Sephora Direct Case Narration
The first Sephora store opened in Europe in 1969 and specialized in selling cosmetics and other beauty products. It was well-known for its lively stores, which actively encourage customers to try out new things. Because of its massive market share and loyal customer base that is obsessed with purchasing Sephora brand products, Sephora is now widely regarded as the most prestigious and largest beauty retailer in the world. Additionally, the Sephora brand is well-known thanks to the high quality of its products and the exceptional care it takes for its clients.
The senior vice president of Sephora Direct, Julie Bornstein, is looking forward to increasing the budget for social media and other digital marketing initiatives by a factor of two for the year 2011. She made numerous digital efforts over the past few years to improve the social media image of Sephora on Facebook, Instagram, and other social websites in order to attract more customers through increased brand awareness.
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Sephora Direct : Case Dilemma
Sephora needs to figure out the best combination of digital marketing strategies in order to preserve its brand image in the beauty industry. Justifying the strategy of doubling the budget for marketing initiatives and social media requires that Bornstein provide evidence in support of the decision. Additionally, in order to determine the distribution of funds among the various platforms, it is necessary to take into account the fact that the funding that has been requested would be provided by Sephora at its own expense, i.e. traditional marketing programs.
In addition, the formulation of a long-term strategy that will be helpful in monitoring the role of the digital activities of the Sephora brand and the determination of methods by which the success of the marketing activities can be measured are important steps.
Allocation of $1 Mn
Since young customers, specific women in the age range of 25 to 30 years old, make up the bulk of Sephora’s customer base, it would be a wise investment for the company to secure additional funding for its social media and digital marketing initiatives. In addition, as a result of the dramatic shifts that have occurred in the business world over the course of the past two decades, it is essential for businesses to strengthen their brand identities through the use of digital marketing and social media in order to remain competitive and to keep their brand names.
The three categories where Sephora is planning to invest:
Social Media
Facebook is the social network with the highest number of users and the fastest growth rate. It is an excellent platform for advertising and connecting with customers, as Facebook users are more likely to provide feedback and find answers to questions concerning a given brand on this platform. It would be really beneficial for the company if they created beauty talk as a separate platform as a large number of followers will help in the improvements, required by the brand through their suggestions, recommendations, and questionnaires. Sephora Direct has more than 900,000 fans on Facebook, and it would be really advantageous for the company if they created beauty talk as a separate platform.
Online Videos
The products have been the primary focus of advertising efforts made by Sephora Direct, which has been doing so through the production of videos that feature said products. According to the statistics from 2010, it has been observed that potential customers are paying more attention to makeup tutorial videos; consequently, the funds could be used in making more professional videos according to the requirements of potential customers. In addition, the numerous keywords for products and other beauty items that the company has purchased also favor the investment in YouTube videos because it will directly hit the target market and will increase sales. This is another reason why the company should consider making this investment.
Mobile Apps
As consumers look for ways to simplify their lives on a daily basis, more and more of them are choosing to do their shopping from the comfort of their own homes, using a mouse to complete their transactions rather than leaving the house. In addition, the competitors already present in the market concentrate their efforts on the visits made by customers, and social media platforms are simple to access using smartphones. Consequently, the development of an advanced and quick app for the purpose of online shopping for Sephora’s products is an excellent initiative. And the additional funds may help increase sales by creating this app for Android and Blackberry/RIM devices as well so that the app would be accessible to all classes of customers. This would be possible because the app would be available on multiple platforms.
Sephora Direct: Assessment of the competition
There are a lot of beauty shops out there, and each one of them sells a diverse selection of items to its clients. Because of this, Sephora faces an ongoing competitive risk because its customers always have the option of switching to one of the company’s rivals. Because there are now more beauty stores overall, including departmental and drug stores, Sephora is up against a significant amount of competition. The most significant of these competitors is ULTA, which is undoubtedly giving Sephora a difficult time. ULTA has 331 locations, each of which not only provides its customers with an extensive selection of readily available beauty products but also features a hair salon for the purpose of providing a more individualized shopping experience for those same customers.
Therefore, in order to prevail over the competition presented by its rivals, Sephora is working to improve its performance in social media and digital marketing and is using this improvement as a weapon against the competition. Recently, Sephora launched a new feature called “Sephora Ask” in order to engage with its customers on a daily basis in order to learn more about their needs and requirements. This is because beauty retailers can only maintain their brand name in the market if they have a great deal of knowledge about the needs of their customers.
Sephora Direct: Target Audience
People who shop at department stores are typically older and less trendy than the customers of Sephora Retail, who tend to be younger and more trendy. To be more specific, it is aimed at females between the ages of 25 and 35. Because consumers believe that the brands sold at Sephora Retail are more prestigious than those sold in supermarkets, these consumers are more likely to purchase products that fall within the moderate to high price range. In spite of this, it is also geared toward people who may have never purchased cosmetics before, as customers at Sephora Retail have the option to test out the products without having to commit to buying them.
Because Sephora Retail represented a new way of shopping for cosmetics, the audience that you are trying to reach is one that is open to trying new things, from a psychological point of view. They take an interest in their appearance as well and relish the opportunity to try out a variety of beauty products. A shopping environment in which sales are more objective and less driven by commissions is preferred by the audience who will be doing the shopping. In addition, they have the goal of becoming a better version of themselves. In general, teenage girls hope to model themselves after older women, while older women want to regain their youthful appearance.
The customer base that is targeted by Sephora Online shares many of the same demographic characteristics as the customer base that is targeted by Sephora Retail. However, Sephora Online also makes an effort to reach people who live in areas of the world where there is not yet a Sephora Retail store. In a psychological sense, it appeals to people who are at ease making online purchases, obtaining information through online channels such as reviews, videos, Facebook, and ratings, and sharing that information with other people on the internet. Last but not least, Sephora Online is looking for superusers who can bring life to the community as well as people who identify with the brand in order to fill out its loyalty program.
Sephora Direct: Analysis of Competitive environment
The majority of Sephora Retail’s competition comes from department stores like Macy’s, beauty stores run by a single brand like Mac Cosmetics, and multi-brand specialty stores like ULTA Beauty. Single-brand beauty stores like Mac Cosmetics also pose a threat. ULTA is the company that most directly competes with Sephora among these others.
The majority of Sephora Direct Online’s competition comes from other online retailers, particularly Amazon.com, Beauty.com, and a variety of other, more specialized websites. Additionally, it competes with some younger businesses that are experiencing rapid expansion, such as BirchBox and Gilt Groupe. BirchBox is a monthly subscription service that sends customers a carefully curated box of product samples in exchange for a monthly fee. Customers of Gilt Groupe have the opportunity to make purchases from a curated selection of high-end goods at substantial savings for a limited time only.
Sephora Direct: Points of Difference
The first thing that sets Sephora Retail apart from competitors is its non-commissioned model, which allows sales associates to guide customers and respond to their inquiries in a manner that is more objective.
Second, because the products of various brands are displayed side-by-side, consumers are afforded the opportunity to compare and contrast them in a stress-free environment, without the obligation to actually buy the products.
Thirdly, Sephora Retail portrays itself to customers as a young and laid-back brand, and the company designs its customer experience to reflect this image. For instance, Sephora stores create a lively and festive ambiance by playing a variety of musical genres, including pop, alternative, and rock.
Fourthly, the majority of Sephora stores are located in urban areas and shopping malls, and these centralized locations enable it to reach a more significant number of people.
When it comes to Sephora Online, the website features an intuitive and powerful search function, and it gives customers information about each and every product that is offered for sale at Sephora (ratings, reviews, etc.).
The second thing that sets it apart from the competition is the high-quality and interesting customer experience. The Beauty Insider loyalty program that Sephora Direct Online maintains is managed with the utmost care, and loyal customers are awarded a variety of benefits. Moreover, it interacts with customers and gives them the impression that they are heard by using digital tools (such as YouTube, Facebook, and mobile apps) in a successful manner. For instance, the team at Sephora constantly monitors its Facebook page in order to ensure those customer complaints are addressed promptly.
Thirdly, Sephora Direct Online cultivates a community of people who are incredibly enthusiastic about beauty and centers it around its brand. For instance, users can ask questions about products on the company’s Facebook page, and other users who follow Sephora will frequently respond to those questions. In addition to this, it introduces a Q&A Beauty Talk forum on its website. According to Choi, who directs social media, the team feels that sometimes they are playing the role of party hostess, and they seek to create an environment where customers can freely share their beauty insights with one another. In addition, the team feels that they are sometimes playing the role of the party host.
Sephora Direct: SWOT ANALYSIS
The following S.W.O.T. analysis will further identify the possible opportunities and strengths, as well as the potential weaknesses and threats, that are associated with the Sephora brand. Opportunities and strengths
Strengths
The fact that Sephora operates the largest beauty website in the industry contributes to the company’s growing popularity among consumers. It runs a one-of-a-kind platform called “Beauty Talks” to engage with its customers and has a customer base that is both passionate and loyal to the brand. In addition, the iPhone app that Sephora Direct offers for online shopping of its products is a wonderful addition to the company’s many strengths.
Weaknesses
There are no stores in non-metropolitan areas, unlike its competitor ULTA, which has an outlet in a non-metropolitan area. In addition, the online store app is only available for iPhone users. Even though there were more sales of Android devices in the United States in 2010 than there were of iPhones, there is still no equivalent app available for Android users.
Opportunities
The brand has access to a variety of different opportunities. The first one to be the launch of a brand-new fragrance created by Jennifer Anniston. The exclusive rights to this fragrance could be granted to Sephora, which would be a fantastic opportunity to capitalize on in order to boost the popularity of the brand. In addition to this, a growing number of businesses are interested in forming partnerships with Sephora in the e-commerce industry as a result of the proliferation of apps for online shopping.
Threats
x’Sephora is vulnerable to competition from online merchants such as Amazon.com and Beauty.com because these online merchants have been operating in the e-commerce industry for a considerable amount of time. As a consequence of this, Sephora’s share of the online market is only thirty percent, as the majority of the market is held by other well-known merchants.
Sephora Direct: Key Performance Indicators
The following key performance indicators could be used to measure Sephora Direct’s social media and digital marketing success:
- The number of audience profile visits;
- The number of shares on Sephora product posts;
- The frequency with which Sephora engages with its audience;
- The number of audience likes;
- The number of direct sales made via the website or app.
- Analyze the sales in order to determine the market share.
- The aforementioned KPIs can be used to evaluate and monitor the effectiveness of social media and digital marketing activities for Sephora.
Sephora Direct: Discussion of Alternatives
Alternative 1: Stick to the Current Budget
Even with the current budget, Sephora has a 30% online market share and a large customer base. Therefore, the first option would be for Sephora to maintain the current budget for social media and digital marketing. Along with a massive social media following (i.e. Facebook and Twitter). In addition, Sephora customers are brand loyal and give the brand preference when purchasing beauty products. In addition, its social programs to engage with its customer base also contribute to the growth of Sephora’s product sales. Therefore, not increasing the budget will have little effect on Sephora’s brand recognition and customer base.
Pros:
- Reputable brand
- Loyal clientele
- Vast fan base
- Social programs for customers
Cons:
- Same market share (30%)
- Increased market competition
- Decreased advertising
Alternative 2: Increased Budget
The second possibility is that Sephora Direct raises its budget in order to concentrate on developing an online app specifically for users of the Android operating system, while also working to improve the iPhone app that it already offers in response to feedback from customers. This will be to the benefit of the brand in terms of increasing its sales as well as the satisfaction of its customers. The launch of an Android app will also result in an increase in its share of the online market. In addition to this, the app will be available to all customer classes, which will result in an expansion of the target market for the Sephora brand.
Pros:
- Increase in customer satisfaction;
- Sales growth;
- Market share expansion.
Cons:
- Android application manufacturing expenses are astronomical.
- Increase staffing for digital marketing management.
- Increase the cost of iPhone app repair.
Alternative-3- Partnerships
The third possibility is that Sephora Direct can work together with well-known people in the beauty industry, such as actors and models. This will enhance the reputation of the Sephora brand, which will lead to an increase in the number of customers who purchase its products. In addition, Sephora Direct will have an advantage over its rivals as a result of this strategy, and it will become a well-known brand because the products of this brand will be used by prominent people in the public eye.
Pros:
- Competitive advantage
- Brand recognition
- Customer growth
Cons:
- Huge cost
- Increase the level of market competition
- Different customer perceptions are associated with distinct public figures.
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Samrat is a Delhi-based MBA from the Indian Institute of Management. He is a Strategy, AI, and Marketing Enthusiast and passionately writes about core and emerging topics in Management studies. Reach out to his LinkedIn for a discussion or follow his Quora Page