Why L'Oreal's Jean-Paul Agon Believes He Is on the Winning TeamPublished: March 30, 2005 in Knowledge@Wharton
Before the Wharton Marketing Conference's afternoon keynote address even began, the stage was set for Jean-Paul Agon, president and CEO of L'Oreal USA. L'Oreal gift bags - full of L'Oreal brands ranging from salon and luxury products to cosmetics - balanced on the edge of every chair. Introduced as a "marketing pioneer" responsible for "innovative and high-performing" techniques, Agon responded by noting that "when I was a young student in a French business school, it was my dream to one day be able to go to Wharton. Thank you for making this dream come true today, even if it's not really the way I had imagined it."
L'Oreal is the world's number one beauty company, with 17 global brands and sales in 2003 of $3.8 billion. As part of Agon's description of the company's marketing efforts, he presented what he called "The Five Elements of the L'Oreal Strategy." They include:
· Acquiring and sustaining a unique beauty expertise
· Believing in the science of beauty, recognizing that beauty is "science in a jar"
· Maintaining a strategic portfolio of brands
· Adopting a "global or nothing" strategy for all brands
· Hiring talented, diverse and passionate people to work in the company.
Regarding the first element, Agon said the company's "unique expertise of beauty" exists because "we know beauty very well, we believe in beauty, and we also think that beauty is different from any other industry."
Since L'Oreal was founded in 1907, the company has concentrated only on the development, manufacturing, and distribution of beauty products, Agon noted. "We believe that beauty has always played an important role in people's lives ... We believe that by enhancing the well-being, the satisfaction and the self-esteem of people, we help them have a better and happier life."
And when it comes to marketing beauty, Agon insisted, the process is unique. "Beauty is not like other fast-moving consumer goods categories: food, detergents, paper products, etc. Beauty is not about just responding to consumer needs. It is about transforming dreams into reality. It is about creating and inventing satisfactions, emotions, pleasures, well-being, self-esteem and ultimately moments and reasons for happiness. Beauty is about creating products that people will want and desire, not just need."
In marketing beauty, Agon said it is critical to develop brands that have strong emotional connections with consumers. "I personally believe that marketing for beauty is an art. It goes beyond the usual and rational marketing. The marketing we do at L'Oreal is a unique combination of intelligence and emotion, reasoning and intuition, rigor and sensitivity, details and visions, dreams and reality. The yin and the yang, always. It is fascinating - quite exhausting - but really fascinating."
Second, Agon emphasized, is the "science of beauty. This may sound strange to you, because when you think of science you may think of industries like computers, aerospace, drugs, etc. It is also true that for some people, beauty is not something serious; it is more like 'hope in a jar,' as Charles Revson, the founder of Revlon said 50 years ago. At L'Oreal, we believe exactly the opposite. We believe that beauty is 'science in a jar.' We believe that to be successful in beauty it is all about science and technology, because we believe in quality."
Agon noted that L'Oreal was founded by a scientist named Eugene Schueller who invented the first modern hair dyes. Today, the company employs nearly 3,000 scientists in 10 research centers in Europe, Japan and the United State, invests 3% of net sales in R&D, and registers more than 500 patents a year - "more than all of our competitors. Our objective is simple: We want to dominate the technology battle to increase our leadership. This is also why we manufacture 95% of our products in our own plants in order to perfectly control their quality and insure the confidentiality of our formulas."
There are two reasons for that, Agon added. First, "we firmly believe that consumers are clever and that they always recognize quality and superior performance." Second, "innovation is absolutely critical ... We have always known that we had to have the best research and development to win the battle of technology. If consumers are ready to switch for better quality, we have to be able to permanently innovate, to constantly invent products that are new, different and better and that consumers will want to try."
The third key element in the L'Oreal strategy is the company's portfolio of brands, "imagined and created by the mastermind of L'Oreal, our CEO, Lindsay Owen-Jones," said Agon. This portfolio of brands reflects "several fundamental ideas that define the L'Oreal strategy." For example:
· The company has very few brands - only 17 - but all are marketed and are available globally.
· Brands are organized by distribution channels, and the brands are "absolutely exclusive to each distribution channel: professional products brands to hair salons; consumer product brands to retail stores including drug stores and food stores; luxury products brands to specialty stores and department stores; and active cosmetics brands to dispensing dermatologists and pharmacies.
· Inside each distribution channel, the brands are positioned according to a segmentation based on price and image positioning following a very clear strategy.
· Last, but not least, the portfolio of brands is very diverse in terms of brand origin, with the objective of offering consumers anywhere in the world a choice between diverse visions of beauty. For example: a European vision of beauty with brands like L'Oreal Paris, Lancôme or Giorgio Armani; an American vision of beauty with brands like Matrix, Redken, Ralph Lauren, Kiehl's, Maybelline or Soft Sheen-Carson; an Asian vision of beauty with the Japanese brand, Shu Uemura or the new Chinese brand, Yu Sai Kan.
When it comes to L'Oreal's fourth marketing element - "global or nothing" - Agon said that at L'Oreal, "we have made the choice of being global and we are executing the plan without compromise ... Our brands are all global. Consumers can find our brands and our products almost everywhere in the world. There are presently 193 countries on this planet. Some of our brands, like Lancôme, are in more than 160 countries, many others are in more than 130. When we make acquisitions, we don't compromise this rule. We acquire only brands that are already global or can become global, or local brands that will be merged with existing global brands. (There are) no exceptions."
Moreover, Agon added, "all of our brand strategies and product launches are conceived to be truly global. The brand strategy is absolutely identical everywhere in the world. It is a rule. And the products are created to be global, (which means) one name, one concept, one formula, one packaging, and one communication worldwide."
L'Oreal's fifth and key marketing strategy element - "the real secret weapon of L'Oreal," according to Agon - is its employees. "At L'Oreal, we believe that the most important assets of our company are the individual talents of the members of our teams. Other companies, some of our competitors, believe more in the importance of the organizations and the processes. Not us. We are not crazy about structures and processes. But we are crazy about talents. I, personally, believe that it is all about talent. All forms of talent for all disciplines: finance, sales, manufacturing and especially marketing. I simply believe that it is like any sports team: By having the best talent on your team, you win."
Agon also believes that a winning team must be diverse and passionate. "We believe diverse teams are more creative, more open-minded and more productive. We believe that it is by bringing talents of different genders, different origins, different ethnicities, different nationalities and different profiles, by creating what Lindsay Owen-Jones calls 'a united nations of beauty,' by being truly 'global from within.' that we will succeed.