Innovation Diaries: Dealing with an Uncertain Future
In the midst of these crazy times, most industries still haven’t gotten their shit together. However, a few bright minds managed to understand the paradigm shift, act accordingly and reap the rewards. So, Bente Zerrahn and I talked to some of them! Join us on our learning journey over the next few weeks to see how completely unrelated industries deal very differently with the same challenges we all share – and let’s become better together!
Since 2015, Sabine Menzel has been with L’Oréal, since 2021 as Market & Media Intelligence Director Austria and Germany. Before that, she ran the Beauty Care market research at Henkel and prior to that the Deutsche Post DHL’s Market Research Service Center. Her current role at L’Oréal is heavily driven by digitalization. She – together with her team – focuses particularly on accessing relevant data, putting it together, and understanding the bigger picture.
The French Company L’Oréal is the world leader in beauty. Notable brands include Garnier, Maybelline, Vichy, Lancôme or Kerastase. In recent years, L’Oréal not only entered into new digital sales channels in E-Commerce but also innovated in areas like AI cosmetics testing.
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How do you coordinate innovation and market research within a global corporation?
At L’Oréal, every country and country cluster has its own Consumer Market Intelligence. This is key to our success because every market differs, consumer behavior differs, and every region has its own specialists.
With this concept everyone brings something to the party: Being not fully centralized is really helpful in all this because the country clusters are closer to our consumers. We at market intelligence are responsible for feeding our central brand development and R&D teams with local insights. So, we have parallel streams of regional and global research being put together. While many global brands, products are often launched on a global scale; local needs can also be answered by local adaptations, still respecting the brand core.
Is there a direct exchange between you and foreign Consumer Market Intelligence (CMI) teams about current market trends?
As the country cluster of Germany and Austria, we rather share our local insights with central development teams than with CMI colleagues on the other side of the globe as our local units of global brands don’t necessarily develop their products from scratch.
It is also essential to mention that we may inspire our central development teams when it comes to consumer needs that are earlier pronounced in our country cluster than in other regions. For example, we have had an impact when it comes to sustainability, which is obviously an essential topic in every country. Germany was one of the very first countries in the world to launch organic beauty care. With our experience, we could provide a lot for our global cooperation thanks to huge meetups with brands and R&D teams coming to Germany. Together, we discussed all our local findings. Speaking of sustainability: When the pandemic hit, right from the beginning we could for example reduce our emissions manifold by switching to Microsoft Teams virtual meetings instead of traveling.
Which kind of data do you need to work with, and how do you access it?
At L’Oréal, we are working with a mix of hard facts about what happens in the market, and traditional consumer insights research while also gaining social insights by identifying what consumers unprompted talk about.
Because we are operating on all channels and providing 36 brands to all types of customers, we also buy all types of market data we can access. I’m talking about the mass market, luxury market, pharmacy market, professional business as well as, of course, eCommerce. A lot of data is out there to buy, but still, many insights are also unavailable.
Often, there is a difference between what customers say they want and what customers do. How do you approach this?
Data reflects past behavior so it’s not prognostic about the future – or is it? That’s the big question.
Of course, we have many consumer insights on beauty wants and assess this so-called ‘say-do-gap’ and how they have changed due to the ongoing circumstances of the pandemic and inflation. We see a change in purchasing behavior. You could call it “from bricks to clicks”. Our customers love physical shopping in stores. Nevertheless, they shop online way more than before the pandemic, and around 20% is eCommerce sellout. Fortunately, we accelerated our eCommerce business already before the pandemic.
Where does innovation happen at L’Oréal?
We describe ourselves not only as a beauty company anymore. We transitioned to a beauty tech company, we want to reinvent the future of beauty at the intersection of science and technology; and with that make beauty more responsible, inclusive, and accessible.
The transition from a pure beauty company to a beauty tech company started well before the covid pandemic. We combine our century-long scientific knowledge and data expertise with innovative digital and physical technology. This allows us to reinvent and augment beauty experiences and meet consumers’ desires. So, thanks to our innovation philosophy, L’Oréal already developed digital solutions before anybody else thought a pandemic would occur. Covid did not disrupt our business model but accelerated our existing strategy.
One might think that due to the fact the economy has gotten worse, and you couldn’t really go out during the past pandemic years that beauty spending would plummet now. Our data shows the opposite. Even with inflation and everything going on around the globe, people still spend similar amounts on beauty. While this might seem counterintuitive, it says a lot about the human psyche – “I can’t be that miserable if I can still afford my lipstick”.
Can you give us an example of an area where consumers can see the shift to digital?
To give an example: Before covid, every woman bought her lipstick in a drugstore or a perfumery. Suddenly, they were not allowed to use the testers anymore, even if the drugstores were still open while the perfumers were closed. The importance of digital channels to our customers drastically grew from one day to another.
We had already developed a virtual try-on called Makeup Genius. You can install it directly on a mobile device, and it uses Augmented Reality to let customers test different kinds of beauty products. A customer can try on, for example, different colors of lipstick. We also provided the software to our retail partners.
Other examples are our SkinCeuticals Pro 1:1 virtual consultation that allows consumers to experience a private one-on-one video consultation with a medical aesthetic professional, YSL Beauté Rouge sûr Mesure, an AI & AR tool that creates the right lipstick color at home within seconds and in sufficient but minimal quantity, hence also fulfills the desire for more sustainability because lipstick consumption and packaging are reduced. Another example is Lancôme’s Le Teint Particulier, a patented technology that allows each woman to obtain her own customized foundation, in perfect harmony with her skin tone.
We also choose radical transparency when it comes to communicating with our customers. With our brand Garnier we launched e.g. the Product Environmental and Social Impact Label which allows customers to compare products within the same range in terms of CO2 and water footprint, as well as packaging and social impact. There are 14 different influencing factors that are taken into account to enable our customers to make sustainable choices. This label is currently in the roll-out for all of L’Oréal’s brands.
Customers demand a sustainable beauty routine, they talk about packaging waste, animal cruelty, micro-plastic pollution, and carbon production. What does L’Oréal do to create a sustainable future of beauty?
L’Oréal launched a program called “L’Oréal for the Future” in 2020, following a first dedicated program that was started back in 2013. “L’Oréal for the Future”defines our ambitions until 2030 and underlines our view as to what a company’s vision, purpose, and responsibilities should be to meet the current challenges.
This program is a three-pillar approach: We transform ourselves to mitigate and reduce our impact on climate, water, biodiversity, and natural resources. The second pillar stands for the empowerment of our business ecosystem, meaning that we work alongside our complete value chain – from producer to consumer – to help them transition to sustainable production and consumption behaviors. And pillar 3 is dedicated to financially contributing to solving some of the world’s most pressing challenges. To that end, we have allocated 150mio€ in three funds to empower and support women in vulnerable situations, regenerate 1mio hectares of degraded ecosystems and accelerate circular economy solutions.
We see progress that underlines that economic and sustainable practices go hand in hand. Since 2005, the Group for example reduced the CO2 emissions of its plants and distribution centers by 81% in absolute terms, while production volume increased by 29% over the same period. At the end of 2021, 58% of the global L’Oréal sites were already carbon neutral, meaning they apply energy-efficiency measures and use 100% renewable energy, including all 5 German sites. With a system called “solidarity sourcing”, which is a social and inclusive purchasing program, we empower change in our upstream supply chain. The program directs a proportion of our global purchases to suppliers who employ people from vulnerable communities to allow them to have durable access to work and income. And we help customers understand the impact of their consumption patterns with our Product Environmental & Social Impact Label that rates a product from A to E, offering insights on the CO2 and water footprint, social impact, and packaging of a product.
There are many more initiatives and goals I could talk about but the most important thing to me is that we drive our transformative agenda collectively forward with a lot of passion because we all are convinced that this is the only right thing to do.
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Tl;dr for the lazy
- Make use of all the data available to you to learn first about market trends and customer needs.
- Be attentive to conversations consumers have on- and offline about your products.
- Communicate internally on a personal level, get to know your colleagues and be open to inspiration and change
- Respect the individuality of markets and regions and reflect that in the go-to-market approach with global brands.
- Connect your innovation strategy to overall sustainability goals.