Approaching Target Market

Company Profile

• Incorporated in Texas in 1963 by Mary Kay Ash

• A direct selling cosmetics company

• Offering Skin care system as opposed to individual product

• Products: Skin care, Personal care, Cosmetics

• 2,75,000 independent salespeople worldwide known as “Beauty

Consultants”

• Unlimited opportunities for women in business with distinctive

compensation & recognition plan

Background

• In 1992,MKC’s international sales represented 11% of the $1

billion retail sales

• In contrast, Avon products derived over 55% of its $ 3.6

billion retail sales

• Formulation of critical success factors for MKC

internationally

• Evaluation of two market entry opportunities:

Japan- mature but lucrative market

China- rapidly growing but relatively unknown market

Cosmetics and Direct Selling Industries

• MKC competed in both cosmetics and direct selling industries

• Top four companies in US cosmetics market in 1992 were

Procter & Gamble

Estee Lauder

Avon

Revlon

• L’Oreal, subsidiary of Nestle dominated the world market with

$5.9 billion in retail sales

• Two approaches to direct selling:

Repetitive person-to-person method

Party plan method

International Operations

• Australia and Argentina not chosen for strategic reasons

• Challenges MKC faced internationally:

Canada Market research indicated that MKC was perceived

as outdated

Australia- In 1992, MKC had low brand image

Mexico- Brand awareness was high, brand image was

positive

Taiwan- Rapid expansion had generated $3.3 million in sales

Contd.

• Factors inhibiting growth include:

Direct application of U.S. marketing strategy without

modification in local markets

Low consumer brand awareness

Insufficient marketing resources

Cultural barriers impeded use of party plan

MKC in ASIA

• Taiwanese subsidiary became profitable and promised good future

sales growth

• Asia had evolved as one of the fastest growing and dynamic regions

of the world

• GDP was expected to reach 32% by the year 2000 as compared to

24% in 1988

• MKC’s long term market position depended on competitive

advantages to develop a market entry strategy

Market Environment of China & Japan

• In 1992 Japan was the largest direct selling market in the

world with an estimated $19.2 billion retail sales

• 1,120,000 women engaged in direct selling in 1992

• 1993 might prove to be an opportune time for MKC to

launch in Japan

• Economic recession created more demand for part time

employment

Market Environment of China & Japan

• China covered 3.7 million square miles and was divided into

22 provinces, 3 municipalities and 5 autonomous regions

• The Chinese population was predicted to grow up from 1.1

billion in the year 1992 to 1.5 billion in the year 2020

• Out of 310 million of urban population 156 million were

female

• “Open Door Policy’’ indicated a series of wide ranging

economic reforms

Consumers

• In 1992 over 50% of 51.8 million Japanese women aged over 15 years were employed (on a part time basis)

• Annual cosmetic expenditure in Japan was above $ 260 per household in 1992

• In Japan 40% of cosmetics were sold to women aged between 20 to 30 years

• Consumer habits in China varied by region: Northerners were more concerned with clothing and appearance Southerners preferred household products and customer

electronics• Brand name were highly appreciated by Chinese consumers

who would pay up to four times to avail a foreign brand than a local brand

• 87% of Chinese women were employed

Products

• Skin care products accounted for 40% of all cosmetics sales in 1992

• Products tailored to the Japanese market included Whitening

products and wet dry foundation cakes.

• Kao and Shiseido dominated Japan’s skin care market.

• Foreign manufacturers were successful in selling make-up products.• Products in China were mainly segmented into 2 parts:

Skin Care Category Make Up Category

Competitors

• Top five domestic cosmetics manufacturers in Japan in the 1992:

Shiseido, Kao, Kanebo, Pola, Kobaysashi Kose• Foreign competitors in China and Japan in 1992 were: Avon Johnson & Johnson Kao Unilever L’Oreal Procter & Gamble Revlon Shiseido

Distribution

• Distribution in Japan:

Franchisee System

General Distributorship

Door-to-Door Sales

• Distribution in China:

• 280000 outlets accounted for 40% of all consumer product retail sales.

• Cosmetics display in stores tendered to be confusing.

• In department stores imported brands were sold in separate cases.

• Shelf space were taken for rent in departmental stores.

Advertising

• In 1992 advertising expenditure was less than $1 but was

expected to grow.

• Newspapers were rarely used for print advertising.

• Regional TV channels were more popular than single national

TV channel.

• Advertisement on national channel was liable to censorship.

• For a foreign importer the cost of 30 second prime

advertisement on Chinese national television was $4000.

Marketing Mix of Mary Kay Cosmetics for Asia

Product:

• MKC emphasized on “teaching skin care and glamour”.• MKC wanted to enter market with both skin care and make up

product.• Developing a product line in Japan would require three times

as much resources as compared to developing a line for Chinese market.

• MKC believed that there current product line was already global in appeal.

Positioning:

• MKC’s product positioning muddled up between glamour

provider and skin treatment.

• Confused about the basis of differentiation and which age

group to target.

• Communication strategy:

Level of emphasis to place in MKC’s communication

Pricing:

• Product sold in Japan would be twice as high as for

corresponding products sold in China.

• Start-up cost in China would be lower.

• Chinese market entry was expected to break even within 24

months as opposed to 3-5 years for Japan.

• MKC product should be priced in relation to both domestic

and foreign competitors.

Promotion:

• Consultant recruitment programs have to be developed.

• Print advertising, public relations and service workshop have

to be developed.

• In Japan MKC thought of establishing a toll-free number,

developing travelling showroom in suburbs, etc.

• MKC’s advertising expense in Japan would cost around $3

million/year, whereas in China it might require $100,000/year

for the first three years.

Thank You…