SEPHORA DIRECT CASE STUDY 6
SephoraDirect Case Study
SephoraDirect Case Study
Theallocation of the funds to different marketing categories is done inthe budget, but the case presents a preference of some sections.Particularly, Julie Bornstein, the senior vice president preferslarger allocation to the category of social media and digitalmarketing. According to Bornstein, social media should get double theamount it was allocated in the budget (Ofek& Wagonfield, 2012).If she gets the additional funding, Julie Bornstein she shouldallocate funding to various digital categories according to theirmarket value. She can do this by ranking them according to the addedvalue they bring to the company. This will help the company tounderstand the return on investment for every section of the digitalmarketing platforms.
Amongthe categories social media, mobile platforms and videos, the threehave different results in terms of sales results. To distribute thefunds to the digital categories, Julie Bornstein has to know whichdigital category gives the company higher marketing results. Thisway, she can convince the organization to focus on the digitalmarketing. However, the main problem that she will face is how toquantify the value added by each category to the marketingperformance of the company. For instance, it would be challenging todetermine the market value of social media, especially when thecategory does not result in direct sales orders. Similarly, thecompany will be challenged to determine the quantity value of all theother digital marketing categories compared with traditionalmarketing.
Tofinance this increased spending on social and digital marketingfunction, other marketing sections will have to experience marketingcuts. The sections that should receive budget cuts should be thosethat present low return on investment for the company in terms ofmarketing results. One of those that can receive budget cuts isonline advertising. According to Ofekand Wagonfield (2012),the current online advertising has $7 million in budget allocation.This can be reduced to direct the reduced allocation to social mediato meet the demand by Julie Bornstein. It is the most rationalreduction to do since online advertising involves one section whilesocial media is combined with mobile and video, which only receives$1 million.
Inaddition, the section of email marketing could receive the budget cutin order to finance the additional cash requirements in the socialmedia. According to the company’s budget, email marketing hasreceived a high budget allocation. Some of this allocation can beredirected to social media, video and mobile platforms that arepotentially viable for the company. With increased use of socialmedia platforms, people are changing their use of emails to the useof social media messaging. In addition, social media will reach morepeople that the company has no experience within the email platforms.Moreover, the use of mobile platforms of marketing through the use ofthe Sephora mobile app reaches more people compared to traditionalemail marketing.
Asof the fall of 2010, the digital and social media marketing effortsof the company are successful. The efforts of the company to presentits products and services in the online markets have paid off becausethe company has improved its online presence and it is familiar withpeople. In addition, the digital marketing efforts have led toincreased rates and establishing platforms for rating. According tothe vice president, Sephora is the first business to establish amobile platform for reviews and ratings through a website (Ofek& Wagonfield, 2012).The establishment of the company’s digital platforms has helped thefirm to reach out customers and receive feedback.
Anotherfrontier where the company has succeeded is in the socialinteractions is setting of the Facebook platform in addition to othersocial media. The company has a large following of fans on Facebook,through which the company can use to interact with consumers.According to Julie Bornstein, Facebook is one of the platforms thatthe company can use to get advice from fans in relation to theirproducts as well as the competition in the market (Ofek& Wagonfield, 2012).However, in addition to the Facebook platform, Sephora has createdBeauty Talk as a separate social media platform. In an opinion, thismove is wise since it creates an alternative that will reach morecustomers. In addition, Beauty Talk provides an extended social mediaplatform where customers will find the company in a diverse manner,not just Facebook.
Despitethe ambitious digital marketing campaigns, the company should beworried of the worried about the competition in the market. In fact,it is steeper since the company faces competition from three arenasdepartmental stores, single-brand beauty stores and the multi-brandspecialty stores. At the level of multi-brand specialty stores, themain competitor that should worry Sephora is the ULTA Beauty.Currently, ULTA Beauty has coverage of 400 stores in the UnitedStates, including serviced salons (Ofek& Wagonfield, 2012).Another competitor includes the general multi-brand specialty storesand online sites that sell beauty products. A good example is theAmazon.com and Beauty.com that have a specialty in selling similarproducts. Moreover, the company should not ignore the competitionfrom small sites that sell beauty products.
Asstated, it is challenging to measure the results of the digital mediato the general performance of the marketing function of the company.However, Sephora Direct should adopt a number of metrics to measurethe success of its digital efforts. First, the company should use thesales levels to measure the value that digital marketing is added tothe total sales of the company. This can be done by comparing thepast sales volumes with the current sales after introducing thedigital marketing efforts.
Additionally,the company should use the cost of sales levels to evaluate theimpact of its digital marketing efforts on reducing costs. This canbe done by comparing the total marketing costs before the digitalefforts with the costs after the digital marketing campaigns. Thisway, the company will understand the results of the digital marketingefforts in both the cost side and the revenue side. It is importantbecause the digital efforts may result in either reduced costs orincreased revenues.
Thestrategic goal of the digital and social media marketing for SephoraDirect should be focused on two targets. First, the goal should be toincrease sales and reduce marketing costs. Through increased salesand reduced costs, the company will increase its profitability andprovide financing for expansion. Secondly, the strategic goal of thecompany should be to outdo the competitors by establishing aconsistent presence in the digital and social media. To satisfy theCEO’s desire for digital space dominance, Bornstein shouldcontinue to implement the social media campaigns. This will make thecompany more familiar with consumers to the level that competitorswill require high marketing capital to match the level of SephoraDirect. Therefore, the long-term benefits of the company will bedomination the market gained by increased marketing and digitaldominance.
Ofek,E., & Wagonfield, A. B. (2012). Sephora Direct: Investing inSocial Media, Video, and
Mobile.HavardBusiness School. 9-511-137, Rev June, 2012