Case Study

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Lawson Cosmetics Case Study MKTG 605: Case Study #2

Jason Ryan, PhD

Lawson Cosmetics wants to make a big splash with a new global branding initiative. What should

headquarters do when a country manager says his market will never go for it?

ROWINA GUPTA was amused to see almost every guest at the black-tie gala sporting the same futuristic

sunglasses. It was past 10 PM in Los Angeles, and the party to celebrate the release of the summer's

most anticipated movie, The Grid Revisited, was heating up. Earlier that evening, a select audience had

watched the long-awaited sequel to the 1998 blockbuster The Grid, and the scene-stealers had once

again proved to be the lead pair's eyewear. In fact, there had been a near stampede when the invitees

realized that each of the goody bags of TGR memorabilia contained a pair of the new shades, designed

by the legendary Tom Strider.

Gupta, the executive vice president and global marketing officer of one of the world's best-known

cosmetics companies, $1.1 billion Lawson Cosmetics, rarely found the time to attend such events. When

she wasn't visiting one of the 75-odd countries where the company marketed lipstick and nail polish, she

liked to spend time with her husband and 12-year-old daughter. But her friends at Supreme Studios,

which had produced the blockbuster, had insisted that she should attend, along with Lawson's chairman

and CEO, Ed Johnson -- and Tasha knew why.

Just as she had given up hope of spotting her boss in the melee, she heard his deep baritone behind her.

"There you are. I knew I'd eventually find you," Johnson called out. As she turned to greet him, Gupta

was surprised to see Johnson triumphantly brandishing a pair of Strider shades. Noticing her expression,

he chuckled. "My son, who's studying Spanish in Peru this summer, wanted them. You gotta hand it to

this guy Strider, eh? He's got a global cult following for his product, thanks to some sci-fi movie,"

Johnson said as he looked around the crowded ballroom.

Gupta couldn't have asked for a better cue. She grabbed two flutes of champagne, handed one to

Johnson, and determinedly steered him to a deserted alcove." Ed, I want to bounce an idea off you, and

it can't wait. I started talking to some people at Supreme Studios six months ago, and they've offered

Lawson the cosmetics sponsorship for the second Diana's She Devils movie."

"Is that why those folks were so keen to have me come here tonight?" asked Johnson, his eyebrows

shooting into his hairline.

"They'd want you here anyway, I'm sure. But it's true they're looking for a decision. And I'd love to ink

the deal soon" replied Gupta enthusiastically. "Diana's She Devils was a hit two years ago, and our

research suggests that the sequel will probably be an even bigger draw. There are more romantic

elements in it, by the way. Most important, I've seen the studio's publicity plans. They're huge. And we

can associate Lawson's new summer line with the release all over the world."

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"We've been offered deals like this in the past," Johnson pointed out. "But we never thought it was

worth the money. And particularly if it's only our summer products range--"

"Here's why I think it's right for us now," Gupta cut in. "First, we should be doing something splashy --

next year is our 50th anniversary, after all. Second, this is an ideal vehicle to launch a global brand-

building strategy. Think about it, Ed. The three stars are from Europe, Asia, and South America -- our

fastest-growing markets. And they're all on board for the sequel. What if we created three new lipstick

and nail polish combinations, in the right palette for each of the three stars, and then associated the

stars with the advertising? As the film gets released in each country, we can launch the new products in

specially designed combination packs."

"And call it Lawson's anniversary line," Johnson chimed in. "Interesting. But where does the money for

the promotion and the related advertising come from? I don't think you have enough in your budget."

"I don't" replied Gupta, her nose wrinkling slightly. "But I know where to find it. I had lunch last week

with Brian Davis." She was referring to the marketing head for North America. "He loved the idea. As he

sees it, two of the stars also happen to represent big ethnic markets in the U.S., so he's more than

willing to foot some of the bill. Now I just need to get the other regions to chip in, which shouldn't be so

hard."

Johnson frowned. "I wouldn't be too sure about that," he said slowly. "If the recession in the U.S. gets

any worse, and it may, I'll have to cut marketing budgets again. In that case, the country heads will have

little left for local advertising or promotion initiatives after paying for your global promotion. They aren't

going to like that very much, and they'll blame you if they don't meet targets. If I were you, I'd check

with the regions before going any further."

"Well, I'm off next week to Europe and South Asia, so I'll sound them out in person," said Gupta, a trifle

defensively.

"Good" said Johnson, ushering Gupta back into the thick of the party. "Let's talk when you get back"

Je Reviens

As the airplane rose into the bright blue sky over Paris, Gupta's spirits soared with it. She pulled out a

laptop to write up her notes on her discussions with Jacques Dubois, Lawson's newly appointed

marketing head for Europe. Belying her apprehension, the young Frenchman had warmed to the idea of

a big movie-based promotion to mark the company's golden anniversary. He admitted that Lawson's

archrival, Revlon, had boosted top-of-mind awareness by tying in with movies like the 2002 Bond film,

Die Another Day, and he was ready to fight fire with fire.

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A flash of European pride had, however, showed itself when Gupta mentioned her wish to set up a

central Web site that would allow people to buy customized products from Lawson. She wanted to test

the initiative first in North America and extend it to Europe once the logistics were in place. "That will

not work. A Web site for European customers must have a different look and feel from the American

site. It should also have a different name if it is to appeal to them" Dubois had immediately declared.

Although Gupta had agreed to think about it, she wondered if the possibility that he could be wrong

ever crossed Dubois's mind. Now, reflecting on that moment of irritation, she couldn't help but smirk;

that must have been how she had seemed to her own colleagues back in 1994. After all, she'd been

more than a little self-confident when she took over as the company's marketing head in India. Lawson,

which sold a wide range of cosmetics and accessories, was the leading mass-market brand in North

America and Western Europe. Despite the global cachet and the pent-up demand for foreign cosmetics,

however, the company had been unable to make any headway in the competitive South Asian market.

When Gupta was being interviewed for the job in Delhi, she had been quick to point out why. "I can get

a facial for Rs 300 [$6.66] and a manicure for Rs 75 in a beauty parlor. Why would I pay Rs 120 for a

lipstick or Rs 75 for a nail polish?" she demanded. Although the comment annoyed the multinational's

top brass, they gave her the job. Those had been heady days, recalled Gupta, who had cut her marketing

teeth at two British multinationals in India after graduating from the prestigious Indian Institute of

Management at Ahmedabad. She had slashed product prices, reduced pack sizes, and used, for Lawson,

unusual retailing tactics. For instance, since there were no chains like CVS and Walgreen's in India,

Lawson had been selling its products only at the handful of department stores in the four largest

metropolitan areas. So Gupta reduced prices and sizes and made sure Lawson items were available in all

the hole-in-the-wall grocery stores in the cities and, later, even many of the towns. Lawson couldn't use

large counters in those stores, so trays of lipsticks and nail polishes were placed invitingly near the

cashiers. That was a tactic Lawson's top brass hadn't even considered. In five short years, the company

became one of the market leaders in the Indian market.

Johnson was so impressed by Gupta's performance that after three more years he offered her the newly

created position of global marketing officer. By that time, Lawson's sales were growing faster in Western

Europe, Asia, and South Asia than in North America. "We need to develop a more cohesive brand

identity by coordinating local strategies and find a way of leveraging synergies across markets," Johnson

said at the time of her promotion, about a year ago now. "You're in an ideal position to do that, because

people respect you -- but they also know you'll be sensitive to local issues. The job might not win you

any popularity contests, but I know you'll get it done."

The announcement that the aircraft was beginning its descent into Kiev's Boryspil Airport interrupted

Gupta's reverie. As she leaned forward to look down at the Dnieper River, she wondered how her old

colleague in arms, Vasylko Mazur, the head of Lawson's operations in Eastern Europe, was faring. They

had first met five years ago at a leadership training program in Los Angeles and had spent some long

evenings sampling California wines and griping about top management attitudes toward developing

markets. They had stayed in touch until recently. Gupta realized that Mazur had dropped out of sight

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after taking over as the head of Lawson's Eastern European operations six months ago. It would be good

to talk to him again, she thought as she fastened her seat belt.

An Ugly Wrinkle

Kiev was glowing green and gold at the end of a perfect summer day. The gilded tower atop St. Sophie's

Cathedral cast burnished shadows on Mykhailiwska Square, a short distance from Lawson's offices. But

neither Gupta nor Mazur noticed. They had been at each other's throats from the moment she broached

the idea of a global promotion.

"Vasylko, you are being entirely unreasonable," said an exasperated Gupta.

"Me? Or you?" retorted Mazur, puffing furiously at the cigarette that never seemed to leave his lips.

"Tasha, you don't realize how different Eastern Europe is from the rest of the world. Movie-based

promotions won't do anything for my sales. We are in the beauty business, not the movie business." He

tried again to convince Gupta that appointing beauty queens like Miss Russia and Miss Ukraine as brand

ambassadors would strike a chord with customers in Eastern Europe. Not only would it be cost-effective,

it would also allow Mazur to create a contest-based promotion. "Customers will write in with

suggestions for new colors, each beauty queen will pick her favorite, and there will be lots and lots of

prizes. You, of all people, should know what I'm talking about," he said pointedly.

Gupta winced. Her rows with Lawson's headquarters were part of company folklore. She had insisted on

launching nail polish in eight-milliliter bottles (price: Rs 35) in India rather than the standard 12-milliliter

bottles (price: Rs 75). That would encourage customers to sample, she argued, and allow Lawson to take

on the local market leader, which sold a 12-milliliter bottle for Rs 30. "You do know that we have sold

our products in only one size all over the world," she had been told initially. The next year, Gupta had

insisted that Lawson create a range of products in purple because that had been the rage in traditional

Indian dresses like the sari and the lehnga that year. The palette was alien to Lawson, which usually

stuck to beiges and reds, but it did wonders for the brand in India.

"Vasylko, you are being unfair. First, I did all that ten years ago," argued Gupta. "It was a different world

then, and India was different, too. Second, I've stayed away from beauty contests because they are off

brand. The Lawson woman is smart, independent, a risk taker. She doesn't identify with pageant

queens. Third, I've chosen colors for the global promotion that will work in Eastern Europe. If you won't

believe me, test market them yourself, and I'll be receptive to any changes you can show me we need."

"You should hear yourself talk," scoffed Mazur." Do you remember how we used to mock HQ, saying

how little it knew of our countries? You now sound like an HQ person, who can only see the logic of

creating a global brand, using a global campaign, and sticking to a global positioning. Very little of that

works here! You must let me handle the market the way I think best. Did a global strategy work for you

in India? If it didn't, how can you try to sell me one now?"

"Because a global strategy can work, in India and in Eastern Europe, tool," Gupta shot back. "Do you

remember Operation Second Coat, which I spoke about at our annual conference three years ago? We

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had to launch global colors in India because our customers started asking why they weren't available.

We used those products to segment the market and shifted many customers from a less expensive local

line to a more expensive international range. By the time I left, we

were increasingly using global ad campaigns. I'll admit we modified them sometimes, but they were

essentially--"

"That's not what you used to say," Mazur interrupted, grinding his cigarette into an overflowing ashtray.

"In any case, I want no part of your global promotion. It smacks of a narrow vision, and there is no scope

to adapt it for this market. Moreover, the promotion will eat into my marketing budget, and I cannot

afford that. I need to be quick, tactical, and responsive to local needs, and your templates and rules

about standardization only slow me down. I will worry about being in sync with the global brand after

Lawson has become the market leader in Eastern Europe."

Cosmetic Differences

The weekend at her parents' farmhouse on the outskirts of Delhi was a welcome break for Gupta. Family

gossip relegated the tensions of Kiev to the back of her mind and helped her recover a little from jet lag.

As she walked briskly into the glass-and-concrete tower that housed Lawson's India office in the city of

Gurgaon, near Delhi, on Monday morning, Gupta literally bumped into Ravi Narayan, who had taken

over from her as the head of South Asia marketing. "Good job on the signage at the airport, Ravi," she

said enthusiastically. "I saw the new backlit signs at JFK and Charles De Gaulle, and it's great to see them

at Indira Gandhi International too. How are we doing?"

"Not badly," Narayan replied as he escorted her to the 20th-floor conference room that served as

Gupta's office when she was visiting. "Our market share rose by two points last quarter. However, the

market isn't growing as fast as I thought it would. In addition, competition is getting stiffer since several

Asian brands have launched theft products in India in the last six months. Local brands are offering large

discounts, and direct marketing in cosmetics is catching on. It's a cruel market."

"Is that putting pressure on prices?" Gupta asked immediately.

"No," replied Narayan. "We've managed to hold prices until now. In fact, our premium line is doing quite

well in the metropolises. Many more department stores have opened in the last 12 months, and that

has eased the retailing bottlenecks."

"I was amazed to see two more department stores in this area since my last trip," agreed Gupta. "I went

to one over the weekend and felt I was already back in L.A. Almost every big American brand seems to

be available here now."

Narayan laughed. "That's nothing, Tasha" he said. "You should see how things are changing beyond the

big cities. A couple of months ago, I went on a market reconnaissance trip to Chandigarh and decided to

drive the 260 kilometers there. I couldn't believe my eyes. All along the way, I saw farmers using cell

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phones, there was an Internet café every two miles, and rooftops were crowded with satellite television

dishes. Almost every town I drove through had billboards for Cosmo, Elle -- or Friends!"

"What does that mean for us?" asked Gupta, all ears now.

"I suspect consumer habits are changing faster than we imagine," replied Narayan. "I stopped at a gas

station in the small town of Shahabad and checked out a nearby grocery store. The shop counter was

full of trays containing cosmetics, and I counted at least three local brands and two global brands,

including Lawson. Two teenagers were looking for a nail polish but couldn't find what they wanted. They

kept asking for the latest color that they had seen advertised on an English serial the previous evening.

The shopkeeper had to promise to order it for them before they would go away. What struck me later

was that not once did the girls ask how much the latest nail polish would cost."

"I guess the cost-benefit equation in towns works closer to the way it operates in cities today,"

suggested Gupta. "All our customers want to be, for want of a better phrase, with it. Earlier, the point of

reference used to be the nearest big city; it's the world now. Don't forget that the 100-odd satellite

television channels we receive in Delhi are available in small towns, too. The Internet allows people to

access information about the rest of the world from anywhere. People are traveling abroad much more

than they used to. That's why I've believed for some time that we can afford to be more global in our

approach to markets like India."

Narayan shot Gupta a wary glance. "That's tricky. A global strategy will resonate in India in some cases,

but I doubt if we will be able to do away with local marketing initiatives. There are large income

differences in India, and it all depends on the market you want to tap. Moreover, it's tough to overcome

cultural differences. You've lived in the U.S. for over a year, but that's tea you're drinking -- not coffee. In

any case, what do you have in mind?"

Hope Springs Eternal

Three days later, Gupta walked into Johnson's penthouse office suite in Lawson Tower in downtown Los

Angeles. She handed him a box of the champagne-filled truffles from Paris that he loved.

"That means trouble," groaned Johnson in mock despair. "By the way, the Supreme Studios people have

been hounding me in your absence." He popped a chocolate into his mouth and commanded: "Talk."

"I've had mixed reactions to the global promotion. Dubois was supportive, Mazur hated it, and Narayan

was willing to give it a shot," Gupta reported.

"Really?" Johnson asked. "I thought India would be the least interested in a Hollywood film-based

promo. Aren't Bollywood films more popular there?"

Gupta snorted. "Last year, Bollywood had just one hit while Hollywood had six hits at the Indian box

office. SpiderMan, Harry Potter, Lord of the Rings, et cetera, et cetera, et cetera--they all made more

money in India than Bollywood productions."

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"Interesting," said Johnson. "What's changed?"

"For one thing, the international studios have improved the dubbing of English movies in local

languages," Gupta explained. "And import regulations have eased, so films can be released in India a lot

faster, sometimes within days of the U.S. release. Basically, people like good films regardless of where

they're made. So tying in with the Diana's She Devils project makes sense for India -- and most of our

other markets, too."

"But not everyone agrees?" asked Johnson.

"No," sighed Gupta. "And of course I see why. Every country head believes his or her country is unique.

And it's risky for them to pin their hopes on a global promotion when they've never done so before. But

what's the point of doing business in a global marketplace if we don't leverage the opportunities that

globalization presents?"

"Let me play devil's advocate for a moment. Most companies I've seen try global game plans have failed

at them," cautioned Johnson. "The global tactics tend to either over-standardize or oversimplify, and

they discourage local innovation. What's more, I'm not sure our brand has the same image all over the

world. Why should we waste money on a global campaign that may end up confusing our customers?"

"We will save costs by building brands through global strategies and allowing local initiatives to drive

sales," Gupta pointed out. "Most managers concede that the quality of campaigns we produce is better

than those done locally."

"I need to see some research to prove that a worldwide initiative will save Lawson money. Barring a

handful of exceptions, I have yet to see global projects generate economies of scale," Johnson said.

"There are also organizational issues. Who will take responsibility for the success of the anniversary line

after its launch? You? Or the regional heads, who follow your dictates without conviction? The

promotion won't be a success if it proceeds on autopilot."

"Those issues can be worked out. In fact, I've been meaning to talk to you about the kind of global-brand

team we need to have," said Gupta. "But we should go ahead with the movie tie-in. At best, it will

reinforce the brand's equity. At worst, we will learn some lessons about where global promotions don't

work. Since the initiative will boost sales in North America at least, what do we have to lose?"

"Vasylko Mazur, for one," said Johnson somberly. "After your visit to Kiev, he wrote to me. He's pretty

upset at the prospect of our trying to control his marketing strategy."

"Are you saying he's threatened to put in his papers?" asked Gupta, startled.

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"It was more than implied. But look, I only mention it because it raises the larger issue. How hard should

we be pushing a global strategy?"

Should Lawson Cosmetics take its new branding initiative global? Should Rowina Gupta press forward

with her plans?