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HARVARD BUSINESS BRIEF CASES SCHOOI 4550 MAY 5, 2010 JOHN A. QUELCH LISA D. DONOVAN Flare Fragrances Company, Inc.: Analyzing Growth Opportunities It was early December 2008, time for Flare Fragrances Co. to launch its final analysis of 2009 strategic initiatives, and the group of 10 sales and marketing employees in the main Flare conference room could see by the look on her face that CEO Joely Patterson was determined to make 2009 better than 2008 had been. The economic crisis had taken its toll on Flare's businesses. Back in 2007, sales had risen 12%; now, less than a year later, the CFO's estimated year-end numbers projected only 2% growth in 2008-a better recession story than some businesses had to tell, but not a trend that Patterson or the company founders wanted to see repeated in the coming year. for "I congratulate you for surviving in a tough economic climate, and I thank you for your hard work," Patterson told the group. "Good as we were, now we have to be better. We are here to discuss the study that our consulting group, Arlmont Associates, submitted on Monday. As you have read, Arlmont suggested that several strategic options offer the greatest potential for growth. At this point I favor the two that Arlmont viewed as most promising: one, increase our efforts in the drug store channel; two, introduce a new perfume brand. Today, we begin to analyze our options intensively. We can do one, both, or neither. But if we do neither, we have to identify some other idea that can deliver at least $7.5 million incremental revenue in 2009 and reverse our declining sales HBS Professor John A. Quelch and writer Lisa D. Donovan prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. The authors thank the following employees of Estee Lauder Companies, Inc. for their valuable contributions to the development of this case: Michelle Liu (HBS MBA 2007) and Stephanie Cheung So (HBS MBA 2007). This case, though based on real events, is fictionalized, and any resemblance to actual persons or entities is coincidental. There are occasional references to actual companies in the narration. Copyright 2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. Authorized for use only by Joyce George in BU362 at Wilfrid Laurier University from 1/4/2022 to 3/31/2022. Use outside these parameters is a copyright violation.
4550 Flare Fragrances Company, Inc.: Analyzing Growth Opportunities trend. If our strategy works, the founders can consider taking the company public. Before we dwell on the future, though, I want us to review who we are and how we got here, because that historical context is important for determining the direction in which we should head." Flare Company Background and Industry Position From its origins in 1955 as a small manufacturer of women's perfume, Flare had grown into the No. 4 player in the U.S. women's fragrances market. The brand Loveliest had been introduced in 1975 and was the company's sole focus for some time. Starting in 1996 with the launch of Awash, Flare began introducing a new brand every two to three years, each with the Loveliest name on its label. By 2007, approximately 93% of Flare's sales came from the six lines of fragrances listed in the top row Exhibit 1. The remaining 7% of sales came from scented products based on these individual fragrances; such brand extensions, sold only through department store channels, included products such as soaps and shower gels, which served mainly to round out gift sets. One of Flare's greatest strengths was its dominance in sales of fragrances through mass channels, particularly the market for "prestige" brands. The total U.S. retail market for all fragrances-that is, the total dollars that customers spent at retail outlets on fragrance products for both men and women-was $5.70 billion in 2007. The share held by women's fragrances was $3.80 billion, or 66.6% of the U.S. retail market-a percentage that had remained steady over time.¹ Flare products generated 9.5% of that total, exceeded only by Depuis, Suzanne Weber, and Aromatique, with shares ranging from 11.5% to 15.6%. Flare's 2007 factory sales-that is, its retail sales minus the 40% of revenues earned by retailers and intermediaries along the distribution chain-were $216.8 million. Although final numbers weren't yet in, it looked like Flare would end 2008 with $221 million in factory sales, or 10% of the retail market-a respectable share of a market recently experiencing a 3% overall annual decline. But Patterson wanted Flare back on an upward trend. For decades Flare had sold its brands through both premium and mid-tier department stores, (e.g., Saks, Macy's) and remained an established presence there. In the late 1970s, Flare had moved into privately owned pharmacies, and in the late 1980s into the mass market-including discount department stores like J.C. Penney and, later, Target, Wal-Mart, and Kohl's, where it became a prominent player. It also sold through certain chain pharmacies like Walgreen. The company was confined to the United States, having eschewed international markets because the costs of gaining a foothold seemed too high. Exhibit 1 provides a breakdown of Flare's sales. At the meeting, Marketing Director Bill Charters commented on Flare's brand positioning. "I'm pleased that the Loveliest fragrance is maintaining its 3% share of a crowded retail market-$77 million. Loveliest is positioned as a classic scent associated with prestige and elegance, giving us strong appeal among women over age 35. We are increasingly well-positioned in other segments. Take our most recent launch, Natural-it's reaching a slightly younger demographic that is seeking environmentally safer or so-called 'green' products. It looks to do roughly $9.1 million in its second full year this year, taking share from competitors and following a solid $7 million launch in 2006. In combination with our other brands that target women starting out in their careers, we now have a range of perfumes that appeal to the 25-34 demographic. What is the key to all this? It's the power of Loveliest as an umbrella brand." Patterson nodded in agreement and then turned the group's. attention to the study page that presented the data in Exhibit 1. 1 Datamonitor: "Fragrances in the United States: Industry Profile," October 2009, 2 BRIEFCASES | HARVARD BUSINESS SCHOOL Authorized for use only by Joyce George in BU362 at Wilfrid Laurier University from 1/4/2022 to 3/31/2022. Use outside these parameters is a copyright violation.
Flare Fragrances Company, Inc.: Analyzing Growth Opportunities | 4550 The U.S. Women's Fragrance Market "Our penetration remains strong through mass outlets generally, with 74% of our sales through those channels-we over-perform in the mass market. Loveliest is one of the best-selling lines of women's fragrances in the mass market. But Arlmont's study highlighted gaps where our sales don't mirror the overall market: prestige department stores, drugstore chains, and other channels including the internet. That's where I think we'll find some great prospects." Like most industry professionals, Patterson divided the women's fragrances market into three groups based on price point, placing Loveliest in the middle segment, as shown in Table A below. Many manufacturers competed in multiple segments. Table A Eau de Parfum Categories Typical Distribution Channel(s) Description & Example Brands Typical Price Points Premium Brands • Often designer-named • Leading brands have from 1.1% to 2.8 % share $70 and above for 1 oz. spray bottle • Majority sold through prestige department stores . Also sold through specialty and gift stores Mid-Tier Brands • Prestige image . Often originate in . Considered "prestige" brands Leading brands have 3% - 3.5% share $30-$60 for 1.7 oz. spray bottle Loveliest $32 department stores • Ultimately sold in mass and discount department Flare's other brands $30-$36 stores Mass Brands Affordable • Often lower-end offerings by Sold through food, drug, and mass merchandisers and discount stores. the same manufacturers as in the top two tiers Patterson then walked through Arlmont's review of current recession-era fragrance industry dynamics: Product Selection. . Consumers under economic pressure trade down from luxury brands to mass alternatives . Diminishing exclusivity: mid-tier and premium brands increasingly available in mass channels . Substitution of lower-priced scented products (body washes, sprays) or forgoing of fragrances in place of skin care creams and products from which consumers expect to see results . Constant hype, though recently a waning trend, of celebrity and designer fragrance introductions . SKU and brand proliferation (e.g., over 400 new fragrances launched in the United States in 2007) HARVARD BUSINESS SCHOOL | BRIEFCASES 3 Authorized for use only by Joyce George in BU362 at Wilfrid Laurier University from 1/4/2022 to 3/31/2022. Use outside these parameters is a copyright violation.
4550 Flare Fragrances Company, Inc.: Analyzing Growth Opportunities Channel Activity ● Department store discounting, store closings, and incorporation of pop-prestige boutiques (e.g., Sephora in J.C. Penney) . Mass market evolution as consumer traffic grows in these stores and as they overhaul beauty departments by stocking trendier fragrances and employing beauty consultants Blurring of retail channels with upscale influences trickling down and new fragrances first introduced into prestige department stores more quickly being made available in smaller sizes through mass market retailers Overall market trends show slight declines in sales through high-end department stores and sales of mass brands through the mass channel, countered by small percent increases in sales of prestige brands through mass and relatively stable sales through mid-tier department stores Patterson asked everyone, "Do these trends and our positioning suggest or deny an opportunity to either advance in the drugstore channel or launch a new product as recommended by Arlmont? Keep these in mind because I'm going to come back to them and ask for your input." Sales and Pricing Since joining the company, Patterson had achieved success by devoting more resources to Flare's mass group by hiring and placing managers in offices near key retailers' headquarters. She had also begun to reorganize to create a chain drugstore sales team with more experience at the sales management level. While the drugstore reps had made some initial inroads in product placements and increased sales, the team's overall performance was uneven at best as its members were still learning how to market most effectively to this channel. Recently, Patterson had held Flare's prices steady. Her goal was to help bolster Flare brands' appeal in the mass channel and ensure continued loyalty among its consumers who had grown up with Flare's products. By maintaining both price-competitiveness and a prestige image, this strategy reflected the importance of capturing new consumers entering the market who often became loyal to a fragrance over time, particularly if the lifestyle association of the brand was strong enough. A perfume customer typically first experienced a product at a department store. Department stores hired dedicated beauty advisors who were then trained by Flare to provide education and application suggestions to customers at the store counter. Fragrance industry sales were seasonal, concentrated heavily around Mother's Day and the winter holidays when both men and women purchased fragrances as gifts. Retailers garnered an industry-standard 40% margin from the sale of Flare products. They were encouraged by Flare to maintain suggested retail prices and typically did so. Flare paid its account executives an industry average 3% commission on factory sales. Flare drove trade interest through promotions such as gift-with-purchase (buy one item and receive another free) and purchase-with-purchase (buy one item and get another at a discount). Flare did not encourage discounting and did not offer coupons as mass brands tended to do. Periodically, Flare offered its products to the trade at promotional prices allowing 5%-10% above the usual 40% industry margin. Exhibit 2 presents an income statement outlining Flare's cost structure for its fragrances. 4 BRIEFCASES | HARVARD BUSINESS SCHOOL Authorized for use only by Joyce George in BU362 at Wilfrid Laurier University from 1/4/2022 to 3/31/2022. Use outside these parameters is a copyright violation.
Flare Fragrances Company, Inc.: Analyzing Growth Opportunities | 4550 Advertising, Promotion, and Marketing Communications In the U.S. market in 2008 approximately 74% of adult women and 75% of teenage girls used fragrance products.2 With such high penetration and a very diverse audience, companies varied their marketing efforts to woo these customers using tactics that ranged from in-store demonstrations to interactive websites to scented catalog inserts. Flare's promotions typically involved prepacks featuring a variety of products shipped in a package of individual items being featured with a buy- one-get-one-free or or price-discount for buying a specified value of product. Flare offered a co-op advertising program, contributing to store advertisements that featured Flare products. Under the Loveliest brand, Flare sponsored fashion events, movie industry gatherings, educational programs, and television shows. Flare also placed free samples in department stores and testers at the point of purchase, which tended to generate trial. Flare's website was basic though interactive, emphasizing Loveliest, communicating various characteristics of each brand under that umbrella, and collecting data from site visitors who signed up for weekly emails with a Loveliest theme Flare's advertising focused on fashion and lifestyle, with the themes of imagination and fantasy. While targeting women, it also aimed to influence men who might be buying gifts. Flare dedicated the bulk of its advertising budget to Loveliest, as its umbrella brand. With the Loveliest name on all of its packaging, Flare's other products benefitted from a halo effect. Each brand had its own image, although the first four that had been introduced after Loveliest-Awash (in 1996), Summit (1998), Essential (2000), and Swept Away (2003)-appealed to the more mature, successful woman. Natural, though it also carried the Loveliest name, was Flare's first real attempt to penetrate a younger demographic, interested in the current health and green trends. Flare's brand positioning is outlined in Table B below; a graphical view of it appears in Exhibit 3. Table B Loveliest Flare's Other Brands Under Loveliest Umbrella • Receives 70-80% of Flare's annual advertising budget • Receives 20%-30% of Flare's annual advertising budget • Television and print focus • Promotion focus • Expected halo effect from Loveliest advertising • "You are the love in Loveliest theme (in use since 1995) • Strongest with those aged 25-34 • Strongest with those aged 34-65 o Often become loyal to a new scent over time o Long-time users o Willing to try new scents o Tend to have signature scent o Regular purchasers of gifts o Vary scent given time of day, activity, outfit o Regular purchasers of gifts • Also target men purchasing for women in this age group • Also target men purchasing for women in this age group Charters noted, "Our share of industry advertising is declining. We've historically spent about 19% of our sales on advertising and promotion, relying on the traditional strength of the Loveliest brand, its excellent name recognition, and its halo effect on our other brands under that umbrella. However, our spending now lags our competitors' spend levels, which are approaching 23%. They outspent us on all six of our lines in 2007. Any additional sales growth, even beyond what a new 2 Source: Mintel, "Women's Fragrances - US - September 2008," section titled "Market Drivers" HARVARD BUSINESS SCHOOL | BRIEFCASES 5 Authorized for use only by Joyce George in BU362 at Wilfrid Laurier University from 1/4/2022 to 3/31/2022. Use outside these parameters is a copyright violation.
4550 Flare Fragrances Company, Inc.: Analyzing Growth Opportunities product launch might contribute to revenue, will enable us to bring ad spend more in line with the industry." Exhibit 4 outlines Flare's communications budget. Marketing Director Bill Charters pointed out one more aspect of the retail environment. "Because consumers can now find more premium and mid-tier fragrances in mass market retailers, the Arlmont study predicts that traditionally higher-end fragrances with prestige images will be the best. performers in the coming years. The most successful brands will offer an aspirational experience for consumers seeking prestige at an affordable price. This implies that image-based advertising and promotions will continue to be critical. We'll succeed if our consumer regards our fragrance as an expression of her personality. That is how we will build both trial and loyalty." Planning for 2009 When Charters had finished his review, Patterson suggested they consider the opportunities that current market trends presented, as highlighted in the consulting study shown in Table C. 6 BRIEFCASES | HARVARD BUSINESS SCHOOL Authorized for use only by Joyce George in BU362 at Wilfrid Laurier University from 1/4/2022 to 3/31/2022. Use outside these parameters is a copyright violation.
Flare Fragrances Company, Inc.: Analyzing Growth Opportunities | 4550 Table C Product Potential Channel Potential • Originality and innovation will be necessary to stimulate sales and capture consumers entering the extremely fragmented, crowded market • A meaningful consumer experience will still be required as fragrance shoppers will turn in greater numbers to specialty stores (such as pop-prestige Sephora boutiques that had begun to open within J.C. Penney) and mass market retailers • A prestige image should be maintained because consumers in mass stores, when given the choice, will frequently choose mid-tier or premium over mass brands because of their associated prestige and image • Redesigned drugstore chains with upscale, customer service-oriented outlets (such as CVS Beauty 360) and mass market retailers will attract younger women • The Loveliest brand should not be diluted too heavily because aging consumers are still loyal to its image and new consumers consider it classic. Patterson said, "With Loveliest's strength in the mass channel, we have excellent potential to penetrate further with our existing brands. But we can't assume that this alone will grow revenue satisfactorily-so I want to focus on the two options I mentioned at the outset: launch a well- positioned new brand and penetrate further into upscale drugstore chains. Patterson continued: "It's been two years since our last product launch, Natural. We must stay relevant, invigorate sales, and generate excitement. Can we position Savvy to help us to do that?" Savvy, a name and fragrance that had received favorable responses in focus groups, was the new brand that Flare was considering launching in 2009 (see Exhibit 5). Charters had developed a brief, preliminary marketing plan aimed at confident, successful young women aged 18-34 who were in college or starting careers (see Exhibit 6). The projected retail price point was $40 for a 1.7 oz. spray bottle. Savvy could be sold initially exclusively at department stores before mainstreaming into mass markets, or it could be sold in the mass market from the outset. Flare's advertising agency had outlined three alternative media plans for Savvy with differing total budgets (see Exhibit 7). Patterson felt at least the minimum plan would be necessary to reach her goal of $7.5 million in factory sales in 2009 and then grow at least as much as Natural had in its first few years. Patterson had recently seen a competitor forecast approximately $10 million in retail sales on $6 million of ad spend for a celebrity launch; another had forecast $5 million in retail sales on $3 million of advertising. Flare's agency had suggested the Savvy budget could potentially be reduced if the Loveliest name was included on the label and in ads, with the name Savvy... by Loveliest, as they had done with every prior launch. However, Patterson and Charters agreed that Flare should consider launching it independent of Loveliest. With the "You are the love in Loveliest" theme in use since 1995, it seemed time for a new brand to break out. Despite the challenge of diversifying away from Loveliest, introducing Savvy also might help to shore up their position in department stores, still an important sales channel. Patterson hoped Savvy would take sales from competitors' brands in the $30-$45 range, although Flare's Natural product might already be meeting that goal. She had wondered whether Natural should be further supported with greater ad spend rather than spending resources on another mid- tier product launch like Savvy. Alternatively, perhaps any additional advertising budget would instead be better utilized by emphasizing the entire product line. HARVARD BUSINESS SCHOOL | BRIEFCASES 7 2022 to 3/31/2022. Use outside these parameters is a copyright violation. Authorized for use only by Joyce George in BU362 at Wilfrid Laurier University fro
4550 Flare Fragrances Company, Inc.: Analyzing Growth Opportunities Then there was the key question of whether expansion in drugstore chains, either with a new lower-priced brand or existing brands, would generate greater sales growth than a Savvy launch. Flare had not pursued drug chains as actively as it might have, instead directing its energy and sales expertise toward key mass merchandisers while, of necessity, continuing to work closely with department stores. But drug chains were evolving; some had higher-end features. CVS Beauty 360, in place to assist shoppers in for example, was putting on-site aestheticians in in selecting brands, some of which had never been sold outside of department stores. However, drug chains typically wanted to sell only Flare's highest-turnover items, which might damage Flare's relationships with other retail accounts. Yet if Flare was not a strong presence at the outset of drugstores' efforts to reposition themselves, would its competitors step in and take the lead? Arlmont had suggested creating a competitive planning matrix that considered each of Flare's products by channel in order to take a fresh look at which might be best suited for each of Flare's brands. Patterson, Charters, and Arlmont had considered other growth strategies. One involved building their line of scented products other than fragrances. However, because these lower-priced products were tangential to their core marketing and sales expertise, they backed off. They also considered instituting across-the-board price increases, but decided to remain conservative and wait until the dust settled from the current economic crisis. Patterson had news-urgent news-for her team to consider as they evaluated these options. She had just learned that a major competitor, Aromatique, would launch a new perfume brand, Dulcet, with a suggested retail price around $42, followed by a rollout of additional products under that name. Its slogan, "A winner's style," and an associated music-themed campaign, would feature a recent American Idol contestant, well-known by the teen and young adult market-the same market that Flare's Savvy brand would be targeting. Dulcet would be supported by a communications budget of $10 million-a not uncommon amount for promoting a major new scent. Patterson concluded with specific challenges to her team: "What are the important factors to consider in deciding whether to cancel, delay, or move forward with a Savvy launch? If we launch, given our current margins, approximately how much should we budget for its media spend and what are the implications for our 2009 income statement? We'll need to determine the contribution over a two-year horizon and compare that to the media plans to get a sense of both how that choice will affect our cumulative profit or loss over the next couple of years and how long until payback on the three media plans. Knowing the market's segmentation and our brands' positioning, should we instead focus on drugstore expansion, and, if so, do we have the experience to be successful here? "Okay-that's it for today. Each of you should reread Arlmont's study, and then regroup as a team to create a proposal explaining what we should do and documenting the analysis behind it. Next Monday we'll meet to review your recommended plan of action." 8 BRIEFCASES | HARVARD BUSINESS SCHOOL Authorized for use only by Joyce George in BU362 at Wilfrid Laurier University from 1/4/2022 to 3/31/2022. Use outside these parameters is a copyright violation.
Exhibit 1 2008 Estimated Flare Factory Sales and Percent by Brand and Channel Versus Market Swept Away Loveliest Awash Mixed Prepacks Summit Essential Natural Mass Market 25.7% 4.0% 16.0% 12.4% 7.4% 2.0% Drug Stores 1.5% 0.1% 1.2 % 0.2% 0.1% 0.5% Department Stores/Prestige 6.5% 2.0% 5.0% 4.3% 3.0% 1.5% 1.2% 0.2% 0.4% 0.0% 0.1% 0.1% Other (Inc. Internet) Total 34.9% 6.3% 22.6% 16.9% 10.6% 4.1% Flare Factory Sales $77.1 $13.8. $50.1 $37.5 $23.4 $9.1 $10.2 $221.1 a Source: Mintel Market research b Manufacturer sales for total market 2008 are approximately $2.2 billion, assuming 40% trade margin. Typically lumped in as part of mass market sales figures but listed separately here to highlight 4% of Flare's sales through drug stores Exhibit 2 2007 Income Statement for Flare Fragrances Gross Sales COGS 100.00% 55.47% Contribution Margin 44.53% Manufacturing Overhead 2.27% Real Estate, Taxes, Insurance, Utilities, Depreciation 1.96% Advertising and Promotion 19.20% Field Sales Force 7.30% General and Administrative 6.96% Net Pretax Income from Operations 6.83% Contribution margin if include 3% of sales cost as variable 44.31% Source: Company records ****** 2.0% 0.8% 1.8% 0.0% 4.6% Percent of Total Flare Sales 69.5% 4.4% 24.1% 2.0% 100.0% Flare Total Sales ($ mm) $ 153.7 $9.7 $ 53.3 $4.5 $221.1 Total Market Sales 30.1% 16.6% 42.1% 11.2% 100.0% Total Market Size ($ mm)b $ 665 S 367 S 930 $ 247 $ 2,208 -9- Estimated Approx. Flare Share of Channel 23.1% 2.6% 5.7% 1.8% 10.0% Use outside these parameters is a copyrig Authorized for use only by Joyce George in BU362 at Wilfrid Laurier University from
4550 Flare Fragrances Company, Inc.: Analyzing Growth Opportunities Exhibit 3 Flare Fragrances Brand Positioning Map-One Possible View CLASSIC LOVELIEST YOUNGER AGE APPEAL OLDER AGE APPEAL 10 NATURAL SAVVY? SUMMIT CHIC AWASH SWEPT AWAY ESSENTIAL BRIEFCASES | HARVARD BUSINESS SCHOOL Authorized for use only by Joyce George in BU362 at Wilfrid Laurier University from 1/4/2022 to 3/31/2022. Use outside these parameters is a copyright violation.
Flare Fragrances Company, Inc.: Analyzing Growth Opportunities | 4550 Exhibit 4 Flare Communications Budgets 2006 2007 2008 Budgetª Media, advertising production costs, web & trade promotionsb Loveliest Awash Summit Essential Swept Away $ 15,438,399 $ 146,336 $ 2,414,536 $1,375,554 $ 512,174 $2,092,598 $ 21,979,598 $5,304,663 $ 3,215,723 $ 16,441,611 $ 166,497 $ 2,663,957 $ 1,498,476 $ 495,330 $ 2,401,724 $ 23,667,594 $ 7,817,049 $ 2,476,648 $ 16,770,443 $ $ 169,827 $ 2,717,236 $ 1,443,532 $ 509,482 $ 2,755,447 $ 24,365,968 $ 7,926,688 $ 2,233,229 Natural Subtotal Co-op advertising Sponsorships Point-of-sale samples, display fixtures $ 6,368,523 $ Sales sheets, flyers, brochures $ 786,700 $ Gift-with-purchase, purchase-with-purchase promotions $ 249,746 $ Public relations $ 4,880,290 $ 753,628 $ 168,286 $ 281,696 $ 14,604,287 $36,583,884 18.9% $ 258,071 $ 6,457,682 878,856 297,198 297,198 18,090,850 42,456,817 19.2% Subtotal $ Total communications budget $ 17,956,736 $ 41,624,331 19.2% $ As % of sales (of owned brands) Total company sales $193,565,526 $216,793,390 $ 221,129,257 Source: Company Records à As of December 2008, it appeared that actual expenditures would be close to budget. b Figures for each line include cost of promotions & trade deals as well as cost of measured media advertising and production. Promotion costs allocated among lines on a prorated basis for cross-line events. Of the total 2008 advertising and promotions budget, 34.2% was for measured media, of which 73.5% was allocated to television, 11.5% to magazines, 121% to radio, and 2.8% to internet. €2008 budget includes approximately $750,000 in media advertising to promote sponsored events HARVARD BUSINESS SCHOOL | BRIEFCASES 11 Laurier University from 1/4/2022 to 3/31/2022. Authorized for use only by Joyce George in BU362 at Wilfrid Use outside these parameters is a copyright violation.
4550 Flare Fragrances Company, Inc.: Analyzing Growth Opportunities Exhibit 5 2008 Focus Group Sessions: Summary of Findings During April 2008, Flare's advertising agency conducted a series of women's focus groups. Key findings are included below. . Savvy The name Savvy for a women's fragrance seen as stylish, upbeat, and classy Packaging would be expected to reflect the modern quality of the name . Across Age Groups Daily scent choice influenced by their mood at the time, activity they will be doing, the time of day, the season, or their wardrobe Almost 50% prefer to shop for fragrances in department stores Nearly 40% shop for fragrances in mass stores such as Target and Wal-Mart and specialty stores like Sephora, though use of these channels declines with age Just over 20% say they shop at drugstores for their fragrance purchases Most fragrance-wearing respondents say they switch between two or three brands over time . Age 18-34 Highly brand-aware with sensitivity to premium and prestige branding Prefer images of elegance and exclusivity Word of mouth is influential High willingness to try a new scent . Age 35-64 o Luxury fragrance brands are most popular with this age group o Highest likelihood to use/buy perfume among all age groups o Interest in classic fragrances o More likely to be loyal to a favorite signature scent o Very familiar with Loveliest as a fragrance they have known since their youth 12 BRIEFCASES | HARVARD BUSINESS SCHOOL Authorized for use only by Joyce George in BU362 at Wilfrid Laurier University from 1/4/2022 to 3/31/2022. Use outside these parameters is a copyright violation.
Flare Fragrances Company, Inc.: Analyzing Growth Opportunities | 4550 Exhibit 6 Proposed New-Product Introduction Program Savvy Women, aged 18-34 Eau de parfum initially; to be followed by bath soap and body lotion Brand Name: Target Customer: Product Line: Retail Price Point: Trade Margin: Introductory Deals: $40 for 1.7 oz. spray bottle. Variable cost structure similar to other Flare fragrances. 40% 5% and 10% off-invoice allowances on small- and large-size prepacks, respectively. Sales of each prepack were expected to account for one-third of 2009 Savvy sales. Production of one million 1/8 oz. samples to be distributed free at the point of sale at a cost of $400,000 Sampling: Counter display materials, brochures, and testers at a cost in 2009 of $100,000 Merchandising Aids: Timing of Launch: Sales Target: First orders accepted in April 2009; first shipments in September 2009 Gross factory sales of $7.5 million in 2009 Exhibit 7 Three Media Plans for Savvy Introduction (totals rounded) Plan 2 Plan 3 Plan 1 $1,654,251 $ 259,615 $3,308,502 $519,231 178,633 293,694 Television Magazines Digital Production Reserve Total 157,500 210,522 $5,514,170 $ 865.385 602,833 250,000 267,613 7,500,000 168,051 2,250,000 4,500,000 HARVARD BUSINESS SCHOOL | BRIEFCASES 13 Laurier Authorized for use only by Joyce George in BU362 at Wilfrid University from 1/4/2022 to 3/31/2022. Use outside these parameters is a copyright violation.