Page 16 - DMGT510_SERVICES_MARKETING

Unit 1: Introduction to Services Marketing

Notes

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Lakme Beauty Salon* – Extending Into Service Brand
Case Study

he Lakme Beauty Salon (LBS) was inspired by Lakme, the brand that has for 50 years
now led the way in truly understanding the Indian woman. It is the classic example
Tof an exercise in extending a product brand to a service brand. It seems not to have
1
escaped the usual pangs of extensions, although it has clearly sought to exploit definite
market opportunities. Lever had tasted success in its previous brand extension exercises:
Rexona, Lux and Liril soaps to deodorants, with Rexona particularly performing
exceptionally, capturing almost 70% of the organized market share (it has, by 2004, dropped
to 50%). But this brand extension was different: the product offer (Lakme cosmetics and skin
cares) of the mother brand possessed more tangible features than the extended service
offer (LBS), which mostly promised experience.
Simone Tata, wife of the late Naval Tata, had promoted Lakme, a distinctive jewel from
the House of Tatas. But as a perceived misfit to the new strategic blueprint for the group
drawn by Ratan Tata, the Chairman of Tata Sons (the holding company), in the mid
nineties, the cosmetic major was sold off to the FMCG major Hindustan Lever Limited
(HLL) .
2
HLL turned over a ‘new leaf’ in 2001 when it set up LBS under its beauty brand, Lakmé. The
idea was to offer a complete brand experience . Three years later, LBS contribute 11 per
3
cent to the company’s turnover, but only one per cent of Lakmé product sales are through
LBS outlets. LBS have not been a major success, since its branded service was often as
uneven as the local beauty parlour. But, can the effort be called a failure?
Performance: Lakme Lever has 50 per cent share in cosmetics market and 22 per cent in
skin care, aiming to have a larger pie of the ` 1,000 crore salon industries, which is
growing at 20 per cent. With 150 salons, LBS would also enter relatively small towns,
while adding new salons in metros like Delhi, Mumbai, Bangalore and Chennai.
Lakme & Beauty Industry Performance
The Indian cosmetics industry is in a state of flux. Even as the premium segment is getting
crowded, the rural market is turning out to be the stronghold of smaller, regional players.
Although stiff competition has emerged for Lakme Lever within the ` 250-crore colour
cosmetics market, it continues to lead. In the skincare market, estimated at ` 700 crore,
Lakme’s market share averages 7-8 per cent. (2003). Lakme Lever, which saw a 32 per cent
growth in 2003-04, plans to concentrate on growing the salon business through its LBS,
while consolidating its core business of colour cosmetics and skin care.

1 The name Lakme has a very romantic origin, partly credited to the French origin of Simone Tata. In the Twenties and
the Thirties there was a very well known cabaret dancer in Paris of Indian origin, called Lakme. Her real name was
Lakshmi; the rest is inspiration.
2 The sell off by the Tatas as a redefinition of their business was preceded by other sell offs: Tata Oil Mills Company
Limited (TOMCO) to HLL; the liquor division of Forbes, Forbes & Campbell to Vijay Mallya’s UB Group etc. Simone
Tata used the corpus from the sell-off to start their retail venture through Tata Retail Enterprise (TRENT): the Westside
chain.
3 It was to be the beginning of a series of steps by the household goods major to step into services.
Contd...

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