Lush CIM Case

Delivering Customer Value Through Marketing Case Study June and September 2012Professional Diploma in Marketing (Level 6) 541 – Delivering Customer Value Through Marketing Case Study June and September 2012 Lush © The Chartered Institute of Marketing 2012 Delivering Customer Value Through Marketing Case Study June and September 2012 Delivering Customer Value through Marketing – Case Study Important guidance notes for candidates regarding the pre-prepared analysis The examination is designed to assess knowledge and understanding of the Delivering Customer Value through Marketing syllabus, in the context of the relevant case study. The examiners will be marking candidates’ scripts on the basis of the questions set. Candidates are advised to pay particular attention to the mark allocation on the examination paper and plan their time accordingly. 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As part of the preparation for the examination, candidates will need to carry out a detailed analysis of the case material ahead of the examination. Candidates will find that the time available during the examination is sufficient to answer the compulsory questions, but only if detailed analysis has been undertaken beforehand. When compiling their analysis, candidates should only use the information found within the case, supported by their knowledge and understanding of the syllabus. Candidates are encouraged to use a range of analytical tools and models in order to undertake a thorough investigation of the key aspects of the case. This will improve their understanding of the case and the issues faced by the organisation(s) and/or industry sectors to which it relates. Clearly, the analysis required will vary depending on the specific case content but, as a guide, candidates should consider undertaking the following:         analysis of the external environment using PESTEL analysis analysis of the competitive environment using Porter’s Five Forces model strategic review using Ansoff’s matrix and/or Porter’s generic strategies stakeholder analysis detailed review/analysis of each of the marketing mix elements product/portfolio analysis (eg using product life cycle analysis, BCG (Boston Consulting Group) matrix, GE (General Electric) matrix SERVQUAL SWOT analysis. The copying of pre-prepared ‘group’ answers, including those written by consultants/tutors, or by any third party, is strictly forbidden and will be penalised by failure. The questions will demand analysis in the examination itself and individually composed answers are required in order to pass. Candidates will then need to condense their analysis into a FOUR side summary (a maximum of four sides of A4, no smaller than font size 11. The content of tables, Page 2 recording. Although no marks are awarded for the analysis itself. Page 3 . stored in a retrieval system. The Chartered Institute of Marketing reserves the right not to mark any submission that does not comply with these guidelines. Cookham. in full or in part. Candidates are strictly instructed NOT to contact individuals or organisations mentioned in the case study or any other organisations in the industry. cannot be reproduced. This assessment. electronic. Candidates are not permitted to take in the downloaded case study or any other notes. Candidates are advised not to repeat or copy the analysis summary when answering the exam questions. Figures used in tables may differ as they have been compiled from different sources.cimlearningzone.co. Berkshire SL6 9QH. All rights reserved.Professional Diploma in Marketing models or diagrams must be in a minimum of font size 8). when answering the questions. or otherwise. using a range of criteria. Important Notice The following data has been based on real-life organisations.uk © The Chartered Institute of Marketing 2012. Any attempt to introduce such additional material will result in the candidate’s paper being declared null and void. It is important that candidates refer the examiner to the analysis summary. The analysis should be numbered for ease of reference when answering the examination questions. Moor Hall. It should then be attached to the answer booklet on completion of their examination. Copies of the case study may be obtained from: The Chartered Institute of Marketing. mechanical. or transmitted in any form or by any means. where and when appropriate. The invigilator will issue candidates with a new clean copy of the case study at the start of the examination along with the question paper. UK or may be downloaded from the CIM student website www. but details have been changed for assessment purposes and do not necessarily reflect current management practices of the industries or the views and opinions of The Chartered Institute of Marketing. They should write their CIM membership number and examination centre name in the top right hand corner of each page of the analysis. Candidates are only permitted to take their analysis into the examination room. candidates will be awarded marks for how the analysis is used to answer the questions set. without prior written permission of The Chartered Institute of Marketing. Candidates must hole-punch their analysis and staple it in the top left hand corner. photocopying. using the treasury tag provided. Candidates may not attach any other additional information in any format to their answer book. You have been asked to advise Lush on a number of marketing related issues. The written analysis must be submitted as appendices on completion of the examination and attached with a treasury tag to your answer book. including the company’s approach to:      product development. in order to prepare your analysis of the company. Your written analysis must not exceed FOUR A4 sides and must include your CIM membership number on each page. you have been asked to particularly focus on Lush’s ethical and environmental credentials in the context of its objectives and strategies. In addition. positioning and brand management managing customer relationships marketing communications in support of other elements of the marketing mix pricing distribution and channel management. Page 4 . You will be given a clean copy of the case study on the day of the examination. Role You are employed as a marketing consultant in the Health. Beauty and Toiletries sectors.Delivering Customer Value Through Marketing Case Study June and September 2012 DELIVERING CUSTOMER VALUE THROUGH MARKETING CASE STUDY Preparation In preparation for the examination you will need to analyse the Lush case material provided. but you must bring your analysis with you into the examination. which is largely manual using predominantly natural ingredients and with no animal testing. Other figures quoted later in this case study relate to the financial year July to June. Japan and the USA. The company invents its own products and fragrances. word of mouth recommendations and PR. It uses Fairtrade sources where possible and has some product lines whose entire proceeds are donated to charity (including the Dorset Wildlife Fund and the Sumatran Orangutan Society). Lush products are made largely from fresh ingredients. according to Fairtrade principles. Page 5 .000 consumers. including Russia. using a combination of oils. where possible. the company was voted one of the 1 Note: These figures relate to the calendar year January to December 2009. 2009). The company currently offers around 294 different products. it has grown very rapidly over the decade and a half since it was established. the company expected overall profits to increase by 10% (Sanghera. which are then handmade using vegetarian ingredients and the finest essential oils. By using a combination of franchises and partnerships. 2010). Lush is regularly listed in The Sunday Times 100 Best Companies To Work For and in 2010.Professional Diploma in Marketing Case Study: Lush Introduction Mark and Mo Constantine founded Lush in 1995 and in the space of just over 15 years their brand of fresh handmade soaps and other cosmetics has become widely recognisable and highly successful. up from £194 million in the previous year. 2009). based on a poll of over 14. UK in 1995. including organic fruit and vegetables. which are sourced. As part of its ethical culture. a common ingredient in cosmetics but one that is associated with the destruction of rainforests. Instead it relies wholly on in-store advertising. A key principle that governs the company’s operations is its commitment to buying ingredients only from organisations not involved in animal testing. UK based company. 2% of the profits from Lush are donated to charity. especially in South East Asia. and promoted its discovery to encourage other soap manufacturers to make the switch (Siegle. observers’ and analysts’ opinions about this approach were divided. The owners have been quoted as saying that they believe 'fresh' and 'organic' have an honest meaning beyond marketing. It has made a concerted effort to find alternatives to palm oil. Either the whole approach would prove enough of a differentiator to enable the company to prosper or it would lead to its downfall. Packaging is kept to a minimum. They also believe that their products are good value and that the customer is always right. thus ensuring that every Lush store has a fragrant smell of soap and other scents. with the company unable to grow or capitalise on its initial success.000 people. Production. Sales in the US alone were worth £35 million in 2009 (Sanghera. Lush announced that it had found an alternative. Lush Fresh Handmade Cosmetics Ltd (Lush) is a privately owned. All of Lush’s products are tested on humans only. is shared between five plants. Lush’s approach to marketing is also distinctive in that it does not adopt many of the standard methods. 2010) and the company employs 6. reaching 689 in 2010 (Lush. in the UK range. The company’s core proposition is based on the use of ethical and natural materials and processes. The number of stores has continued to increase. Despite a 4% fall in sales in the UK in 20091. it had around 600 stores in 2009 across 46 countries. that are presented as wholesome and fresh – none of the items found in store are more than six months old. At the time the company was launched. From a single store in Dorset. In 2010. It enjoyed global sales of around £240 million in 2009. one of whom happened to be Anita Roddick. In turn he became concerned about his dependence on The Body Shop and the risk of it seeking alternative suppliers or producing its own goods. These included classics such as peppermint foot lotion.5 million. The Body Shop was floated on the stock exchange and this led to a review of its reliance on suppliers. In 1984. honey beeswax cleanser. The products were presented in store as if they were food items in a delicatessen – on wooden counters with little or no packaging and sold by weight. Constantine and Weir. inadequate stock control often meant that the company ran short of items in demand. with careful attention to customer service. Roddick’s confidence in their products quickly ensured that Constantine and Weir became a regular supplier of The Body Shop. The success of each company contributed to the growth of the other. Fairly soon it was unable to satisfy customer demand. although this was unsuccessful. after training in hairdressing and specialist scalp treatments known as trichology. it was purchased. herbal hair colours and body butters. pushing Constantine and Weir’s annual sales in the 1980s as high as £8. the company adopted an unconventional and creative approach to its products and business operations. Constantine’s influence had a major impact on Roddick’s own approach to business. 2010). His first business venture. Its pricing strategy was confusing and promotion was expensive. it was recognised that The Body Shop was in danger of being overly dependent on a single supplier. with the directors having direct involvement in day-to-day operations. controversially. Constantine’s influence lessened and fewer of his company’s innovative products were adopted. in 2001. Cosmetics were created by hand. which quickly became unmanageable. and were made available in unusual colours with eye-catching names. founder of The Body Shop. The organisational structure was intentionally very flat. Origins Mark Constantine had a lifelong interest in makeup but being unable to gain access to the industry as a male. All these factors Page 6 . As a result. by L’Oréal. as a result of a number of actions by The Body Shop’s founder. such as fruit and vegetables. Constantine started a mail order business called Cosmetics to Go and sold the manufacturing rights in Constantine and Weir to The Body Shop for £11 million in 1990 (as reported on the Lush website). after the creation and success of Lush. Constantine made a bid to buy The Body Shop. formed in 1976 and dedicated to producing bath and beauty products from natural ingredients. Accordingly. and not always successful. a company whose own ideals and methods seemed at odds with the approach taken by The Body Shop. was as a founding director of Constantine and Weir plc. Constantine and Weir made its products available to a number of customers. Cosmetics to Go featured ethical and natural cosmetic products that had not been tested on animals and which relied on manual manufacturing methods. he entered hairdressing instead. with many of The Body Shop’s leading items being produced by Constantine and Weir. In addition. Later. Cosmetics to Go enjoyed rapid success. Like Constantine’s previous endeavours. using a range of natural ingredients. The Body Shop went on to become widely acknowledged as an innovative enterprise founded on ethical principles. In particular. The online catalogue contained a wide range of new products with inventive names and very limited use of packaging. the relationship between Constantine and Roddick became strained.Delivering Customer Value Through Marketing Case Study June and September 2012 top three retailers in the UK (Eckerall. with spectacular results. The company prides itself on creating a sense of fun in its stores. However. Instead. but at this stage (1976) had only just opened its second store. At the outset. In addition to in-store advertising. They experimented with unconventional ingredients such as lemon. the Lush experience is a powerful and sensual one. The colours of the products are equally arresting. in baskets or on shelves. Repeat purchases are common and an important part of the company’s success is supported by its ability to promote new products to existing customers. fruit and vegetables. and many sold loose by weight. Its trademarked name is written in uppercase letters as LUSH and was chosen to convey greenness. 2003). lollipops. The displays are designed to intrigue and entice passers-by inside. one of the most striking features of a visit to a Lush store is its fragrant aroma. Some of these were funded directly by external investments. being restricted by a clause in the sale of Constantine and Weir from going into direct competition with The Body Shop. Overall. vivid colours and being able to feel the textures of the products directly without intervening packaging.Professional Diploma in Marketing led to the failure of Cosmetics to Go in 1994 with debts estimated at £2 million (quoted in Jenkinson and Sain. there is a guarantee that 100% of the proceeds go to charities as chosen by staff. Lush Out of the disappointment of Cosmetics to Go. Lush also uses its website and mail order catalogue to make its products available to a wide audience. slices of pie. This channel helps the company to reach a wider audience than it can just through the stores. Many of them even resemble food such as ice cream cones. on bare wooden benches. Lush sold its products through car boot sales. Lush’s only other form of marketing is PR. Customers are able to buy with the confidence that no product has been tested on animals and that a portion of profits will go to help protect the natural world and promote ethical ideals. Some are wrapped in greaseproof paper. In addition to selling through its stores. At first. the Constantines formed Cosmetic House Limited in 1994. Products are often laid out like food. Initially. orange and cinnamon. This means high profile positions in close proximity to other stores selling up-market products. placing press articles to create maximum profile. The profits from this store allowed Lush to open a second store in 1996 and further growth resulted in a total of 25 stores by 1998. however. Because of the absence of packaging. Its online offer is comprehensive and sales went up by about 25% year-on-year in 2009. The company was sold off with all of its equipment and machinery. having sold off everything with the collapse of Cosmetics to Go. For some of the products (Charity Pot). evolving into partnerships in Canada and Australia and enabling expansion on a global scale. through the combination of smell. The walls are often brightly coloured and the interior warm and inviting. This. at which point Lush opened its first store. freshness and a certain amount of frivolity (in one meaning. no longer applied from 1995. The Lush customer experience Lush looks for premium sites for its stores. Gift wrap is usually in the form of a cloth designed to be used as a scarf afterwards rather than paper to be Page 7 . changing its name to Lush the following year. This enables the company to promote a premium image without the need for direct advertising. the Constantines and their business partners created products at home in their kitchens using ordinary domestic appliances. and continues trading to the present day under new ownership using the original name. the catalogue and the website. cakes. ‘lush’ is a slang term for a person who drinks too much alcohol). together with the fact that the products are freshly made (none being more than six months old). but soon became firm favourites. Staff training is very important in order to safeguard the levels of customer service that Lush customers have come to expect. Part of the secret of keeping staff positive about their work is ensuring that they are involved in decision making. Word of mouth plays an important role in promotion. but this style of environment became established as the norm. Teams enjoy active social lives outside work. Rather than a hard sell. For example. The management structure is flat and within the UK there are no area managers. meaning that decisions are taken locally by teams taking responsibility for manufacturing or retail. the Constantines have built a team of highly creative individuals. The personal involvement staff feel in the company and its goods clearly makes this more likely. from the beginning of Constantine and Weir to the present. Individual products bear the date they were produced and a sell-by date. It offers previously withdrawn products exclusively by mail order at a premium price. with a target to increase this to 30%. Product lines are changed on a regular basis to maintain interest from customers as well as staff. There is also a policy of keeping stock levels low in shops and factories to maximise the rate of turnover. Raw materials The following is a sample of the raw materials used in a single year:   25 tonnes of organic fruit 50 tonnes of fresh fruit and vegetables (locally sourced where possible) Page 8 . the introduction of bath bombs that fizz in the water while dissolving initially caused consternation at The Body Shop. Feedback from staff and customers is used to judge their success or otherwise. Staff surveys reveal that Lush employees tend to feel a very strong sense of solidarity with management in support of corporate social responsibility. In fact. The involvement by staff in committing to the same ethical principles as the company is an important feature.Delivering Customer Value Through Marketing Case Study June and September 2012 thrown away. much of it is distinctly atypical. while those that are under-performing are eliminated just as quickly. with Mo Constantine taking the lead in overseeing product development. The products are often highly individualistic and sometimes it is necessary to educate consumers. The withdrawal of a product can sometimes lead to angry complaints by customers. It is also clear that staff enjoy working for the company and are happy to work in their teams to deliver excellent customer service. The personal tastes of the staff and directors are used as a guide to determine what new products to introduce. together with a cartoon of the individual at Lush responsible for creating it. provide demonstrations and be enthusiastic about the products. Working in a kitchen was a necessity at one stage as there was nowhere else available. which contributes to a lively in-store atmosphere. Lush has a very innovative solution to this problem. 15% of products are replaced each year. On average one new product is launched every week. Product development Over a period of time. The speed of introduction also requires innovative forms of marketing. staff are encouraged to give advice. Customers similarly feel connected personally through the rich and happy environment and the motivation of staff. A lively online users’ discussion forum is also a very useful source of ideas and input to the creative process. Hand-written signs describing products add to the sense of authenticity and naturalness. with 33 new outlets in 2007/2008. but needs to convert those strengths into store growth. Beauty Retailing . Slovakia. Market positioning Lush has a strong niche appeal. This included 11 in-store shops in Macy’s department stores. non-animal testing and fresh handmade products from natural ingredients. Weaker financial performance has been coupled with rising costs. with only four stores opening in the year from June 2008. Its position as a provider of affordable. North America and Australia. Despite this decline.000 Sicilian mandarins 10 tonnes of organic coca butter (Fairtrade) the juice of 90. Asia. 6 million bergamot fruits and 900. operating in 37 countries throughout the rest of Europe. minimal packaging. This is reinforced by the company’s approach to ethical buying. January 2010 with additions from Lush Further expansion remains slow. In 2007. Retail Intelligence. as shown in the following table: Lush Retail Ltd UK: 2004 – 2010 At June Outlet numbers Sales per outlet (£’000) 2004 63 507 2005 64 497 2006 73 516 2007 85 495 2008 87 490 2009 87 477 2010 86 473 Source: Mintel. the number of stores is always fluctuating. Mintel’s research indicates that ‘ethical responsibility’ is one of seven key consumer behaviour trends for the year ahead. Mintel reports that Lush is still seen as ‘the most engaging. This took the number of UK stores up to 91 in 2009.000 zest lemons and 33. average sales per store fell. Forecasts indicate that consumers will be scrutinising ethical claims and there will be more activity in eco-friendly labels.000 olive trees. These included 24 stores in Germany. Store portfolio and sales According to Mintel. provides it with a competitive edge. indulgent and vibrant’ of the top brands. Lush’s underlying revenues are declining in the UK.000 oranges 8. The company has a small presence in Belgium. funky image.Professional Diploma in Marketing      the oil from 20 million Sicilian lemons. Asia accounts for 21% of total revenue and is Lush’s most significant international market. 11 in France and 8 in Spain. In January 2012 Lush reported having over 750 stores across 46 countries. Sweden and Russia.UK. Lush had 546 stores.000 bunches of fresh flowers 20 tonnes of olive oil from 30. International stores In June 2008. It also operates an e-commerce facility in the Netherlands. everyday indulgences with a young. sold in bright lively stores in high footfall locations. Page 9 . Estonia. However. Lush is already ahead of the game in this area. North America accounts for the most store openings. Austria. Lush opened 12 new stores in the UK but as the economy began to slow down. 17 in Italy. 5 -1.5 31. accounting for 12% of total revenue or £18.7 52. This means the company agrees that it will no longer carry out animal testing for its products or ingredients henceforth. It is planning to introduce 12 spa treatments and the service is to become available in up to six stores between 2009-2012. higher costs.2 million.2 million).3 Source: Mintel.4 -8.1 -1.1 57. January 2010 with additions from Lush Policy on animal testing Lush’s hard line on animal testing is such that not only will the company desist from any testing of its own products or their ingredients on animals (other than humans). food or pharmaceuticals).9 1.1 35. as the company has opted to eliminate any substance or product that has been tested on animals or provided by a supplier that uses animal testing for any reason (such as cosmetics.0 49. However. A commonly adopted standard (the Humane Cosmetics Standard) requires adherence to a cut-off date policy.3 -2. with an annual confirmation.5 -1. have resulted in the UK business making an operating loss.1 51.5 -3.2 1. Suppliers to Lush are required to sign a statement to attest their adherence to Lush’s own policy. European operations. The directors of Lush have adopted this approach as they feel it is more effective in moving manufacturers and suppliers towards a cruelty-free position. Page 10 .4 1.4 -3.5 41. Lush’s own policy is stricter than this. This is quite unique in the cosmetics industry and has led to the creation of Lush’s Supplier Specific Boycott Policy. Beauty Retailing – UK.0 0.4 1.4 35.Delivering Customer Value Through Marketing Case Study June and September 2012 In-store spas The opening of an in-store spa in 2009 enabled the company to extend its range into spa products.4 41.3 44.3 -5.4 39. excluding the UK. Retail Intelligence. are relatively small. may allow themselves to trade with suppliers who refrain from animal testing for those products they wish to purchase. even those that consider themselves to operate on strong ethical principles.2 -3.6 0.0 -2. this allows it to continue to sell substances that have been tested prior to the cut-off date.2 -3. it will also avoid purchasing from a supplier that tests any of its products or ingredients on animals. UK Financial Performance 2004 – 2010 (£million): Lush Retail Ltd Latest year end: June 2008 2004 2005 2006 2007 2008 2009 2010 Sales (£m excl.5 6. Global Financial performance The Lush group more than doubled its global operating profit in the year to June 2008 to £18.0 1. However. Many of Lush’s competitors.3 46. while engaging in such tests on other materials or for other purposes.4 million. VAT) Operating profit (£m) Operating margin (%) Pre-tax profit (£m) 24. International expansion. especially in North America and Japan helped to increase sales by 28% to £153. If a company wants to do business with Lush it knows it must eliminate animal testing from its activities. and higher overheads associated with new store openings.6 -1. This may help to overcome the current problem facing the company of falling incremental sales growth despite new product development. VAT) Sales (€m excl. as a result of the rising price of raw materials coupled with rising occupancy and staff costs.2 53.1 3.4 million (€25. Pricing In general Lush does not compete on price. putting our faces on our products and making our mums proud.  We believe our products are good value. despite the brand being perceived as a premium product. together with a superior customer experience. However. massage. These beliefs inform Lush’s policies. because their production is very labour-intensive. lose everything and start again.  We believe in long candlelit baths. The profit margins on Lush products are quite tight. which do not Page 11 .  We believe in buying ingredients only from companies that do not commission tests on animals and in testing our products on humans. which leads the company to seek innovative solutions. since most of the ingredients Lush uses are natural and are known to be safe. sharing showers. such as those sold at convenience stores and supermarkets. is flawed and unreliable. The exception is with close competitors such as The Body Shop. it is able to command prices above those offered by alternative products.Professional Diploma in Marketing In the absence of animal testing. it is actually more appropriate and effective. The company tends to attract those with higher than average levels of disposable income that are not only willing but also able to pay premium prices. as a method of checking on safety for human use. Volunteers form a panel of assessors in order to confirm that each Lush product is safe before it is launched. Lush tends to price itself lower. Instead. Lush draws upon tests on human beings.  We believe in happy people making happy soap. Lush mission and values Lush’s mission statement comprises a set of beliefs.  We believe in making effective products from fresh organic fruit and vegetables. its environmental policy is based on a desire to have a positive impact on the planet. it is comparatively affordable as a product offering. This activity is not as hazardous as it may sound.  We invent our own products and fragrances. we make them fresh by hand using little or no preservative or packaging. For example. the finest essential oils and safe synthetics. Animal testing. It argues that not only is this method more humane. that we should make a profit and that the customer is always right. Otherwise. it largely differentiates itself from its competitors through product innovation and image. In this instance. using only vegetarian ingredients and tell you when they were made. filling the world with perfume and in the right to make mistakes.  We also believe words like 'Fresh' and 'Organic' have an honest meaning beyond marketing. Lush customers are prepared to pay for what they regard as superior products. its ethical stance and the natural raw materials that are used to create the products. One such innovation is solid bars of shampoo. Even the small number of synthetic ingredients used are limited to those with a well-established record for safety. Lush has found an innovative way of eliminating the use of palm oil in order to protect bio-diversity. Some of its more striking direct actions have included dumping manure at the European Parliament in Strasbourg in protest against animal testing legislation. Where flights are absolutely necessary. Non-mineral organic oils (such as plant oils) are used in preference to mineral ones. donating £50 to environmental groups for every metric tonne of CO2 created by using this means of transport. with a target of reducing energy in its UK factories by 5% each year for five years. It also requires significantly less water to produce.Delivering Customer Value Through Marketing Case Study June and September 2012 require any packaging (and certainly not a bottle). Lush actively supports a number of ethical campaigns. despite the industry’s Page 12 . containing very few synthetic ingredients or preservatives. sea and air transportation. All suppliers are required to comply with its own non-animal testing policy. and only a very small amount ends up in a landfill site. Lush aims to reduce this to less than 5%. Similarly. According to its own estimates. Initiatives that Lush actively supports include:  World Development Movement – a company campaigning against speculation by large investors. eg wheat and maize. such speculation pushes prices up and increases world hunger  Biofuel Watch – a campaigning group committed to raising awareness about the devastation to rainforests created by the biofuel industry. The absence of packaging is particularly striking in the cosmetics industry. Energy consumption is reduced by using efficiency measures such as high efficiency light bulbs and switching lights and appliances off when not in use. on the prices of staples. but also that they would not be able to secure the necessary funds elsewhere very easily. 90% is already from recycled sources and the aim is to reach 100% recycled and recyclable packaging. Raw materials are selected very carefully. rail. The campaigns and groups that it supports are chosen carefully. It sets itself a target of keeping air-freighted resources to below 5%. The company also contributes to charities and pressure groups targeting environmental issues. Lush aims to keep packaging to an absolute minimum. Lush has a selfimposed tariff. minimising waste in the production process and from its retail outlets is also a priority. Video conferencing is used in preference to moving people around the country or internationally. Accordingly. such as banks. Where packaging is necessary. The company is aware that in operating across 46 countries and drawing resources internationally it relies upon road. lending its name and time as well as donating funds. Lush seeks suppliers that reflect similar values. this alone has resulted in the saving of over six million plastic bottles. on the basis that not only do they share values held by Lush. Solar panels are being installed. The majority of what waste is produced can be recycled. encouraging customers to take products home ‘naked’. The products are almost entirely bio-degradable. where manufacturers and retailers often seek to differentiate their product through the use of distinctive containers and the reinforcement of identity and logos. on the basis that trees enrich the lives of individuals far more than sites of mineral excavation. the company seeks to use recycled materials. It has six production plants around the world in order to be able to draw upon local resources where possible and plans to expand upon this. as a means of generating substantial profits for their shareholders. As noted above. and having staff displayed in its shop windows on meat hooks in protest against the treatment of sharks. 2010). however. was only 1. This grew by 7. Growth has been particularly strong in the Page 13 . the global market for bathroom products grew by 5. thanks in part to Reprieve  Animal Protection Agency – for the protection of reptiles. It acts as both a newsletter and a catalogue. eggs and honey) and the company supports campaigns to promote veganism. as the former generates only one tenth of the CO2 emissions of the latter  Reprieve – a campaign to release Binyam Mohamed.2% more than growth by the rest of the cosmetics and toiletries market (Cosmetics Business. born out of the catalogue produced for Cosmetics to Go. and features write-ups on the latest products. Among bathroom products the category that has shown the most rapid growth is bar soap. news of the various campaigns Lush supports.4% to a total value of US$8.9 billion. this campaign is aimed at raising awareness and challenging common beliefs and policies  Campaign against greyhound racing – many puppies are destroyed or abandoned as being unsuitable for racing and older dogs face a similar fate once they become too slow.5 million.130. he was illegally detained and tortured. 0. it is claimed. Growth in Europe. where. in poor conditions and forced to perform in difficult circumstances  Bat Conservation Trust – a group that campaigns for the protection of the natural habitat of bats. its products being 100% free from animal products and made without cruelty. six million of which were brought into the EU as pets in 2009. competitions and other items. at least) by considering who will have the most positive impact on the rights of animals and the interests of animal welfare  Sea Shepherd – ‘pirates of compassion’ who patrol the oceans in order to protect sharks and whales and their habitats  Climate Rush – a group promoting the use of trains in preference to planes. It is available as an electronic or hard copy publication. with participation by customers and staff. who was imprisoned in Guantanamo. which is frequently under threat  World vegan day – many Lush products are free from any animal products (including milk. dogs that could live as long as 14 years may live as little as three or four. Hand-drawn pictures are used rather than photos.2% to US$19. many dying in transit or living in poor conditions in people’s homes  Meat Free – Lush is committed to vegetarian principles. Lush Times magazine The company produces its own magazine for staff and consumers. feedback from consumers. he has since been freed. it is responsible for substantial deforestation and long-term environmental impact  Protecting Animals in Democracy – a movement that encourages individuals to choose their elected representatives (in part. and it is all printed on recycled paper.6%. The market for bathroom products In 2009.Professional Diploma in Marketing apparently eco-friendly sounding name. a quirky and humorous approach is very evident. The same image and principles are apparent throughout. 3% 8. 2010). however. towards bar soap. Page 14 . Awareness of the importance of cleanliness was heightened in 2009 by fears of a pandemic of swine flu.6% (36. and shiny additives that add a shimmer to the skin. 2010 According to Cosmetics Business (2010). In addition.7%) 4. In this respect. for example.Delivering Customer Value Through Marketing Case Study June and September 2012 Middle East.8%. to take a 19. Growth is expected to remain strongest in Asia – India in particular.6% 19.091 million to £572. Otherwise. according to Cosmetics Business. The use of spa products at home may be increasing at the expense of visits to the spa for professional treatments. Its total sales value increased from £557.5% 11. Africa and Eastern Europe. and some brands command higher levels of loyalty.905 million over the 52 weeks to 1 November 2009 (Cosmetics Business. Boots.8% 0. the UK bathroom products market grew by 2.2% (3. despite the global economic downturn. global economic conditions have influenced the way consumers are buying soap. enabling manufacturers to seek the Fairtrade certification for products that meet its demanding requirements for adherence to environmental and ethical principles.2%. The largest proportion of the market as a whole is represented by shower products (37. the market for bathroom products did not experience any significant innovation or new trend. was the introduction of the Fairtrade Foundation’s standard for beauty products.8%.0)% 7.5% Growth/(decline) in 2009 sales compared with 2008 4.2% 19. There is a move away from bath and shower products. the publicity surrounding it caused many consumers to buy hygienic and anti-bacterial hand washes and wipes. 2009 showed a continuation of the previous year. One important innovation for 2009.5% share of the market. all introduced product lines to pamper the body and indulge the senses.8% 0.3% overall. In 2009. rather than selecting more luxurious or niche brands at department stores. This is largely the result of a trend among consumers to ‘trade up’ to more expensive and luxurious brands. The use of exotic fragrances to enhance a sense of well-being and health. rising 5. there are variations within the general trend. Meanwhile. Consumers do not tend to be very loyal to brands and are increasingly likely to purchase soap at the supermarket during their weekly shopping for groceries. with continued moves towards incorporating food ingredients (especially fruit and vegetables). The volume of goods sold increased even more.2%). sales of liquid soaps grew by 8.6% 10. growing spa products for home use and an interest in Asian treatments and remedies. were also on the increase.8% 3. while cutting back on some more expensive products and beauty treatments.3% Source: Cosmetics Business. Category within UK bathroom products market Shower products Liquid soaps Bath liquids Body washes Bar soaps Bath salts Bath cubes Market share in 2009 by sales 37. a lot of women are replacing them with smaller indulgencies. In the long term it is likely to result in a move towards bath and shower gels. whose sales grew by 4. Although the levels of infection fell well below the worst predictions. Palmolive and The Body Shop. as has been the case in more mature markets. However. including Evolve and amaZene. In particular. According to Cosmetics Business. This extension of the accreditation to beauty products first became available in the UK in 2009. It provides an accreditation service. it remains to be seen to what extent consumers are swayed by social and moral principles when faced with hard economic choices. The first 57 beauty products to be recognised by Fairtrade are made by five companies:      Boots Bubble & Balm Essential Care Neal’s Yard Remedies Lush. At present these are limited. However. specialises in providing a certification scheme for organic and natural beauty products. shea butter and brazil nut oil. A further 73 products have now been accredited. cocoa butter. meet stringent ethical standards. Fairtrade products do not necessarily have to be more expensive or limited to luxurious brands. honey. Ecocert. what is also required is a full commitment to Fairtrade values. According to a Lush representative: ‘Lush has always used Fairtrade cocoa butter in its Fairtrade Foot Lotion but this new category allows us to formalise our support to Fairtrade. In addition to Fairtrade. These and companies like them are commonly concerned not only with wholesome ingredients. but include products such as sugar. 2010). so long as the methods of production. Recent research on consumer habits suggests that as many as 31% of UK shoppers would buy a Fairtrade certified beauty product if one were available (quoted by Cosmetics Business. and leave-on products a minimum of 5%. The product will carry the Fairtrade mark. including the sourcing of raw materials. for example. but also with environmental issues and other ethical matters. for example. allowing manufacturers to use their logos on their goods. this means ensuring that the suppliers get a fair deal and are supported through.’ Julia Franklin. where getting a fair deal for the crop growers and farmers has been of paramount concern. The initial requirements for Fairtrade certification for cosmetics are that wash-off products must have a minimum of 2% of Fairtrade ingredients by weight. tea and other foodstuffs. However. an independent consumer guarantee that suppliers are getting paid a fair wage for their produce. To gain approval with Fairtrade it is necessary that the ingredients come from Fairtrade sources. there are other companies offering similar kinds of recognition schemes. for instance. the sharing of knowledge and technology to improve their productivity and profitability.Professional Diploma in Marketing Natural and organic One of the main trends to continue in the bathroom products market is the growth of natural and organic lines. Other findings show that 74% of consumers recognise and value the Fairtrade logo. The Fairtrade brand is well known through its association with manufacturers of coffee. Business Development Manager for beauty at the Fairtrade Foundation has been quoted as saying: Page 15 . A number of new players have entered the market. It is a not-for-profit organisation. Boots. The Fairtrade Foundation was set up in the early 1990s. The list is being expanded over time. is one company to have introduced a product approved by Fairtrade. by 69% of staff. The fact that the company has regularly featured in the survey for the last eight years is recognition of the positive working culture that the two ethical entrepreneurs. staff enjoy working together. The staff structure is flat. The key findings of the staff survey reveal that staff believe there is a real sense of mutual respect and cooperation. staff reported that they feel a strong sense of family in their team. Page 16 . so top-down and bottom-up lines of communication are fast and effective. In particular. Every three months each member of staff is sent a DVD by Mark Constantine. with 71% agreeing that they get a buzz out of working with their colleagues. Innovative approaches are taken in internal communications.’ The requirements for Fairtrade (as quoted by Lush.Delivering Customer Value Through Marketing Case Study June and September 2012 ‘If a cosmetics company wants to get Fairtrade accreditation then it has to agree to a Trading Partnership Plan with us and it is a three-year agreement. employees clearly feel valued. have developed within their company. Staff policy at Lush 2010 proved to be another successful year for Lush. while 82% confirmed it was changing the world for the better. The senior team is well respected. This money is used by us for further producer development and standard setting so it’s something of a win-win situation. with news of performance over the last quarter as well as forthcoming plans and developments. the highest rating (87%) was given to the belief that Lush makes a positive impact on the environment. Ideas and solutions from staff are encouraged and attributed. Its listing of 40th place in The Sunday Times 100 Best Companies To Work For survey represented an improvement from its 50th place in 2008 and 68th in 2007. 2010) for the accreditation of cosmetics products are as follows:       all ingredients that can be Fairtrade must be Fairtrade non-Fairtrade oils must be replaced by Fairtrade oils where possible ingredients for scrub-type products must come from Fairtrade sources where possible surfactants should be replaced with surfactants derived from Fairtrade materials where feasible companies are expected to use the highest amount of Fairtrade ingredients possible in their products products must comply with the relevant national legislation in each individual country. including strong personal friendships between the Constantines and some members of staff. once accredited. 80% provided a positive response to the statement that staff care for each other and 78% to the claim that staff go out of their way to help each other. With its flat management structure. not just for its financial performance but also for its status as a good employer. perceiving that the company is run on strong moral principles. with 70% of staff expressing confidence in top management and 83% believing the business adheres to strong ethical principles. from new product development through to staff development and training. This is reflected in a number of ways. Support for good causes is seen to be genuine rather than a bid for publicity. In The Sunday Times 100 Best Companies To Work For survey. reflecting their passion for their work and their ethical stance in all aspects of their business operations. The directors are actively involved in all aspects of the business. Mark and Mo Constantine. and that working for the company is a way of life. Working for Lush is almost a way of life for some. Then. 1. In addition.7% of any product’s wholesale price goes back into the Fairtrade Foundation. 75% confirm that there is a sense of family within the company. Page 17 . Andrew Gerrie.Professional Diploma in Marketing The future for Lush In terms of the future Lush’s CEO. we now have the strongest management team we have ever had and so far this team is delivering our best year ever.” Part of the intended legacy for the future is that Lush’s approach will encourage other businesses to adopt similar stances on environmental and ethical issues. Lush is no different. commented: “As we have read everywhere businesses are maintaining a cautious watch on the worldwide economy. Given the public interest in corporate social responsibility. We are also expanding. there is a tendency for organisations to adopt an appearance of green credentials without committing wholeheartedly to fundamental principles. There is likely to be plenty of interest in acquiring Lush if the company becomes available. as this could be a way for another organisation to gain ethical respectability. Across the world. we are optimistic as there are plenty of opportunities for us to keep growing. Even so. with new shops opening and new production facilities in planning. We have made a number of internal improvements and continue to strive for more. The Daily Echo.cosmeticsbusiness.com/news/article_page/Fairtrade__an_ethical_investment/55864 [Accessed July 2011] Eckerall.guardian.bournemouthecho.wikipedia.com/market_reports/article_page/Bathroom_Products/46446 [Accessed July 2011] Cosmetics Business (2010) Fairtrade – an ethical investment. (2004) Lush couple with a shed load of ideas. The Guardian.steppingstones. [online] Available from: www.uk/environment/2010/may/30/lucy-siegle-innovator-lush-cosmeticswar-palm-oil [Accessed July 2011] Teather.org/wiki/Lush_(company) http://secure.cosmeticsbusiness.uk/tol/life_and_style/women/beauty/article5662077. the scent of success. B. 13 April [online] Available from: www. 24 June [online] Available from: www.co.timesonline.co.ca/shop/about-lush/articles/history Page 18 . (2009) Lush founder Mark Constantine on the recession and hypocrisy. Centre for Integrated Marketing.cosmeticsbusiness.cosmeticsbusiness. Retail Week (2010) Conference speaker overview.co. F. D.cfm?officeContactId=3159&eventYear=2011 [Accessed July 2011] Sanghera.retailweekconference.co.com/speakerdetail. S.Delivering Customer Value Through Marketing Case Study June and September 2012 References and sources Cosmetics Business (2009) Foundation Fairtrade certifies its first beauty products.lush.ece [Accessed July 2011] Siegle. (2010) Soap stars as Lush in top three shops. (2003) Lush. Mintel (2011) Beauty Retailing – UK.uk/business/2007/apr/13/retail2 [Accessed July 2011] Two websites with more information about the company: http://en. The Times. The Guardian. 28 July [online] Available from: www.org/externalDocs/E22. and Sain. A. 28 May [online] Available from: www. Mintel.com/news/article_page/Fairtrade_Foundation_certifies_its_firs t_beauty_products_/49305 [Accessed July 2011] Cosmetics Business (2010) Bathroom products – clean-up operation.Soap_stars_as_Lush_in_top_three_shop s/ [Accessed July 2011] Jenkinson.uk/news/8189676. Mintel.com/technical/article_page/Bathroom_products_-_Cleanup_operation/47952 [Accessed July 2011] Cosmetics Business (2010) Bathroom products.pdf [Accessed July 2011] Mintel (2010) Beauty Retailing – UK. www. 23 February [online] Available from: www. 30 May [online] Available from: www. 1 April [online] Available from: www.guardian. L. 5 February [online] Available from: http://women. (2010) Mo Constantine’s innovation: finding an alternative to palm oil. 2009/10 Retailer (parent/country of origin) Operations No. January 2011 Page 19 . (h) 2008/09 figures. (i) Store numbers include concessions. Source and copyright: Mintel.Professional Diploma in Marketing APPENDIX ONE Figure 13: UK: Leading beauty specialists. (j) Includes three concessions and two outlet stores.322 AS Watson Europe (Hutchison Whampoa/Hong Kong) of which: Drugstores/perfumeries 1.UK. In addition trades through 19 third party stockists.473 6. (g) Includes sales from one store in Ireland and Eve Lom international wholesaling. (e) Sales and store numbers estimated for The Body Shop. (b) Store numbers include Ireland. of outlets Sales (£m excluding sales tax) Notes Alliance Boots Pharmacy/health & beauty 2. In addition trades through 31 third party stockists.315 1.426 Superdrug Drugstores/in-store pharmacies 917 1.075 Savers Health & Beauty Drugstores 230 172 The Perfume Shop Perfumeries 168 179 (b) The Body Shop Beauty 338 159 (e) Molton Brown Beauty 45 48 (c) The Fragrance Shop Perfumeries 106 47 (d) Space NK Beauty 61 47 (g) Lush Beauty 87 41 (h) L’Occitane (France) Beauty 47 27 (i) Penhaligons Perfumeries 16 6 (j) (a) (e) (a) Sales = total turnover not just beauty/toiletries but excluding opticians. store numbers include opticians. (c) Includes two airport stores. Beauty Retailing . (d) Sales cover the period 13/1/09 to 31/3/10 following a company restructuring. and store numbers only for Superdrug. 140 107.503 501.403 2.925 855.354.078 39.285 765.080 1.Delivering Customer Value Through Marketing Case Study June and September 2012 APPENDIX TWO Figure 15: Leading retailers’ advertising spending.477 882.795 965.583 827.150.816 3. Lush does not prioritise spending on main media advertising and therefore is not included.356. January 2011 Page 20 .132 1.316 1.965. 2006-09 Retailer Boots The Chemists Ltd Avon Cosmetics Ltd Superdrug Stores Plc Asda Stores Ltd Tesco Plc Wm Morrison Supermarkets Plc Perfume Shop L’Occitane Ltd Debenhams Plc Sainsbury’s Supermarkets Ltd The Body Shop House of Fraser Plc Space NK Limited Selfridges & Co Lloyds Pharmacy Ltd Molton Brown Cosmetics UK Harrods Ltd Wilkinson Hardware Stores Ltd Argos Ltd Fenwick Ltd Total of the above 2006 2007 2008 2009 14.713 5.193 3. Beauty Retailing .159.760 410.729 1.868 122.580 710.002 1.764 92. cosmetics and toiletries.547.088 870.272 2.658 7.981 212.357 33.806 231.628.074.351 1.171 64.165 19.730 1.559.327 152.541 377.202 691.413.214 56.287.372 182.082.254 17.834 561.284 NB: figures relate to total advertising spend on cosmetics and toiletries by the retail brand.435 1.237 261.388 595.830 79.943.319 143.906 1.237 2.646 74.110.098 1.892 945.338.107 11.839 249.079.246 28.064.444 441.925 819.239 71.956 5.553 148.547 43.780 169.927 25.850 436.344 0 43.292 102.920 1.889.783.433.028 248.636.540.511 3.751.UK.448 457.563 5.343 328.987 108.865 79.589.761 37.037 340.811.511 5.601 536.403.689 95.705 558.612 3.213 72.318 7.312. Source: Mintel. 4 0.2 1 Health & beauty* 0. beauty and other personal care shops) Source: Mintel. 2005-2008 1. January 2011 Page 21 .8 Beauty** 0.Professional Diploma in Marketing APPENDIX THREE Figure 52: Lush Retail Ltd: Sales as share of UK health and beauty retailers’ sales. Beauty Retailing .6 1.6 0.2 0 2005 2006 2007 2008 * Including all NHS receipts and all of the Boots store network ** Share of cosmetics/toiletries specialists’ sales (drugstores.UK.4 1.8 1. perfumeries. UK. January 2010 Page 22 .Delivering Customer Value Through Marketing Case Study June and September 2012 APPENDIX FOUR Figure 32: Attitudes towards the Lush brand. December 2009 Brand attitudes towards Lush Base: 232 GB internet users 18+ who expressed a view Source: Mintel. Beauty Retailing . Retail Intelligence. ’ in The Sunday Times 100 Best Companies To work For survey 2010.9m. For the financial year ending 30 June 2009:  Lush Group worldwide turnover increased by 40% reaching £215 million  the number of shops worldwide at end June 2009 reaches 651.Professional Diploma in Marketing APPENDIX FIVE TRADING UPDATE London.’ 3rd for ‘giving something back’ and in the top 10 for ‘staff feeling that the company makes a positive difference to the world. For the first 8 months (to 28/02/10) of the current financial year:  Lush Group turnover is currently 10% ahead of the previous financial year  a further 56 Lush shops have been opened worldwide  profitability is up on prior year  morale remains high after Lush staff voted the company top for ‘believing their employer does all it can to help protect the environment.4m to £13. an increase of 19%  profit before tax fell from £19. Tuesday 30 March 2010: Lush. Source: Lush publicity Page 23 . announces today that. purveyors of fresh handmade cosmetics. mature customers that remain loyal to The Body Shop  the company matches The Body Shop in customer satisfaction ratings. in contrast to the more conservative. non-conventional but yet serious about ethical principles  it commands strong CSR values. are worth a higher price  expansion has seen overall sales remain buoyant. Beauty Retailing . Page 24 . January 2010. with their aesthetic indulgence benefits. customers feel it lacks The Body Shop’s service image and warmth  the final issue relates to the complaint that the strong smells lingering within the store give customers headaches and puts them off browsing.Delivering Customer Value Through Marketing Case Study June and September 2012 APPENDIX SIX Summary of strengths and areas for improvement Mintel summarised the company’s strengths as follows:  high brand recognition – although only three in ten had been into a Lush store. The following areas for improvement have been identified:  falling sales per outlet and same-store customer retention is an issue that needs addressing.UK. It is seen as cool and quirky. with two in five people stating that the company has a caring attitude towards animals. Retail Intelligence. Mintel brand research supports this. but has more top ratings. However. 83% of people think it is distinctive. with 18% of visitors stating that they are unlikely to go back and 24% saying they no longer visit  one in three people (32%) stated that they would never consider the brand and 37% stated that they had never heard of it  customer opinion is polarised with almost half (47%) of customers recommending the organisation. 61% of those interviewed felt it was a brand leader in product innovation  the products appeal to the younger teenage age group. similar to the proportion for The Body Shop. This is a difficult problem to address given that the smell of the products is part of the brand’s USP. with one in four (24%) thinking it is excellent compared to one in five for The Body Shop  most customers feel that the products. Source: Adapted from Mintel. Delivering Customer Value Through Marketing Case Study June and September 2012 Page 25 . Delivering Customer Value Through Marketing Case Study June and September 2012 Page 26 . Delivering Customer Value Through Marketing Case Study June and September 2012 Page 27 . Delivering Customer Value Through Marketing Case Study June and September 2012 Moor Hall Cookham Maidenhead Berkshire.cim. SL6 9QH. UK Telephone: 01628 427120 Facsimile: 01628 427399 Website: www.uk Page 28 .co.