Month: October 2010

“You know what? It’s just 9 dollars! It’s less than half the price if I buy it in Shanghai!”

This is what I told my friends last month when I bought the L’oreal lash serum( made in US) in London drug store for 9 dollars. I felt so luck, even proud of myself, for I have managed to get the right good in the “right” place.  The same L’oreal lash serum would have cost me 20.45 dollars(about 135 RMB) after tax! So why is the price so different among different places in the world?

Well, at first, I thought it would be the difference in costs. If I bought it in Shanghai, the serum will be made in somewhere in China, where , in most cases,costs of  labor are far  cheaper than Canada or US. This means that in terms of costs, the serum should be far cheaper in Shanghai! So why would the real case be the oppiste?

In Canada, L’oreal is something you usually get in drug stores.  You get it, pay for it and go back. However, L’oreal owns counters in nearly all department stores in Shanghai. In many cases, these counters stand right between luxurious brand like Chanel and Dior. Even before you arrive at the counter, the modern-looking shop-assistant will greet you, with a beautiful smile on her face. She will present you as much products as possible and what’s more, try to put all these products on your face ( or hand, if your skin is sensitive). You pay for the products at the customer service center where another well-dressed girl is waiting for you, and get a chic paper bag along with receipt and samples of other products. Of course, you will never receive all these services for free(although you don’t need to tip!) . Most of these service fees like department store rent are already included in the price. Then, why did L’oreal choose to raise the price to provide all the extra service? Why not just sell it at the usual price ( like the price in US or Canada) in drug stores?

The answer might be the difference in targeting strategy.In china, L’oreal might target the segments where people want  the service, to some extent, for the “esteem” need. These people certainly want to get something like Chanel or Lancome, but they simply cannot afford it. Therefore, L’oreal provides them with thoughtful service to meet their need for esteem. They are respectfully addressed, well served and treated with reverence.

THESE PRODUCTS CAN BE PRODUCED IN THE SAME PRODUCTION LINE!!!

” Do different brands from the same company make that much difference? A difference that worth more than 40 or 50 bucks? ”

This is a question my friend asked me last week when she read an essay posted on Renren .com( Chinese Facebook) about the “secret” that  Maybelline NY and Giorgio Armani all belong to the Loreal group. This essay posted one month ago is  shared by more than 20,000 people on Renren and according to the comments( thousands, actually) below, most readers will now think twice before they ever purchase any Giorgio Armani product. For those used to purchase Maybelline and dreaming to switch to Armani once they have money, they may well change their mind simply because ” It can be produced in the same production line with Maybelline, so why should I pay 40 bucks more ?” . For those used to purchase Armani, the link between Maybelline, a cheap brand available in supermarkets, and Armani, a luxurious brand purchased only by customers of wealth and position  like themselves, can degrade the image of Armani.

Well,to a market professional, or one who is studying to become a market professional ( like us),  different brands can be viewed as a market segmentation strategy. Company segments the market according to demographic aspects like income and psychological aspects like self-concept and self-values. However, things could be different  when customers finally realized this ” trick” of market segmentation.

The first question customers face may be ” should I trust the brand, or the company?”  According to the comments made on the loreal case, at least, most customers value the company more than its brands.  If most customers trust the company,  Maybelline and Armani should not be that much  different, for they all belong to the same company which claims it provides various goods of best quality. Wait, if the products are all of good quality, where dose the huge price difference come from? Advertisement expense?   Well, though customers may reach different conclusions,  the fact that customers start to analyze a company’s marketing strategy itself can be troublesome, for they are now more rational, thus less likely to be affected by the powerful psychological factors. However, this just marks the prelude of a nightmare to marketers. If these rational and skeptic guys finally post their conclusion ( usually unfavorable to the marketers)  on the social websites, more and more customers, especially these potential ones, might be affected or even form a negative brand image. This is, of course, the last thing marketers want to see.