Preventing erosion of luxury beauty brands through global communication

Preventing the erosion of your luxury beauty brand’s identity:
Getting communication right
between your global teams

How to stop the erosion of your luxury brand’s identity
Despite online growth, the retail
point-of-sale experience remains
critically important for luxury
beauty brands.
How can you be confident that
across a dispersed and global
network of retail outlets, your
brand values are always
accurately presented?

Page 3Page 3

The essence of luxury is about
things being choice or costly.
It’s about high quality and
attention to detail. It’s about
style and rarity and about
focussing on excellence
and not price.

Page 5
Luxury brands are generally very clear as to the critical importance of maintaining
a consistent and accurate brand image, conveying to the consumer some specific idea,
a collection of attributes, a dream. To opt for Guerlain is to become that chic Paris
woman; to buy Burberry is to let others know that your style is that of an exclusive kind
of Britishness. It’s that dream, resonating at a personal level, which consolidates loyalty
and so encourages future purchasing.
The central marketing team, which is at the heart of the brand, will therefore be extremely
sensitive to protecting the brand and ensuring that it doesn’t become tarnished through
bad presentation. It’s particularly important that any risk of commodification is avoided.
Given the luxury beauty sector is an intensely competitive market with constant threats
from existing competitors and new entrants, a damaged brand image will impact negatively
on sales, quite probably suddenly and dramatically.
Because maintaining this brand image through an exceptional point-of-sale (POS) experience
is so critical, it’s vitally important that what brands do is done supremely well. This isn’t as easy
as it might seem. Good communication is key.

Page 6
The personal luxury sector as a whole has been growing steadily. The analysts forecast the
global personal luxury goods market to grow at a compound annual growth rate of 7.9% over
the period 2012-20161
and to reach €270bn by 20172
, hitting an all-time high and tripling its
size compared with 1995. European production and supply accounts for 70% of the global
market3
. The proportion taken by the beauty and fragrances section is now around 20% of
the global whole and is growing particularly rapidly4
. According to L’Oréal this market is
expected to double in the next 10 to 15 years5
.
A growing market of opportunities
The analysts forecast the global
personal luxury goods market
to grow at a compound annual
growth rate of 7.9%1
... and to
reach €270bn by 20172
...

Page 7
20%
4%
28%
25%
23% Beauty
Other
Accessories
Apparel
Hard luxury
300
147
159
170
167
153
173
192
212 217
245-255
15%
10%
5%
0%
-5%
-10%
8.1% 8.2%
6.9%
-1.8%
-8.4%
13.1%
11.0%
10.4%
2.4%
250
200
150
100
50
0
-50
-100
-150
2005 2006 2007
Market size Growth
2008 2009 2010 2011 2012 2013e 2015e
€billion
Growth(%)
Worldwide personal luxury goods market trend
Source: Challenging growth in the luxury and cosmetics sector. The luxury and cosmetics financial factbook 2014 edition, Ernst & Young
Global personal luxury goods market by product type (2013E)

Page 8
Online sales have also been growing although here it’s generally department stores that make
the running, at least as far as direct selling is concerned. Indeed some 35% of luxury brands
do not sell online at all6
while in contrast some brands, notably Burberry, Prada and Gucci,
have made successful efforts to develop captivating online experiences that link closely to
what consumers might experience in store. Luxury beauty brands’ consumers may well be
sophisticated web users but use the web to mainly research and compare products rather
than buy online. Buying remains a physical act and so one where the POS experience remains
extremely important.
A further complication comes from the rise in tourist spending. Bain & Company points out
that this is a major driver and that in the cosmetics and fragrance sector of the overall luxury
market, airports can be thought of as a “sixth continent”, such is the strength of their retail
sales7
. Half of the French luxury sales are made in the tourist market8
. Brand owners should
understand, therefore, that the consumer is more important than the location, that it’s a case
of Who? and not Where?
How will luxury businesses succeed in the
next decade? Get prepared for Luxury 2.0
1995
100
290
500
2014E 2025F
Luxury 2.0 imperatives
Superior customer experience
- Promoter system around the brand
- Omnichannel strategy
- Innovation marketing
Flawless retail management
- Continuous network and Capex optimization
- Hospitality culture
- Assortment tailoring
People excellence
- Talent management
- Frontline engagement
- Customer centricity
Luxury-goods market, indexed to 1995
Source: Bain & Company | LUXURY GOODS WORLDWIDE MARKET STUDY Fall-Winter 2014 The rise of the borderless consumer

Page 9
Growth in this sector is desirable for luxury beauty brands but brings its own challenge of
retaining market share and while doing so ensuring that brand consistency is protected, given
that the distribution chain will certainly increase in complexity. This complexity comes not only
from wider geographical distribution but also from an increase in both the number and type
of retail outlets serving the brand. Add to this complex mix, the seasonal nature of the luxury
beauty brand market and the scale of the task of ensuring exceptional POS environments are
always produced becomes significant.
This underlines the vital
importance of making sure
that communication between
all the different participants is of
the highest quality so that brand
integrity can be maintained.
Page 9

If a global luxury brand owns or franchises the entire distribution and retail network then
good central-local communication is generally less of a problem although issues around
maintaining brand integrity can still arise from matters such as language usage, cultural
factors and a lack of understanding by the centre of specific local matters or opportunities.
More commonly a global luxury brand will work through a chain of suppliers and partners
with products reaching consumers through a dispersed global network of country specific
retailers, covering as many as 180 countries. This introduces a whole new set of brand
management problems and increases greatly the risks of brand distortion or damage because
the interests of the global brand, procurement teams and the local brand teams are not
always aligned. According to the analyst company AT Kearney, British retailers do not value
the brand image at the same high level as in some other countries, instead placing more
emphasis on the perception by the consumer of the retailer rather than of the luxury brand9
.
This means more work for the brand management team in ensuring that a local retailer sets
up and delivers the proper POS experience.
Good communication –
the key to brand integrity
This brand distortion often arises
from communication failure
between central and local
marketing teams.
Page 10

Page 11
Traditionally the brand management team will pass on to the local teams responsible for POS
production and/or implementation, information about brand guidelines and ethos via email
with the necessary documents attached.
This works well for simple communication but becomes difficult to manage as numbers grow
and projects start to overlap by time or region. This is especially evident in merchandising
a luxury beauty brand, who often have as minimum ten seasonal promotions and product
launches a year. Each promotion will require different retailers’ booths and floor set-ups,
so it’s hardly surprising that the parties involved become confused as to what material is
current and often resort to using versions stored on their local drive. As Nicolas Meauzé,
POS category leader at Pernod Ricard, comments, he found “some countries using items that
did not even stick to the core brand colours, let alone the right design, lettering and so on”10
.
And although email is a highly convenient communication approach, there can inevitably
be security and audit trail issues inherent in such systems with the global brand team
unsure who has received and actioned which communications.
There’s also the matter of human interaction and consequent misunderstanding. This
may be language based or cultural or it may be because the central brand management
team doesn’t always know the extent and responsibilities of the local teams. Central teams,
with responsibility for brand management and the purse strings, can sometimes appear
far too arrogant and dictatorial in insisting on what needs to be done when developing a
POS environment for a luxury beauty brand. In the absence of good interpersonal relations
between the teams this can be very damaging. The local team will ‘do their own thing’ using
non-approved suppliers to respond quickly to their market’s needs producing POS which does
not always meet the global brand’s guidelines. Crucially, the global brand and procurement
teams will not have visibility over the POS actions at local level and will be unable to confirm
that brand integrity remains intact.
The risks and costs to the brand

Page 12
The power imposed by the central team over the local team also shuts off a source of
good local information which might well transform a mediocre marketing campaign in
that particular locality to one which has full impact and drives sales.
Brand control for luxury beauty brands has to come from head office; but to be applied
and disseminated successfully across markets, there needs to be scope for feedback and
participation from local markets. Communication needs to be a genuine two way flow and
an important part of the managerial role is to listen and be open-minded about suggestions
from those on the ground locally.
It is only by taking this approach that the highest quality POS environment, one which
properly resonates with the consumer’s expectations and so leads to exceptional sales,
can be brought into being.
Local and central teams must recognise each other’s strengths and central marketing
should appreciate the real value a committed local team can bring over and above
both immediate sales and customers’ tracking. This can be enhanced through good
communication but also dramatically destroyed when communication is poor and
mutual respect limited.

Page 13
MARKET CONDITIONS
COMPETITORS
N
EW
ENTRANTS
THREATS
OPPORTUNITIES
GLOBAL BRAND
AND
PROCUREMENT
TEAMS
MARKET RETAILERS
MARKETRETAILERS
MARKETRETAILERS
Local
teams
Localteams
Local
team
s
Local
team
s
Local
teams
PRESSURE
PRESSURE
PRESSURE
PRESSURE
PRESSURE
Brand implementation:
The importance of good communication

Page 14
If luxury beauty brands want to enter new markets or adopt new retail channels, without
suffering any damage to the brand or the luxury experience delivered to consumers, such
risks have to be tackled head on.
One very important strategy is to have regular face to face meetings. This reassures the local
team that they’re important and that their views and concerns are being listened to and taken
as valuable contributions to the whole process. It also means that people can put a face and
personality to their remote colleagues and in doing so enhance mutual respect and loyalty
and make it easier to discuss relevant matters over time.
Setting up local brand workshops and associated training is also very valuable, not only in
developing passion and commitment and in ensuring that local teams fully understand the
brand ethos but also in providing valuable feedback to the central team about local events,
culture or conditions. Of course this can be difficult and costly where there are large numbers
of brand and procurement teams spread over the globe but it is necessary in some form.
One option is to host regional conferences or even use videoconferencing. The diamond
company De Beers, for instance, holds its annual meeting using a very high quality video
conferencing link between its Luxembourg headquarters, London and South Africa with
many hundreds taking part as if they were in the same room.
Whilst these processes help with a local team’s engagement and build trust and respect
between all parties, they do not guarantee that “everyone has the same version of the truth”11
.
Digital Asset Management (DAM) systems are used by some brands, but often with limited
success, as whilst a DAM guarantees the right artwork is being used, it does not handle the
complexity inherent to POS and merchandising.
There is also an increasing number of cloud-based software and service solutions to support
the development and implementation of POS complexity, of which a good example is Geneus,
ProProcure’s Spend Management platform.
Enhancing communication

Page 15
Geneus: spend management platform
COST AND TIME EFFICIENCIES
COSTANDTIMEEFFICIENCIES
VISIBILITYOVERWHODOESWHAT
VISIBILITYOVERWHODOESWHAT
JUNE
SUPPLIERS DISTRIBUTORS
CENTRAL TEAM LOCAL MARKETS
Conﬁrmation on
what POS should
be used and how
POS guidelines on
decoration and
construction
Schedule and
costs conﬁrmed
Local market
intelligence informs
POS design

Page 16
It is designed to present seamlessly information on as many POS products and services
as the company requires, showing these to whatever level of complexity is wanted. This
means that everyone concerned, including authorised suppliers and distributors, whether
in Berlin, Buenos Aires, Buffalo or Beijing, will see the same up-to-date information in their
own language. The responsible manager at company HQ can then discuss with the local
manager or supplier responsible, in real time, exactly what POS products are to be used
and how. Those involved are able to agree details of construction and decoration, confirm
schedules and costs, consider changes based on local knowledge, and much more, all
in a tight security environment underneath a very easy to use interface and with a full
audit trail of decisions and actions. Effectively everyone concerned with the marketing or
procurement processes whether brand manager, distributor or supplier, can be confident
that the information is accurate, up-to-date and reflects fully what was discussed and
agreed. The risk of misunderstanding and confusion between the centre and the periphery
reduces dramatically and the luxury POS experience is maintained.
Can you afford to get it wrong?
The take outs from this are clear: with the luxury beauty market growing and new markets
and competitors emerging, luxury beauty brands cannot risk getting it wrong at the point-
of-sale, not unless they want to lose market share. To ensure a first class POS experience
which draws on good knowledge of the customers, there has to be close and harmonious
working between teams. And the key to that is timely communication between the centre
and the periphery and between the marketing teams, the sales teams, the suppliers and
the procurement teams.

Page 17Page 17

1. “Global Personal Luxury Goods Market 2012-2016” - Researchandmarkets.com
2. Worldwide Luxury Goods Report 2014 - Bain & Company
3. The value of the cultural and creative industries to the European economy,
A report prepared for the ECCIA, Frontier Economics Limited, June 2012.
http://www.aim.be/uploads/news_documents/Thevalueoftheculturalandcreative.pdf
4. Worldwide Luxury Goods Report 2014 - Bain & Company
5. L’Oréal Annual Report 2014
6. Luxury Goods Worldwide Market Study Fall-Winter 2014,
The rise of the borderless consumer, Bain & Company
7. Luxury Goods Worldwide Market Study Fall-Winter 2014,
The rise of the borderless consumer, Bain & Company
8. Global Powers of Luxury Goods 2014: In the hands of the consumer, Deloitte
9. Beauty Only as Deep as the Customer Experience - AT Kearney
10. Pernod Ricard, Procurement gets to grips with global brand collateral
- Peter Smith, Spend Matters/ UK & Europe, 2013
11. L’Oréal and suppliers collaborate in cloud-based Control Tower
- Supply Chain Movement 2013
References

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ProProcure tackles the lack of co-operation that commonly exists between procurement
and marketing in global and multi-national companies.
Technology is at the heart of the business. Geneus, the marketing spend management
platform is built to seamlessly integrate with existing business systems and successfully
manages client’s POS complexity giving complete visibility over costs, providing an
unrivalled aggregation solution and ensuring brand compliancy.
For the last 14 years, ProProcure has worked with a number of luxury brands, including
Perrier-Jouët, Mumm, and Martell.
About ProProcure

ProProcure Limited
Europa Court, Marsham Way, Gerrards Cross, Buckinghamshire. SL9 8BQ United Kingdom
+44 (0) 870 380 1717 | info@proprocure.co.uk
If you wish to discuss the contents of this paper or to find out more about ProProcure,
please call Edwige Riou on +44 (0) 870 123 5143 or email edwige.riou@proprocure.co.uk
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Preventing erosion of luxury beauty brands through global communication

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