OBJECTIVE 3 OBJECTIVE 2 Explain the fundamentals of competitive
19.1 L’Oréal: “The United Nations of Beauty”
Real Marketing
Global-local balance: Cosmetics and beauty care giant L’Oréal balances local brand responsiveness and global brand impact, making it “The United Nations of Beauty.”
Getty Images How does a French company successfully
market an American version of a Korean skin-beautifier under a French brand name in Australia? Ask L’Oréal, which sells more than
$30 billion worth of cosmetics, hair care prod- ucts, skin care concoctions, and fragrances each year in 150 countries, making it the world’s biggest cosmetics marketer. L’Oréal sells its brands globally by understanding how they appeal to varied cultural nuances of beauty in specific local markets. Then it finds the best balance between standardizing its brands for global impact and adapting them to meet local needs and desires.
L’Oréal is as global as a company gets. With offices spread across 130 nations and more than half of its sales coming from markets out- side Europe and North America, the company no longer has a clearly defined home market.
L’Oréal’s well-known brands originated in a half dozen or more different cultures, includ- ing French (L’Oréal Paris, Garnier, Lancôme), American (Maybelline, Kiehl’s, SoftSheen- Carson, Ralph Lauren, Redkin), British (The Body Shop), Italian (Giorgio Armani), and Japanese (Shu Uemura). The master global marketer is the uncontested world leader in makeup, skin care, and hair coloring, and sec- ond only to P&G in hair care.
L’Oréal’s global mastery starts with a corps of highly multicultural managers. The company is famous for building global brand teams around managers who have deep back- grounds in several cultures. L’Oréal managers around the world bring diverse cultural per- spectives to their brands as if they were, say, German, or American, or Chinese—or all three at once. As explained by one Indian-American- French manager of a team that launched a men’s skin care line in Southeast Asia: “I can- not think about things one way. I have a stock of references in different languages: English, Hindi, and French. I read books in three dif- ferent languages, meet people from different countries, eat food from different [cultures], and so on.”
For example, a French-Irish-Cambodian skin care manager noticed that, in Europe, face creams tended to be either “tinted” (considered makeup) or “lifting” (considered skin care). In Asia, however, many face creams combine both traits. Recognizing the growing popularity
of Asian beauty trends in Europe, the manager and his team developed a tinted lifting cream for the French market, a product that proved highly successful.
L’Oréal digs deep to understand what beauty means to consumers in different parts of the world. It outspends all major competi- tors on R&D, painstakingly researching beauty and personal care behaviors unique to spe- cific locales. L’Oréal has set up R&D centers all over the world, perfecting a local observa- tion approach it calls “geocosmetics.” This science is fueled with insights gained through everything from in-home visits to observations made in “bathroom laboratories” equipped with high-tech gadgetry. L’Oréal’s research produces precise information about regional beauty and hygiene rituals, as well as about local conditions and constraints that affect the use of its products, such as humidity and temperature:
How many minutes does a Chinese woman devote to her morning beauty routine? How do people wash their hair in Bangkok? How many brush strokes does a Japanese woman or a French woman use to apply mascara?
These beauty rituals, repeated thousands of times, are inherently cultural. Passed on by
tradition, influenced by climate and by local living conditions, they strive to achieve an ideal of perfection that is different from one country and from one continent to the next.
They provide an incredibly rich source of in- formation for L’Oréal. Behind these rituals, there are physiological realities: fine, straight, and short eyelashes cannot be made-up the same way as thick, curled, and long lashes.
L’Oréal uses such detailed insights to cre- ate products and positioning for brands in local markets. “Beauty is less and less one size fits all,” says a L’Oréal executive in China.
“You have to have an answer for very different needs.” For example, more than 260 scien- tists now work in L’Oréal’s Shanghai research center, tailoring products ranging from lipstick to herbal cleaners to cucumber toners for Chinese tastes.
At the same time that understanding the minute details of local customer behavior helps L’Oréal be responsive to specific market needs, it also lets the company achieve global scale by integrating brands across world cultures. For example, consider Elséve Total Reparaỗóo, a hair care line initially developed at L’Oréal’s labs in Rio de Janeiro to address specific hair problems described by Brazilian
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women. In Brazil, more than half of all women have long, dry, dull, and very curly hair, result- ing from the humid Brazilian climate, exposure to the sun, frequent washing, and smoothing and straightening treatments. Elséve Total Reparaỗóo was an immediate hit in Brazil, and L’Oréal quickly rolled it out to other South American and Latin American markets. The company then tracked down other global locales with climate characteristics and hair care rituals similar to those faced by Brazilian women. Subsequently, L’Oréal launched the brand as Elséve Total Repair in numerous European, Indian, and other South East Asian markets, where consumers greeted it with similar enthusiasm.
Such adaptation often plays out across multiple L’Oréal brands—which takes us back to that Korean skin-beautifier sold un- der a French brand in Australia mentioned in the opening paragraph. Blemish Balm Cream (BB Cream) was originally created by L’Oréal dermatologists in Korea to soothe skin and hide minor blemishes. It quickly became a high-flying Korean brand. However, apply- ing their deep knowledge of skin colors, treatments, and makeup worldwide, L’Oréal
researchers developed a successful new- generation BB Cream adapted to condi- tions and skin colors in U.S. markets (where BB stands for “beauty balm”) and launched it under the Maybelline New York brand. Still not finished, L’Oréal created yet another local version for Europe under the Garnier brand, which it also introduced in other world mar- kets, including Australia.
L’Oréal doesn’t just adapt its product formulations globally. It also adapts brand positioning and marketing to international needs and expectations. For example, nearly 20 years ago, the company bought stodgy American makeup producer Maybelline. To reinvigorate and globalize the brand, it moved the unit’s headquarters from Tennessee to New York City and added “New York” to the label. The resulting urban, street-smart, Big Apple image played well with the midprice
positioning of the workaday makeup brand globally. The makeover soon earned Maybel- line a 20 percent market share in its category in Western Europe. The young urban posi- tioning also hit the mark in Asia, where few women realized that the trendy “New York”
Maybelline brand belonged to French cos- metics giant L’Oréal.
Thus, L’Oréal and its brands are truly global. But the company’s international suc- cess comes from achieving a global-local balance that adapts and differentiates brands in local markets while optimizing their impact across global markets. L’Oréal is one of the few companies that have achieved both local brand responsiveness and global brand inte- gration. When a former CEO once addressed a UNESCO conference, nobody batted an eyelid when he described L’Oréal as “The United Nations of Beauty.”
Sources: Based on information from Hae-Jung Hong and Yves Doz, “L’Oréal Masters Multiculturalism,” Harvard Business Review, June, 2013, pp. 114–119; Liza Lin, “L’Oréal Puts on a Happy Face in China,” Bloomberg Businessweek, April 1–April 7, 2013, pp. 25–26; and www.lorealusa.com/Article.aspx?topcode=CorpTopic_
RI_CustomerInnovation and www.lorealusa.com/research-innovation/when-the-diversity-of-types-of-beauty- inspires-science/stories-of-multicultural-innovations.aspx, accessed September, 2014.
Starbucks developed new flavors—such as green-tea-flavored coffee drinks—that appeal to local tastes. Rather than just charging U.S.-style premium prices in China, Starbucks boosted prices even higher, positioning the brand as a status symbol for the rapidly growing Chinese middle and upper classes. And rather than pushing take-out orders, which account for most of its U.S.
revenues, Starbucks promoted dine-in services—making its stores the perfect meeting place for Chinese professionals and their friends. Whereas U.S. locations do about 70 percent of their busi- ness before 10 a.m., China stores do more than 70 percent of their business in the afternoon and evening. Under this adapted strategy, Starbucks China is thriving. China is now Starbucks’ largest market outside of the United States, with more than 1,000 current stores and 1,600 stores in 70 cit- ies planned by the end of 2015. “We’re trying to build a different kind of company in China and are mindful of how we grow while maintaining the heart and soul of what Starbucks stands for,”
says the president of Starbucks China.
Product
Five strategies are used for adapting product and marketing communication strategies to a global market (see Figure 19.3).34 We first discuss the three product strategies and then turn to the two communication strategies.
Straight product extension means marketing a product in a foreign market without making any changes to the product. Top management tells its marketing people, “Take the product as is and find customers for it.” The first step, however, should be to find out whether foreign consumers use that product and what form they prefer.
Straight extension has been successful in some cases and disastrous in others. Apple iPads, Gillette razors, Black & Decker tools, and even 7–Eleven Slurpees are all sold suc- cessfully in about the same form around the world. But when General Foods introduced its standard powdered JELL-O in the British market, it discovered that British consumers Straight product extension
Marketing a product in a foreign market without making any changes to the product.
610 PART 4| Extending Marketing FIGURE | 19.3
Five Global Product and Communications Strategies
Don’t change product Don’t change
communications
Adapt communications
Straight extension
Communication adaptation
Communications
The real question buried in this figure is this: How much should a company standardize or adapt its products and marketing across global markets?
Adapt product Product adaptation
adaptationDual Product
Develop new product
Product invention
prefer a solid wafer or cake form. Likewise, Philips began to make a profit in Japan only after it reduced the size of its coffeemakers to fit into smaller Japanese kitchens and its shavers to fit smaller Japanese hands. And Panasonic’s refrigerator sales in China surged 10-fold in a single year after it shaved the width of its appliances by 15 percent to fit smaller Chinese kitchens.35 Straight extension is tempting because it involves no additional product development costs, manufacturing changes, or new promotion. But it can be costly in the long run if products fail to satisfy consumers in specific global markets.
Product adaptation involves changing the product to meet local requirements, con- ditions, or wants. For example, McDonald’s operates in 118 countries, with sometimes widely varying local food preferences. So although you’ll find its signature burgers and fries in most locations around the world, the chain has added menu items that meet the unique taste buds of customers in local markets. McDonald’s serves salmon burgers in Norway, mashed-potato burgers in China, shrimp burgers in Japan, a Samurai Pork Burger in Thailand, chicken porridge in Malaysia, and Spam and eggs in Hawaii. In a German McDonald’s, you’ll find the Nurnburger (three large bratwurst on a soft roll with lots of mustard, of course); in Israel, there’s the McFalafel (chickpea fritters, tomatoes, cucumber, and cheese topped with tahini and wrapped in lafa). And menus in Turkey feature a choco- late orange fried pie (Brazil adds banana, Egypt taro, and Hawaii pineapple).
In many major global markets, McDonald’s adapts more than just its menu. It also ad- justs its restaurant design and operations. For example, McDonald’s France has redefined itself as a French company that adapts to the needs and preferences of French consumers:36
“France—the land of haute cuisine, fine wine, and cheese—would be the last place you would expect to find a thriving [McDonald’s],” opines one observer. Yet the fast-food giant has turned France into its second-most profitable world market. Although a McDonald’s in Paris might at first seem a lot like one in Chicago, McDonald’s has carefully adapted its French operations to the pref- erences of local customers. At the most basic level, al- though a majority of revenues still come from burgers and fries, McDonald’s France has changed its menu to please the French palate. For instance, it offers up burg- ers with French cheeses such as chevre, cantel, and bleu, topped off with whole-grain French mustard sauce.
And French consumers love baguettes, so McDonald’s bakes them fresh in its restaurants and sells them in oh-so-French McBaguette sandwiches.
But perhaps the biggest difference isn’t in the food, but in the design of the restaurants themselves, which have been adapted to suit French lifestyles. For example, French meal times tend to be longer, with more food consumed per sitting. So McDonald’s has refined its restaurant interiors to create a comfortable, welcoming environment where customers want to lin- ger and perhaps order an additional coffee or dessert.
McDonald’s even provides table-side service. As a result, the average French McDonald’s cus- tomer spends about four times what an American customer spends per visit.
Product invention consists of creating something new to meet the needs of con- sumers in a given country. As markets have gone global, companies ranging from appli- ance manufacturers and carmakers to candy and soft drink producers have developed Product adaptation
Adapting a product to meet local conditions or wants in foreign markets.
Product invention
Creating new products or services for foreign markets.
Think globally, act locally: By leveraging the power of its global brand but constantly adapting to the needs and preferences of French consumers and their culture, McDonald’s has turned France into its second-most profitable world market.
ERIC PIERMONT/AFP/Getty Images/Newscom
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products that meet the special purchasing needs of low-income consumers in developing economies.
For example, Chinese appliance producer Haier developed sturdier washing machines for rural users in emerging markets, where it found that lighter-duty machines often be- came clogged with mud when farmers used them to clean vegetables as well as clothes.
And solar lighting manufacturer d.light Solar has developed affordable solar-powered home lighting systems for the hundreds of millions of people in the developing world who don’t have access to reliable power. d.light’s hanging lamps and portable lanterns require no energy source other than the sun and can last up to 15 hours on one charge. The com- pany has already reached 10 million users, is adding 1 million users per month, and plans to reach 100 million users by 2020.37
Promotion
Companies can either adopt the same communication strategy they use in the home market or change it for each local market. Consider advertising messages. Some global companies use a standardized advertising theme around the world. For example, Chevrolet recently swapped out its previous, American-focused
“Chevy Runs Deep” positioning and advertising theme with a more global “Find New Roads” theme. The new theme is one “that works in all markets,” says a GM marketing executive. “The theme has meaning in mature markets like the U.S. as well as emerging markets like Russia and India, where the potential for continued growth is the greatest.”
The time is right for a more globally consistent Chevy brand message.
Chevrolet sells cars in more than 140 countries, and nearly two-thirds of its sales are now outside the United States, compared with only about one-third a decade ago.38
Of course, even in highly standardized communications cam- paigns, some adjustments might be required for language and cul- tural differences. For example, ads for Pepsi’s youthful “Live for Now” campaign have a similar look worldwide but are adapted in different global markets to feature local consumers, languages, and events. Similarly, in Western markets, fast-casual clothing retailer H&M runs fashion ads with models showing liberal amounts of bare skin. But in the Middle East, where attitudes toward public nudity are more conservative, the retailer runs the same ads digitally adapted to better cover its models.
Global companies often have difficulty crossing the language barrier, with results ranging from mild embarrassment to outright failure. Seemingly innocuous brand names and advertising phrases can take on unintended or hidden meanings when translated into other languages. For example, Interbrand of London, the firm that created household names such as Prozac and Acura, recently devel- oped a brand name “hall of shame” list, which contained these and other foreign brand names you’re never likely to see inside the lo- cal Kroger supermarket: Krapp toilet paper (Denmark), Plopp choco- late (Scandinavia), Crapsy Fruit cereal (France), Poo curry powder (Argentina), and Pschitt lemonade (France). Similarly, advertising themes often lose—or gain—something in the translation. In Chinese, the KFC slogan “fin- ger-lickin’ good” came out as “eat your fingers off.” And Motorola’s Hellomoto ringtone sounds like “Hello, Fatty” in India.
Marketers must be watchful to avoid such mistakes, taking great care when localizing their brand names and messages to specific global markets. In important but culturally dif- ferent markets such as China, finding just the right name can make or break a brand (see Real Marketing 19.2).
Rather than standardizing their advertising globally, other companies follow a strat- egy of communication adaptation, fully adapting their advertising messages to local markets. For example, in the United States and most Western countries, where running is accepted as a positive, healthful activity, Nike advertising focuses on products and personal performance. In China, however, running is viewed as a boring sport, or even Communication standardization: With nearly two-
thirds of its sales now outside the United States, Chevy recently switched to a new, more global “Find New Roads”
positioning and advertising theme that has meaning in all markets worldwide, here Russia.
General Motors, LLC 2011
Communication adaptation A global communication strategy of fully adapting advertising messages to local markets.
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Real Marketing
19.2
Localizing Chinese Brand Names:
Very Important but Notoriously Tricky
Brand names in China take on deep significance. Coca- Cola’s Chinese name, when pronounced, sounds much like the English name, and the Chinese symbols convey
“tasty fun” or “happiness in the mouth,” a close fit to Coca-Cola’s current worldwide “open happiness”
positioning.
© Stuwdamdorp / Alamy After a long day’s work, an average upscale
Beijinger can’t wait to dash home, lace on a comfortable pair of Enduring and Persevering, pop the top on a refreshing can of Tasty Fun, then hop into his Dashing Speed and head to the local tavern for a frosty glass of Happiness Power with friends. Translation? In China, those are the brand-name meanings for Nike, Coca- Cola, Mercedes, and Heineken, respectively.
To Westerners, such names sound pretty silly, but to brands doing business in China, the world’s biggest and fastest growing con- sumer market, they are no laughing mat- ter. Perhaps more than anywhere else in the world, brand names in China take on deep significance. Finding just the right name can make or break a brand. “Often, a company’s most important marketing decision in China is localizing its name,” asserts one global brand- ing analyst. “It’s also a notoriously tricky one.”
Ideally, to maintain global consistency, the Chinese name should sound similar to the original, while at the same time conveying the brand’s benefits in meaningful symbolic terms. Nike’s Chinese brand name, Nai ke, does this well. Not only does it sound the same when pronounced in Chinese, its “Enduring and Persevering” meaning powerfully encap- sulates the “Just Do It” essence of the Nike brand the world over. Similarly, P&G’s Tide is Taizi in China, which translates to “gets out the dirt,” a perfect moniker for a tough-acting detergent. Coca-Cola’s Chinese name—Ke kou ke le—dates all the way back to 1928. It not only sounds much like the English name, the Chinese symbols convey happiness in the mouth, a close fit to Coca-Cola’s current
“open happiness” positioning. Other names that wear well on Chinese ears while also con- veying a brand’s essence include Lay’s snack foods—Le shi (“happy things”); Reebok—Rui bu (“quick steps”); and Colgate—Gau lu jie (“revealing superior cleanliness”).
Chinese brand names can convey sub- tle meanings that might not be apparent to Western sensibilities. For example, “Dash- ing Speed” seems appropriate enough for an upscale automobile brand like Mercedes.
So does BMW’s name—Bao Ma—which translates to “Precious Horse.” However, in
China, “precious” has a feminine connotation, whereas “dashing speed” is more mascu- line. This works out well for both car makers, which target different genders among China’s upper crust. For instance, BMW is a market leader among affluent Chinese women.
Some brand names translate naturally. For example, when Garnier introduced its Clear shampoo in China, it lucked out. The Chinese word for “clear”—Qing—is one of a select few Chinese words with unusually positive asso- ciations that are used in many brand names.
Garnier added the word yang, which means
“flying” or “scattering to the wind.” Accord- ing to the director of Garnier’s brand consul- tancy, the Qing Yang brand name connotes
“very light, healthy, and happy—think of hair in the air,” just what the brand intends. Other universally positive Chinese
words commonly found in brand names include “le”
and “xi” (happy), “li” (strength or power), “ma” (horse), and
“fu” (lucky). Thus, Kia sells one model in China named Qian li ma, or “thousand ki- lometer horse,” suggesting unusual strength.
There was a time when Western companies entering China simply created a brand name that was phonetically similar to the domestic name, even if it had no meaning in the Chinese language. In fact, such obviously foreign looking and sounding names often communicated a sense of Western cache. For exam- ple, Cadillac went with Ka di la ke—a meaningless group of sounds that gave status to the luxury brand. And McDonald’s got away with Mai dang lao, a term that sounds like the English ver- sion but whose characters translate into gibberish—
“wheat,” “should,” and “la- bor.” Other global companies
with short names such as IBM or Gap sim- ply expect consumers to learn their Western names.
Today, however, with so many foreign brands entering the crowded Chinese mar- ket, most companies expect more of their Chinese brand names. If Chinese consum- ers can’t pronounce a name or don’t know what it stands for, they are much less likely to buy it or talk about it with others, in per- son or in social media. Instead, with some work, companies can come up with names that will engage and inspire buyers. In China, it’s not Subway, it’s Sai bai wei—“better than 100 tastes.” It’s not Marriott but Wan Hao, or
“10,000 wealthy elites.”
However, finding the right names and char- acters can be a daunting challenge. Brand