Case Study: Lush Cosmetics
# What is meant by the term “target market”? (2m)
The target market is the selection of people that the business wishes to sell their products to. They try to tailor their offerings to that demographic.
# State two examples of behavioural segmentation included in the article (2m)
- Celebrity purchases are noted on the website, so people who like to follow celebrities will be more likely to buy from Lush.
- They also focus heavily on freshness and authenticity of their products, meaning that people who look for quality will be more attracted to their store.
# Analyse two reasons why Lush introduces new products every three months. (9m)
Customers come to Lush because their products are fresh, if they offered the same products constantly then the range would become stale. This would psychologically impact the customers, making them feel that Lush wasn’t being fully fresh. By using fresh ingredients and changing their range up frequently, they can counter this.
Also, fresh ingredients means that products have a short shelf life otherwise they would risk damaging their reputation. This would result in them having to have a short production chain and a quick product turnover in their stores. Therefore, changing their actual products helps to keep things fresh without having much of an impact on their production.
# Analyse two reasons why Lush might have decided to open its own shops when it re-launched the business in 1994? (9m)
Lush is “iconic”, their stores are unlike any others. You can smell their stores from a distance, which makes them noticeable. If Lush sold their products in other company’s stores, such as a supermarket, they would not be able to utilize such a marketing method. Also, people tend to consider the ethics of the store they are in more that the ethics of the company producing the product that they are buying. By running their own stores, Lush can take their core values such as freshness and reinforce them by designing their stores around their business.
Also, running their own shops would provide them with greater control over every aspect of their business. When they were selling through The Body shop, they were completely dependent on The Body Shop for all sales. If The Body Shop decided to stop stocking their products, they wouldn’t have anywhere to turn. However, if running their own stores they would have greater control. Nobody would be able to cut them out of their own business.
# Lush uses market segmentation in its planning. Evaluate the usefulness of market segmentation in segmentation in enabling Lush to make large profits. (16 marks)
Lush utilizes market segmentation to help them focus their product development efforts on the correct target audience. By splitting the market in which they operate into segments, they can identify the people who are most likely to buy their products and ensure that they are meeting all the requirements of these customers. In this sense, the use of market segmentation is a good thing for Lush. However, when they focus solely on certain market segments they may alienate some of their customers.
However, the risk that some customers will be excluded may be a worthwhile risk for Lush as they will be able to ensure that they stay focused on their core audience, which will allow them to retain their main customer base and provide a higher quality service to their consumers.
Lush achieves high profits through their market segmentation planning by finding quality selling points, such as fresh and natural ingredients, which they then use to make their high markup a reasonable purchase for their target market, which consists of people who are willing to spend more to get a product that ticks these boxes. Because Lush is operating in a fairly niche market, they don’t have a huge amount of competition either, which allows for them to take more risks when it comes to new products, and allows them to continue growing their market share.