Sephora Direct: Investing in Social Media

Introduction. Background

• Date: October 2010
• Sephora, a cosmetics retailer, found in 1969 as a single perfume shop, in 1999 expanded to an online multi-brand store.
• Situation: requesting additional funding for the new online marketing strategy
• Decision leader: Julia Bornstein, (senior Vice President, Sephora Direct)

Decision Dilemma for Leader in Case

• The Vice President has to commend which marketing path to choose to both increase public impact and support additional funding.

Analysis of the Case Facts

• Only two large brands: Chanel and MAC Cosmetics, are not presented at Sephora stores – was it the brands’ or Sephora’s decision?
• Before introducing Sephora’s ratings and reviews boards, there were major concerns about negative responses about products – how was this problem solved?
• Why is Sephora continuously standing against discount strategies if they work effectively for their competitors?

Omissions

• A comparative chart of profit from various platforms should have been considered in the proposal.
• Sephora’s attitude to the UGC segment on social media and YouTube should have been exposed better.

Personal Insights

I believe that the engagement to almost all online resources is admirable since it creates a consistent global image for the company, and Sephora needs to maintain it. However, choosing social media as the primary promotion device has lower production costs and simplifies impact evaluation. From my personal experience, customers become more engaged in communication with brands through the familiar interface of social networks.

Validate Analysis

• Sephora is a large offline and online cosmetics retailer promoting on multiple platforms.
• The company effectively utilizes various interactive tools to engage the audience.
• The company’s services emphasize frequent purchases and prioritize regular customers.
• Online resources need to be prioritized in order to develop a consistent marketing strategy.
• Additional funding to online marketing is reasonable due to high profits.

Emphasize Marketing Through Social Networks

PROS

• The campaigns would not require additional platforms, websites, or applications; maintaining an account is free of charge
• Easy to evaluate impact through likes, reposts, comments, and followers count and compare it with competitors
• Customers are more likely to interact with the brand using their already existing accounts and pre-downloaded apps
• Potential expansion of target audience with younger customers
• Increased performance and constant presence in customers informational field
• Additional opportunities to support UGC

CONS

• Lack of user evaluation system
• Absence of tools to control loyalty program.
• Difficulty in calculating the direct impact on sales
• Potential loss of older customers who are unfamiliar with social networks

Emphasize Marketing through Youtube

PROS

• More comprehensive, detailed promotion of particular products
• Possibility to demonstrate company’s competence
• Public excitement and brand recognition rising naturally through Youtube trends
• Opportunities to collaborate with independent creators

CONS

• Larger amounts of content needed
• High production costs for each individual video
• Potential conflicts with independent creators who might have strongly negative opinions
• Possible identity and ideas crisis for company’s channel

Emphasize Marketing through the mobile application

PROS

• Access to the loyalty program and user evaluation system is attractive while purchasing
• Personalized offers and recommendations would increase sales
• Opportunities for customers to instantly learn product information will raise brands’ credibility

CONS

• Additional promotion of the application is needed
• Customers are less prone to download and keep a specific app to communicate with the store
• High production and maintaining costs, constant need of updates and improvements
• Potential negative response from Android users (if decided not to optimize the app for that platform)

Ultimate Decision

Emphasizing online marketing through social networks is an excellent opportunity to raise the company’s performance and brand recognition with cheaper resources and, at the same time, to evaluate the success of each campaign constantly. The recommendation of Bornstein should include the comparative chart of production and promotion costs for each strategy focusing on the ultimate profitability of social media marketing. Additionally, with familiar interfaces, the interaction between customers and brands is likely to increase, as well as the overall number of customers. The proposal should mention that extended funding will be able to cover quantitatively more promotions on social media and help to establish a consistent presence in the customer’s informational field.

Reference

Ofek, E., (2012). Sephora Direct: Investing in Social Media, Video, and Mobile. Harvard Business School, Case 511-137. Web.