. Another area of opportunity could be bald or shaved head care, with products like an SPF balm, a mattifier to reduce shine and a skin sensitive cleanser.

The other key to opening up the men’s beauty market is communicating with this previously reluctant consumer. Brands outside beauty have been communicating with men for some time. “Budweiser, with its true story campaigns, makes beer a lifestyle choice, while Best Buy creates a non-intimidating, toy store-like environment for the tech-savvy male,” pointed out the group’s leader, Michelle McCabe. Education, familiar to men through other venues like home entertainment equipment stores, automotive stores and building supply outlets, could be extended to skin care.

The beauty industry has learned to co-promote at sporting events, but hasn’t taken this to the next level by distributing product at sporting goods stores or pro shops. Men are used to taking care of their bodies through nutrition and exercise, so why not distribute product at nutrition stores and gyms? Also, while celebrities are commonplace as spokespersons for beauty products, everyday heroes like policemen, fire fighters, soldiers and working dads might resonate more deeply with the male consumer. These kinds of role models make products accessible.
The group also advocated communicating with this consumer in familiar places—radio, newspaper, mass transportation, gas stations and convenience stores.

Following the average male consumer on a daily basis, the group identified all sorts of locations he frequents where beauty products are not available. Perhaps this is where the beauty industry should begin to reach this potential consumer—on his own turf.

Emotional Branding

The Group: Stephanie Delille, director of packaging development, Victoria’s Secret Beauty/aura science,Tennille Kopiasz, director of global trend and prospective marketing, Maybelline New York/L’Oreal USA (Group Leader), Elizabeth Lamont, assistant vice president – marketing, shu uemura/L’Oreal USA, Celia Nichols, associate director of marketing, Donna Karan Collection

Emotion is a powerful sales motivator, cutting through the clutter of so many media messages bombarding consumers about product.

“Successful brands use key emotional drivers—experiences, customization, customer service, convenience and entertainment—to go beyond creating a brand, and establish a lifestyle connection,” pointed out group leader, Tennille Kopiasz.

The group defined these emotional drivers further:

• Experiences trigger emotions and are becoming more important, as consumers are now searching more for experiences than products.

• Consumers have become the creators in the technology age, with products such as Ipods and cell phones that allow for a high level of customization.

• Customer Service is more important than ever. One in three women have left a store due to a poor service experience.

• Convenience is also essential as the phenomenon of acceleration in technology and everyday life has led to a premium on time-saving opportunities and convenience.

• Entertainment seeking is seen in a move away from “shrine” retailing to a fun, exciting environment that provides the consumer with “retailtainment.”

Kopiasz pointed out that “Many brands outside the beauty industry have established emotional connections with their consumer by linking into a shared value system and by establishing long-term and loyal relationships with their customers.” Three strong examples of such brands are:

• Apple introduced the Ipod, which revolutionized the way the world experiences music—a revolution led by individual customization of the experience. It has even spurred a small industry, generating accessory products for the Ipod.

• Nike recently launched websitewww.Nikeid.com, where its consumers can try their creative hand at customizing over 40 styles of footwear, backpacks and watches. Consumers can choose from color combinations, details and even purchase a personalized ID tag for their product.

• Mitchells/Richards, a family-run specialty retailer in Connecticut achieves some of the highest margins in its industry by focusing on relationships rather than transactions. “They have customized a database program that allows them to know their top 1000 customers in a very personal way, using it to provide a very high level of customer service,” explained Celia Nichols, adding, “CEO Jack Mitchell has coined the term ‘hugs,’ as a metaphor for any caring, simple gesture that impresses and satisfies the consumer.”

The group also identified scenarios for reaching consumers in a new and meaningful way.

• Back to School: A national curriculum with a theme of “Skin Care Week,” co-sponsored by the American Skin Care Foundation would educate young men and women about the biological functions of skin, skin care regimens, nutrition for healthy skin, and the dangers of overexposure to the sun and skin cancer.

“Personalized starter kits, samples and coupons would set the stage for brands to connect with young consumers and establish good skin care habits early in life,” added Elizabeth Lamont.

• Mirror Image: Technology would be harnessed to take a photo of the consumer, project it onscreen and scan bar codes of products to show her how her desired products might look. This virtual beauty advisor would also provide the customer with education and information on each product and allow her to print out her look, along with application techniques and instructions, and a personalized shopping list to take home.

• Beauty Trunk Shows: Top customers would be rewarded with a sneak peek at new product launches, color trends and customized looks delivered with VIP customer service. “The opportunity to purchase product before it is available in stores would allow customers to feel part of a special brand community,” noted Stephanie Delille.

• Open Forum Retail Environment: With no stock keeping or cashiers, the intimidating aspects of retail would cede to an intimate environment that encourages trial, conversation with a beauty advisor and a relaxing consumer experience. Technology would allow for scan technology for ordering and fulfillment, while the customer relaxes, or chooses a home delivery option for maximum convenience.

The challenge for the beauty industry is to reach beyond tried and true business practices, which at prestige department store retail have not changed for more than 50 years. In the same time period, the whole lifestyle of consumers has radically changed, causing them to interact with brands incompletely different ways.

New Ideas Through FIT

If you are interested in receiving a copy of the FIT graduate student and alumni essays prepared for the Fairchild Beauty CEO Summit, or you would like to be added to the guest list for the 2005 Capstone presentations, you may call FIT’s School of Graduate Studies at (212) 217-5714 for further information.

The Cosmetics and Fragrance Marketing and Management graduate program will also sponsor a major industry seminar on Beauty Retail on Friday, Oct. 8, at FIT’s Katie Murphy Amphitheatre. The event, “Counter Culture: Where is Beauty Retailing Headed,” will feature senior executives, journalists and retail consultants as panelists and a keynote address by Thia Breen, senior vice president – Beauty, Federated Merchandising Group, who is a member of the Master’s program Industry Advisory Board.

For further information on this event, please contact the Graduate School or download information and registration at website: www.fitnyc.edu/cfmm.