Marketing Plan for a Herbal Company – Himalaya Herbals

The purpose of this document is to analyse the situation of Himalaya Herbals of Oregon and provide forecasts for future market and product innovations. We have developed organisational goals and objectives which stem from their “back to basics” philosophies’. After evaluating the strengths, weaknesses, opportunities and threats, we found that competition was the single biggest threat to Himalaya Herbals’s success both nationally and internationally. We concluded that Himalaya Herbals must undertake an intensive advertising campaign to promote brand awareness, gain a greater market share, propel the image of its products, and elevate itself towards a more sophisticated level. Followed up by a number of control procedures and marketing research this would ensure the desired image and sales are achieved.

Situational Analysis

Internal Analysis

Himalaya Herbals is one of Australia’s leading skincare and cosmetics retailers. The corporate culture is one that reflects commitment to the environment and has been described as being “in harmony with ideologies and environmental issues of the 1900’s.”

Current objectives include establishing the company as a determinant force in the Natural Beauty industry, providing environmentally-friendly, products, sensibly packaged from recycled materials and free from animal testing.

Stated future aims are to achieve further growth of:

56 National stores to 70

23 concept bars to 45

70 international outlets to 150-200

Finance is limited in Australia. Capital is currently injected from franchise operations. It is important to finance from Australia so that the company continues its Australian owned and made uniqueness.

External Analysis

Customers of Himalaya Herbals span the 12-60 age bracket. From this, three main market segments exist:

Women aged between 20-27 years

Women between 12-20 years. The mature male segment

Economic Environment

The present economic conditions are promising, they are characterised by:

Low interest rates: increase the discretionary income consumers and their ability to buy “non necessity” products.

Consumer confidence is strong due to the strong economy, therefore, consumers will be more inclined to purchase.

The exchange rate may effect overseas ventures, positively in the USA where the economy is strong, and negatively in Asia, where the economy has collapsed.

Himalaya Herbals should monitor the international economy to ensure products are affordable and the price remains competitive to other competitors in the host nation.

Social & Cultural Environment

Demographic changes which may impact Himalaya Herbals are:

The aging population

The increased incidence of women in the workforce

Lifestyles are changing towards more “empty nesters” and couples having kids later for dual career couples.

The male perception of cosmetics is changing. Males are more inclined to use cosmetics (up to 40% of pop.).

Increased recognition of the benefits of natural therapy (Appendix 1)

Australians are becoming more culturally diverse, influencing product preferences.

Attitudes have changed. Some sectors of the community refuse to buy products harmful to the environment or animals and increased importance is placed on buying from socially conscious organisations.

The importance of buying locally made products has increased. Australian’s identify with Himalaya Herbals’s “outback qualities”.

Ecological/Natural environment

Himalaya Herbals uses all natural ingredients

Seasonal or climatic factors may impact Himalaya Herbals through raw material shortage. (hence shortage of plant extract through drought).

The knowledge gained from late 1980’s about Ozone. Layer depletion, forest depletion, and sustaining resources.

The list of Himalaya Herbals’s chief competitors are as follows:

Largest competitor Body Shop 45%

Second largest competitor Red Earth 35%

Third largest competitor Bodyline 15%

Fourth largest competitor Jurlique 5%

Other: Body Collection, Neutrogena, Natures Way, Simple, Perlier 5-8.%

Other new entrants

Since Himalaya Herbals began, many more Australian skin-care products have jumped on the “Green Bandwagon”, or the Australian made tag. These include: Freeman’s, Australis, Aveda, Blackmores (New Zealand),and Natures Way.

Technological Environment

Himalaya Herbals’s philosophy indicates that technology advancements are not really important for product development. However, they are valuable to manufacturing processes and communication.

The Internet is used for advertising and mail-order.

Telephone, telecommunications, faxes and computers, are a vital link to Himalaya Herbals International.

Comprehensive product manuals are distributed internationally.

Eftpos, both cash and credit facilities, are available in stores.

Barcoded products (POS, for stocktake and stock control).

Technology in recyclable materials, innovations in energy saving through production processes.

Political/Legal

Tariffs/trade agreements affect Himalaya Herbals and need to be considered when opening international stores.

Environmental laws, and special interest groups regarding animal testing have affected the cosmetics industry as a whole.

Ways the Trade Practices Act affects, Himalaya Herbals’s Trading in Australia:

Health and Safety regulations mean Himalaya Herbals must obey hygiene laws. Packaging must not be tamperable.

Packaging: Labelling required, requirement for disclosure of contents and safety regulations

Promotion: Advertising must not be misleading/deceptive.

Place/distribution: restrictions on operating hours, location, import/export restrictions. eg. the requirement in Canada to have 1/3 package written in French

Product: Consumer protection regarding use of certain ingredients (allergies, ammonia, etc)

Price: subject to Sales tax regulations.

Strengths/Weaknesses/Opportunities/Threats of Himalaya Herbals

Strengths

Well trained staff

Australian owned and made

Support for social/environmental causes

Reputation for quality

Training programs and communication between stores

Weaknesses

Control of advertising is strict

Limited capital in Australia

Location: only in metropolitan centres

Eftpos not in every store

Opportunities

Economy allows Himalaya Herbals to expand

Aging population may be capitalised on in the future

Increase brand awareness

Support from many diverse ethnic backgrounds

Gain larger share of customers from traditional cosmetics markets

Opportunities to innovate, given that suppliers are flexible to Himalaya Herbals

Implement more efficient manufacturing processes

Gain from tax reforms and tariff changes

Threats and factors identified in Porter’s 5 Competitive forces:

Intense rivalry

Threat of new entrants is high, threat of market saturation

Many firms are cashing in on social issues

Threat of substitutes is high and people have enormous choice of prices.

Tariff trade agreement/barriers increase

Negative changes in sales tax

Advertising/PR backfires, presents unhealthy image which damages reputation and sales

Segmentation

Himalaya Herbals operates in the generic product market of organic health and skincare cosmetics.

The category is disaggregated into the broad product market of aromatherapy skincare, bodycare, bath and shower, hair, suncare, fragrance, mother and child, cosmetics and accessories.

The specific product markets are listed in Appendix 2

Geographic characteristics defining customers

Himalaya Herbals targets metropolitan customers as stores and concept bars are located in large cities. This limits the availability to rural residence. Locations range from around 60,000 (Geelong) to 5 million people in Sydney

Himalaya Herbals International targets 70 outlets in 10 different countries including: Hong Kong, Japan, Indonesia, Malaysia, Philippines; Canada, New Zealand, Thailand, USA, and Holland

Demographic characteristics defining Himalaya Herbals customers are:

Income: Target customers in the middle income bracket

Sex: The majority is targeted at women (78% products) with a small percentage at men (3% in 1992, to 8% recently)

Age: 12-60 years, women predominantly 20-27,girls 12-20 (15-20% of sales), men 15- 45

Family: Singles, newly married couples, (gift market); Empty-nesters (more discretionary income); New Mothers: Speciality gifts from friends.

Occupation: Professional, part-time working students

Education: 12-20’s (High School), 20-27 (Tertiary education/TAFE, intelligent), 27-35 (Females, Post-Graduates), 35-50 (older women, well-read)

Behavioural: Products need tobe economical,be prestigious,be safe for the environmentimprove the appearancehelp relaxationto look good/feel healthybe allergy-freebe a cheaper alternative

Rates of Use:

Heavy Women Used on a daily basis (skincare, haircare, aromatherapy)

Light Men Occasional gift, some daily, (shaving, hair, fragrance, acne treatments, seasonal suncream)

Medium Girls Use daily (acne cream, occasionally make-up 2/3 times per week)

Purchase Frequency:

Women Purchase most frequently and regularly

Men Purchase irregularly, less frequently

Girls Use regularly, less loyal. More likely to browse/test products.

Brand Familiarity:

Women have ‘brand preference’, however, if it is unavailable they would buy from competitors.

Men Level of familiarity is ‘non recognition’, in that they will not hunt the product out.

Girls have ‘recognition/preference’ for products, depending on finances

Kinds of Shopping:

Women Speciality shopping behaviours as they seek prestige

Men Convenience – pick whatever, is available

Girls Comparison – will try many products before deciding

Information Required:

Women/girls Ingredients

Men Low information required

Homogenous Groups and their qualifying dimensions, in order of importance

Market 1(Women 20-27) Businesslike, singles, with no kids, sophisticated taste and environmentally conscious

Market 2(Women 27-35) Newly married/attached, very young children, middle class

Market 3(Girls 12-20) Mature tastes, limited spending money, environmentally conscious

Market 4(Males 20-45) Businesslike, middle class, possibly students

Market 5(Women 35-50) Well established, perhaps higher discretionary, income.

Determining Dimensions: Features of products that influence consumer choice

Packaging: size, appeal, recyclable benefits

Price

Animal Testing free

Ingredients: Natural extracts

Logo, reputation

Smell, fragrance, texture

Range

Quality

Availability

Specials

Sales

Determine Market size and Growth:

Market Category % market share of Australian Natural Beauty Market Year 2001 projections

Market 1 40% 33%

Market 2 27% 22%

Market 3 15-20% 20%

Market 4 8% 10%

Market 5 10% 15%

*Projections are based on what statistics are available plus estimates based on demographics

Vision/Mission Statement

To avoid the hype, inflated prices and synthetic products offered by mainstream competitors and opt for a back to basics philosophy at an affordable price.

To be environmentally conscious, using only materials not tested or harmful to animals.

To target the intelligent and discerning male and female buyers and increase market position.

To provide a comfortable/supportive environment for all staff so that they can provide superior customer service.

Company goals and Objectives

Increase individual store sales

Maintain the modern and appealing layout of all Himalaya Herbals stores

Reward individual staff for good service and commitment to jobs

To maintain integrity on social issues

Corporate and divisional objectives

Operate continual staff training programs to maintain friendly and exceptional service

Make every store accessible to the internet by creating a web site for both national and international outlets

Develop an intranet system which will link all Himalaya Herbals stores to enable comparison of information such as sales and stock levels

Financial objectives:

Increase market-share from 12% to 25% in five years, and 30% in ten years.

Increase annual profits nationally and internationally

Increase competitiveness via price strategy.

Maintain Long Term stability

Marketing objectives:

Increase to 150 domestic stores and 250 international stores within eight years

Increase the awareness and brand familiarity of the Himalaya Herbals range through extensive advertising and promotion

Remain selective in market exposure through promotion and advertising to only desired target markets

Strategic Options

Growth Strategy Options

Market Penetration Himalaya Herbals should increase the growth of their present markets and determine the strength of their competition. Himalaya Herbals should also undertake market penetration to increase brand awareness.

Market Development Himalaya Herbals should consider distributing their products through mail-order, expanding geographical distribution. Himalaya Herbals should entice the male market by looking at different advertising strategies.

Product Development Himalaya Herbals should keep their loyal customers happy, by developing products to keep ahead of fashions and trends, by adding new features to present products to make them more appealing, and by expanding the sporting range and product lines for males.

Diversification Himalaya Herbals should consider the feasibility of developing specialised products for specific countries and cultures.

Competitive Strategies

This involves Himalaya Herbals distinguishing its products from other suppliers or other substitute products

Differentiation cosmetic products are between the growth stage and maturity stage, competition is intense, sales may still be growing, but are starting to fall. Himalaya Herbals must take this into account. Himalaya Herbals could differentiate their product by looking at mail order.

Cost Leadership This requires Himalaya Herbals to produce at the lowest cost to offer better prices. Himalaya Herbals could use their bargaining power with suppliers to obtain raw materials at cheaper prices. This could translate savings to customers by offering a wider range of products between the price range of $8-$25 rather than concentrating so heavily on the current prices of $25-$39.95.

Strategy Selection

Competitive Advantages

Australian made and owned

Well established

Medium levels of brand familiarity/reputation

Competitive prices

Environmental benefits

Franchised/international

Himalaya Herbals should adopt mainly growth strategies and a number of competitive strategies:

Growth Strategy

1. Market penetration to increase the strength of brand familiarity, and to make existing customers consume more of the product.

2. Marketing development through more effective and targeted advertising

Increase sales to males

Increase sales of 27-50 year old females

3. Product development

Keep up with trends/cosmetics

Expand male products

Competitive Strategy

4. Cost Leadership by increasing the range of prices in the $8-$25 range

5. Differentiation through a new mail order distribution system to non-metropolitan residents.

The Marketing Mix

The overall marketing mix proposed is as follows:

Market 1:

Product Skincare/cosmetics, aromatherapy, sophisticated colours, conservative, gift-packs for male partners

Price $20-$39

Promotion Women’s magazines: Elle, Made-Claire, Vogue, Billboards in the city, Frequent buyer incentive, Editorials, Sponsor fashion shows, Endorsement, by Australian personality: eg Elle McPherson

Place Metropolitan outlets with class: on long well known shopping strips.

Market 2:

Product Perfume, skincare, gift products, high trend and day-wear cosmetics.

Price $8-$20

Promotion Impulse buying through incentives like 2 for I offers, Gift tokens in magazines: Cosmo, Cleo, Girlfriend, Dolly, Sponsorship of Covergirl, Endorsement by TV personality

Place Shopping malls/centres, less exclusive area

Market 3:

Product Easy application, skincare, anti-aging products, products that combat hormonal effects from pregnancy (stretch marks), non allergic.

Price $15-$39

Promotion Magazines: New Idea, Woman’s Day, TV, Hospital: complementary trial packs given to new mothers, Endorsement by everyday mothers (TV interview ad)

Place Shopping malls, mail order

Market 4:

Product Product: Shaving products, after-shave, .deodorant, easy to apply products, haircare, acne treatments, sports injuries range, (massage oils, muscle relaxants)

Price $8-$30. Economical for younger males, not exceeding $30 for business types, as males are more inclined to spend less on maintenance than women.

Promotion Inflight magazines, Ralph, billboards, sport sponsorship, newspapers

Place Convenience: shopping malls, mail order, Internet order, airports, and duty free for international travellers

Market 5:

Product Skincare, HealthCare, Menopause products, aromatherapy: relaxation.

Price $20-$39.95

Promotion Magazines: Woman’s Weekly, Family Circle, TV Ad’s: Lifestyle programs, News BreaksAmbassador: personality Kerry-Ann Kennerley

Place Mail order mixture, sophisticated shopping areas and convenience.

Positioning statement

Himalaya Herbals wants to convey diverse product offerings suitable to a multicultural and contemporary Australia. Himalaya Herbals wants to project superior customer service and quality as a dominant force in the Natural Beauty industry. Himalaya Herbals is committed to maintaining a favourable public perception, having high integrity on environmental and social issues whilst remaining competitively priced.

Currently research in Vogue readers polls indicate that the major cosmetics houses like Clinique are more prestigious than Himalaya Herbals. In the future a major aim of Himalaya Herbals is to change customers’ perceptions of the product, to bring it to a level on a par or better than the level of the major cosmetics houses.

Tactical Elements

Positioning

Ensure Himalaya Herbals is accessible to consumers by positioning stores in major shopping centres: Chadstone, Melbourne Central, Highpoint, Northland, Eastland, Doncaster, Knox, Southland. Exclusive centres such as: Daimaru, Australia on Collins, Crown Casino. Trend setting strips: Bridge Road, Richmond, Burke Rd, Camberwell, High St, Armadale, Toorak Rd, Toorak, Greville St Prahran, and Sth Melbourne. Shops should be located in the vicinity of public transport and parking where possible.

Packaging

Keep packaging Simple but stylish, with the use of recyclable materials. The logo is impressive/well recognised internationally.

Distribution management

Himalaya Herbals should continue to practice selective distribution, which will develop special attention to the product. This will allow Himalaya Herbals to maintain its reputation for being more prestigious than supermarket brands.

Price management

Himalaya Herbals needs to implement a better price balance between the price range.

Communication management

Himalaya Herbals should use the following forms of communication management to promote their products:

Advertising

Publicity

Sales Promotions Aimed at customers: Contests, gift vouchers, sponsored events, samples

Aimed at individual stores: Sales contests, gifts, meetings, catalogue,
merchandising aids

Aimed at Himalaya Herbals’s own sales force: Contests, bonuses, displays, training materials, sales aids

See Appendix 3 for the advertising proposal and time details.

Budget

At the time of writing access to financial details was not available.

Control Procedures

Sales Analysis

A detailed analysis of organisational sales records will be conducted, in the following areas:

1. Geographical region

2. Product, package size

3. Customer size.

4. Method of sales, direct mail, internet

5. Financial arrangement, cash or credit, Eftpos

6. Size of order

Performance analysis

Should be conducted by Himalaya Herbals to look for exception or variations from planned performance. Eg: Analysing expected increase in profit and market share.

Marketing cost analysis

Sales are achieved at a lower cost and these costs should be analysed and controlled. These are determined through Customer awareness, attitudes and satisfaction. This information may be obtained through questionnaires, feedback phone lines.

Himalaya Herbals are in a large industry and are a well established company and therefore must undertake the above activities to succeed in the long term.

Appendix 1

Patterns of Use for Natural Therapies in Australia

AromatherapyNaturopathyMassageHerbalism Men6.9%11%15%- 2.4% Women8.9%13.5%13.8%4%

Source: Newspoll, 1996: “Natural therapy on the increase”

Appendix 2

Product Markets

Generic Broad Specific

Health and skincare cosmetics Aromatherapy SkinBodycare Essential oils, Burners Facials, Cleansers, toners, mud masks, moisturisersMassage oils, Body lotions

Bath & Shower HairSuncareFragrance Mineral salts, vegetable soaps, loofah, seasponge TreatmentsSPF cosmetics, suncream/aftersunEssential oil perfumes

Mother & Child CosmeticsAccessories Babycare creams, shampoos, conditioners Lipsticks, foundations, eye shadows, Mascara pencilsgift boxes, potpourri, baskets, wildflowers

Appendix 3

Advertising Percentage of advertising exposure Timeline/period for campaign Details

Magazines 25% highest allocation in terms of cost 2-3 paid ads per month See potential slogans, Appendix 3a Popular women’s, girl’s and men’s magazines. Aimed at increasing brand awareness

Billboards 5% 3 month to 5 month exposure intervals for mass market

Internet 5% Ongoing, with regular bulletins and updates on new products For information line. Interactive questions, information on products, services, initiatives.

Television 20% Prime time, 10 second ads during: Melrose place, Seinfeld, sports events for males, environmental specials Aimed at brand awareness and recognition amongst mainly men

Sponsorship 10% Aimed for Mercedes Fashion Week, Selected popular sporting events, tertiary scholarships Periodic, aimed at brand awareness at mature women and men

Promotions 15% In-store 2 for 1 offers in girls & women’s magazines, discount card at a cost of $50 for regular club discounts, coupon for men purchasing sportswear from a sports chain for sports range products Aim to stimulate interest, trial, or purchase by final customers or intermediaries. Aimed mainly at women and sporting men

Talk show segments 10% Midday product review segments, beauty demonstrations for studio audience Mass market to aid brand awareness

Editorials 10% Write-ups for new products, especially men’s products in the Herald-Sun, lifestyle magazines or Age Weekend Magazines Major women’s magazines, Major newspapers

Appendix 3a – Potential SIogans

Women – general

‘Beauty based on the basics’

‘Basically Beautiful ……… Himalaya Herbals’

‘P U R I T Y” “Pure Himalaya Herbals’

No Animal Testing, No chemicals, No animal products, no rip-offs, no imports, no exaggeration, – No bull. (Himalaya Herbals Australia)

No Cyclomethicone, No Distearyldimonium, no Dimethicone, no Hydroxyethyl cellulose, no Methlychloroisothiazolinone, no Methlisothiazolinone.

No poison, No ingredients you don’t know and more importantly ………….. no Bull.

Women/girls buying for men

‘Himalaya Herbals Australia, is your man enough?’

Men – General

‘Intimidated by perfume, pink lingerie, beautician’s in nurses uniforms.?’ Himalaya Herbals Australia

‘Himalaya Herbals Australia as masculine as you can get’

‘Himalaya Herbals Australia, no threat to your manhood’

‘What’s up, Pretty Boy?? (Gay community – picture of drag queen screaming)

LIST OF REFERENCES

Articles

Anonymous (1996) Body Shop ditches mostly men brand as attitudes change, Marketing Weekly, May 10, pp. 10.

Anonymous (1996) Friends of the Earth ‘,joke’ ASA ,judgement on shell ad, Marketing Weekly, May 17, pp. 12.

Barret, P. & Lee, J. (1996) Body in need of reshaping, Marketing Weekly, April 4, pp. 10.

Collin, J. (1996) Battle for the Soul of the Body Shop,

Working Woman, April, pp. 11-12.

Red Earth Information Kit (1995)

Text

McCarthy, E. Jerome, Perreault, William D., Quester, Pascal G. (1997) Basic Marketing A Managerial Approach, McGraw-Hill Book Company Australia Pry Ltd.

Web sites

http://www.redearth.com/

http://www.bodyshop.com/

http://www.revlon.com/

http://www.naturesway.com/