The Business of Powder and Paint: Part Two

Posted March 16, 2013 by Katherine Toll in Building Your Brand

In our previous episode, a seemingly innocent question was posed: Is there truly a difference between a drugstore and department store cosmetic brand?

The short answer: Yes, there is a difference between a drugstore (mass) product and a prestige (class) product.

I, of course, made our readers suffer through an industry primer on “Who owns whom”, so they fully appreciated the enormity of the question. For instance, L’Oreal corporation owns more than 15 brands including: Lancôme, Kiehl’s, Maybelline, Redken, and Yves Saint Laurent.

The only reason we care a wit about who owns a cosmetic company is to better understand who funds the research and development of the company’s products. Technological advancement and innovative “recipes” drive this hyper-competitive industry. Hence, innovation comes at a higher price. Just like the newest piece of computer technology pulls in the loot, so does a fancy new molecular delivery system in a moisturizer.

Review any of the major players’ annual reports and you’ll see the same strategic theme: Technological innovation and increased investment in research and development.

For instance, Estee Lauder’s New Advanced Night Repair holds 20 patents worldwide and was “inspired by 25 years of ground-breaking DNA research.” The Advanced Night Repair ad states, “Estee Lauder scientists now re-invent skin repair with the age defying power of our exclusive Chronolux technology.”

Why in the hell would cosmetic companies go to such extreme lengths to develop a better wrinkle cream? Easy – supply and demand. According to Estee Lauder’s Fiscal 2011 annual report, “The demographics driving our business are strong and getting stronger. Research shows that by 2015, global women’s purchasing power is expected to increase by $5 trillion and beauty is the category these consumers are most likely to spend money on after food and clothing.” TRULY amazing information, and, admittedly, I constitute one of the consumers who approach the beauty category as a top three priority for her cash expenditures.

Mass and class products resemble one another, but they possess differences that separate them from each other. Think of it this way: If you placed a piece of Godiva and Hershey’s chocolate side by side and reviewed the ingredients you’d likely find the same ones listed for each. Same ingredients equals same product, right? Nope. Three things influence the outcome: the technological advancements used, the grade (read, quality) of the ingredients, and the combination of the ingredients. Hypothetically, Godiva employs a higher grade of ingredient, so the taste outpaces that of a Hershey’s chocolate bar, even through the “recipes” might look deceptively similar.

However, let me clarify one thing for you. I rail against many of the over-packaged and over-priced “innovations” that fetch anywhere from $150 to $1500. Especially when I read the ingredients and see nothing but chemicals. If you want to plunk down that kind of money then get the damn plastic surgery and call it a day.

So, the tired and clichéd adage of “you get what you pay for” plays well for this conversation, balanced with a healthy dose of “buyer beware.”

About the Author

Katherine Toll

Katherine (Kathi) Toll possesses more than 20 years of management and consulting experience within the retail and beauty industry. Her industry experience combined with her special brand of irreverence fuels her mission to find the ‘must-have’ beauty products for Career Girls of all ages. She aspires to remind women the airbrushed perfection of the beauty industry must be tempered with a healthy dose of humor. Kathi holds a general management certification from Northwestern’s Kellogg School of Management, along with an undergraduate degree from Northwestern’s School of Communications.