A case study of the marketing communication strategy of a hair styling brand

A case study of the marketing

communication strategy of a

hair styling brand

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It’s got to be got2b

A case study of the marketing communication

strategy of a hair styling brand

Graduation thesis Rijksuniversiteit Groningen

Date:

June 2007

Place:

Amsterdam

Author:

Jacqueline Smale

Student number:

1230093

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supervisor:

Dr. J.H.M. van Kesteren

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supervisor:

Dr. M.A.G. van Offenbeek

Company:

Henkel Belgium N.V.

Company supervisor:

Dhr. D. Debie

‘The author is responsible for the content of the graduation thesis; the copyright of the graduation thesis is held by the author’

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PREFACE

This thesis for my studies International Business at the Faculty of Business Administration of the University of Groningen is the result of a research I have conducted at Henkel Belgium. During a six month internship at Henkel in Brussels I have learned a great deal about the Fast-Moving Consumer-Goods industry, I have obtained my first real working experience and gained lots of surprising insights about the Belgian culture. Apart from these learning experiences I also had a lot of fun with my colleagues in the Hair-team, especially on the differences between the Flemish and the Dutch way of speaking. I want to thank David Debie, my supervisor and brand manager of the styling products, for his feedback, for involving me in all his activities and for always calling me Janine! I also want to thank Sylvie-Anne Grimmelprez, Mathias Mys and Bart Baeyens for their support. Additionally I want to give my acknowledgements to the rest of the Cosmetics and Toiletries department, who all made my stay in Brussels a pleasant one.

It was only after the internship that I could actually start working on my thesis. It was not always easy to keep my motivation level high but now I can finally present the result. This would not have been possible if it wasn‟t for my supervisor from the RUG, Dr. Jos van Kesteren, who has not given up on me and kept giving me useful feedback and motivation. Also thanks to my second supervisor, Dr. Marjolein van Offenbeek, for taking the time to give me feedback during the process. My thesis also could not have been completed without the cooperation of the other subsidiaries of Henkel who have taken the time to give me all the data I needed to finish this research. My special thanks go to Drs. Schelte Lettinga, Ms Katerina Moragiani and Ms Petra Beer-Michaud.

Last but not least I want to thank my family and friends whom I have driven crazy sometimes but who supported me until the end.

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SUMMARY

After becoming a major success in the US, the brand „got2b‟ was introduced throughout Europe ever since 2004 and on the Belgian market in May 2005 and became the newest hair styling brand of Henkel Belgium. Got2b is a hip and trendy styling brand aiming for a small niche in the styling market, where professional products are offered in the retail for a premium price. After one year the results have been disappointing for got2b in Belgium and the brand manager wonders what he can do to improve the brand‟s performance. In other European countries got2b is performing quite well, apart from some exceptions. The causes for these differences in performance level are unknown. This question was the reason to start this research.

Many articles and books discuss the process of how to attain the best performance for a brand. The most famous and widely used theory is the brand equity theory of Kevin Lane Keller (2003). Other authors have contributed to his theory and broadened it, but there seems to be a general agreement that the brand‟s performance is dependent on the company‟s capacities and how they are used in the market situation. The boundaries of this research have lead to a focus on the capacities of the company, and more specifically on the marketing communication tools‟ application. This has lead to the following problem definition:

Research objective:

To provide suggestions to the brand manager of got2b for improvement of got2b’s performance in the future.

Research question:

Learning from other practices, in which ways can the brand manager of got2b in Belgium use what factors of a marketing communication strategy in order to make got2b perform better?

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To answer the research question and meet the research goal, a comparative case study was conducted to examine what could be learned from other practices in three other subsidiaries of Henkel in Europe. Data was collected from Germany, Greece and the Netherlands on how these subsidiaries have managed the marketing communication strategy in the first year after the launch.

From the data the main similarities and differences among the cases are extracted. The decision-making of the factors „research for consumer and product‟, „target group‟, „proposition‟ and „creative development‟ is centralized at headquarters. For these last three factors this seems like a logical decision because it can create economies of scale. For the research of consumer and product, Henkel relies on a research conducted only in the German market. They seem to make the assumption that the market situations are comparable for the subsidiaries, which is quite a heavy assumption. This contradicts to the fact that the four cases do have different market share targets, because that implies different market situations.

Examining the other factors shows that advertising, especially in the shape of a television commercial (TVC), is the most effective marketing communication tool for creating a long term positive effect on the market share. Sales promotions in the shape of discount are successful as well, though only on the short term, except when they are implemented as a support for a TVC. In Belgium and Greece many expensive and small-reach sponsoring activities have been undertaken which were quite diverse and did not show any effects on the market share. Both in Germany and the Netherlands they conducted a major national activity which contained a contest about trendy hair styles and became a success. The activity embraced several media like TV, print and internet; the latter made it quite interactive. Also the activities had a clear focus on two brand values of got2b. The Dutch and German brand managers indicated that these components were the key success factors.

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The most remarkable aspect that is shown in the analysis is the need for integration among the marketing communication tools. Before developing our suggestions we looked further into this subject by examining relevant literature. The literature review shows that „Integrated Marketing Communications‟ (IMC) is quite a popular topic at the moment in the field of marketing. Though the practical application of the theory is still in development, it enhances the understanding of the issue and provides some general recommendations. The integration of the marketing communication tools need to be evaluated on their capacity to achieve the intended effect, their contribution and their cost.

The weaknesses of the current marketing communication program in Belgium are the lack of integration and coverage. To deal with these weaknesses we recommend the brand manager to conduct a national advertising or co-branding campaign with a clear focus on one or two of the unique brand values of got2b that involves active participation from the consumer. The advantages of this first option for improvement are that it makes up for the current weaknesses, it enables the brand manager to use already established partnerships and the brand manager can build on the experience of his Dutch and German colleagues. However, it could also be quite cost- and time-excessive to design and implement such an activity.

Our second option for improvement is to conduct a consumer research. We believe that the benefits of knowing what the consumer needs are and where to reach your target group will weigh up to the cost of that kind of research.

Third, the brand manager is recommended to take on a structured approach when designing the marketing communication plan, because it can enhance the quality of the program. Drawing on the IMC literature review, we recommend the brand manager to take four steps:

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1. Design an integrated marketing communication program 2. Evaluate the marketing communication program

3. Execute the final design and implement 4. Research the results of the IMC program

The challenge in this option is the cost-benefit trade-off. Some tools may be more suitable to enhance the integration but might also be the most expensive ones. Additionally, to research the results of the IMC program beyond the market share effects can be expensive as well. To deal with this, the brand manager should review his current budget allocation. It might be possible to diminish the amount of budget that is currently spent on ineffective sponsoring activities. Additionally, though we believe that sales promotions still need to be part of the marketing communication program, the brand manager could lower the amount of budget that is spent on this tool and focus more on tools that build brand awareness.

Finally, the importance of researching the results is emphasized. Though it might be expensive, it can make a substantial contribution in the improvement of the next IMC program.

We conclude by indicating that if the brand manager needs to choose among our four options, we would recommend him to use the four-step-plan because it embraces the most important issues found in this research and has a more long term practical value for improving got2b‟s performance in the future.

Reflecting on our research we suggest some directions for further research. It would be interesting to conduct a market research about the effects of the implemented marketing communication strategies of the four cases because it provides insights in the „intangibles‟ of brand performance like brand awareness, brand knowledge and brand associations. Additionally it would be interesting to deeper examine the practical use of the Integrated Marketing Communication theory.

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TABLE OF CONTENTS

PREFACE

SUMMARY

INTRODUCTION

Step 1: Looking for the context of the assignment

CHAPTER 1

BACKGROUND

§ 1.3.2 Strategic Marketing Communication Plan p. 22

§ 1.3.3 Brand Extension p. 27

§ 1.3.4 Standardization versus adaptation p. 31

§ 1.4 Conclusion p. 34

Step 2: Formulating the research design

CHAPTER 2

RESEARCH DESIGN

§ 2.1 Methods p. 38 § 2.2 Problem definition p. 38 § 2.2.1 Research objective p. 39 § 2.2.2 Research question p. 39 § 2.2.3 Conceptual framework p. 40 § 2.2.4 Sub questions p. 43

9 § 2.2.5 Research boundaries p. 45 § 2.3 Case selection p. 46 § 2.3.1 Cases p. 46 § 2.4 Data collection p. 47 § 2.5 Data analysis p. 48 § 2.6 Conclusion p. 49

Step 3: Examining and learning from the cases

CHAPTER 3

MARKETING COMMUNICATION GOT2B

§ 3.1 Marketing Communication Plan p. 52

§ 3.1.1 Factors determined by headquarters p. 54

§ 3.1.2 Results of communication p. 57

§ 3.1.3 Communication investments p. 59

§ 3.1.3.1 In-store communication p. 60

§ 3.1.3.2 Advertising and sponsoring p. 61

§ 3.1.3.3 Public relations p. 62

§ 3.1.3.4 Direct marketing p. 63

§ 3.1.3.5 Conclusion p. 64 § 3.2 Contribution of the Marketing Communication Instruments p. 64

§ 3.3 Conclusion p. 66

CHAPTER 4

PERFORMANCE OF MARKETING

COMMUNICATION INSTRUMENTS

§ 4.1 Successful activities p. 70

§ 4.2 Unsuccessful activities p. 71

§ 4.3 Conclusion p. 73

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CHAPTER 5

OPTIONS FOR IMPROVEMENT

§ 5.1 Integrated marketing communications p. 76

§ 5.1.1 Integrated marketing communication criteria

by Keller (2001) p. 77

§ 5.1.2 Communication instrument capabilities

by Floor & van Raaij (2002) p. 81

§ 5.1.3 IMC and product portfolio management

by Anantachart (2004) p. 83

§ 5.1.4 IMC implications for got2b in Belgium p. 87 § 5.2 Interpretation of the information from the cases p. 88

§ 5.3 Options p. 89

CHAPTER 6

CONCLUSION, RECOMMENDATIONS

& REFLECTIONS

§ 6.1 Conclusion & recommendations p. 93

§ 6.2 Reflections p. 95

§ 6.2.1 Limitations & further research p. 96

§ 6.2.2 Scientific criteria p. 97

BIBLIOGRAPHY

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INTRODUCTION

In November 2005 the author started an internship for 6 months at Henkel Belgium at the Cosmetics and Toiletries department, Division Hair, performing several activities for the three subdivisions: Hair Styling, Hair Colorations and Hair Care. The Cosmetics and Toiletries department of Henkel is active in the fast-moving consumer goods industry. Product life-cycles are relatively short and the market is characterized by many introductions. As an intern at this department, the author experienced many of these introduction processes. One of these processes is the introduction of got2b. Got2b is a new brand for high-quality styling products and is a sub brand of Schwarzkopf, the parent brand for almost all the hair products of Henkel Belgium. The brand manager of the hair styling department indicated that got2b was not performing as well as he had hoped.

Got2b was first launched in 2000 in the US and there immediately became a major success. After the ongoing success, the headquarters in Düsseldorf decided to introduce got2b in Europe as well. The introductions in several European countries were conducted at different moments in time and got2b was introduced in Belgium in May 2005. Almost one year after its introduction, got2b was not performing very well in Belgium and was losing market share. Since the brand was doing well in several other European countries, the brand manager of got2b wondered what he could learn from these other countries, and asked the author to examine this problem.

To be able to meet the request of the brand manager, several steps were taken. The research process consisted of four steps, which will be covered throughout the different chapters in this report. Together they provide an advice to what the brand manager can do to improve got2b‟s performance. A co-student recommended the author to use a step-by-step plan for structuring the research (De Lange, 2005: 9). The step-by-step-by-step-by-step plan for this research contains all the steps taken to create the content in this research. These steps also guide the design of the report. First, the assignment will be put in perspective to introduce the main question and what its boundaries are. Next, the research design will be

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formulated to provide a plan for the case studies. In the third step the cases will be examined and analyzed in relation to the central concepts of this research. Sub questions 1, 2 and 3 will be answered in this step. In the final step the answers found in the previous step will be integrated and concluded by the learnings from the cases and how these learnings can be used in favour of got2b in Belgium. Sub question number 4 will be answered with this step. Figure 1 clarifies the four steps.

Figure 1. Step-by-step plan for this research

Step 1

Looking for the context of the assignment Step 2

Formulating the research design Step 3

Examining and learning from the cases Step 4

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Step 1

Looking for the context of the assignment

The first step was, as shown in the introduction, the search for the context of the assignment as the brand manager of got2b had formulated it. The context of this assignment will be discussed in chapter 1.

Step 1

Looking for the context of the assignment Step 2

Formulating the research design Step 3

Examining and learning from the cases Step 4

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CHAPTER 1 BACKGROUND

In this chapter we are looking for the assignment‟s broader perspective. To do this, we will look at the company where the assignment comes from, we take a closer look at the management question and we review the relevant literature. Finally, this chapter concludes with a summary that will be the input for the formulation of the problem definition and the research design.

§ 1.1 The company

Henkel was founded in 1876 by a young merchant, Fritz Henkel, and was situated in Aachen, Germany. The first product it marketed was “Universalwaschmittel”, a universal detergent. In 1886, Henkel opened its first sales outside of Germany, and from then on Henkel has never left the international market. Henkel has grown in the past 130 years by acquiring many companies through-out the world and by performing well on the diverse range of markets it serves. Today, the company‟s headquarters is situated in Düsseldorf and the company has a total of around 51.000 employees working in 125 countries around the world. Total sales in 2005 were around € 12 billion (Annual Report Henkel KGaA, 2005).

Henkel operates in three strategic areas of competence - Home Care, Personal Care, and Adhesives, Sealants and Surface Treatment. These strategic business areas are organized into four globally operating business sectors within Henkel:

15 Laundry & Home Care

Cosmetics/Toiletries

Consumer & Craftsmen Adhesives Henkel Technologies

Figure 2. 2005 Sales by business sector

In 1929 Henkel Belgium is set up in Brussels and only 3 years later Henkel Netherlands is founded too, situated in Nieuwegein. Together they form Henkel Benelux. Henkel Netherlands is only responsible for the local marketing & sales activities, all the other activities for Belgium, the Netherlands and Luxembourg are performed by the office in Brussels, which is the headquarters of the Benelux. About 65% of the total revenue of Henkel Benelux is generated in the Netherlands („Introduction Henkel Benelux‟ Presentation, 2004).

In 1898, Hans Schwarzkopf established the Schwarzkopf Company by taking over a drugstore and perfumery, which subsequently became one of the major cosmetics businesses in Germany. Henkel acquired Schwarzkopf in 1995. Since then the division of Cosmetics/ Toiletries is also called Schwarzkopf & Henkel (S&H) and operates in Belgium in four different product groups, as shown in Table 1. Almost all the brands in the product group „Hair‟ are a sub brand of the parent brand „Schwarzkopf‟.

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Table 1: Product groups and brands of Cosmetics / Toiletries division

Product Groups Brands per Product Group

Hair Schwarzkopf

- Hair Colorations Vital Colors, Country Colors, Live Colors, Re-Nature, Vision, Palette, Revital, Poly Blonde and Root-Retoucher

- Hair Styling Taft, Junior and got2b

- Hair Care Gliss Kur, Schwarzkopf Shampoo, Bubble Joe, Seborin Body Fa

Oral Denivit, Theramed Skin Diadermine

The management structure is based on these product groups. The department of the hair products in the Benelux has one marketing manager and the body, oral and skin departments together have one marketing manager. The structure of the Hair department is shown in figure 3.

Figure 3. Organizational Structure Hair department Benelux Marketing Manager Cosmetics / Toiletries Benelux Marketing Manager B.O.S. Benelux Marketing Manager Hair Benelux Marketing Assistant Hair B Marketing Assistant Hair NL Senior BM Hair Styling NL Senior BM Hair Care NL Senior BM Hair Colorations NL Senior BM Hair Styling B Senior BM Hair Care B Senior BM Hair Colorations B Junior BM Hair Styling NL Junior BM Hair Care NL Junior BM Hair Colorations NL B = Belgium NL = Netherlands BM = Brand Manager

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In the light of the problem that is central in this research, it is interesting to see that all the „hair-brands‟ are sub brands of Schwarzkopf. This is quite an important decision in the introduction of a new brand. This aspect will be further investigated in § 1.3. Another interesting fact is that in Belgium there is one brand manager responsible for Hair Styling, while in the Netherlands there are two. This could mean that in Belgium the time to spend on got2b and the commitment towards got2b could be less. It probably also has to do with the fact that the Netherlands has a bigger market and generates more revenue, so there is more money available to hire a Junior Brand Manager. However, to investigate this is beyond the scope of this research.

§ 1.2 Management problem

As discussed above, this research addresses the underperformance of the brand got2b in Belgium. This paragraph deeper examines the management problem and is mostly based on the observations of the author.

Got2b is a brand for styling products and is a sub brand of „Schwarzkopf‟, a famous brand for hair products. The proposition of got2b is to offer professional hair styling products in retail instead of hairdresser shops, where most professional hair styling products are offered now. With this strategy, got2b entered a niche in the competitive hair styling market. In 2000, got2b was introduced in the US where it soon became a major success. The combination of a flashy look, professional quality and funny product names proved to be very appealing to the American public („Launch got2b‟ Presentation, 2005).

Because of its ongoing success in the US, Henkel decided to introduce got2b in Europe as well („Launch got2b‟ Presentation, 2005). Starting from September 2004, when got2b was introduced in Germany, many other (western) European countries followed until now. Based on an analysis of its hairstyling market, each country decides how many and which products of the got2b range they are going to introduce. Headquarters develops a

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marketing strategy which specifies the positioning, the target group, the brand and the communication strategy. This strategy is not country-specific but pan-European. Headquarters also provides advertising material like TV-commercials, the logo and visuals for advertisement in print. The decisions made locally are the operational marketing activities. These activities are, for example, the development of printed advertising material like sales folders, posters, coupons, postcards and leaflets. Another responsibility of the local brand manager is sponsoring, although the approval lies with the higher management.

One of the main decisions made at headquarters is to introduce got2b under the brand name „Schwarzkopf‟. Schwarzkopf is also the parent brand of Taft, Junior Power Styling, Junior Hairspray, Gliss Kur and the hair coloration brands of Henkel. Schwarzkopf itself is also the brand for the basic shampoo line of Henkel. All these brands have very different images and propositions (see www.henkel.com).

§ 1.2.1 Success of got2b

In some European countries, for example Germany, the Netherlands, France and Austria, got2b is a success nowadays. The market share of the brand in these countries is meeting or even crossing the expectations („Got2b Country Review‟ Presentations, April 2006). In Belgium and a few other countries too, like Greece and Spain, got2b is not performing as well as expected yet („Got2b Country Review‟ Presentations, April 2006). The brand manager of the styling department wonders what could be the explanation for this underperformance, especially because got2b is doing quite well in other European countries.

The got2b assortment in Belgium consists of 12 different styling products which all have the same consumer price: €6, 49. This is a high price level, since the average price in Belgium for retail hair styling products is €3, 50. Still, most professional hair styling

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products are priced even much higher (around €15,-). Many marketing activities have been undertaken for the introduction of got2b in Belgium, but some plans the brand manager had could not be carried out because of budgetary reasons („Got2b Country Review‟ Presentation Belgium, April 2006). Still, the managers believe that the activities undertaken should have been sufficient to create a successful brand.

So where does the explanation of the underperformance of got2b lie? Is it the standardization of the marketing strategy? Is Schwarzkopf the right choice as a parent brand for got2b? Was the right marketing program used in the introduction process? To put these questions in a theoretical perspective, the relevant literature will be discussed next.

§ 1.3 Theoretical background

This section gives an overview of literature that is related to the management problem. Got2b‟s launch is the introduction of a new brand and will therefore mainly be viewed as a marketing problem.

§ 1.3.1 Brand equity

When a new brand is introduced, it is the responsibility of the brand manager to build the brand. To build a brand, one needs to undertake activities through which consumers get to know the brand and perceive the brand in a favourable way. In the literature, this process is called „building brand equity‟. One author that has written many articles and books on this subject is Kevin Lane Keller. Almost every recent article or book that addresses brand equity refers to his work (Aaker, 1991; Madhavaram et al., 2005; Rust et al. 2004). Because there was no one definition of brand equity on which everybody agrees, Keller (2003) made a broad summary to capture most definitions in one: „brand

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equity relates to the fact that different outcomes result from the marketing of a product or service because of its brand than if that same product or service had not been identified by that brand‟. This concept will be used in this thesis to investigate what aspects should have been considered for the introduction of got2b in Belgium.

When a company wants to create a strategy to build brand equity, the first aspects to consider are the basic decisions of product, place, price and promotion, better known as the four P‟s (Keller, 2003: 237).

Product

For successful marketing it is necessary to deliver a product that fully satisfies consumer needs. Whether a product can satisfy consumer needs depends on the perceived quality and value of the product. „Perceived quality has been defined as customers‟ perception of the overall quality or superiority of a product or service relative to relevant alternatives and with respect to its intended purpose‟ (Keller, 2003: 238). Product quality is not purely the performance of the product but is built by several dimensions as for example reliability and style and design. Apart from these functional dimensions, perceived product quality is also influenced by the consumer‟s attitude towards the brand that the product is part of. There is an interaction between the brand and the product. Aspects like additional service or symbolism or personality reflected in the brand affect the consumer‟s perception of the product, while the experience with a product affects the perception of its brand (Keller, 2003: 247).

Price

The price of a product influences how consumers categorize a product. The frequency and the amount of discounts also affect consumer‟s opinion about the brand (Keller, 2003: 248). „Price has a complex meaning and can play multiple roles to consumers‟ (Keller, 2003: 249). Companies should determine a pricing strategy to send out a clear message to consumers and to prevent ambiguity about the image of the brand.

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The way in which a product is provided to the consumer can have an important impact on the brand equity (Keller, 2003: 259). Channel strategies can be classified into direct channels, selling through personal contacts from the company to the consumer, and indirect channels, selling through third-party intermediaries. In the indirect channels, retailers have the most direct contact with the consumers and therefore are most likely to affect the brand image. Companies should therefore well determine a strategy to manage their relations with retailers.

Promotion

„Marketing communications are the means by which firms attempt to inform, persuade, and remind consumers – directly or indirectly – about the brands that they sell‟ (Keller, 2003: 283). Advertising is often seen as the most important element of promotion but is usually not the only element to create brand equity. Advertising can be done in many different ways and other marketing communication options are promotions, sponsorships, publicity and personal selling. These options can be judged by their ability to achieve the desired brand knowledge structures and to create the differential response that makes up brand equity. Companies should design a marketing program by using a right mix of marketing communication options in order to build brand equity.

Reflection

This theory is quite useful for understanding the concepts that need to be considered when introducing a brand. But it also provides a rather general perspective and does not give a more practical model that could be used to design the best marketing strategy. Though Keller (2003) does deeper examines the four P‟s, he still stays on quite a general level. Next we will discuss a theory that is built on the theory of the four P‟s but takes a more practical approach. Additionally, in the discussion of the management problem we have seen that three of the four P‟s are decided at headquarters in Germany and that „promotion‟ is the only responsibility of the brand manager in Belgium. This research aims at providing suggestions about what the brand manager can do to improve got2b‟s

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performance. That means that it is only relevant to look at factors that the brand manager can actually influence and we will do so in the next paragraph.

§ 1.3.2 Strategic marketing communication plan

This paragraph will further look in to promotion or marketing communication as we will call it from here on. This is because the term promotion can easily be confused with sales promotion which covers the instruments of temporary increasing sales, which will be discussed later in this paragraph.

The design of a marketing program or strategy is often stated in a marketing communication plan. Floor & van Raaij (2002) describe every detail of marketing communication strategy very extensively in their book, which is part of the required marketing literature at the University of Groningen and therefore used in this research. A marketing communication plan contains the partitioning of the budget over the communication instruments and the goals that are set for the upcoming period. The marketing communication plan consists of nine factors (Floor & van Raaij, 2002: 87).

Marketing communication plan

Research of consumer and product - every marketing communication plan should be based on market research (Floor & van Raaij, 2002: 88). Because there are big investments involved, for example the use of TV commercials, the risks are too high to just base your decisions on instinct.

Marketing communication target group - the group of consumers, decision makers or companies at whom the communication is directed (Floor & van Raaij, 2002: 87).

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Marketing communication objective - the effect that the marketing communication must have (Floor & van Raaij, 2002: 151). The objective often consists of a combination of objectives and is expressed in terms of consumer behaviour and in terms of market share.

Marketing communication strategy - apart from the research, target group and the objective, another input for the marketing communication strategy is the positioning (Floor & van Raaij, 2002: 166). The positioning is the position of a brand with respect to other brands in the perception of the consumer (Floor & van Raaij, 2002: 160).

Marketing communication mix - based on the marketing communication strategy, the communication instruments should be chosen (Floor & van Raaij, 2002: 90). There is a wide variety of instruments possible but the most commonly used are advertisement, public relations, sponsoring, sales promotion, direct communication, merchandising, personal selling and fairs and exhibitions. The instruments that form the marketing communication mix are an important aspect for this research because it reflects the implementation of the marketing communication strategy. We will give more attention to the marketing communication instruments below.

Creative development – in the determination of the marketing communication strategy it is decided what is going to be communicated towards the target group. In this part it is decided how this is communicated towards the target group (Floor & van Raaij, 2002: 90). The creative concept will be developed and aspects like the slogan, colours and fonts are chosen in this part of the marketing communication plan.

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Choice of media – one needs to determine what media or what combination of media they are going to use for each chosen marketing communication instrument (Floor & van Raaij, 2002: 91).

Marketing communication budget – the budget is continuously connected to the other factors of the marketing communication plan (Floor & van Raaij, 2002: 91). It influences the marketing communication objectives and puts boundaries on developing a creative concept. Every decision that is made during the communication planning process is dependent on the marketing communication budget.

Research for results – One needs to determine on forehand how the effects of the decisions made in the marketing communication plan will be evaluated (Floor & van Raaij, 2002: 91). Regularly the objectives need to be reviewed to see if they are being met or need to be adjusted (Floor & van Raaij, 2002: 91).

As stated above, the marketing communication mix deserves some extra attention because of its relevance for this research. We go deeper into this element of the marketing communication plan and describe the communication instruments separately. Different sources give different overviews of the marketing communication instruments but many instruments correspond among them. The overview below provides a combined perspective from the different authors.

Marketing communication instruments

Advertising – through instruments that are directed at large groups of consumers, called „mass media‟, like television, radio, newspapers and magazines companies try to influence the knowledge, attitude and purchase behaviour of the consumer (Floor & van Raaij, 2002: 275). „Advertising means any form of non-personal presentation and promotion of ideas, products and services that is paid by a recognizable source‟ (Leeflang & van Rooy, 1995: p. 405). Mühlbacher,

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Dahringer & Leihs (1999) call it „the paid communication of company messages through impersonal media‟ (Mühlbacher, Dahringer & Leihs, 1999: 758).

Public relations – the planned building and maintenance of relations between a company and its stakeholders with the objective of establishing knowledge and a positively valued identity of the company in those stakeholders‟ perceptions (Floor & van Raaij, 2002: 303; Mühlbacher, Dahringer & Leihs, 1999: 751). In short, „be good and tell it‟ (Leeflang & van Rooy, 1995: p. 399).

Sponsoring – „the provision of resources by an organization directly to an event, cause or activity in exchange for a direct association (link) to the event, cause or activity‟ (Mühlbacher, Dahringer & Leihs, 1999: 778). Leeflang & van Rooy focus on the objective of sponsoring when explaining this instrument: „to provide a contribution to an action set up by a third party in order to create goodwill among consumers, to create direct contact with a stakeholder or to create editorial publicity‟ (Leeflang & van Rooy, 1995: p. 401).

Sales promotion – „short-term market communication decisions and activities that try to gain attention, stimulate interest, and provide motivation of (potential) customers, staff or intermediaries for a company and its products‟ (Mühlbacher, Dahringer & Leihs, 1999: 768). Leeflang & van Rooy (1995) define sales promotion as the „action mix‟, which contains instruments that create a temporary rise in the sales, like temporary discounts, savings systems, contests and premiums (Leeflang & van Rooy, 1995: p. 395).

Direct communication – an individual approach to the consumer which provides flexibility and high customer involvement (Mühlbacher, Dahringer & Leihs, 1999: 702, 780). Floor & van Raaij (2002) define direct communication more specific: „building and maintaining a long lasting direct relation between the company and a consumer‟ (Floor & van Raaij, 2002: 378).

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In-store communication or merchandising – „handling the in-store image of the product by an attractive display of the products and a most favourable placement of advertising material‟ (Leeflang & van Rooy, 1995: p. 406). Floor & van Raaij explain the different forms of in-store communication which will be discussed in chapter 3.

Personal selling – Leeflang & van Rooy (1995) define personal selling as „direct contact with consumer to convince the consumer of purchasing the product or service‟. It is the most effective but most expensive selling strategy Leeflang & van Rooy, 1995: p. 455). Floor & van Raaij agree as they explain that in personal selling there is a „personal and interactive contact between buyer and seller‟ (Floor & van Raaij, 2002: 428).

Fairs and exhibitions – only Floor & van Raaij (2002) add this element to the marketing communication instruments. Participating in fairs and exhibitions is a complex instrument that also includes several other instruments (Floor & van Raaij, 2002: 445).

Reflection

This theory mostly provides an overview of factors that build a marketing communication plan and lacks suggestions for implementation. It raises questions like „when do I know if the designed marketing communication plan is the best possible one‟, „ how to implement the marketing communication instruments‟ and „what would be the most successful marketing communication mix for a certain market or brand‟. In spite of this weakness, strategic marketing communication is an important issue in this research. It provides a structure for examining the conducted strategy in practice and also gives input for what tools should be considered when we want to give suggestions to the brand manager.

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§ 1.3.3 Brand extension

Another perspective that could give insight in the management problem is that of a brand extension. Since got2b is launched under the name of Schwarzkopf, the introduction of got2b can be viewed as a brand extension. “A brand extension is when a firm uses an established brand name to introduce a new product. When a new brand is combined with an existing brand, the brand extension can also be called a sub-brand. An existing brand that gives birth to a brand extension is referred to as the parent brand. If the parent brand is already associated with multiple products through brand extensions, then it may also be called a family brand” (Keller, 2003: 577).

Brand extensions can be broadly classified into two general categories:

Line extension – the parent brand is used to brand the new product that targets a new market segment within a product category currently served by the parent brand.

Category extension – the parent brand is used to enter a different product category from that currently served by the parent brand.

Schwarzkopf served the category „Hair styling‟ already with several sub brands: Taft, Junior, Junior Power Styling and Gliss Kur, so Schwarzkopf is not entering a new category by introducing got2b and the introduction can thus be considered a line extension.

Since this research is about the success of got2b, the author has searched the literature for information on what drives the success of a brand extension. In their article „Drivers of Brand Extension Success‟, Völckner & Sattler (2006) describe 10 determinants of brand extension success and their relative importance. The five high-lighted factors are the most important ones and managers should put the most emphasis on these factors (Völckner & Sattler, 2006: 30).

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High quality of the parent brand – the perceived quality of the parent brand in the eye of the consumer.

Successful previous brand extensions – refers to the number and the similarity of the previous brand extensions.

High parent brand conviction – the extent to how popular the parent brand is, if the consumer trusts the parent brand.

High parent brand experience – refers to the purchase frequency and the intention of buying the parent brand in the future.

Extension‟s marketing context

High marketing support – the extent to which the brand extension is well supported in advertising.

High retailer acceptance – the extent to which the extension is well supported in distribution and available in many supermarkets.

Relationship of parent brand to extension product

High fit between the parent brand and extension – refers to the similarity between the parent brand and the extension and the usefulness of the brand associations of the parent brand to the brand extension.

Low utility of the parent brand linked to product attributes – extent to which the parent brand is tied to the attributes of the original product category.

Extension‟s product category characteristics

Low perceived risk – refers to whether consumers feel the need to rely on a well-known brand in this product category.

High consumer innovativeness – extent to which consumers enjoy buying the latest products.

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Nijssen (1997) takes a different approach when he describes the success factors of line extensions of fast-moving consumer goods. The factors are divided into two categories: market-related factors and company-related factors.

Market-related factors

One of the market-related factors is the intensity of the competition. Private labels are becoming more popular these days (Nijssen, 1997: 453), which has forced many companies to focus on price reduction and adding value to their products. Innovation and new product development is supported due to this increased competition, but another effect is that new product success is only to stay shortly (Nijssen, 1997: 453).

The second market-related factor is the level of retailers’ power, which also has a negative effect on the success of a line extension (Nijssen, 1997: 460). Nowadays, many retailers charge manufacturers for introducing new products and they can do so because of their increased power over manufacturers. Retailers generally feel that pioneer extensions meet un-served consumer demands and that fast followers provide competition, which is needed for diminishing the power of the pioneer manufacturer. Later entrants don‟t have much extra to offer. Line extensions that only consist of a new smell or new packaging have little extra value and therefore are often not worth the trouble in retailers‟ opinion. It depends on the goodwill of the retailer toward the manufacturer if the new product will be introduced by the retailer (Nijssen, 1997: 453). This factor is related to the sixth factor of Völckner & Sattler, described above.

The third market-related factor that Nijssen (1997) considers is the level of variety

seeking behaviour of consumers. The fast-moving consumer goods industry is

characterized by low consumer involvement and many competitive products which lead to such variety seeking behaviour (Nijssen, 1997: 454). The reasons behind variety seeking behaviour are divers, for example, it could be due to changes in income or taste, to different preferences within a household or to differences across usage situations. To meet these variety seeking consumers, manufacturers offer wide and deep product lines.

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Nijssen‟s (1997) research shows that variety seeking behaviour has a negative effect on the success of a line extension. The line extension might have not been innovative or attractive enough to attract a significant number of consumers, or the extension might have reached many consumers but not loyal ones, which could be due to a characteristic of the product‟s category (Nijssen, 1997: 460).

Company-related factors

Advertising is one of the most important factors that have to be considered when introducing a new product. However, it is hard to make the consumer identify the line extension as a new product. Consumers may believe that the brand is already offered in the new form (Nijssen, 1997: 454). That is why a specific advertising budget for the line extension is needed, apart from the regular one of the parent brand. High advertising

expenditures have a positive effect on the success of a line extension.

Companies that have many marketing resources tend to be more successful in line extensions, as well as companies that have experience in line extensions. Large companies usually have better marketing resources and more experience than small companies and therefore it seems that large companies are more successful in line extensions.

Another company-related factor is the fit between the parent brand and the line

extension. Fit is the level of perceived consistency between the parent brand and the new

product (Aaker & Keller, 1990: 29). In general, successful line extensions have a good fit between the parent brand and the line extension. Fit is important to a line extension because a good fit can enhance the transfer of the perceived quality and other positive associations of the parent brand to the line extension. A poor fit can stimulate negative or undesirable associations (Aaker & Keller, 1990: 30).

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Nijssen (1997) addressed some other company-related factors as well like the strength of the parent brand and the order of entry of the line extension, but his research did not prove a relevant relation with line extension success.

Reflection

The articles discussed in relation to the brand extension concept have provided a comprehension of all the factors that play a role in the success of a brand extension. However, many of those factors can not be influenced by a brand manager because they are either based on market conditions or previous experiences of the company. Still, this theory is useful in this research because it emphasizes the factors that lay outside the brand managers‟ scope but that play an important role in the introduction of a new brand. It helps to look beyond the boundaries of this research and create a more complete view. In the author‟s opinion, to complete the view it would be interesting to consider whether the company is operating internationally, because this aspect influences where the strategic decisions about the introduction of a brand are made. Nijssen (1997) did not discuss this company-related factor in his article. This issue will be discussed next.

§ 1.3.4 Standardization versus adaptation

In many multinational corporations (MNC‟s), major decisions like the development and introduction of a new product are made at headquarters. If and how the new product is being introduced in the countries of the subsidiaries depends on the decision-making structure of the MNC. This is important for this research because the level of standardization reflects the decision power of the brand manager of got2b and therefore gives boundaries to what options he has to improve got2b‟s performance.

So how do MNC‟s determine what is being decided where? Couto et al. (2005) describe the „determinants of the establishment of marketing activities by subsidiaries of MNC‟s‟. Their results show that the autonomy of the subsidiary is influenced by cultural factors,

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the organizational form of the MNC and the existence of autonomy of decision with respect to markets, production and R&D (Couto et al. 2005: 310). Because there was no support found for the management model to be of influence as well, the writers argue that this is probably because the need for local responsiveness in marketing activities is stronger than holding on to the corporate culture.

For the cultural factors, the writers use Hofstede‟s cultural dimensions: power distance, masculinity – femininity, uncertainty avoidance and individualism – collectivism (Thomas, 2002: 50). A higher degree of power distance and masculinity leads to a lower level of autonomy of the subsidiary and the reverse is true for uncertainty avoidance and individualism.

To analyze the organizational form, Couto et al. use three classifications of a multinational organization form: multi-domestic, international and global. The results show that a higher level of globalization correlates with a higher level of autonomy in marketing activities.

Couto et al. argue that when a subsidiary performs well in one area like R&D or production, it can serve as proof of the subsidiary‟s competence to work autonomously and support the development of marketing activities. Their research has proven this to be true for decisions regarding production and markets to serve, but not for R&D activities. The level of autonomy depends on the standardization level. If a MNC is highly standardized, decisions are taken at a higher level. Samiee & Roth (1992) argue that the level of standardization also depends on the sort of industry a MNC is operating in. A global firm that produces industrial goods is more likely to standardize than a firm that produces consumer nondurable goods (Samiee & Roth, 1992: 9). The reasoning behind this is that consumer products are more subject to market differences as income, taste, means of transportation, cultural factors and legal issues, and therefore require a more adaptive strategy. Their main finding is that MNC‟s that focus on global standardization do not have a better economic performance than MNC‟s that do not focus on standardization.

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Hamel & Prahalad (1983) agree with the fact that companies in the fast-moving consumer goods industry need to take an approach to strategy-making that takes „important elements of local diversity‟ into account. The decision of standardization versus adaptation is a very important one as it affects many fundamental management tasks, including the task of deciding what responsibility lies where (Hamel & Prahalad, 1983: 342). Previous research of the authors has shown that firms find it quite difficult to create a fit between the variety of demands for a certain strategy and the structural division of strategic responsibility. There are two ways of misfit in this issue (Hamel & Prahalad, 1983: 344):

The strategic imperatives require local responsiveness, but the organizational structure is based on standardization.

The strategic imperative demands for strategic responsibility to reside at headquarters, while strategic responsibility lies with the subsidiaries.

A misfit can lead to many costs as missed opportunities, frustrated employees and mismanagement etc. To prevent a misfit one must first identify the strategic imperatives and then manage strategic responsibility according to the strategic imperative. The authors give a list of factors that determine the need for global integration and factors that determine the need for local responsiveness (Hamel & Prahalad, 1983: 342).

Table 2. Strategic imperatives (Source:Hamel & Prahalad, 1983)

Global integration Local responsiveness Extra-national scale economies Lack of scale economies

Universal needs Product adaptation to meet the idiosyncratic needs of local customers

Asset and technology intensiveness Relatively low technology dependence Global competitors Large number of non-global competitors Predominance of multinational customers Nationally-distinctive distribution channels Low trade barriers and weight / value Availability of product substitutes

characteristics which allow substantial inter-regional trade

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In multi-business MNC‟s however, not all businesses will be characterized by the same strategic imperative, which results in strategic ambiguity. MNC‟s facing strategic ambiguity have to rely on a set of tools for the management of strategic responsibility that include management of systems, the corporate culture milieu, and people rather than a simple area- or product-based structural approach.

Reflection

Though all the articles discussed take a different approach towards the issue of standardization versus adaptation, they do seem to agree on the fact that the kind of industry and the characteristics of the entry market play the most important role in determining what is decided where. Couto et al. and Samiee & Roth focus on the effect of this decision for the marketing activities which is quite relevant for this research. They almost make it seem like it is an „easy decision‟ if you just take the factors they mention in your consideration. However, Hamel & Prahalad make an important contribution by pointing out that if a MNC is active in multiple businesses, strategic ambiguity will arise and it is therefore not that easy to structure the decision power within the organization. To further investigate this issue in relation to Henkel would be very interesting though a totally different research. We will use the concept to describe the current autonomy distribution and what it means for the decision power of the brand manager of got2b.

§1.4 Conclusion

Henkel KGaA, an international company that is founded in Germany is active in three different business areas. This research is focused on the business line of Cosmetics & Toiletries and more specific on the Belgian subsidiary and the hair styling brand „got2b‟.

Got2b is introduced in Europe after being a major success in the USA. In several countries throughout Europe got2b has also become a successful brand, but in Belgium

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got2b is not performing as well as planned. Therefore the request from the management of got2b is to find out what can be learned from practices in other European countries. This is the main question for this research; we will try to find out what the brand manager in Belgium can do to improve the performance of got2b. The literature review shows that many factors need to be considered to determine what influences the performance of a new brand or brand extension. Figure 4 shows a schematic overview of the literature review.

Figure 4. Schematic summary of literature review

A possible explanation for the underperformance of got2b in Belgium could be a misfit between the strategic imperative and the structure of the strategic responsibility. The scope of the brand manager is quite small because many decisions are standardized and centralized at headquarters. The literature review shows that in the fast-moving consumer-goods industry there is often a need for adaptation to the local market situation.

Managerial autonomy Fit between strategic imperative and structure of strategic responsibility

Local marketing strategy - Product - Place - Price - Promotion / Marketing Communication Advertisement Public Relations Sponsoring Sales Promotion Direct Marketing Merchandising Personal Selling Fairs & Exhibitions

Marketing Communication Plan - Market Research - Target Group - Communication Objective - Communication Strategy - Communication Mix - Creative Development - Choice of Media - Budget

- Research for Results Performance of the brand

Success of brand extension Company related success factors of brand extension

Variable factors: - advertising expenditures - marketing resources

Fixed factors: - parent brand conviction - parent brand experience - parent brand support - fit parent brand vs. extension

- experience in extensions

Market related factors - intensity of competition

- consumers‟ variety seeking behaviour - retailer‟s power

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But the distribution of strategic responsibility also has an implication for this research itself because it determines the boundaries of the eventual recommendations. Since we aim to provide options for improvement that could be implemented by the brand manager we are bounded by his scope of responsibility as well. The marketing communication plan is the most direct element that the brand manager can influence to improve got2b‟s performance and an imperfect design of that plan could also be a possible explanation for the underperformance. The marketing communication plan will therefore be the focus of this research.

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Step 2

Formulating the research design

Now that we have looked into the background we need to develop a plan for the research. To give structure to the questions raised in chapter 1 we need to design a research strategy. This research design will guide us through the remaining of this research and explain why we have chosen to conduct the research in this way.

Step 1

Looking for the context of the assignment Step 2

Formulating the research design Step 3

Examining and learning from the cases Step 4

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CHAPTER 2 RESEARCH DESIGN

To answer the question raised by the management of got2b a problem definition is needed. A problem definition is the heart of every scientific research and consists of a research objective, a research question which is often divided into several sub questions, and research boundaries (De Leeuw, 2001: 117). When defining the research problem, one needs to decide what kind of research will be conducted.

§ 2.1 Methods

A research can take many shapes, for example explorative, experiment, case study or survey (de Leeuw, 2001: 94). This research comprised a combination of a comparative transversal study and a case study, because we compare different and only a few cases to get to some learnings for got2b in Belgium. A case study means: a research strategy that involves the empirical investigation of a particular contemporary phenomenon within its real-life context, using multiple sources of evidence (Saunders et al., 2003: 473). Braster defines a case study as a „research strategy which main characteristic is the intensive study of a social phenomenon with one or more research entities‟ (Braster, 2000: 125). A comparative transversal study means two or more situations are compared at the same time (De Leeuw, 2001: 97). So in this study we used a comparative case study. In this kind of studies, only quantitative data is often used, but in this research quantitative data is also used (Baarda & de Goede, 1999: 21).

§ 2.2 Problem definition

Chapter 1 clarifies the question from the management of got2b. Their request to the author of this research was to provide answers to why got2b is performing less than other

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European countries and what can be learned about what should be done to turn this around. A problem definition has two goals: the goal of the research and the goal in the research (Verschuren, 1999: 32). The goal of this research was to answer the question of the managers of got2b. It will be addressed below in the research objective. Apart from the research objective, a problem definition also consists of a research question which is a logical deduction from the research objective (Braster, 2000: 38).

§ 2.2.1 Research objective

To meet this objective this research focused on choices which were made by the Belgian subsidiary and the other subsidiaries that are cases in this research and therefore aims at identifying factors that can be managed differently in Belgium. This results in the following research question:

§ 2.2.2 Research question

From this central question we extract the following: the cases need to be compared on their marketing communication activities and based on this comparison we need to

develop an advice for making got2b perform better in the future.

Learning from other practices, in which ways can the brand manager of got2b in Belgium use what factors of a marketing communication strategy in order to make got2b perform better?

To provide suggestions to the brand manager of got2b for improvement of got2b’s performance in the future.

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§ 2.2.3 Conceptual framework

In the conceptual framework the concepts of the research question are put in context with the theory (Braster, 2000: 47). The literature review provided a framework for this research. But there is a tension between the framework and the research question. As mentioned before, this research aims at providing suggestions about what the brand

manager can do to improve got2b‟s performance. These suggestions are based on

learnings from looking at differences and similarities between the marketing communication strategies of other practices. That means we only looked at the decisions made in the subsidiary and kept the decisions made at headquarters that apply to all the subsidiaries as a constant variable in this research.

For starters, the subsidiaries‟ managerial autonomy is limited and is equal for all the subsidiaries in Europe (Observations). Secondly, it seems obvious that no brand manager could influence market related factors like the intensity of competition and retailer‟s power. But it is highly of influence on the performance of a brand and could be different in other markets. That makes it a very important possible explanation for differences in success in the cases and therefore was taken into account in the conceptual framework, but the focus of this research stayed on the factors that the brand manager can influence.

Also, the other parts of the marketing strategy, product strategy, price strategy and place strategy lie outside of the brand managers‟ decision power and this is equal for all the cases. But some decisions in the marketing strategy are of influence to the marketing communication plan and therefore were included in this research.

Finally, the decision of introducing got2b as a line extension from Schwarzkopf is made at headquarters. So it is equal for all the cases and can not be changed by a local brand manager. The factor „advertisement expenditures‟ is ambiguous in this case. Although the brand manager can not influence the amount of his budget, he can determine how he used this budget. Looking at the framework derived from the literature review, we see that the

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factors that the brand manager can influence to change the performance of the brand are: advertising expenditures and marketing communication strategy which results in a marketing communication plan.

Figure 5. Schematic summary of literature review

We see that advertising is a component of marketing communication and the decision on expenditures is included in the budgetary part of the marketing communication plan. Therefore this company related success factor of a brand extension is covered already in these parts of the framework and does not need to be a separate concept. In the literature review we have seen that the instruments in a marketing communication strategy are stated in the marketing communication plan under the part „marketing communication mix‟. This leads to the following conceptual framework for this research:

Managerial autonomy Fit between strategic imperative and structure of strategic responsibility

Local marketing strategy - Product - Place - Price - Promotion / Marketing Communication Advertisement Public Relations Sponsoring Sales Promotion Direct Marketing Merchandising Personal Selling Fairs & Exhibitions

Marketing Communication Plan - Market Research - Target Group - Communication Objective - Communication Strategy - Communication Mix - Creative Development - Choice of Media - Budget

- Research for Results Performance of the brand

Success of brand extension Company related success factors of brand extension

Variable factors: - advertising expenditures - marketing resources

Fixed factors: - parent brand conviction - parent brand experience - parent brand support - fit parent brand vs. extension

- experience in extensions

Market related factors - intensity of competition

- consumers‟ variety seeking behaviour - retailer‟s power

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Figure 6. Conceptual Framework

The components of the conceptual framework needed to be defined to clarify what is meant in this research when making statements about any of these components. The marketing strategy, the marketing communication plan and the market related factors have been discussed in § 1.3, but the performance of the brand has not been specified yet. In the dictionary, „performance‟ is defined as:

1. The carrying out of a command, duty etc.

2. The accomplishment, carrying out, doing of any action or work 3. The action of performing a ceremony, play, part, piece of music, etc.

„Carrying out a command or duty‟ means that there must be an input in the shape of a command or assignment or duty to be carried out. In business these commands are often expressed in targets. Targets of a brand can be specified in several ways like the market share of the brand, the number of sales of the product(s), the brand awareness, brand associations and brand knowledge, etcetera. At Henkel the targets for got2b are expressed in terms of market share. The performance of got2b is therefore also expressed in terms of market share and the way in which the actual market share relates to the targeted market share.

Local marketing strategy

Marketing Communication Plan - Market Research - Target Group - Communication Objective - Communication Strategy - Communication Mix Advertisement Public Relations Sponsoring Sales Promotion Direct Marketing Merchandising Personal Selling Fairs & Exhibitions - Creative Development - Choice of Media - Budget

- Research for Results

Performance of the brand Market related factors