Boots:

Hair Care Sales Promotion

IVEY Business School Case

Prem Prakash Dewani, Ph.D. (IIM A)

Marketing Professor, IIM Lucknow
What is Boots?
Who is
Dave Robinson?
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 Who are the Players?
Dave Robinson
o Marketing Manager at Boots Group
PLC

Boots: Hair-Care Sales Promotion

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What is the present
situation?
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 Situation Analysis
Dave Robinson was planning sales promotion strategy
for a line of professional hair care products at Boots

His challenge was to select one of three promotional

alternatives- “3 for 2”, GWP, on pack Coupon worth 50p

The alternative he selected would have immediate

effects on costs and sales volume, but also long
term applications for the brands involved

Drive sales volume and trade up consumers from

lower value brands while retaining brand equity

Prof. Prem P. Dewani, http://www.BuddingMarkets.com

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Why study this
case?
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 Objectives of this Case
To examine strategic and financial issues related to price
promotions

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We will focus on the
analysis of the
THREE given
alternatives
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 Three Options

1) Get three for the price of two(“3 for 2”)

2) Receive a gift with purchase (GWP)
3) On pack coupon worth 50p

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No Promotion
(Status quo)
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 Product
Consider 3 products made
by the same brand:
• Shampoo
• Conditioner
• Gel
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 Prices
Retail Prices if there are no
promotions:
• Shampoo: £3.99
• Conditioner: £3.99
• Gel: £2.99
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Margin, Marginal Cost

Margin = 40%
Marginal Cost
= 60% of Retail Price
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 Marginal Cost
Shampoo Conditioner Gel
Retail Price £3.99 £3.99 £2.99
Cost(60%) £2.40 £2.40 £1.80
Margin £1.59 £1.59 £1.19

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 Marginal Cost

• Shampoo: £2.40
• Conditioner: £2.40
• Gel: £1.80

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 Assumption
If no promotion is run, we
assume that an equal
number of bottles of
Shampoo, Conditioner, Gel
will be sold.
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 Sales (If no promotion)
For simplicity, assume the
sales are:
• Shampoo: 100 bottles
• Conditioner: 100 bottles
• Gel: 100 bottles
=> Total: 300 bottles
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 Timing
Consider two time periods:
• December (Any 1 of 3 promotions
may run)
• January (No Promotion)

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 Profit/day (December)
Shampoo Conditioner Gel
Margin £1.59 £1.59 £1.19
Sales 100 100 100
Profit £159 £159 £119

Total Profit = 159 + 159 + 119 = £437

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 Profit / day (Dec, Jan)

Profit (Dec) £437

Profit (Jan) £437

Total Profit £874

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3 for 2
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 3 for 2 - Margin
Shampoo Conditioner Gel Bundle
Retail Price £3.99 £3.99 0 £7.98
Cost(60%) £2.40 £2.40 £1.80 £6.60
Margin £1.59 £1.59 £-1.80 £1.38

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 Effect on Sales
Sales per day increase to
300% of pre-promotion
sales during the deal period
(i.e. December)

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 3 for 2 – Sales in December
Shampoo Conditioner Gel Bundle
Sales 300 300 300 300

300 bundles are sold at 3 for 2

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 Effect on Sales
60% of the increase in sales
would be to customers who
would not otherwise have
purchased a hair-care product
from Boots during the
promotional period.
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 3 for 2 sales in December

Sales = 300 bundles

Incremental sales = 300-100 = 200 bundles

New customers = 60% of 200 = 120 bundles

Stockpiling = 40% of 200 = 80 bundles

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 Sales in January
Stockpiling = 80 bundles
(because of December promotion)

=> Sales in January are reduced by 80*3

bottles of shampoo, conditioner, gel

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 Sales in January
Shampoo Conditioner Gel
Sales 100-80=20 100-80=20 100-80=20

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 3 for 2 – Profit in December
Bundle
Sales 300
Margin £1.38
Profit: £414

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 Profit in January
Shampoo Conditioner Gel
Margin £1.59 £1.59 £1.19
Sales 20 20 20
Profit £31.80 £31.80 £23.80

Profit in January = 31.80 + 31.80 + 23.80 = £87.40

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 3 for 2 - comparison
December + January
Profit under 3 for 2 £501.40
Profit (No promotion) £874

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 3 for 2 – Strategic Issues
• Brand Image: Price-based promotion
may cheapen brand image

• Sampling: consumers may select a hair-

care product they would not otherwise
try

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 3 for 2 – Strategic Issues

• Competition: cannot be directly imitated

• New Customers: 60% customers, (likely

new to the brand), who would not
otherwise have purchased hair-care
products during the period from Boots
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 GWP
(Gift With Purchase)
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 GWP
Customers got a product
sample along with a regular
purchase.

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 GWP Cost

Cost: £0.90 for the sample +

£0.03 to secure the sample

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 GWP Sales
Sales per day increase to
170% of pre-promotion
sales.
40% sales will come from
new customers.
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 GWP - comparison
December + January
Profit under GWP ?
Profit (No promotion) £874

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 GWP – Strategic Issues
• Packaging: Involve operations to attach
the samples to the featured product

• Advantage: Slower competitive

response
• Disadvantage: Lead time and planning

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 GWP – Strategic Issues
• High Cannibalization & Stockpiling:

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On pack
Coupon
(50p off) 48
 On pack Coupon – Strategic Issues
• Brand Image: Price-based promotion
can cheapen brand image

• The promotion is not novel within a very

crowded competitive environment. It is
less likely to “break through the clutter”

• Competition: Can be easily copied

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Best Option?

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 Comparison
Decision Matrix
Option 1 (3 for 2) Gift with Purchase Pack Coupon
Brand Dilution High Medium High
Immitation by
Competitors Medium Medium Very High
Brand Exposure to
New Customers High High Low
Additional Setup
Required No Yes No
Cannibalization Medium High Medium
Effectiveness Medium Medium Low

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