TO: Jackie Smith
FROM: Stephanie Perez, Communication Specialist at Estée Lauder Company
DATE: November 16, 2021
SUBJECT: Addressing Economic and Social Challenges
During last week’s communications meeting, we recently discussed the economic and social challenges facing Estée Lauder. These challenges include adapting to the negative effects on supply and demand inflicted by COVID-19, managing high plastic packaging expenses, diversifying our skin tone selection and product, and attending to the absence of customer sampling. In addressing all four issues, my team and I agreed upon taking a collaborative approach. An approach where everyone can brainstorm together and specialize in different tasks, ultimately reaching an exceptional outcome.
Despite addressing such pressing matters, my team and I are committed to offering a promising solution incorporating solutions to all the issues at hand.
Areas of Concern: Finding Commonalities
Upon evaluating the four problems, it may seem challenging to determine the appropriate adjustments needed to find a resolution and make Estée Lauder a more sustainable organization. However, after careful analysis, we found commonalities amongst all four issues leading us to find a suitable solution.
The four issues in revision are:
Negative effect on supply and demand: Due to Covid-19, Estée Lauder has experienced a decrease in consumer demand regarding their makeup products and a shortage of supply regarding their skincare products. Customers' needs are not being satisfied, resulting in a financial loss for the company. Lack of social media and online reach further disconnects us from our customers.
High plastic packaging expense: Estée Lauder's plastic packaging for products is imported from outside the United States, resulting in a costly expense and is harmful to the ecosystem. It was determined that our suppliers are not offering us a fair price that is financially beneficial to our company due to new import policies and delays; therefore, we must seek other options.
Limited diversity in skin tone selection and product: Estée Lauder wants to provide its customers with the best product at the lowest price possible; however, we currently only offer a limited selection of skin tone shades. Additionally, Estée Lauder does not have a product line with high-demand sustainable ingredients. The lack of a wide variety of skin tone selections costs the company a loss of customers and capital. Additionally, such a short variation of shades makes it more challenging to accommodate our demand from consumers. Our current products are unable to resonate and empower our current audience. Similarly, our lack of sustainable products inhibits us from resonating with any other audiences. This hinders company performance and likeability.
Absence of customer sampling: Sampling makeup products is essential. Estée Lauder believes that we offer the best quality on the market; thus, we grant customers the opportunity to sample our products to find the perfect match for their skin tone and be 100% satisfied. Amidst a global pandemic, the absence of sampling negatively impacts our purchases; therefore, we must work hard to resolve this issue.
Throughout these issues, the presence of these themes remained consistent: The lack of efficiency and amenableness, and the lack of technological advances.
Lack of Efficiency and Amenableness
The company needs to understand and adapt to the changing world. Most of our issues are created by a lack of amenability which in return hinders efficiency and performance. With a new sustainable product line and program that features wholesome, plant-based ingredients, we can stay in touch with a large and growing demand for environmentally friendly products. Employee drive is present, but there is a lack of efficiency and communication to explore employees' creative ideas that are most connected to the wants of our consumers. We can increase our responsiveness as a company by listening to employee ideas about real life demands for cleaner beauty products. Our company has some of the most creative and seasoned employees in the industry, but a program to lay out their ideas is not in place. The absence of a program to collaborate and understand the current global climate, stunts company productivity and purpose.
Lack of Technological Advances
It is a necessity that the company diversifies its marketing and sales outlets. Our marketing is focused in the wrong areas and our sales channels are not at their highest potential. Our new target audience is online and our lack of technological assets prohibits us from reaching them. Once we have our new product line developed, our use of modern technology will help us connect with the younger generation. Due to COVID-19, older and younger generations have chosen to make their purchases safely from their home, online. The inclusion of an official Estée Lauder app gives our company a technological edge not yet seen within other cosmetic companies.
Proposed Solution
The development of a program dedicated to designing and implementing our new sustainable measures will enrich the company and its future. This program would empass the development of a new sustainable product line, facilitate the embracement of employee input, and reimagines our brand's image. Employee collaboration would be encouraged through the development of our sustainable product team within this program, allowing employees to share ways to reimagine our company goals. Transitioning our production process to take place in the United States, where oversight can occur and ingredients can be managed on the homefront provides for a more secure environment as well.
Once our sustainable line of products is developed, the product team would be tasked to work hand in hand with our marketing and app development teams. The teams will work together to articulate our new sustainable line of products to our loyal and future customers. The implementation of an exclusive online Estee Lauder app will appeal to the younger audiences interested in sustainable practices and online convenience. The teams would be tasked to construct new marketing strategies. These strategies will shift towards targeting an audience craving more sustainable products in our changing world that has an increased demand for ethically sourced collections.
Key features of the Program
Listed here are the features our program will provide:
Reallocating our valued employees into teams geared towards our new program goals. This involves the development of a new product team and an app development team. Our established marketing team will work with our new teams to reach common ground on new marketing techniques.
Facilitation of employee input and collaboration for our Sustainable Beauty Line. Employees will be able to share their personal experiences and needs, simulating the real life demands and wants of our changing economy. Our line will feature wholesome ingredients sourced ethically. Additionally we will reduce our environmental footprint by transferring operations to the US. Product development and discussions will be proposed and refined at this stage.
Once a clear idea and plan for our Sustainable Beauty Line has been reached. The product team will work with our established supply team to ensure our resources are being sourced properly. In addition to the product itself, the packaging of the product will have a clean design. Consumer preferences have changed to favor white and simple packaging. Our traditional dark shaded packaging will not be used for this product line.
The product team will collaborate with our skilled marketing team to shift our marketing goals to reach younger audiences. Our sustainable line will resonate with those interested in the environment as well as their health. Using data and analytics, we can refine our online marketing parameters to send our ads to our new target audiences. Our app will feature a suitable product “try on” experience. Customers will be able to match their skin tone to our products and feel an in-person experience from the comfort of their home. Since this product line is a new collection under our company name, we can use our well established brand image to collaborate with “Influncers”. This group resonates with our target audience and is highly influential in changing buyer behavior. The inclusion of diverse influencers on our app and social media pages will help reshape our trusted image. While we are a trusted brand, we must keep up with the changing demand, this new product line is our way.
Benefits of the program
Our company’s and employee’s futures will feel secure after the economic and social instability this past year. The new product line will put us back in the game.
While other companies in our industry have made shifts to more sustainable products, there have been few apps geared towards an online sustainable experience. Our app will be a one of a kind experience.
This is our company's chance to embrace the change inflicted by COVID-19. Our new products can make our customers feel good about themselves and their ethical purchases. Estée Lauder will be the name directly connected to this feeling.
Estée Lauder would be able to collaborate with other environmentally friendly companies and brands to spread the message of sustainability. These connections boost our future launches of sustainable products as well.
With our at home comfort experience, a rise in customer satisfaction will create a more positive brand appearance.
Cost and Potential Challenges
With Estée Lauder being a billion-plus dollar company, the creation of a sustainable product line is new and well within reach. However, it’s benefits will come with some challenges and costs, of which we are acknowledging below and prepared to embrace. Our journey will be a large, daunting one, but it is a transformative experience Estée Lauder needs to continue prospering. We want to make a sustainable product line, including makeup and skincare products produced with natural ingredients and packaged in recycled material. As well as, create an app with an immersive at home “try on” experience that features promotional content from selected “influencers”. We understand these new business decisions come with a price.
The main challenge we will be faced with is finding the materials needed to create what we have envisioned, while keeping the costs of the products low. Clean products cost more to source, our USA production will help mitigate this issue. Another challenge we will be faced with is the cost of the app that we want to create. The app will include a new and rare technology where a user can take a picture of their skin tone and it will automatically generate which shade is the right fit for them. Additionally, we understand that partnering with influencers can get costly. It is a necessary cost we have budgeted for below. Lastly, one of the challenges we may face are our products not being able to get shipped to the United States on time due to the supply chain issues we have been facing. Estée Lauder's newly proposed move to the United States is expected to reduce the severity of this issue. As if we choose to produce everything here, we will be in closer proximity to 80% of our customer base.
Program costs in depth:
App – As our app will be complex with new technology, there are going to be some high cost factors involved in the production. However, in the long run it is going to be a profitable asset for the company. According to MLS Dev, a software development company, a custom multi-feature app, which is what we are looking at, starts at $300,000. We do want to be realistic and give a little leeway because of our proposed new skin match technology, we are looking at a price of $400,000 for the new app.
New sustainable product line – The sustainable product line will cost us more than our “non-clean” line because the products are scarcer and in turn might cost more if we do not do our research and find the right products. The Guardian stated that “recycled packaging can cost $72 more per tonne (metric ton) compared to newly made plastic.” Not only is the packaging more expensive to make, but the actual formula for the beauty line is going to be more expensive to produce as well. Estee Lauder is such a big company that we have cosmetic chemists that specialize in making our makeup and skincare formulas. Estée Lauder’s chemist team and our new program team will work to test new eco-friendly materials and come up with a new line. Our materials costs are going to cost us more, but the market price for sustainable products is set to cover these increased costs. According to the Chemist Corner, “cosmetic formulations can run anywhere from $0.10 per pound to $3 per pound”, however, this is non-clean materials meaning they are not eco-friendly so we are going to estimate each metric ton to cost around $8,818.48, meaning each pound will cost us $4. Note that this is per metric ton and it is just the formula. If we were to add the packaging, which we estimate is around $1.50 per pound or $3,306.93, we are looking at around $12,125 per metric ton. Each metric ton can produce around 3,527 10 fluid oz bottles. Estee Lauder is going to need a few thousand bottles to come up with a new line based on our current product demand. We estimate that the final cost for the production of 150,000 bottles will be around $549,981.
Promotion (influencers) – Estee Lauder is a well-established, popular company so contacting and finding influencers is relatively trouble-free. The familiarity of our brand will create ease in our scouting process. The company requires more popular influencers within the range of 1 million followers, the cost will be higher opposed to selecting smaller influencers. However, the efficiency and success will be larger if we allocate the majority of our funds to larger and more influential “influencers”.
According to Business of Apps, “mega” influencers will cost around $10,000, depending on the influencers rates and our requirements for promotional content. We can pick which influencers we would like to pay to promote and which influencers we can send promotional gift boxes to. Due to our brand status many younger influencers provide promotional services in exchange for a gift box. The realistic cost of influencer marketing will fall between $60,000 to $100,000.
In total for our whole project, we are looking at an estimated $1,049,981. We can begin to test our new product line by launching the program. In the early stages of the program, we will be able to establish more accurate costs and our future plans.
Mystery part?
The Marketing Department developed a plan to get to younger generations, Estee Lauder not only offers skin care products for older customers but also offers our new line for younger audiences. Our new shadow will reflect a new product line. We want to connect with all that enjoy makeup artists and also to people that are not experts but they would like to learn basic techniques to look on style.
Outsourcing our products is a concern , we want to ensure that quality and environment savings are plus, our products must have the best ingredients but at the same time natural and green. Our new line of avocado seed will ensure that your skin will get the perfect vitamin from a natural source, also helping our environment.
Our Next Steps: The development of the Sustainable product line and special task force Program (#7)
(shift to action, how the company starts to move forward and encourage this proposal, ask for a meeting to further explore the concepts in the proposal)
Sample Solution