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�1Golden'Gate'Universit/'|'Professor'Tsung'Hsu'|'Direct'and'Database'Marketing'Marianna'Levyash'|'Sarah'Broch'|'ChengBHsun'Yeh'|'TangBChu'Lee'|'YuBWei'Na

A Direct Marketing Makeover

Makeup You Money Marketing Consultantsby

Executive Summary!! This is a geo-targeted direct marketing plan for Benefit’s Brow Bar services in San Francisco. !

! This campaign will introduce the Brow Bar Gorgeous Rewards mobile application, which will be developed for this program. It will function as a loyalty card, a distribution system for offers and a quick and easy way for customers to make beauty appointments at their preferred Brow Bar location. This direct marketing plan has two main goals, new customer acquisition and customer retention through the use of house mailing lists, advertising and guerilla marketing in the city of San Francisco.!

! The campaign will come in four phases throughout the course of a year. Each channel will launch during the beginning of the phase. Then, each channel will cycle through each touch point, from first touch point (communication about the offer) to second touch point (follow-up about the offer if no response). !

! The specific channels included in this plan are: direct mail, email, direct response radio, social media, and flyers. For each media channel, we will provide a 20% discount for new users and reward points for existing users through the mobile application to redeem for products and beauty services each time a Gorgeous Rewards customer gets a brow service at one of our locations. This will continue to drive customers to the store, keep customer retention, grow customer loyalty, and encourage consumption of both Benefit’s products and its services.!

! We will continuously check outcomes and monitor our KPI’s to ensure that our campaign is performing efficiently and we are getting the highest ROI. !

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!!Executive Summary! 2! Introduction! 4! Company Background! 4! Situation Analysis! 4!

Marketplace Macro-Environment! 4! Competitive Situation! 5! Product Situation and Positioning! 6! Research Results! 6! SWOT Analysis for Brow Bar (See Exhibit 4)! 9!

Goals and Objectives! 9! Marketing Strategy! 10!

Target Market! 10! Positioning! 10! Offers! 11!

Direct Marketing Tactics! 12! Media Channels! 12!

Database Development! 15! Testing! 15! Fulfillment and Service! 16! Coordination and Integration with Other Channels! 16!

Implementation Timetable of the Program! 16! Budgets and Financial Information! 18!

P&L! 19! Customer Lifetime Value (CLTV) ! 20!

Evaluation Rules and Methods! 21! Conclusion! 22! Appendix! 22! References! 32

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TABLE OF CONTENT

Introduction!! We have been hired as outside consultants to create a direct marketing plan for Benefit Cosmetics’ six San Francisco, California brow and beauty bar locations. We analyzed industry trends, found primary and secondary research, and recommended a direct marketing strategy and tactics that will help promote Benefit’s Brow Bar and beauty services, increase store traffic, gain new customers, and grow customer loyalty.!

Company Background!! Benefit Cosmetics LLC is a cosmetics manufacturer, which was established in 1976 in San Francisco, California. The company has various product lines including makeup, skincare and beauty services. The company provides their services at over 2,000 locations in more than 30 countries. After the successful growth in the U.S. market, the company expanded their brand to London in 1997 and the company was acquired by LVMH in 1999 (Benefit Cosmetics About Us Page, 2014).!

Situation Analysis!Marketplace Macro-Environment!

! The cosmetic and beauty industry has $52 billion in total revenue and the annual growth is 4.9 percent each year from 2009 to 2014. It is expected to remain the same percentage until 2019 (Phillips, 2014). The revenue of the industry decreased 27 percent in 2009 because of the recession. However, the revenue has slowly increased and it grew to $52.3 billion in 2014. According to the GMID industry report (2014), Benefit Cosmetics, LLC occupies one percent market share in the U.S. cosmetics market. !

! The department store is a common distribution channel in the cosmetics industry. Many cosmetic products are sold in department stores, though this has been changing in the last five years (Phillips, 2014). The online platform has become one of the most popular shopping channels as well because it allows the brand to sell directly to the consumer rather than going through a distributor. Consumers can not only go to the physical stores to make the purchase, but can also place their orders online. Online

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cosmetics shoppers generated more than seven billion dollars in 2010 and this group is estimated to grow steadily in the future (Schulz, n.d.).!

Competitive Situation!! Benefit Cosmetics uses a unique business strategy in the prestige makeup industry. Unlike many prestige makeup brands, which distribute products through department stores such as Nordstrom, Macy’s, or stores like Sephora or Ulta, Benefit sells directly to the consumer (Phillips, 2014). The Benefit Cosmetics stores sell only their brand. In addition to their products, they sell beauty services, from eyebrow waxing, to eyebrow tweezing, to bikini wax, to spray tanning: they offer an array of options. !

! Our plan is to promote the Benefit Brow Bar and Boutiques beauty services within the Benefit stores. These stores are heavily dependent on local traffic, so we chose to focus our direct marketing analysis and strategy on locations in San Francisco, California. There are six Benefit Cosmetics store locations in San Francisco offering Brow Bar or beauty services. One of Benefit’s closest competitors in San Francisco is Anastasia Beverly Hills, located in Nordstrom’s Market Street location in San Francisco. Anastasia offers a full brow service complete with brow arching, brow re-shaping and sculpting as well as facial waxing. Much like Benefit, Anastasia offers a line of brow products, which are promoted and sold through this beauty service (Tiffany, 2014). !

! While Anastasia is the closest competitor in the level of service and products, there are many options to wax, color, or reshape one’s eyebrows in the San Francisco area. A search for “brow bar” near Sutter Street in San Francisco reveals several locations for Benefit, Anastasia and Wax Addict, a brow service owned by a former Benefit Brow Bar expert. The latter company boasts five stars for the service out of 41 reviews.!

! In addition to these high-end services, independent salons that offer waxing services present competition for Benefit Cosmetics’ Brow Bar. A search on Yelp using the keyword phrase “waxing eyebrows” reveals 973 results (including Benefit’s Brow Bars) in San Francisco, California. The results include day spas, nail salons, hair salons, and cosmetic and beauty supply shops (Yelp, 2014). !

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! Another form of competition for brow services is a recent phenomenon called eyebrow threading. Said to originate from India, threading “involves rolling a twisted cotton thread over unruly hairs then removing them at the follicle level,” (Starzee, 2009) and has increased in popularity in the US over the last decade. It works well for sensitive skin and unlike tweezing, can remove rows of hairs at a time. The Shapes Brow Bar uses this method in malls in seven states and one of the owners of the franchise calls it “the McDonalds of the beauty industry,” (Starzee, 2009). While there are no Shapes Brow Bar locations in San Francisco, this franchise has contributed to awareness about the threading technique as a result of its prominent locations in the public areas of malls. A Yelp search with the keyword phrase “brow threading” reveals 234 search results in San Francisco, California. Upon closer inspection, however, it was difficult to find a location that actually offered the service, but many of the Yelp reviewers mentioned that they had had the service at one point. In a phone call with a representative from Urban Beauty Spa, located at 130 Bush St, 4th Fl, San Francisco, CA 94104 and offering threading services, we found that the threading service costs $22 and eyebrow waxing costs $18 (See Exhibit 1).!

Product Situation and Positioning!! Benefit Cosmetics advocates that laughter is the best cosmetic, and that makeup doesn't have to be serious to look good. Benefit products include makeup for the face, cheeks, eyes, lips and accessories. The company builds the brand image through creative packaging, unique product names, and unique services, such as the Brow Bar. Benefit Cosmetics creates witty, cute and funny taglines for all their products.!

Research Results!• Primary Research Results (See Exhibit 5)!

! Primary research was conducted in the form of a survey about Salon Services using SurveyMonkey. The main objective of this primary research was to examine customers’ buying behaviors and direct marketing methods. In total, we obtained 61 respondents who are females and live in San Francisco. Below are our survey results.!

• 86.67% respondents use salon services such as: Brow Bars, Nail Salons, and Waxing.!

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• The reasons of respondents use these services instead of doing it yourself!

- Improve your own skills: 3.27%!

- Convenience:31.11%!

- It makes you feel good: 27.86%!

- Prefer professionals: 37.7%!

• Age segments!

- 18 to 24: 9.9%!

- 25 to 34: 88.64%!

- 35 to 44: 2.27!

• The times of day respondents normally go get salon services!

- 10am~12pm: 24.43%!

- 12pm~2pm: 14.29%!

- 2pm~4pm: 30.95%!

- 4pm~6pm:35.71%!

- 6pm~8pm: 47.62%!

- 8pm~10pm: 7.14%!

• Information acquisition channels!

- Direct mail: 6.5%!

- Email:14.75%!

- Catalogs: 4.91%!

- Magazines:11.47%!

- In-store pick-up:26.22%!

- Official website:36%!

- Radio or TV:1.63%!

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• 54.55% respondents look for promotions related to salon services!

• Promotion acquisition channels!

- Groupon!

- Facebook!

- Email!

- Online search!

- Living Social!

- Magazine!

• 54.67% respondents know Benefit Cosmetics in San Francisco offers a Brow Bar service!

• Eyebrows service satisfaction evaluation!

- Price:44% respondents satisfied!

- Service: 55.56% respondents satisfied!

- Location: 44.44% respondents strongly satisfied!

- Promotion: 77.78 respondents neither dissatisfied nor satisfied!

• Secondary Research Results!! The personal waxing and nail salons industry has $7.1 billion in revenue with an annual projected growth of 3.9% from 2013-2018. There are no major players in this industry and 7.3% of the service segmentation is waxing services. !

! There are currently an estimated 236,625 nail and waxing salons in the United States. This figure represents average annual growth of 4.7% compared to five years ago. The industry is highly fragmented; more than 99.0% of salons have just one location (Phillips, 2014). !

! Disposable income and declining unemployment will continue to be the primary drivers of this industry’s growth. Despite its discretionary nature, the industry grew strongly in the face of the recession (Phillips, 2014). !

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! The personal waxing and nail salons industry is in the growth stage of its industry life cycle. Although the industry’s service offering is well developed, lower price points have engineered greater growth by expanding the industry’s target market (Phillips, 2014). !

! Our plan includes introducing a customer loyalty program through a mobile application. According to the 2013 Research Alert Yearbook, the top motivations for shopping via mobile include ease of use, seeing a mobile ad, finding the best deal, and boredom of filling time (Research Alert Yearbook 2013, XII).!

! According to Javelin Strategy and Research, consumers spent $20.7 billion in mobile purchases in 2012 and according to Comscore, almost two-thirds of smartphone owners (65%) engage in shopping-related activities on their phones. (Research Alert Yearbook 2013, 159). !

SWOT Analysis for Brow Bar (See Exhibit 4)!! Based on our SWOT analysis and research, we’d like to propose a customer loyalty program that will increase the following: !

Goals and Objectives!• New Customer Acquisition !

• Customer Retention!

! Since Benefit Cosmetics has a unique business strategy that includes selling their branded beauty products and services in the same locations, the company has a great opportunity to use these different offerings to entice customers to come back for more. The Brow Bar and Beauty Bars in particular offer services that are regular parts of a woman’s maintenance routine on her appearance. We recommend that Benefit develop a loyalty program for their beauty services, which would award points for repeat visits, and which customers could redeem for services or beauty products. The Brow Bar Gorgeous Rewards mobile application, which will be developed for this program, functions as the loyalty card, a distribution system for offers and a quick and easy way for customers to make beauty appointments at their preferred Brow Bar location. This

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direct marketing campaign has two main goals, new customer acquisition and customer retention through the use of house mailing lists, advertising and guerilla marketing in the city of San Francisco. Our key performance indicators for this campaign will be based on new customer conversions to the Brow Bar and repeat visits. For new customer conversions, our KPI is 1.5% and for repeat visits it’s 85% of the initial conversions.!

Marketing Strategy!! This campaign will drive traffic to the six Benefit Cosmetics locations, which have Brow or Beauty Bars (see exhibit 8 for list of locations) using a 20% discount for a customer’s first eyebrow service. The discount coupon will be awarded to the customer via each media channel. Once the customer has redeemed the code in store, she will be encouraged to download the mobile application. The app will then function as a loyalty program and appointment system, keeping track of past and future appointments as well as rewards points.!

Target Market!Target Group Analysis (See Exhibition 3.)!

! As of 2012, there are 825,863 people in San Francisco, 405,499 of them women (49%). 68% of the total population are above 18 and below 65, approximately half of which are women. The approximate amount of women in this segment is approximately 268,405. Our target market has a high disposable income (yearly salary is over $60,000)—which narrows our target market even more. The median income in San Francisco is $73,000 so we are assuming that at least 100,000 women make enough money to afford Benefit’s salon services (U.S. Census Bureau, 2012).!

Positioning!! Our target market for this campaign is a large age range, from 18-45, so they’ll likely be responsive to a range of direct marketing channels including direct mail, magazines, email, and TV/radio advertising. Benefit targets a more upscale customer—women that like to look nice and are willing to spend money on products and services. They are single or married, more affluent, and most likely enjoy things like shopping and nail services.!

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!! According to a survey of 500 U.S. women ages 18-34 taken by market-research company Lab42, Beauty store owners and managers note that millennial women are loyal to their favorite makeup brands. 68% say that they would opt for their preferred brands over less expensive products. This is strength for Benefit because it’s a large segment of their target market. This survey also noted that 42% of millennial women follow beauty brands on social media and nearly half of them received a discount as a result of following a brand. More followers leads to better customer retention, which is important for Benefit and their customer loyalty program (Lab 42, 2014).!

Offers!! For each media channel, we will provide a 20% discount for new users and reward points to redeem for products and beauty services each time a Gorgeous Rewards customer gets a brow service at one of our locations. This will continue to drive customers to the store, keep customer retention, grow customer loyalty, and encourage consumption of both Benefit’s products and its services.!

• Creative Approach: Benefit Cosmetics has a very distinct look and feel. They use different shades of pink, nude, black and white with retro style illustrations. Their copy is clever, using rhyming and other literary devices, and stays true to their mission statement that “laughter is the best cosmetic.” For example, on their website, there are calls to action (CTA’s) such as “See how Benebabes wear their faves,” and, “Nice Package! Build your own makeup kit.” The product names also impart a humorous tone. For example, one of their beauty kits is called “Confessions of a concealoholic” and their body balm is called "take a picture...it lasts longer..." For each media channel, we will use these branding elements to create a consistent look and feel for the campaign. !

• Strategy: The messaging is based around the concept of “taking a brow break,” meaning that we are encouraging working professional women in areas near Brow Bars to take a break from work either during their lunch or after work, to get their eyebrows shaped. See Exhibit 7 for an example of the direct mail flyer we would use (See Exhibit 9 for cost breakdown).!

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!• Pricing: The pricing for the Brow Bar service is $20-$23 for a Brow Wax, $5-$6 for a

Brow Trim, and $12-$26 for a Brow Tweeze. The promotional discount of 20% would be valid for the brow wax or brow tweeze only, since we’d like to encourage customers to get the full service and a trim is just an interim solution between waxings. The pricing with the promotion would then be $16.67 to $19.17 for a customer's first brow wax and $10-$21.67 for a customer's first brow tweeze.!

Direct Marketing Tactics!Media Channels!

Direct Mail!

! The direct mail portion of the campaign will use Benefit’s house mailing list to encourage current customers of Benefit products to use the Brow Bar services, which they may not be aware of. The advantage of using the house list is that these customers are already aware of Benefit as a prestige makeup brand and have indicated an interest in Benefit’s products and services. They may not be aware of the Brow Bar and direct mail postcards will drive interest and curiosity about the Brow Bar. Additionally, we chose direct mail as one media channel option because it offers a potentially high response rate, it’s a precise form of targeting, where we can personalize the mail pieces. We will also use rental lists to reach new customers. The rental list we will be using is called Beauty and Cosmetics Buyers List (See exhibit 9 for breakdown of channel costs). !

Email!

! Benefit Cosmetics sends product emails every 5-6 days, around the same time every day, in the early morning. They’ve found this method successful likely because it’s a weekly reminder about Benefit’s products and it comes in the early morning, when women come into work or are on their way to work. Their emails have various promotions as well - e.g. free samples with orders over $50. However, the Brow Bar can use this method as well. Benefit wants to get customers into their store and the objective of this campaign is to get them to come in for services during their lunch break

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or right after work. These are busy, young, working women that want an efficient, expert service for their beauty needs. Also, this campaign is in the San Francisco Bay Area, where people are fueled by technology and mobile. Everyone is always on their phone, reading something and forwarding it to their friends. We will be using Benefit’s house list (which encompasses product and services) to send the promotional emails. For the house list, the goal is to cross-sell and get people interested in Benefit’s products to try their Brow Bar services. !

! Despite the trend of sending these emails in the early morning (between 5 and 7 am on the west coast), we are going to do a split test to see the times that get the most click-through rates. We want to test the time right before lunch, around 11 am, when women want to take a break from work and can enjoy this unique and quick service. The other time we want to look at is right before the work day is over, around 4 pm. This could also be a quick reminder to women on their way out that they could stop by Benefit and get their eyebrows done.!

• Cost: $300 for the creative and no cost for the house list.!

Flyers!

! Flyers are a traditional marketing strategy, a useful tool to communicate with people and get them to come into the store. For example, a company can show their name, logo, promotion and special design in order to attract people’s attention. In order to communicate with our target audience, Benefit Cosmetics can distribute the flyers in the financial area and downtown and near the other Benefit locations. !

• Cost: The channel will cost $300 for creative and $103.95 per 1000 quantity of flyers, as well as staff time for distribution. !

Social media (Facebook, Twitter and YouTube)!

! Social media platforms have become an emerging digital channel, which companies use to advertise their products and services. Among those social media platforms, people use Facebook the most (66 percent), Youtube (28 percent) and Twitter (25 percent) (Harland, 2014). Women tend to use social media platforms as their tools while they research information about cosmetics, expert beauty suggestions,

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reviews and so forth. They also proactively look for a brand’s social media page while they browse online (Lieberman, 2014).!

Facebook!

! Women tend to use social media more often than men do. Among those social media platforms, Facebook attracts more female users, 81 percent of respondents said they have a Facebook account and 58 percent of them said they log into their account more than once a day. Also, women get news from Facebook more than men do.The company will post their promotion on their cosmetic related fan page in order to maximize the efficiency of the advertising. The campaign can emphasize our promotion on the ads “Eyebrow experts” in bold to attract prospects attention (Kaiserman, 2013). !

• Cost: The company will run the campaign for 6 months with total cost $1,840 ($10/day) with potential reach of 176,000 circulation (Facebook, 2014). !

Twitter!

! According to 2013 Social Media Demographics, it indicated that there are 18% of women who use Twitter. Among those user groups, ages 18 to 29 account for 31% and ages 30 to 49 account for 19% (Bennett, 2013). In order to maximize the efficiency of their advertising, Benefit Cosmetics will also post their promotion on their Twitter page. !

• Cost: Twitter will cost $2.50 to $4 per follower and $0.75 to 2.50 per click, favorite, retweet or reply (SmartInsights, 2011).!

YouTube!

! According to a 2014 Google YouTube Demographic Report, females account for 23 percent of YouTube’s most active users. Among those female users, 41% are ages 18 to 24, 26% are 25 to 34 and 11% are 35 to 44.!

• Cost: We will advertise our campaign by setting the daily budget of $10 and maximum cost-per-view (CPV) $0.05. This budget can help Benefit reach the estimated 500 views a day.!

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Direct Response Radio!

! Similar to other tactics, direct response radio has several advantages, such as high reach, high targeting, and low cost (Brown L, 2013). The average listening time of online radio listeners is 10 hours a week. In addition, direct response radio is highly measurable (Lowry T, 2009). Since the numbers of traditional radio listeners have decreased in recent years, we would like to use internet radio, like Pandora as our media channel. Pandora had more than 200 million registered users and 70 million activated users in 2013 and 51% are females (Loeb S, 2013). Unlike traditional radio stations, Pandora advertising can choose a specific target group for Benefit to broadcast its advertising. However, we still have to make sure that the creative approach, offers, and communication methods are attractive enough for our target market. This direct response radio ad will be 15 seconds long and will focus on “taking a brow break” and downloading the new mobile application, like in our other tactics. This commercial should be simple and easy to grasp since our audiences will be listening to music on Pandora and not paying a lot of attention to the short advertisements. First, we have to identify the problem of not having groomed brows and offer our solution. For example, we will identify customers’ potential problem, like “Do you have a wedding to go to this summer?” Then, the commercial will offer a solution of “taking a brow break” after work. The commercial should also emphasize Benefits Brow Bar’s advantages.!

• Cost: According to the digital rate sheet (Pandora Advertising, 2012), we will use Pandora’s Advertising system to place our advertisement. This costs $36 CPM plus $7 CPM for a select list (which includes :15 Web Audio, tile ad, companion banner + geo +ZIP.)!

!Database Development!

Testing!! Each media channel will require testing to ensure the most impact and highest response rate. There are numerous factors that we can test including the offer, copy, design, the call to action, timing and the mailing list. With each new phase of the

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campaign, we’ll use the “beat the champion” rule by using the highest performing version of the particular media piece and testing some new variation against it.!

! Benefit should analyze their current database to check if the click through rate of the advertising in the social media platforms that the company posted their ads were high. !

Fulfillment and Service!! Customer Service: During the campaign phases, store managers will be required to schedule extra Brow Bar experts and adjust staffing based on the amount of traffic the store locations get.! !

! Payment: Benefit Boutiques and Brow Bars have several payment options that provide customers easy and convenient ways to make payments. Payment options include cash, check or credit card. All the payment information will be saved in Benefit’s CRM system for the loyalty program. !

! Customer service feedback: At the end of the service, customers will get a push notification within the application asking them to rate the Brow Bar experts on a scale from 1-5 stars, with 1 being the lowest and 5 being the highest. Benefit store managers will read these excellent and poor reviews and help monitor staff so that staff is properly trained and customers are happy. !

Coordination and Integration with Other Channels!! While sending email reminders to the customers or prospects, we can have our Facebook and Twitter URL mentioned in the email as well so that customers that are interested in social media will click on it and have another chance to find out about the services offered. This strategy can also be applied to direct mail and flyers.!

Implementation Timetable of the Program!! We are launching the campaign in four phases throughout the course of a year. Each channel will launch during the beginning of the phase. Then, each channel will cycle through each touch point, from first touch point (communication about the offer) to second touch point (follow-up about the offer if no response). If a new customer

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schedules a brow appointment and uses the coupon, the customer will be encouraged to use the loyalty program in the app to earn points. The communication for these customers then changes to reminder emails, texts or in-app push notifications around the time they should be scheduling their next appoint, which would be about once every three weeks. (See Exhibit 6 for a diagram of the channel communication map.)!

!TABLE 1. IMPLEMENTATION TIMETABLE!

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Vehicles Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.

Direct Mail (House LIst)

Launching

Reminder

Cleaning data/ Creative adjustment

Direct Mail (Rental List)

Launching

Offer Reminder

Cleaning data/ Creative adjustment

Email

Launching

Reminder

Cleaning data/ Creative adjustment

Social Media

Launching

Reminder

Cleaning data/ Creative adjustment

Radio

Launching

Reminder

Cleaning data/ Creative adjustment

Budgets and Financial Information!! The budget allocation of this direct marketing campaign is based on response rate, CPA, cost and analysis of the various media channels. According to our primary and secondary research, we decided to allocate our marketing budget to direct mail, email, social media, flyers, and internet radio. After we analyzed the cost breakdown, we found that the rental lists and COGS affect whether or not our plan is the most profitable. Since Benefit already has a strong customer base, we will take advantage of existing client lists in order to reduce the marketing costs. In addition, direct email generates the lowest CPA, which ultimately allows us to attract more customers. Although social media has a lower response rate in our campaign, the high impressions will help Benefit reach more potential customers. Flyers are an excellent channel to attract local clients into our stores. With guerilla marketing, we can explain our campaign face to face with our target markets. The greatest drawback for using flyers will be the labor cost because it will increase overhead cost. Therefore, we will hire temporary workers to distribute half of the flyers, and the rest of flyers will be distributed by Benefit employees in front of the stores.!

! Finally, since the numbers of traditional radio listeners have decreased recently, we would like to use Pandora internet radio as our direct response radio channel. The most significant advantage of Pandora internet radio is that we are allowed to broadcast our advertising to our target markets. To sum up, the campaign’s average response rate will be 1.5%. Based on our assumption of variable and fixed costs, we expect to make a $35,259 profit in the first year. Our customer lifetime value will increase significantly in the following year (Second year: $17.67, Third year: $28.49). The P&L and customer lifetime value are listed below.!

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P&L!

Unit price: We use the average service price as our unit price which is $21.5 plus 20% discount for the first year ($17.2).!

S&H and COGS: Since our service does not require a shipping and handling fee, the cost is $0. Our in-store employees are responsible for the Brow Bar service, so we only estimate 15% of the COGS for the material costs and portion of employees’ salary.!

Fulfillment & Bad debt: We used the industry average cost for fulfillment and bad debt.!

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Assumptions Campaign P&L

Unit Price $17.00 Response Rate 1.5%

Shipping & Handling $0.00 Orders $7,954.41

Mail Quantity $531,798.00 Gross Sales $136,816.10

Response Rate 1.5% Returens $0.00

Return Rate 0% Net Sales $136,816.10

Average Order Size 1

Variable Costs COGS $20,522.41

COGS 15% Fulfillment $4,104.48

Fulfillment 3% Bad debt $2,763.32

Bad Debt 2% Total Variable Cost $27,363.22

Total 20%

Fixed Costs Variable Marketing Cost $63,850.20

Creative Costs $1800.00 Fixed Marketing Cost $4,718.00

List Cost (CPM) $138.00 Total Marketing Cost $68,568.20

Print (CPM) $200.00 Overhead $5,625.00

Postage $0.25 Total Fixed Cost $74,193.20

Overhead $0.25

$5625.00 Profit/ Loss $35,259.68

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Customer Lifetime Value (CLTV) !Assumptions Campaign P&L Year 1 Year 2 Year 3

Unit Price 21.5 Response Rate 1.5%

Shipping & Handling 0 Orders $7,954.42 $6,761.26 $6,085.13

Mail Quantity 531,798 Starting Customers $7,954.42 $6,761.26 $6,085.13

Response Rate 1.5% Retention Rates 85% 90% 95%

Return Rate 0.00 Gross Sales $136,816.10 $145,367.11 $130,830.40

Average Order Size 1.00 Returns $0.00 $0.00 $0.00

Variable Costs Net Sales $136,816.10 $145,367.11 $130,830.40

COGS 15% COGS $20,522.41 $21,805.07 $19,624.56

Fulfillment 3% Fulfillment $4,104.48 $4,361.01 $3,924.91

Bad Debt 2% Bad debt $2,736.32 $2,907.34 $2,616.61

Total 20% Total Variable Cost $27,363.22 $29,073.42 $26,166.08

Fixed Costs Variable Marketing Cost $63,850.20

Creative Costs 1,800 Fixed Marketing Cost $4,718.00

List Cost (CPM) 138 Retention Marketing Cost $500.00 $500.00

Print (CPM) 200 Total Marketing Cost $68,568.20 $500.00 $500.00

Postage 0.25 Overhead $5,625.00

Retention Marketing Costs Total Fixed Cost $74,193.20 $500.00 $500.00

Creative Costs 300 Profit/ Loss $35,259.68 $115,793.68 $104,164.32

Email Blast 200 Discount Rate (at 10%) $1.00 $1.10 $1.21

Overhead 5,625 Net Present Value $35,259.68 $105,266.99 $86,086.21

Cumulative Net Present Value $35,259.68 $140,526.67 $226,612.88

Customer Lifetime Value $4.43 $17.67 $28.49

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Retention rate: We assume our loyalty program will retain our customers efficiently. We expect to reach 85% retention rate in the first year, 90% in the second year, and 95% in the third year.!

Response rate: We will offer the Gorgeous Rewards loyalty program once customers are acquired. We assume that customers who begin the loyalty program will continue to buy our services. Therefore, the response rate for second and third year will be 100%. We will remove or change status due to inactivity and non-response in order to increase the response rate during the first year.!

ROMI(Return on Marketing Investment): !

ROMI = (Profit-Total Marketing Cost)/Total Marketing Cost*100%!

The ROMI of our campaign in the first year will be -49%. When this campaign extends to 3 three years, the ROMI will increase to 267%!

Break-even (Net Sales = Variable Costs + Fixed Costs): Based on the break-even analysis, we will have to sell 4314 units of Brow Bar service for this campaign in order to have our revenues covering the cost. !

Evaluation Rules and Methods!! We will integrate our selected media channels in order to maximize the efficiency of the campaign for the Brow Bar service. We will continuously check outcomes and monitor our KPI’s to ensure that our campaign is performing efficiently and we are getting the highest ROI. !

• We will also use several measurement tools in order to find out how our campaign performs with each media vehicle. !

• We can conduct a survey with Benefit’s target audience asking from which channel they heard about the Brow Bar.!

• The company can also evaluate their sales numbers during the radio advertising period to see if sales figure increase.!

• The company will use the following methods in order to find out the value of the online advertising (Digital Marketing NOW, n.d.).!

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• Benefits Cosmetics will measure whether the traffic on their social media increases.!

Conclusion!! If the Gorgeous Rewards year-long campaign is successful, we will expect Benefit to continue it to keep growing customer loyalty and increase sales. !

Appendix!EXHIBIT 1: PRICE COMPARISON!

EXHIBIT 2: INTERVIEW WITH BENEFIT MARKETING MARKETING MANAGER (VIA LINKEDIN): JUN 16, 2014!Answer in bold.!

RE: Benefit Cosmetics Marketing Plan!

Annie Nguyen, Marketing Manager at Benefit Cosmetics!

June 16, 2014 5:33 PM!

Hi Marianna,!

Thank you for reaching out. There is a lot of info that I can't share, but I answered to the best of my abilities. See comments/answers below. Hope this helps! !

On 6/8/14 7:42 PM, Marianna Levyash wrote:!

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Service Comparison Benefit Brow Bar Anastasia,

Nordstrom Wax Addict

Brow Wax $20-$23 $30 $25

Brow Tweeze $21-$26 $30 $30

Brow Trim $5-$6 $30 N/A

--------------------!

Hi Annie,!

I am a graduate student at Golden Gate University and am taking a Direct Marketing and Database course, where one of our final projects is to do a direct mail marketing plan for a company that we choose to focus on. My group chose Benefit because we are interested in the cosmetics industry and think the brand is great - we love the fun creativity and Benefit products. I found you through our mutual LinkedIn connection Antonina Belorusets and I was wondering if you could help me answer just a few questions about Benefit, since it is a private company and not all of the information is available. I will be happy to share everything we do with you and with Benefit Cosmetics - our final proposal, plan, and presentation.!

1. There are many cosmetic brands in the bay area - what makes Benefit Cosmetics different and unique? Benefit is a brand that truly believes a woman is the prettiest when she's happy & laughing. All of our products are know to deliver quick, instant beauty solutions. Unlike all other makeup brands, each of our products also have a story & personality of our own.!

2. Which direct mail marketing campaigns are you currently running? What is working and what is not? Benefit leverages our retail partners to run our direct mail marketing. In the US, we no longer mail our print catalog. The catalogs are still available, but distributed at our points of distribution instead. It's a bit challenging to track the results from our direct mail pieces as not all our retail channels are willing to share the information with us as we leverage their customer database. In the past, anecdotal data has shown that our direct mail pieces have about a 1.5 - 3% return rate.!

3. How does your organization measure campaign outcomes? It depends on the campaign. KPIs can include: Sales results, social engagement & reach.!

4. Is there a set marketing budget for 2015? What is the likely budget allocation? (We don't need exact numbers - just a range is fine) There are 2 US Marketing Teams. One team is Retail Marketing (my team) and the other is Brand Marketing. Retail

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Marketing focuses on initiatives that have a strong retail influence (i.e. retail partnerships, in-store events). Brand Marketing's initiatives have a much wider reach (i.e. Project Runway presents Under the Gunn partnership. As a result, it's difficult for me to provide even a budget range for you to reference.!

5. How frequently do you communicate with members? We interact with our customers on a daily basis through our social media channels.!

6. Are there annual events you focus your marketing efforts on? Benefit will also do a strong focus on our Star Products: They're Real & the POREfessional. Annually, we hold 600+ events in our retail channels. In addition to our Star Product Events, we also hold events for our new product launches & free brow services as well.!

!Exhibit 3. San Francisco Demographics!

! ! ! ! ! ! (U.S. Census Bureau, 2012)!

Demographic Estimate # Percentage

Total Population 825,863 -

Sex and Age

Male 420,364 51%

Female 405,499 49%

Under 5years 37,164 4.5%

Under 18 years 111,491 13.5%

65 years and over 115,621 14%

Median age (years) 38.4 -

Race(alone)

White 448,444 54.3%

Black or African American 50,378 6.1%

American Indian and Alaska Native 7,433 0.9%

Asian 282,445 34.2%

Hispanic 127,183 15.4%

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!Exhibit 4: SWOT Analysis- Benefit’s Brow Bar!

!!

Strengths Weaknesses-High-end!-Target market has high disposable income!-Brow Bar is already well-known, especially in geo-targeted area, San Francisco!-Salon services popular in San Francisco!-Convenient store locations!-Multitude of products and services!-Headquarters in San Francisco, where campaign will be!-Creative packaging!-Easily recognized

-Expensive!-No customer loyalty program

Opportunities Threats-No customer loyalty program!-No mobile application!-Growth in mobile market for apps !-Growing demand!-Growth rates and profitability!-Several channels in direct marketing available !-Large target market !-Select advertising (direct response radio) !-Big house list !-Social media is a great place to increase followers and word of mouth!-Direct marketing is measurable and targeted !

-Competitive industry and marketplace!-Potential for economic problems (another recession) !-Increasing costs!-Disposable income and unemployment are primary drivers of this industry’s growth (could be unstable at any point)

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Exhibit 5: Survey Questions (via SurveyMonkey.com)!

1. ! Do you use salon services such as: Brow Bars, Nail Salons, and Waxing?!

! Yes!

No!

2. ! Why do you use these services instead of doing it yourself?!

! Improve your own skills!

! Convenience!

! It makes you feel good!

! Prefer professionals!

3. ! What is your age!

! 18 to 24!

! 25 to 34!

! 35 to 44!

! 45 to 54!

4. ! What times of day do you normally go get salon services?!

! 10am~12pm!

! 12pm~2pm!

! 2pm~4pm!

! 4pm~6pm!

! 6pm~8pm!

! 8pm~10pm!

5. ! Where do you get information about salon services?!

! Direct mail!

! Email!

! Catalogs!

! Magazines!

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! In-store pick-up!

! Official website!

! Radio or TV!

6. ! Do you look for promotions related to salon services?!

! Yes!

! No!

7. ! Where do you find these promotions? Please answer below. (Facebook, !

Twitter, Email, Direct Mail, Magazines, Etc.)!

8. ! Did you know Benefit Cosmetics in San Francisco offers a Brow Bar !

service?!

! Yes!

! No!

9. ! If you have gotten your eyebrows done at Benefit's Brow Bar, how would !

you rate your experience at the store (From 1-5) (If not, leave blank)!

! Price !

! Service!

! Location!

! Promotion!

!!!!!!!!

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Exhibition 6: Direct Marketing Channel Map!

!!!!!!!!!

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House List (product) & Rented List

House List (product) & Rented List

Distribute near store locations

Offer Reminder

Email Direct Mail Flyer Radio Social Media

Localized ads w/offerPandora/Spotify

Facebook, Twitter, You-Tube

Cu

stom

er Acq

uisitio

n C

usto

mer R

etentio

n

Pulsing Strategy – 1 year

Come into

Brow Bar get 20%

off

Come into

Brow Bar get 20%

off

Come into

Brow Bar get 20%

off

Come into

Brow Bar get 20%

off

Come into

Brow Bar get 20%

off

No Response

No Response

No Response

No Response

No Response

Sign up For Loyalty Card Don’t Sign Up

Reminder Emails, 3

weeks from last appt.

Reminder TXT(If they opt in)

3 weeks.

Back to topStill no response, remove from list

Exhibition 7: Sample Email and Flyers!

!!!!!!!!!!!!

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Exhibit 8: Benefit Boutique and Brow Bar Locations!

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Exhibit 9: Media Plan!

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References!!Annie Nguyen, Personal Communication (via LinkedIn) Benefit Marketing Manager !! June 16, 2014!

Benefit Cosmetics About Us Page Retrieved June 15, 2014 from: http://! ! !

! www.benefitcosmetics.com/brand/aboutus/aboutusoverview !

Bennett, S. (2013 December 31). Facebook, Twitter, Instagram, Pinterest, LinkedIn: !! 2013 Social Media Demographics. Retrieved July 7, 2014 from http://! !

! www.mediabistro.com/!

Brown, L.(October 20, 2013). Pandora takes aim at local radio advertisers. Retrieved !! from http://www.stltoday.com/business/local/pandora-takes-aim-at-local-radio-!! advertisers/article_026e1714-5605-5a66-a7ba-c1a954d903e0.html!

Chaffey, D. (2011, December 13). Twitter advertising campaign costs. Retrieved July 13, ! 2014. http://www.smartinsights.com/social-media-marketing/twitter-! ! !

! marketing/twitter-advertising-campaign-costs/ !

Demographics report. (2014, January 1). Retrieved August 13, 2014. https://! !

! support.google.com/youtube/answer/1715072?hl=en!

Digital rate sheet 2012.Retrieved from !

! http://www.nextdayflyers.com/flyer-printing/8375x5375-flyers.php#!

Digital Marketing NOW. (n.d.). Measuring Online Advertising Effectiveness. Retrieved !! from http://digitalmarketingnow.com/measuring-online-advertising-effectiveness!

GMID (2014). Benefits Cosmetic. Global Marketing Information Database (GMID). !! Retrieved from http://rdl.lib.uconn.edu/databases/1114!

Harland, B. (2014 June). Social Networking- US. Mintel. Retrieved from http://! !

! www.mintel.com/!

Kaiserman, R. (2013 February 12). Reaching Women through Social Media. Retrieved !! from http://www.mintel.com/!

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Lieberman, G. (2014 July). Color Cosmetics- US. Mintel. Retrieved from http://! !

! www.mintel.com/!

Lowrt, T.(2009). Pandora: Unleashing mobile phone ads. Retrieved from!

! http://www.businessweek.com/magazine/content/09_22/b4133052597112.htm!

Loeb, S. (December 21, 2013). How does Pandora make money?. Retrieved from http://! vator.tv/news/2013-12-21-how-does-pandora-make-money!

Market Research Blog, Infographics, Custom Research News | Lab42 -. (2014, August !! 4). Retrieved August 5, 2014 from blog.lab42.com !

Pandora advertising. Products & Specs. Retrieved from http://advertising.pandora.com/!! products-specs/ !

Phillips, J. (2014 April). Cosmetic and Beauty Products Manufacturing in the US. I!! BISWorld. Retrieved from http://www.ibisworld.com/!

Research Alert Yearbook: Year in Review. (Vol. 2013 Edition). (2013). New York: EPM !! Communications.!

Salon Services Survey, https://www.surveymonkey.com/s/D3BYQN7 (Last visited !! August 8. 2014) !

Starzee, Bernadette. (2009) Shaping a New Industry, One Brow at a Time. ! !

! Specialyretail.com. Retrieved from: http://specialtyretail.com/issue/2009/01/!! retailer-profiles/entrepreneur-profiles/shapes_brow_bar_entrepreneur_profile/!! #sthash.rd95U3hl.dpuf!

Tiffany, Anastasia Brow Bar, personal communication, June 15, 2014.!

! U.S. Census Bureau, 2012 Retrieved from http://sfced.org/wp-content/uploads/!! 2014/03/San-Francisco-Demographics-2014.pdf! ! ! ! ! !

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