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Marketing Plan for Neal's Yard Remedies

Preprint · May 2021

DOI: 10.13140/RG.2.2.24977.15209

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 Marketing plan: Neal’s Yard Remedies

MARKETING PLAN FOR NEAL’S YARD REMEDIES

Sara Kaffashi ([email protected])

Cranfield School of Biusness

1. MISSION AND FINANCIAL SUMMARY

Introduction
Neal’s Yard Remedies (NYR) is a British company that manufactures and sells organic natural
health and beauty products (Bloomberg, 2017). In 1981, Romy Fraser started his small
business in Covent Garden, London, primarily selling dried herbs, essential oils, and herb-
based toiletries. Since then, the business has grown immensely in response to high demand
for high-quality organic health and beauty products, both in the UK and internationally. With
more than 135 stores and 470 outlets across the UK and 21 other countries, NYR produces
and retail a wide range of natural and organic products from skincare to haircare cosmetics
and accessories (Wikipedia 2017, NYR 2017) targeting men, women, and children. NYR is the
UK’s first formally certified organic and natural health company and also one of the few that
ensures users of the maximum amount of organic, plant-based ingredients throughout their
product range. The NYR organic “Nurturing Rose Product Range” hereafter Rose products,
including haircare and skincare, is selected as the leading products for this Marketing Plan.
This range uses 85-100% organic ingredients, including rosehip, sea buckthorn and
passionflower oil with a heavenly rose aroma and low lathering foam packaged in the NYR
famous blue bottles.

1.1. Mission statement

NYR, UK, core products including rose products enact within company’s missions statement;

• The unit's role or contribution: Increase sales by adding more stores/outlets and providing
more education about essential organic products.
• Definition of the business: provide high quality natural organic, plant-based health and
beauty products.
• Distinctive competence: Formulate consistently high-quality products with fully disclosed
ingredients, being cruelty-free, 100% vegetarian and with a beautiful scent. They are
supporting fair trade and local producers to satisfy customers’ emotional & societal values.
NYR was awarded the 'Champion Status' by The Campaign for Safe Cosmetics. NYR’s
products are trusted to meet customer aspirations for both personal well-being and high-
end fashion.
• Indications for future direction: Strong emphasise must be given to main Rose products
(where NYR are already differentiated) because of the lack of other trusted gentle to
skin products in the market. Therefore, additional resource allocation is needed not only
to engage more customers who care about their health & physical appearance, the
wider environment and have clear social values consistent with the NYR business model.

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 Marketing plan: Neal’s Yard Remedies

1.2. Summary of business performance

The summary of business unit performance (Rose products) compared with NYR’s total
performance and general UK market is presented below:

Table 1- business unit compared with NYR’s total performance and general UK market
Revenue & increase % / category 2014 (£ mill) 2015 (£mill) 2016 (£mill)
UK – (beauty & wellbeing segment) 51.2 54.8 (+7%) 661.9 (+13%)
Neals Yard Remedies – all UK products 9.1 9.2 (+0.7%) 10.0 (+9.0%)
Neal’s Yard Remedies - Rose products (beauty 2.4 2.62 (+9.2%) 2.91 (+11.0%)
& wellbeing segment) approx.

Data were collected from Mrketline (2017), UK organic Report (2016), Endole Suit, and NYR’s
customer service centre. Important to note that sales for 2017 are conservatively assumed to
be flat as data is not yet available.

Summary of financial projections

A 3-year Business Plan (2018-2020) for NYR’s “Rose Product Range” has targeted to increase
revenues by 45% (15% annually). This conservative objective is generally consistent with an
estimated increase of 50% in UK revenues for the overall organic industry segment.

Assumptions
The NYR product range is an integrated and complementary portfolio of products that present
a cohesive offering to discerning customers willing to pay a premium for products that match
their healthy, caring and occasionally self-indulgent lifestyle. All product segments with the
NYR portfolio are therefore assumed to grow equally, but an emphasis on how to frame the
marketing plan to achieve the overall 3-year Business Plan is currently under discussion.

2. MARKET OVERVIEW:
In this section, Porter 5 forces and market segmentation will be presented.

2.1. Forces Affecting Industry Profitability

Porte’s 5 forces is used to analyse the competitive intensity in the market.

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 Marketing plan: Neal’s Yard Remedies

Threat of new entrants

1. Attractiveness of market share, monopolistic
structure 2.Moderate capital investment
2. Brand name

Rivalry Bargaining power of

Bargaining power of 1. Small market buyers
suppliers niche 1. Low switching cost
1.Ablility to negotiate 2.Presence of 2. Presence of
price by retailers strong competitors substitutes
2. Low switching cost 3. High profit 3. Well educated
margin customers

Threat of Substitutes
1. Cheaper local products
3. Home-made hair-care products

Figure 1- porter's 5 forces assumption

Bargaining power of Buyers: Moderate

As NYR are targeting a niche market, individual customers have limited bargaining power over
price. However, buyers’ are well educated, and their product loyalty, together with their
continued demand for high quality, play a significant role, as switching cost is low.

Bargaining power of Suppliers: Low

The quality of raw ingredients is essential. Health awareness and scares from synthetic
chemicals in hair care products have led to high demand for healthier options that are
environmentally friendly, efficient and following the current trend. However, since small
farmers from different parts of the world provide ingredients for NYR, the bargaining power
of individual suppliers remains pretty low.

The threat of New Entrants: Moderate

As market growth for organic products is greater than for non-organic products, it is likely
that more companies will now wish to enter this high margin market. Customers, without a
doubt, will share experiences, which will encourage new entrants to capitalise by satisfying
specific needs or offering products perceived to offer better value. However, new entrants
will need a sensible investment of capital to overcome the existing brand loyalty and establish
their reputation in this market.

The intensity of Rivalry: High

The market for organic products is niche and currently small but with higher growth rates than
the general market. Hence, increased competition between the well-established brands and
new entrants are anticipated. Through lower pricing policies, some rivals are trying to attract
more customers for similar products. However, since there are only a limited number of well-
established brands, each of them can currently still keep high-profit margins.

The Threat of Substitutes: Low

Locally made soaps, shampoos and skincare products can be substituted for commercial ones.
However, the chance of significant penetration in the market is low because customers are

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 Marketing plan: Neal’s Yard Remedies

less price-sensitive and more concerned about quality when it comes to health and beauty
products.

3. Market Segmentation
In order to reach correct segmentation in the market, the “value in use” information was
collected from some respondents. Considering this fact, price and packaging were considered
as hygiene factors. However, the most critical elements that motivated customers to buy Rose
products from NYR are NYRs’ fully disclosed, organic, high-quality products that satisfy
personal health and trust concerns. The other motivating factor is the very heavenly smell of
the nourishing rose range, which provides customers refreshment of mind and a relaxed,
serene feeling. The segments are then as follow:

Beauty: refers to both Physical and relaxed feeling after using Rose skincare and haircare
products.
Trust (disclosed ingredients): Neal’s Yard and its customers share common pride of full
transparency of ingredients.

Consumer Segments:
Segment 1 hypothesis- Isy (Health Conscious) is a 29-year-old pregnant mom, and all she
cares for is her and her baby health, so she checks ingredients and their source very carefully to
ensure they are very safe.

Segment 2 hypothesis Dana (Luxury Organic) is a 35-year-old woman, and she uses the best
organic brands because they give her a healthier and more beautiful feeling; the great smell
refreshes her mood.

Segment 3 hypothesis Ella (Vanity) is a 25-year-old woman. She loves her haircare and skincare
products to give her a smooth and shiny face and hair. The great smell is also a must, and she
is content to pay higher because she enjoys the refreshing experience and is pleased with the
results.

Segment 4 hypothesis Matthias (Just Natural) is a 44 years old man. He uses natural or organic,
whichever available and believes that either the natural or organic label will be fine for him.

Yes

Health Conscious Luxurious Organic

Beauty Not worried Must
Just Natural Vanity

No
Trust (Disclosed ingredients)

Figure 2- Market segmentation

4. SWOT and Portfolio Summary: Nurturing Rose skincare and haircare

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The market attractiveness table shows that Luxury Organic and Health Conscious segments
are the most attractive. Market growth and profitability have prime importance in these
segments. The market for Luxury organic is very niche, denoted by small market size, though
customers are high end, which results in increased profitability. Competitiveness is another
factor of high attractiveness for Luxury Organic, as NYR can take advantage of fewer
competitors here. In the Health Conscious segment, although the high competition increases
the likelihood of switching brand. The Just Natural segment is characterised by having a
considerably larger market size and high growth potential. However, competitive impact
diminishes their attractiveness for the market. The last segment is dedicated to Vanity users,
where the large size of the market and its growth potential makes it very attractive, though
high competitiveness is also relevant here.

Table 2- Market attractiveness assumptions for different segments

MAFs Weights Health Conscious Luxurious Vanity Just Natural

Organic
Size 20 5 1 4 0.8 7 1.4 6 1.2
Growth 25 8 2 8 2 7.5 1.87 7 1.75
Profitability 35 8 2.8 9 3.15 8 2.8 6 2.1
Competiveness 20 6 1.2 8 1.6 4 0.8 3 0.6
7.0 7.55 6.87 5.65
Total 100

5. Critical Success Factors (CSFs)

The CSFs are attributes of perceived values that customers receive from using products and
give them the power of choice between different alternatives (Brands). The CSFs were
estimated for all segments, though only two segments (1 and 4) with the highest possibility
for market penetration are presented here (the CSF analysis of two other segments are
presented in Appendix 1). The perceived values were collected from consumers and brand
rankings from ethical and performance evaluations (such as the Ethical Companies Evaluation,
Campaign for Safe Cosmetics, and Endole Suit). This resulted in using slightly different CSFs for
each segment.

5.1. The Health Conscious Segment:

This segment has the highest potential for improving NYR profitability (Table 3). The selected
CSF for this segment is personal well-being, where a high score denotes an increased
preference for quality of ingredients and product effectiveness on customer well-being. Trust
refers to perceived value from business transparency and fully disclosing all ingredients.
Morals are respondents’ satisfaction from either ethical values concerned with organic
products (such as free trade, animal cruelty-free, etc.) or moral obligations towards their
family with providing the least harmful products. Finally, beauty represents the young-looking
skin and shiny and silky hair resulting from high-quality products. In this segment, trust and
moral attributes have the highest score for NYR because of the free trade and social
responsibility of their business. Though, beauty attributes have a higher score for Origins
because of their higher experience in this area.

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Table 3- Critical success factors assumption for segment 1 (health-conscious)

CSFs Weights

Wellbeing (Health) 35 8 2.8 7 2.45 6 2.4

Trust (Reputation) 25 9 2.25 8 2 7 1.75
Morals (Ethical) 20 9 1.8 8 1.6 5 1
Beauty 20 7 1.4 9 1.8 6 0.6
8.25 7.85 5.8
Total 100

5.2. The Vanity segment:

The Vanity segment primarily benefits from NYR’s heavenly scent of the rose product range,
and the greater quality ingredients are shown under the well-being attribute. However, in this
segment, Origins, by offering better beauty perspectives and perception of higher class, is
doing better. NYR can use this information to penetrate this segment by improving their Rose
products and satisfying the “high class” brand aspiration for these customers.

Table 4- Critical success factors assumption for segment 4 (Vanity)

CSFs Weights

Prestigious 30 7 2.1 9 2.7 5 1.5

Mind relaxation 25 9 2.5 8 2 6 1.5
Beauty 35 7 2.45 9 3.15 6 2.1
Well being 10 8 0.8 7 0.7 5 0.5
7.85 8.55 5.6
Total 100

6. Portfolio Summary
In order to draw the directional policy map, the relative market share of the segment was
assumed based on overall UK organic products data (Mintel 2017, Marketline, 2017).
The Luxury organic segment is the most dominant one for NYR. The requirements for high
quality and fully disclosed ingredients, together with a touch of scent and mind relaxation,
match NYR products. Therefore, investments are required to retain them. Another attractive
and fast-growing segment that merits investment is the Health Conscious segment. This
segment has a high potential for profitability and can be targeted by NYR because customers
requirements are mostly around high, transparent ingredients to ensure their personal and
family wellbeing. Low competitiveness in this market makes it even more attractive. NYR’s
performance is relatively weak in the Vanity segment. Fashion is vital for customers in this
segment, and NYR has to respond to this need fully. Finally, Just Natural Segment can be
treated as occasional buyers and is, therefore, a lower marketing priority.

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 Marketing plan: Neal’s Yard Remedies

Relative business strength Luxury Organic

Attractive = 7.55 S1: Health Conscious
high low
Strength = 0.8
Health Conscious S2: Luxury Organic
S2
Attractive = 7
Strength = 0.4
high

S1 S3: Vanity
S3
S4: Just Natural
Market Attractiveness

Vanity
S4 Attractive = 6.87
Strength = -0.7
low

Just Natural
Attractive = 5.65
Strength = -0.5

Figure3- Directional Policy

Assumptions, Matrix
Marketing for defined
Objectives segments
and Strategies
*Circle size denotes assumed revenue

6. OBJECTIVES AND STRATEGIES

The objectives and strategies for each market segment defined in the following Table:

Table 5- Objectives and strategies for the defined market segment

Segment Objective(s) Strategies

Health Conscious Increase revenue by 20% Improve “Beauty” from 7 to 9; In order to achieve this,
very close collaboration with R &D is required. The oil-
infused shampoos, especially with Argan oil, are
becoming very popular in the market. Therefore,
increasing diversification together with effectiveness
can attract more customers.
Increase awareness
More advertisement and awareness can increase the
visibility of NYR and the effectiveness of its products.

Luxury Organic Retain the market share Make customers feel special:
This segment has the highest profitability for NYR.
Considering the monopolistic nature of the market and
forces from competitors and new entrants, special
attention must be given to retaining this segment.
Strategies such as occasional gifts together with
products brochures and booklets can send out to these
customers. Free beauty and photo workshops where
NYR beauty specialists give free consultation and
experience to permanent and loyal customers can
create a sense of belonging.

Vanity Increase penetration by 20% Use fashion stars to promote the brand
The NYR has been relying on its health advocates to
promote the brand. With more fashion and sports stars
taking interests in healthy products, NYR can use it to

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its own benefit to increase brand visibility and attract

more customers.
Create Healthy Cosmetic APP. For educational
Purpose
Since this segment's primary concern is beauty, some
mobile Apps such as beauty tips and health tips and
awareness can nudge customers to use healthier
products.
Just Natural Increase revenue by 5% Increase “sense of belonging” and “saving earth” CSFs
both to 9;
Using plastic bottles in the packaging has been the main
NYRs drawback from environmental advocates’
perspectives. Replacing plastic bottles with glass ones
or biodegradable type can attract some customers
from this segment. Organising special events for
families to participate in environmental protection
activities can be considered as another strategy.

To increase revenue by 45% in three years, a detailed Marketing plan is presented to 1-

increase the revenue from the health-conscious segment by a minimum of 10% (or 3.5%
annually), 2- increase revenue from the Just Natural segment by a minimum 5% (2% annually).
Also, in order to improve the market share of NYR hair care products, a 20% market
penetration in the Vanity segment is required, together with increased loyalty and brand
visibility for health-conscious and just natural segments.

MARKETING PLANNING PROCESS

Strategies such as increasing brands' contribution to beauty factors, retaining loyal customers,
and more advertisements to attract more customers were suggested to achieve marketing
objectives. However, the market research section has to gather information from customers'
demand and spending power. The research and development, finance and marketing
departments need to search the possibility of guaranteeing those demands. However, since
there is no requirement to purchase new plants or equipment, the cost would usually be
around research, and the cost is considered low.

CONCLUSION – ‘THE ELEVATOR PITCH’

The results show that a new marketing campaign should focus on the excellent “Rose” -
Beauty & Wellbeing Range to attract new luxury customers who are willing to adopt NYR’s
healthy lifestyle philosophy. This will bring added benefits across the whole product range.

References
Bloomberg (2017). Company Overview of Neal's Yard (Natural Remedies) Limited. Available
at https://www.bloomberg.com/research/stocks/private/snapshot.asp?
privcapid=25251596. Accessed on December 2017.

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 Marketing plan: Neal’s Yard Remedies

Endole Suit (2017). Neal’s Yard Remedies (Home) Limited. Available from
https://suite.endole.co.uk/insight/company/06828905-neal-s-yard-remedies-home-limited
Accessed on December 2017.
Marketline (2014). The UK organic market; recovery and expansion
Organic Market Report (2016). Availabe http://www.soilassociation.org/news/2016/organic-
market-report-2016. Accessed on December 2017.
Mintel (2017). Beauty Retailing UK. Available from http://store.mintel.com/uk-beauty-
retailing-market-report . Accessed on December 2017.
Neal’s Yard Remedies (2017). Available from https://www.nealsyardremedies.com/about-
us-pages/beliefs.html. Accessed on November 2017.
Wikipedia (2017). Neal’s Yard Remedies. Available https://en.wikipedia.org/wiki/Neal%27s
_Yard_Remedies. Accessed at December 2017

Appendix 1

Table 1- Critical success factors assumption for segment 2 (Luxury organic)

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 Marketing plan: Neal’s Yard Remedies

CSFs Luxury organic Weights

Wellbeing 35 9 3.15 8 2.8 5 1.5

Mental relaxation 25 9 2.25 8 2 6 1.5
trust 20 9 1.8 6 1.2 5 1
Beauty 20 7 1.4 9 1.8 5 1.25
8.6 7.8 5.25
Total 100

Table 2- Critical success factors assumption for segment 3 (Just Natural)

CSFs Just Natural Weights

Health 20 8 1.6 7 1.4 7 1.4

Saving earth 20 7 1.4 7 1.4 9 1.8
Sense of belonging 20 8 1.6 8 1.6 8 1.6
Beauty 15 7 1.05 9 1.35 5 0.75
Price 20 6 1.2 8 1.6 9 1.8
6.85 7.35 6.95
Total 100

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