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Lipstick Factor: Marketing Strategies for a Downturn

By: Imogen Matthews
Posted: May 4, 2010, from the May 2010 issue of GCI Magazine.

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By contrast, fragrance has had difficulty keeping pace. “Fragrance perpetually suffers, as [its success relies on] department stores,” Mellage says. According to Kline, the weak economy has forced the department store share of the total market down two points compared to 2003 levels. Mellage believes this decline has prompted both brand owners and retailers to actively engage customers with purchase incentives, loyalty programs and even direct sales. Brands such as Lancôme, Estée Lauder and Clarins have stepped up marketing of direct sales with online enticements, including bonus gifts and free shipping with purchase.

There are signs that the economy is looking up and that, perhaps, the worst is behind us. Lancôme, which was looking lackluster earlier in 2009, for example, saw Asian sales rise by 18% in September 2009. Meanwhile, Elizabeth Arden posted a profit of $40 million in a recent quarter. In fact, many signs are reason for a great deal more optimism than one year ago.

Growth Areas: Alternate Categories and Niche

Direct sales has proven to be an area of unexpected growth, posting a robust 8.6% increase in sales, according to Kline, and nearly double that of the total market. Growth has been driven partly by the earnings potential and expanding sales force—those looking for work in a difficult job market. Internet sales have also contributed to channel growth. Kline notes growth has more than doubled in the past five years as consumers have become increasingly comfortable making online purchases. “Savvy brands are employing a mix of complementary channels—including online sales, catalogs and social networking—to maximize their reach and target consumer in the format that’s most comfortable for them,” explains Karen Doskow, industry manager for consumer products research at Kline.

Online has also favored the smaller niche brands, which are often the first to feel the cold winds of a downturn.

Sian Sutherland, founding partner-chief, Mama Mio,* believes that the layers of padding protecting larger companies can actually make them more unwieldy. “During the past year, I’ve come to appreciate the advantages of being small. We can be more reactive and more nimble than big companies whose marketing plans are set for [an entire] year,” she asserts, pointing out that a 10% flux either way is not a big deal for small brands. “We are fortunate that our rate of growth has been 50% per year,” she adds.