Leveraging Data Analytics to Transform Cosmetic Industry Challenges

Introduction

In the spring of 2021 Mir Meridian and a Fortune 500 Cosmetics Brand (referred to here as "the Client") collaborated on a project aimed at revamping the Client’s international presence. For more context, the Client is a pioneer in the skincare segment, notable for early adoption of e-commerce and innovative digital engagement strategies. Growth strategies helped the Client grow their market presence away from France and into the United States However, by the mid 2010’s brand growth and penetration had stagnated despite historical successes. Even more recently, economic shifts necessitated a reevaluation of their market approach, particularly in North America and emerging international markets.

The Client faced several key challenges that were discovered in conjunction with market studies provided by Mir Meridian. Though numerous, the biggest problems facing the customer were as follows:

• A significant decrease in sales due to shifting consumer preferences and economic conditions.
• High inventory levels due to misaligned production forecasts and actual market demand.
• The need for rapid adjustment to marketing strategies without the high costs of traditional consumer research.

The main goal of Mir Meridian’s work with the Client was to address three key problems facing the company, after a thorough internal assessments, customer outreach, and independent research, Mir Meridian proposed to the Client that the following three strategies could be married with supporting sales, product, and marketing data to ensure that data driven decision making could take place as the Client expanded their global footprint.

Understand Demand in North American Markets.

While the Client had a great understanding of what their own customers were purchasing, there was a disconnect between what their customers wanted and what the broad market wanted. In other words, a lot of their merchandising, marketing, and pricing models were not fully capturing a large swath of consumers in the North American market.

Decode Consumer Behavior

In addition to lacking clarity on product demand, the Client was also doing a poor job at understanding trends to forecast future sales in critical markets. Loyalty programs, freebies, in store displays, online rebates, and other perks were not completely in line with their store experiences or with the wants and needs of younger consumers in the Americas. Furthermore, though marketing would often convey product usage one way, influencers on social media often used products in different or innovative ways that were not anticipated by the Client’s own marketing or merchandising team.

Enhance the Brick-and-Mortar Customer Experience

While the vast majority of shopping that the Client saw was done online, many customers still wanted to try first time purchases in person. However, stores were geared towards purchases of many different products and had become bloated with inventory that was running the risk of becoming stale.

Implementation & Insights

After completing the initial discovery phase, Mir Meridian and the Client started the lengthy task of analyzing data spanning ten years, focusing particularly on the last two years. Mir Meridian’s biggest task was to distill data from multiple sources, including internal NPS figures, loyalty consumer surveys, and other data that had been accumulated by the Client. Additionally, Mir Meridian and the Client relied on data from Nielsen’s, Thomson Reuters, and proprietary marketing research focused on customer LTV, acquisition costs, marketing ROS, and NDR/GDR. Using this approach allowed for a deep understanding of:

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• Consumer demographics and preferences.
• Product strengths and weaknesses directly impacting sales.
• Competitive landscape and how the Client's products compared.

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Insights included:

• Verification of customer segments using advanced linguistic analysis.
• Detailed feedback on product attributes that resonated well or poorly with consumers.
• Strategies for inventory adjustment and product development based on direct consumer feedback.

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The insights from the initial discovery phase of the interaction helped to create a foundation for further analysis focused on demographic analysis, further historical data utilization based on the relevant customer demographics, and product preferences in target customer segments.

Demographic Analysis

Mir Meridian created an innovative approach to analyze demographic data across a variety of different segments and customer/consumer touch points. This allowed us to segment customers more effectively by identifying key characteristics and preferences. For example, for purchases that were made anonymously online, Mir Meridian determined that 66% of the shoppers were female, and 34% were male in the whole population rather than just the customers of our client. This kind of demographic insight helps in tailoring marketing messages and product offerings to match the specific needs and preferences of each group.

Historical Data Utilization

Mir Meridian also leveraged 48 months of historical data to understand long-term trends and shifts in consumer behavior. This approach provides a robust foundation for predicting future trends and preparing marketing strategies that align with projected consumer shifts.

Product Preferences

After uncovering data trends in our initial analysis, we teamed up with the client to determine specific product attributes that appealed to different customer demographics. For instance, some consumers favored products due to their pleasant scents, while others were put off by products that did not perform as advertised or were overhyped by influencers online. This information became crucial for product development and enhancement.

Outcomes

Post-implementation, the Client adapted their product offerings and marketing strategies which led to A refined merchandising strategy that aligned more closely with consumer preferences, significantly reducing backstock. Increased utilization of data for decision making with new marketing campaigns or advertising avenues. On top of the revamped marketing strategy, the Client created a new innovation team focused on addressing quickly moving trends in the skincare market. Lastly, the Client understood that it had cracked a part of the North American market and decided to extend the case to continue expanding into new territories within the USA, Mexico, and Canada.

New Market Penetration

Given the results of the initial engagement, Mir Meridian began to identify products that would likely succeed in the North American markets. By understanding consumer demands and matching them with existing product attributes, the Client could optimize their new market launches. In 2021, the company wanted to enter a new market segmentation in the United States and as such, initiated a partnership with a major US retailer. The insights from our initial study helped the Client understand the local consumer preferences and product trends, which is critical when entering diverse and competitive markets like midwestern states, New England, or the South.

Foreign Market Strategy

The analysis extended to specific geographic regions, such as the Caribbean, where consumer preferences were distinctly different. For instance, Florida showed a preference for brands popular in the Southern United States, while the British Islands favored skincare products with solar protection features. With this granular level of market analysis, Mir Meridian enabled tailored marketing and product strategies that resonate with local consumers.

Optimizing Brick & Mortar Experiences

Mir Meridian continued the initial push to revamp store experiences for customers by marrying the quantitative data with qualitative results from a human centered design campaign aimed at understanding consumer and customer needs. The initial play was to provide data backed insights into how physical store experiences could be optimized based on consumer feedback and sentiment analysis. This was particularly beneficial for improving in-store customer experiences in California, leading to higher engagement and satisfaction. One of the biggest drivers of improvement was the creation of a “Nouveau Bureau” which would specifically highlight new products for customers who were curious about purchasing new products but didn’t want to do so without some kind of experimental treatment. Additionally, products in the stores were slimmed down to the bare minimum of popular products, with customers searching for more obscure products to receive a discount if they shopped online or picked up in store after shipping.

Strategic Implications

Data-Driven product development led to a deep understanding of detailed consumer preferences. The usage of this data and strategies truly allowed our Client to develop or adjust products that meet specific needs of customers and new consumers, increasing the likelihood of successful adoption. Additionally, new adoption methods pushing new products and experiences really helped to drive revenue through the brick and mortar sales channel.

The tailored marketing plan that was developed with our Client drove tried and true marketing strategies but with a twist. Our approach to customer segmentation insights enabled a more personalized and effective marketing voice that not only understood which products people of each demographic segment craved, but also understood the exact voice and verbiage necessary to make the product even more attractive. The personalization of the marketing strategy not only enhanced customer engagement, but also increased loyalty. The economic implications of this revamped strategy was staggering with a month on month growth of 30% in the Client’s loyalty program for 6 consecutive months.

Improved inventory management was a direct result of our engagement with the Client. By revamping the store experience and also pushing long tail sales to digital channels we helped the Client properly predict product success and improve their revenue forecasting models. Currently, our Client can better manage inventory levels, reducing costs associated with overproduction and storage in brick-and-mortar locations, while also expediting shipping to customers with digital orders.

Perhaps the biggest performance boost we were able to give our client was an enhanced competitive positioning. Through our proprietary research, we uncovered the key strengths and weaknesses of products relative to the Client’s competitors. A comprehensive market approach that was previously leaving potential customers by the wayside now allows our Client to strategically position their offerings in the market, focusing on areas where they can outperform and gain market share.

Conclusion

There are many approaches to revamp poor performing products and sales channels. However, by relying on data driven decision making and testable hypotheses companies can narrow down the right approaches for growing their sales channels and customer/client pipelines. Though we were working in retail for this particular project, deep dives into customer segmentation and market penetration strategies can be used by any company in the business cycle. In fact, leveraging advanced analytics for increased marginal gains can often mean the difference between a successful go to market strategy and failure. In our work with our Client this approach not only helped in understanding and meeting consumer needs more effectively but also supported strategic decision-making for entering new markets and optimizing product lines. Each industry comes with unique challenges, nuances, days to close, and product profitability. However, our approach can help bring some transparency to otherwise murky waters.

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