Financial performance for the brand reflects an organization’s raw financial return to the investors and is analyzed as economic profit, a concept akin to economic value added. The financial performance is analyzed for a five-year forecast and for a terminal value. Due to limited resources, we have based our forecast on Euromonitor 2013 Beauty and Personal Care Singapore report.
STAGE 2: FINANCIAL ANALYSIS
MADAM (3%)
According to the report published by Euromonitor in 2012, premium skincare category is expected to increase by 3%. Hence we based the growth rate for this current segment on the increment. We feel that since this is the main target segment for SK-II, the 3% growth rate is appropriate. The growth will be largely due to the consumers (aged 30 years and above) trading up to owning and investing in premium skincare products given a rising disposable income.
Despite the intense competition in the premium skincare industry, SK-II is still able to capture a 3% growth in this segment due to their strong marketing efforts over the years in creating strong brand awareness and brand performance.
Based on recommendations from the Euromonitor report, we predict that there will only be a mere 1% growth for this segment. This is justifiable due to a few reasons below:
Firstly, consumers of this segment are continuously trying new brands and products. Given the entrants of new players from Korea and Japan and the influence of the KPOP and JPOP culture, variety-seeking consumers will tend to try other brands and products to search for those that are best suited for them.
Secondly, the marketing efforts are rarely targeted at this segment. SK-II is perceived to be for more mature skin types as seen from the various well-known celebrities who are chosen to be their ambassadors. As such, many consumers in this segment may not be able to relate to those ambassadors. Therefore, they would spend additional effort to engage with the products unless their friends or families heavily endorse them.
Beauty brands from Korea and Japan might be more popular among this segment because they are better able to identify with these brands through the popular Korean and Japanese idols.
Hence, the high switching behaviors and the low marketing activities has resulted on the evaluation of the 1% growth rate for this segment. Their brand loyalty to SK-II will be further determined by how SK-II appeals to them rationally and emotionally through their marketing communications.
MISSUS (1%)
This segment has the highest growth of 5% out of the 3 segments. This prediction is benchmarked against the Madam segment and also based on some market trends as we have observed from the Euromonitor 2013, Men's grooming in Singapore.
The growth is driven by the fact that these consumers have placed more emphasis on how they look and are willing to spend on premium skincare products.
Contrary to popular belief, men are in fact concerned about their appearance, albeit a lesser extent than women. The changing consumption patterns in men can be further affirmed in the growing trend of premium skincare products targeting men. There is a huge potential in this market due to lower saturation of competition.
SK-II has also just started targeting men by introducing their men’s product line. With focused marketing communications coupled with SK-II’s brand reputation, we are convinced that this segment will have a relatively higher growth rate in the years ahead.
GENTLEMEN (5%)
