LUSH in Taiwan: The role of product attributes in

consumer decision making

Ben Boyden 白晢明 95933047

Andy Chang 張中平 95933015

Delta Féliz 艾斯達 95933040

Farah Wooley伍莉 95933052

Sylvain Sénéchal 司宇文 95933044

International MBA Program

College of Commerce, National Chengchi University

Taiwan Soaps

Table of Contents

1. ABSTRACT...........................................................................................................................................3

2. INTRODUCTION.................................................................................................................................4

3. RESEARCH FLOWCHART...............................................................................................................5

4. LITERATURE REVIEW & FIELD OBSERVATIONS..................................................................6

A. TAIWAN MARKET...............................................................................................................................6B. TAIWAN SOAP MARKET.....................................................................................................................7

i. Characteristics of specialised soap & toiletries stores.................................................................7ii. Field Observations........................................................................................................................8iii. LUSH differentiation and in-store experience............................................................................15

C. ROLE OF EXPERIENCE.......................................................................................................................16i. Sensory Experience.....................................................................................................................16ii. Smell............................................................................................................................................16

5. THE FOUR COMPONENTS OF BRAND VALUE FOR LUSH..................................................18

6. RESEARCH QUESTIONS & HYPOTHESIS.................................................................................19

7. METHODOLOGY.............................................................................................................................21

8. RESULTS & ANALYSIS...................................................................................................................22

A. DEMOGRAPHICS................................................................................................................................22B. CUSTOMER LOYALTY........................................................................................................................24C. PRODUCT AWARENESS......................................................................................................................26D. RANKING OF ATTRIBUTES.................................................................................................................26E. OBSERVATION ANALYSIS..................................................................................................................30

9. APPLICATION OF RESULTS.........................................................................................................32

10. BUSINESS PLAN..........................................................................................................................33

A. PRODUCT..........................................................................................................................................33B. CHANNELS........................................................................................................................................34D. COST ANALYSIS................................................................................................................................35

11. CONCLUSION...............................................................................................................................37

12. REFERENCES...............................................................................................................................38

13. APPENDIX.....................................................................................................................................40

A. ENGLISH SURVEY..............................................................................................................................40B. CHINESE SURVEY.............................................................................................................................41c. Results of survey..............................................................................................................................42

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Taiwan Soaps

1. Abstract

A number of international companies selling high end soaps and toiletries have

entered the Taiwan market, which until relatively recently only offered consumers a

limited choice of products. The Taiwan market’s focus has traditionally been on

whitening and sun protection skin care products, but these new specialized soap &

toiletries brands add value through more environmentally friendly, high-end products

based on natural ingredients, and offer more of an in-store sensory experience. The study

looked specifically at LUSH to determine which attributes (from product attributes,

greenness, and sensory experience) were most important in the consumer’s decision

making process and to establish whether or not specialised soaps can be considered to be

an impulse purchase. The study also sought to establish age group and gender

demographics of LUSH’s customer base.

The research results showed LUSH’s customer base to be younger than the

cosmetics industry in Taiwan as a whole but to contain the same proportion of males. It

also determined specialized soap could be considered an impulse purchase, and that the

most important attributes for LUSH customers were safety for skin, product performance

and product ingredients. These findings were consistent with previous research of the

Asian cosmetics market, and also showed that fragrance was an important attribute for

LUSH customers. Lastly, these findings formed the basis of a basic business plan for

selling hand-made soap in Taiwan.

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Taiwan Soaps

2. Introduction

One of the members of our group recently became interested in making soap after

his wife developed a skin allergy to almost everything. After experimenting with some

natural ingredient-based soaps, the group members recognized an opportunity to sell

hand-made soap in Taiwan. Our group hopes to use this research project to establish a

marketing strategy for selling soap in Taiwan.

We determined that LUSH would be the best candidate to evaluate as its products

shared many similarities with our own hand-made soaps, and their business model is

more suitable for potential start-ups – Lush has no marketing budget and started with just

one store, before building from there.

We then formulated some hypotheses tests to establish which LUSH product

attributes were the most important – i.e. which attributes are most important in the

consumer decision making process. We then designed a short survey for LUSH

customers to test these hypotheses. We also observed customer behaviour to see if there

was anything we could learn about the consumer’s purchasing decision process (VOC).

Our survey results, observations and literature review, as well basic costs

estimates, were then used to help us determine a create a basic business plan and budget

for our proposed soap selling business.

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Taiwan Soaps

3. Research Flowchart

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Taiwan Soaps

4. Literature Review & Field Observations

a. Taiwan Market

According to Chou (2003), initial demand for cosmetics in Taiwan was limited,

but increased as living standards and income gradually improved. Chou (2003) also

reports that the first companies to enter the Taiwan cosmetics market were Japanese, and

they remained unchallenged for almost 10 years. Early launches in Taiwan by western

cosmetics brands with largely unsuccessful at first, primarily because their products were

not specialized for the Asian market. However, the Japanese brands offered skin-

whitening products, which enabled them to enter to market successfully. The perception

among Taiwanese women was that Japanese brands where more suitable for their needs,

as they were designed with Asian preferences in mind. This situation started to change in

the 1990’s when Western brands recognized the demand for these products and

introduced their own whitening products. Now, most imported brands include a variety

of skin-whitening products and account for the majority of total cosmetic sales in Taiwan

(Chou, 2003).

In 2004, the Taiwan cosmetics industry was valued at NT$65 billion and is

expected to continue increasing at a rate of about 7-8% percent annually (Freundl, 2005).

Recently, new interests have caused sales in other categories of cosmetics increase

rapidly. For example, makeup and perfume sales have grown at a rate of 5% (Chou,

2003). Western companies are now introducing their core line of products with growing

success. Stores offering environmentally friendly natural-ingredient products have also

been expending recently.

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Taiwan Soaps

b. Taiwan Soap Market

i. Characteristics of specialised soap & toiletries stores

The cosmetics market in Taiwan is extremely competitive, with many local and

international companies giving Taiwanese consumers numerous options to choose from.

The retail market for pharmacy and cosmetics/toiletries products in Taiwan is currently

dominated by Watson’s, which has close to 400 stores across the Island. In addition to

pharmaceutical, cosmetics and toiletries products, Watson’s sells a plethora of other

products, from potato chips and soft drinks, to teddy bears, pyjamas and domestic

appliances.

The market for more environmentally oriented companies and natural ingredients

based products is still relatively small in Taiwan, but it appears to be growing at a healthy

rate. In recent years, there has been a visible push into the Taiwan market by a number of

specialized soap and toiletries brands that are prevalent in this category in Europe and

North America. These include AVEDA, The Body Shop, Crabtree & Evelyn, L’Occitane

and LUSH.

Relative to local pharmacy stores and large cosmetics/toiletries chains such as

Watson’s and Cosmed, there are a number of ways in which specialized soap/bath

product stores differentiate themselves. First of all, none of these brands offer the

whitening products that appear to be so popular in Asian markets. Instead, the focus is on

natural ingredients and environmental friendliness. Secondly, they add value in a variety

of ways, such as by offering superior service and more professional staff. Thirdly, these

stores tend to offer more of an in-store sensory experience to consumers.

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Taiwan Soaps

By way of example, upon entering an AVEDA store, customers are handed a cup

of hot mint tea, before being asked about requirements and then being given an

introduction to products by staff. As a rule, these stores offer customers the opportunity

to pre-test products, and some stores even provide wash basins to make testing of the

products easier. These stores also tend to have much more distinctive aromas. LUSH has

a characteristic citrus smell, AVEDA has a distinct mint smell, L’Occitane has an orange

smell, and Crabtree & Evelyn has a floral smell. To these companies, the in-store smells

have become a key part of their brand, like a radio or TV jingle is for other consumer

goods. The one exception to this rule seems to be The Body Shop stores, which do not

have any distinct aroma.

These stores also use distinctive music as part the sensory experience of

consumers. For example, LUSH stores feature loud and vibrant pop music, while

AVEDA and L’Occitane stores offer more soothing music.

In terms of location, almost without exception all these specialized soap and

cosmetics stores are located in exclusive real estate locations, where a high volume of

walk-by traffic can be expected. In some cases, these brands have a flagship store in an

exclusive location, as well as numerous smaller stores and concession stands in high-end

department stores such as Sogo and Dayeh Takishimaya. This tends to suggest that

specialised soap/bath products are more of an impulse purchase.

ii. Field Observations

We carried out field observations by visiting numerous retail stores in Taipei of

specialized soap and toiletries brands. For comparison, we also observed stores of the

pharmacy and cosmetics/toiletries market leader, Watson’s.

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Taiwan Soaps

LUSHCost of 100g soap: NT$250 –$350, Cost of gift set: NT$600 – 1,500Taiwan Stores: 23

Positioning: Natural ingredients, hand-

made and environmentally friendly

products and packaging. Focus products

are soaps and “bath bombs”, but a wide

range of other products. Emphasizes

product innovation.

Store atmosphere: Stores have bright

colors, especially yellow and green, with an almost overpowering citrus smell that can be

smelt from the street. Vividly colored and eye-catching product displays. Encourage you

touch/feel products, and testers available for everything. Most products are not pre-

packaged. All displays for products and promotions are hand drawn/written on

blackboards, much like a market. The staff are friendly, but only attend you if asked.

Loud music and lively atmosphere.

Marketing Strategy: No advertising in magazines, newspapers or TV, but does distribute

“LUSH Times” newsletter with information about new products and promotions via

stores and direct mail to loyal customers. Also distributes electronic newsletter with

product news and listens to voice of the customer through forums on its website, where

customers can comment and offer product suggestions. Some discontinued products have

even been re-introduced following customer requests.

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Taiwan Soaps

The Body Shop (L’Oréal)Cost of 100g soap: NT$130 – 220Cost of gift set: NT$300 – 1,500Taiwan Stores: 55

Positioning: Emphasizes natural

ingredients and has a very broad product

range, as well as many gift sets. Promotes

recycling by encouraging re-use of

containers, and claims to be against animal

testing, although this is less prominent

than in the past (since being acquired by

L’Oréal).

Store atmosphere: No strong in-store aroma. Stores are clean and bright, but a little

sterile. Everything is pre-packaged, but recycled packaging is used and refills are

available. Testers are available for most but not all products. Staff are not attentive unless

asked, and don’t seem highly trained or professional (most likely students). Stores play

mainstream pop music, not too loud.

Marketing Strategy: Promotes environmental campaigns, as it has traditionally been

company policy to not advertise products. Also provides brochures in store, and sends

customers newsletters. Offers free samples with some purchases.

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Taiwan Soaps

L’OccitaneCost of 100g soap: NT$160 – 300Cost of gift set: NT$3,000 – 10,000+Taiwan Stores: 38

Positioning: Emphasizes high-end natural

ingredients and essential oils, particularly

fruits. In-store focus is on creams,

especially anti-wrinkle face creams. Also

sells bath products, hair care and soap.

Focuses on its French origins for branding.

Store atmosphere: Well illuminated,

spacious stores with an orange aroma and

soft relaxing music. Staff are attentive, if the customer looks like a suitable target

customer. Otherwise the staff are not so friendly and give an impression of exclusivity.

Tester products for most products, and many in-store promotions going on.

Marketing Strategy: Advertises through TV, magazines, billboards and electronic

newsletters. Customers can also receive free catalogues every month. Also provides free

samples with purchases.

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Taiwan Soaps

AVEDACost of 100g soap: NT$250Cost of gift set: NT$2000 – 4000Taiwan Stores: 8 (+ 11 outlets)

Positioning: Natural, organic ingredients,

focusing on specialized hair care, bath

products and soap, as well as some make

up and other cosmetics. Brands some

products as “therapy” products. Some

stores offer spa/salon services, and has

outlets through salons and spas in addition

to stores. Supporter of environmental and

third-world causes; products are all made

with organically grown plants and flowers, while ingredients are sourced from traditional

communities.

Store atmosphere: Spacious stores with relaxing atmosphere and a strong aroma of mint.

Friendly and very attentive staff – each customer is given a cup of mint tea upon entering

the store. Professional and highly trained staff that are keen to offer product advice.

Soothing soft music gives the impression of entering a SPA.

Marketing Strategy: Marketing effort is focused on salons and spas, as 70% of sales

come through this channel. AVEDA also advertises its products and services through

magazines, billboards and electronic newsletters.

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Crabtree & EvelynCost of 100g soap: NT$300 -500Cost of gift set: NT$600 - 3000Taiwan Stores: 21

Positioning: Luxurious skin care, bath and

body products based on natural

ingredients, especially flower and plant

extracts. Brands itself as traditionally

English, and all products come in fresh

smelling, floral paper packaging. Target

market appears to be middle-aged and

older ladies – lots of lavender scented

products.

Store atmosphere: Friendly service but very formal and conservative. Stores have a cosy

feel and a relaxing floral aroma. Tester products for some products but not all – mostly to

promote new products.

Marketing Strategy: Promotes products through magazines, billboards, electronic

newsletters and brochures. Has a preferred customer program giving loyal customers a

10% discount and a birthday card with a 25% off coupon. Also frequently provides free

samples with purchases.

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Taiwan Soaps

Watson’s100g soap:Gift Set: NT$300 - 1,500Taiwan Stores: 386

Positioning: Almost infinite product range,

including soap & bath, cosmetics,

medicine, food & beverages, gifts, home

appliances, etc. Also sells cheaper own

brand products. Known for offering lowest

prices – “pile them high and sell them

cheap”. Some stores feature “Boots”

concession stands, offering a limited

selection of higher-end products. Mainly

targets women, of all ages and lifestyles.

Store atmosphere: Store is crammed full of products and displays, especially at the front.

Can be difficult to move around, as stores are sometimes messy with boxes everywhere.

Loud music and in-store promotions, with no characteristic smell. Customers have to ask

staff for help, except if hovering around high-end products.

Marketing Strategy: Provides brochures in the store and aggressively distributes direct

mail to promote specials of the month. Also uses billboards and TV advertising.

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iii. LUSH differentiation and in-store experience

LUSH is known for the distinct aroma and vibrant decoration of its stores, as well

as the innovative nature of its products and unique packaging. Innovation is a central part

of the company’s mission, and the company constantly introduces new product lines

while retiring less successful ones. Some of LUSH’s more innovative products include

“shower jellies”, “bath ballistics” and “buttercreams”. In fact, LUSH pledges to retire a

third of its product line each year, to be replaced by new products. It also launches new

products every season according to the occasion. Examples of seasonal products include

Christmas pudding soap and eggnog flavoured lip-balm.

Products are hand-made, and typically feature vivid colors, original design and a

strong, distinct smell. Most products are based on organic fruits and vegetables, as well

as essential oils. LUSH is committed to using safe ingredients in their products without

animal ingredients.

LUSH’s key revenue generators are bath ballistics (effervescent balls that add

bubbles) and soaps, accounting for 40% of sales (Conley, 2005), but it also offers many

other products, including skincare, fragrances and hair care. Products are reasonably

priced considering the ingredients and amount of time that goes into the process. LUSH’s

product names are also distinctive and somewhat witty, with names such as “Skin Sin”,

“Happy Hippy” and “Sonic Death Monkey”.

Soaps are generally cut in-store, off of a large handmade block and wrapped for

the customer, much like a piece of cheese would be at a deli store. A lot of effort goes

into in-store displays, which are usually placed near the front of stores where they can be

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Taiwan Soaps

clearly seen by passers-by. All products can be pre-tested, and stores also include wash

basins to encourage consumers to try out the products.

c. Role of experience

i. Sensory Experience

According to Lindstrom (2005, p55), our senses – sight, smell, sound, taste and

touch – are all contact points with products and brands. According to new research by

Harvest Consulting Group, for brands to maximise contact with consumers, as many of

the senses as possible should be engaged, thereby providing a more complete experience.

Soaps offer an opportunity to use the sense of smell to its full potential since the smell of

soap is one of its primary attributes. Touch can also come into play and can become

integral part of the customer’s experience when buying soap.

ii. Smell

Fragrance has been recognized as playing an important role in customer

behaviour, as it can have a powerful effect on people’s mood, emotions and evoke

memories. Smell is actually the sense with the most precise and longest memory.

Lindstrom (2005) reports that in the U.S., “memories of childhood are experienced by

76% of all consumers when they smell Crayola color pens” and “68% of all consumers in

the U.K. associate the smell of a new car with positive memories despite the fact that the

smell is sprayed into the car prior to leaving the factory”. The characteristics of aromas

are now being used on many levels in sales and branding.

Lindstrom (2005) reports that scents can be added to an environment or product to

transfer harmonious feelings and memories associated with the smell to the product. For

example, real estate agents have long known that the smell of fresh bread can help sell

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homes. Harmonious scents are now used in many settings, from the smell of leather in

shoe stores dispersing the scent of cherry in electronic stores. Leather gives people a

sense of tradition and authenticity, while Sony has successfully used cherry scents to

sales enhance of consumer electronics goods to women (AFP, Nov 19, 2006).

Smells can also attract attention in the same way a large billboard or display

could. In all the visual clutter of downtown Taipei, with neon signs everywhere, a

distinct smell is much more likely to attract attention.

Another increasingly important aspect of aromas is how they can be incorporated

into a brand, and fragrances can be used to help consumers recall a product. In this way a

scent can be more effective than a logo or a jingle, as memories of smell last longer

(Lindstrom, 2005). Although humans can differentiate up to 400,000 odours, they cannot

be classified the way colors can, so smells are categorized by associating them with

previous smells or memories. Therefore, when people identify smells, it usually starts

with “it smells like”. Although this means smells can be a powerful tool in branding, it

also means it is very difficult to research. It would not yield reliable information to ask in

a survey “what is your favourite smell?” since smells are only subjectively stored in

memory, and only the actual smell brings the memories to mind.

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5. The Four Components of Brand Value for LUSH

6. Research questions & Hypothesis

Our general research question is “How can we make money by selling soap in

Taiwan?” To find the answer to this question many details need to be determined first.

What type of consumer good is soap? What type of product should we make? What

should be our pricing strategy? What should be our target market? What kind of channel

should we use? What attributes should we emphasize? Greenness, safety for skin, or

smell? Which fragrance and color should we use?

Obviously we cannot answer every question in one paper, therefore from reading

previously made research and our own observations we formulated some relevant

hypotheses. Our first hypothesis is that specialized soaps are an impulse buy. This was

also supported by Managing Director of L’Oréal Taiwan, Alvin Michael Hew, who

recently told us cosmetics goods were an “impulse buy”.

Our second hypothesis is that sensory experience attributes are more important for

LUSH customers than green attributes, price, location or packaging. A study performed

in Thailand to determine the value of green marketing (Johri, Lalit & Sahasakmontri,

Kanokthip, 1998) concluded that although the value of green attributes was increasing,

many other attributes were still more important to consumers. We also expect this will be

the case in Taiwan. Although we expect sensory attributes to be an important factor for

LUSH customers in Taiwan, a study by Tamkang University in Taipei showed that the

most important attributes for cosmetics consumers in Taiwan, China, Korea and Japan

was clearly product safety (Huang, Chin-Wen & Tai, Ai-Ping, 2003). We expect this will

also be the case for LUSH customers in Taiwan.

Taiwan Soaps

A third hypothesis is that LUSH customers are younger than the average for the

cosmetics industry in Taiwan. From our observation of LUSH stores in Taiwan, we

believe the target audience is probably younger than the industry average. In 2003

women 18-44 represented 70% of skin care products consumers (Chou, 2003).

In addition to our quantitative analysis, we also made many observations of

LUSH stores and customers, some of which will be discussed later. When dealing with

the effects of smells simple customer observations can be very valuable even though

harder to quantify.

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7. Methodology

To find out whether or not LUSH soap could be deemed an impulse purchase,

establish the age and gender demographics of LUSH customers in Taiwan, and determine

product attributes that were most important in the consumer decision making process of

LUSH customers in Taiwan, we conducted a survey of customers of LUSH’s flagship

retail store in Taipei. We administered surveys by intercepting 30 customers outside

LUSH’s flagship store on Taipei’s Chungxiao East Road. The respondents included 25

females and 5 males, which is proportionately consistent with broader Taiwan cosmetics

industry. Questions regarding LUSH attributes were administered using an ordinal

question, featuring 12 separate attributes. We identified these 12 attributes, which can be

grouped into “product”, “sensory experience” and “green” attributes, from previous

academic studies of the cosmetics industry in Asia, as well as from our own observations

of LUSH stores and customers.

We then carried out quantitative analysis of the gathered data by carrying out

hypothesis tests, including t-tests of proportions and chi-square tests of independence,

always using 95% degree of confidence. We then use these data results, as well as some

of our own field observations, to form the basis of the business plan for our proposed

business.

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8. Results & Analysisa. Demographics

We used questions 1, 2 and 5 of the survey to gather some demographic

information and compare LUSH Taiwan’s customers to cosmetics customers in Taiwan.

Chou (2003) reported that men accounted for 20% of Taiwan cosmetics consumers, but

only 7-8% of total sales. Our survey proportion of 5 men from a total of 30 respondents

is close to the average for the Taiwan market. Cosmetics brands typically offer some

products specifically for men, such as shaving products. Even though LUSH does not

have such a line, it still attracts a proportion of male consumers consistent with the

industry average. We wonder if a significant proportion of men shopping at LUSH are

purchasing for another person, i.e. purchasing a gift. We therefore performed a Chi-

square test of independence between the variables gender and purpose of purchase (“Who

are you buying for?”).

Figure 1: Gender of LUSH customers and purpose of purchase (Q1 & Q6)

YourselfSomeone

Else Both

Male

Female0%5%

10%15%20%25%30%35%40%45%

MaleFemale

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The resulting p-value is 0.867, much larger than 0.05. We therefore cannot

conclude men are more likely than women to be purchasing a gift. Although there is

probably a difference in product preference between male and female consumers, LUSH

does not appear to be catering exclusively to female consumers as male consumers are

just as likely to be purchasing LUSH products for themselves.

Another important part of demographics we considered was the age groups of

LUSH customers. From the same study by Chou (2003), we found that women aged 18

to 44 years constitute 70% of the consumer base for skin care products. From our own

field observations we hypothesised that the LUSH consumer base is likely to be younger

than the industry average. Our survey respondents aged between 16 and 35 years

accounted for 73%, with 50% aged 25 years or younger.

Figure 2: Age groups of LUSH customers (Q2)

23%

17%

10%

50%

0%0 - 15

16 - 25

26 - 35

36 - 45

45+

It appears LUSH has successfully positioned itself and targeted a younger

generation of consumers. This could be to LUSH’s benefit, as the younger generation

segment is expected to expand at a faster rate than older generation segments, while

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“high school and college students have greater purchasing power than ever before and

favor fashion and new-to-market products” (Chou, 2003).

b. Customer loyalty

To asses the extent of brand loyalty we asked LUSH customers “How often do you buy

LUSH products?” (Q3) and “What soap do you use (Q4)?” We expected to see a low

level of brand loyalty exhibited, because, as stated in our hypotheses section, soap is an

impulse purchase.

Figure 3: Frequency of purchase of LUSH products by respondents (Q3)

0%

10%

20%

30%

40%

50%

60%

70%

First time Sometimes (1-2x permonth)

Frequently (morethan 2x per month)

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Figure 4: Brand of soap used by respondents (Q4)

0%

10%

20%

30%

40%

50%

60%

Only Lush Soaps Only Others Soaps Both

Interestingly, only two respondents said they frequently bought LUSH products,

and these were also the same respondents to report using LUSH products only. This

finding was consistent with our expectations and reveals that although LUSH does have

some loyal customers; the majority of respondents (93%) are using other brands of soap.

The survey results also showed that LUSH is successful at attracting new

customers, as more than a quarter of respondents were trying LUSH for the first time.

Somewhat surprisingly, Figure 5 shows that half of respondents do not use LUSH soaps.

To look more closely, we carried out a Z-test of proportion for dependence between

“frequency of purchase” and “brand of soap used” variables and calculated a p-value of

0.02. We can therefore infer that there is a relationship between these two variables. This

was evident from the data and makes much sense; essentially first-time customers almost

all reported using other types of soaps. New customers account for almost half of

respondents who reported never using LUSH soaps; the other half can be explained by

the presence of other types of products in the store. Overall the data shows the majority

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of customers are not using LUSH brand soap exclusively, which is consistent with an

impulse-purchase product.

c. Product awareness

Question 5 addressed how consumers become aware of the LUSH store. From our own

observations we could see that the majority of customers that entered the store were

originally just passing by. It was noticeable that most customers became aware of the

store by smelling it first, and only then did they enter. Through our research of LUSH’s

business model, we found that with the exception of distributing a newsletter to registered

customers, LUSH does not do any advertising outside of its store. The data did confirm

that passing-by was the way most people first learned of LUSH.

Figure 5: How respondents first learned of LUSH (Q5)

0%

10%

20%

30%

40%

50%

60%

70%

Word-of-mouth Advertisement Noticed the store

d. Ranking of attributes

Question 7 allows us to determine the attributes of LUSH that its customers feel

are most important in their purchasing decision process. By doing so, we can focus our

business plan and resources on the product attributes that are the most likely to add value.

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Since LUSH stores clearly offer more of a sensory experience than most other competitor

stores, we expected to find that attributes related to the sensory experiences would be

more important to respondents. The attributes of sensory experience we analysed were

“store atmosphere”, “appearance of product”, “fragrance” and “opportunity to pre-test”.

Figure 7: Overall ranking of attributes by respondents (Q7)

0

50

100

150

200

250

300

Safe fo

r skin

Produc

t perf

ormanc

e

Ingredie

nts Cost

Outlet

atmos

phere

not te

sted o

n anim

als

hand

made

produ

ct fra

grance

pack

aging

produ

ct ap

peara

nce

oppo

rtunit

y to p

re-test

locati

on con

venienc

e

Figure 7 shows that the aforementioned sensory experience attributes were not the most

important attributes for respondents. Some attributes did not show any clear statistical

difference between one another, so a one-tail t-test of difference of means with a 95%

level of confidence was performed to determine which attributes were indeed more

important.

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Figure 8: t-test p-values of differences in mean average ranking of attributes

Attributes mean rankSafe for skin 3.0 1Product performance 3.5 2Ingredients 4.1 3product fragrance 4.7 4Cost 5.5 5opportunity to pre-test 7.4 6Outlet atmosphere 7.9 7hand made 8.0 8location convenience 8.4 9product appearance 8.4 9not tested on animals 8.5 11packaging 8.6 12

t test (ranks) p value1v2 0.2431v3 0.0661v4 0.0182v4 0.0493v4 0.1873v5 0.0194v5 0.1554v6 0.0015v6 0.0096v7 0.2426v8 0.2126v9 0.094

6v11 0.0756v12 0.052

The p-values show there are clearly some differences in importance for the

highest ranked attributes, but the lowest six attributes were not statistically different.

This may be because of the survey type, as respondents appeared to spend more time

considering attributes they thought were important to themselves, and paid less attention

to the remaining few attributes.

The results are consistent with the findings of another study at Tamkang

University in Taiwan (Huang, 2003), which concluded that for Asian consumers the most

important attributes were related to safety for skin.

Even though our survey suggests that sensory experience attributes are not as

important as some other attributes for LUSH customers, fragrance was deemed to be a

quite important attribute. Interestingly, this differed from the findings of the Tamkang

study (Huang, 2003), in which fragrance did not rank in the first 15 of 21 attributes. We

can therefore conclude that for selling soap, fragrance is indeed an important attribute and

has a significant role in the purchasing process for LUSH customers. In the case of the

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other sensory experience attributes, the rankings do not form a clear picture. For example

the “hand-made” attribute scored a poor average rank overall, but opinions were divided.

If we assume that attributes ranked first are the most important in the consumer’s

decision making it can be useful to see how many respondents would take into

consideration each specific attribute. Figure 9 shows this by dividing attributes in terms

of how many times each was chosen in the top three attributes, then in the top-six, and

then the remainder.

Figure 9: Importance of attributes in decision making

0%10%20%30%40%50%60%70%80%90%

100%

7 to 124 to 61 to 3

Figure 9 shows that although the “hand-made” and “opportunity to pre-test”

attributes were not ranked highly overall, they are important for some respondents.

Although “cost” was shown to be an important attribute, this does not necessarily

mean LUSH customers are especially price sensitive. We can infer however that the

consumer’s perceived value of LUSH products is important. As such, pricing strategy

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can be very important, as price can be used to reinforce the first three attributes.

Customers might perceive a product as being safer and higher-quality if more highly

priced. The same can be said of some of the other attributes that did not rank as highly.

Safety and performance cannot be easily assessed, so a professional staff and outlet

atmosphere can reinforce these attributes, while the opportunity to pre-test can be a key

determinant of product performance. We can also assume that as the fragrance attribute

ranked as important, smell is an important indicator of soap quality.

e. Observation analysis

When dealing with smell and other sensory attributes, observations can be more

valuable than a survey. As previously mentioned, fragrance plays an important role in

grabbing the attention of consumers passing-by. Many passers-by only noticed the store

after smelling it. LUSH also uses brightly colored displays to entice passers-by, with big

uncut and unpacked and soaps placed near to the entrance to attract attention. There is

also a stand where staff demonstrate the soap, promoting the product performance while

attracting attention.

Another observation was that many

passers-by actually reacted negatively to

the strong smell (好臭). A similar

observation was made by a study in

Thailand (Johri, 1998), where members of

focus groups remarked that some smells

were too strong, or colors were too bright.

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These strong smells and bright colors were associated with unnatural, chemical

ingredients. From our observations, we have learned many Taiwanese consumers are

surprised to learn that LUSH only uses natural ingredients. This may be a result of

LUSH not offering a line of products tailored to the needs of the Asian market, as the

smell and appearance of its products might not represent natural ingredients for these

consumers.

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9. Application of results

From our data results, we observed that male customers are part of LUSH’s

customer base, even though LUSH does not offer any product lines specifically for them.

Therefore, our business plan should avoid excluding or alienating male customers.

Our data and observation showed that although many customers show interest in

LUSH and its products, many do not make a purchase or regularly use LUSH products.

We believe this may be attributable to the relatively high price of LUSH products in

Taiwan, and therefore we see an opportunity for vertical differentiation – i.e. offering a

similar product at a price more suitable for Taiwanese consumers.

We also observed many negative reactions to the strong aroma of the LUSH stores,

which we believe represents an opportunity for horizontal differentiation – i.e. offer a

fragrance tailored to Asian tastes.

Lastly, we learned that fragrance is a key attribute in the consumer’s buying

decision process for specialized soaps. Therefore, we believe it would make sense to

spend more on high-quality fragrance ingredients (such as essential oils), while save costs

on other less important attributes such as packaging.

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10. Business plan

“For Asian soap lovers, Shul Fresh hand made soap is the most attentive brand to their needs because ingredients & fragrance are tailored to their taste”

a. Product

Our plan is to make natural soaps using the finest quality natural ingredients and

essential oils for the process and our scents. Similar to LUSH, our products would be

hand-made, hand-cut and hand-wrapped in small batches to our own unique and standard

recipes. Our soaps will be made through the cold process, meaning they will be made

from the primary ingredients. The base of the soaps will be a mix to vegetable oils like

coconut, olive and palm oil to obtain very creamy and lathering bar of soap. Cocoa butter

will also be added for a moisturizing effect in some soaps. Other herbs and plant oils can

be added to create different properties. Essential oils will be used to add the scents, an

important attribute of the soaps. Special attention will be give to the fragrance of the

soap because of its importance, not only does it need to be pleasant it also needs express

the soap is natural, safe and of very good quality. Other ingredients are often added, such

as herbs or green leaves, oatmeal, honey, natural flowers and other earthly products. Our

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handmade soaps will retain all the glycerin, making them superior and gentle bars of

soap. With the right ingredients, recipes, smell, lather and color we believe we can

successfully reach our target market is anyone who enjoys high quality soaps in Asia.

We plan to hold focus groups and present samples to determine which attributes

are most suitable to local tastes, especially as specialized soap stores like Body Shop,

LUSH and L’Occitane have yet to offer products tailored to Asian tastes.

We plan to explore the possibility of making soaps using local ingredients (e.g.

Chinese herbs, green tea and local flowers) by extracting the essential oils ourselves. We

will also look into making medicated soaps from Chinese herbs and producing some

whitening and sun protecting soaps. Although whitening soaps are likely to be popular in

Taiwan, the process would be more complicated because of the many regulations and

hurdles involved with selling medicated cosmetics.

b. Channels

We will sell the soaps directly from a chain of stands in carefully selected

locations. Selling through retailers was ruled out because we feel it would be impossible

to communicate the value of our soaps in that manner. It would also require the soap to

be pre-packaged and pre-testing would be difficult. We also ruled out opening our own

retail stores because it is not within our budget. However, operating our own stands

would confer many advantages, including the positive brand benefits of being located in

an exclusive retail space (without the associated cost of running a full retail store).

Choice of channel is critical in communicating the quality of our products. For example,

selling from a night market stand might give the impression of a cheap product.

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We also plan to create our own strong and unique store aroma as a central

component of our brand. This scent will need to reflect our Asian focus and reinforce our

use of natural ingredients. In addition to fragrance, vivid product displays will play a key

role in attracting customer interest. Our research also showed that other aspects of the

retail environment, such as sales personnel, all need to be consistent with the high-quality

of the product.

c. Pricing strategy

Pricing is an important strategic tool because it positions your product. When

buying cosmetics price is also used to estimate quality and we believe this to hold true

also to soap. Originally, we wanted to compete directly with LUSH and create a product

that would be selling at a high premium price. Our distribution method is also consistent

with a lower price and through our observations we believe many potential LUSH

customers didn’t make purchases because of price considerations.

Pricing our soap in a range of NT$75 to NT$150 per 100g would still offer

sizable margins (200-300% on BOM), and would potentially attract a larger customer

base in Taiwan.

d. Cost analysis

By selling through stands instead of stores overheads can be reduced (relative to

operating a retail store). We believe this would allow us to achieve margins similar to

LUSH, even though we would be selling at a lower price. We would also minimize

packaging, following LUSH’s example. Our research showed that LUSH customers did

not see packaging as an important attribute when buying soap, although it can accounts

for as much as half of the product cost.

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Since LUSH and other stores import their products they must pay duties of

approximately 15%, so making soap locally would provide another competitive

advantage. One disadvantage we would face would be a higher price for materials, as we

would obviously have smaller economies of scale than established competitors. To offset

this disadvantage, we could extract essential oils ourselves and offer some products on a

seasonal basis. For example, coconut oil in Taiwan is more expensive in winter, while

butter is cheaper.

The cost of the ingredients can vary greatly depending on buying bulk and the

essential oils used. We calculate that a 100g of soap consisting of 1/3 palm oil, 1/3

coconut oil, 1/3 olive oil, lye and water cost approximately NT$8-9. Using ingredients

such as honey, chocolate, milk, oatmeal and vanilla to add properties and fragrance

increase the price only slightly to about NT$ 10-12 but does not yield as great results as

essential oil. Depending on the essential oil used, the total cost of ingredients we intend

to use would be NT$14 (orange) to NT$38 (lily). Adding other manufacturing expenses,

we estimate the overall manufacturing cost per 100g bar to be between NT$ 24 to NT$

48.

The other costs are difficult to approximate since rents vary greatly and some

have fixed costs while others also take a percentage of sales. For example, the rent of a

small stand on the main street of Ximen ding was found to be around NT$ 30,000. The

gross margin of about 200% to 300% per 100g would need to cover rent, distribution,

merchandising, sales personnel and more. 37.5 kilos of soaps (about 375 bars) would be

enough to cover one month’s rent in Ximen ding. We believe this represents an excellent

opportunity.

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11. Conclusion

Having made our observations and conducted our research of a sample of LUSH

customers in Taiwan, we believe we have identified certain key attributes to focus on if

selling our own hand-made soaps in Taiwan.

However, we also believe there is a need for further research if we are to determine

the preferences for consumers of specialized soap products in the Asian market. We

believe this is crucial for success and could be our biggest differentiating factor. For

sensory attributes, especially fragrance, questions administered through a survey have

many limitations.

We will therefore proceed with our project, keeping in mind the importance of

smell and the need to tailor it appropriately through focus groups. We will also design

our products and brand image taking into consideration the need for every aspect to

reinforce the perceived product safety, performance and quality of the ingredients.

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12. References

AFP, Washington. “Companies with a nose for sales use aroma-marketing”. Taipei Times, November 19th, 2006.

AVEDA Web Page. www.AVEDA.com

Body Shop Web Page. www.bodyshop.com

Brand Strategy. “LUSH: Pure and simple”. http://www.brandstrategy.co.uk/issues/2006/June/Pure_and_simple

Chou, Angeli (2003). “The Taiwan Cosmetics and Toiletries Market”. International Market Insight

Coleman, Dean. How are essential oils made? http://www.deancoleman.com/whatareoils.htm

Conley, Lucas. “Rinse and Repeat”. Fast Company, issue No. 96, July 2005, page 76.

Crabtree & Evelyn Web Page. www.crabtreeandevelyn.com

Enlightened Brand. “The Natural Beauty of AVEDA”. http://www.enlightenedbrand.com/pages/ebj_2004-4.php#TL

Faiola, Anne-Marie. Teach Soap.com. http://www.teachsoap.com/askam.html

Feed, Walton. Soap Making. http://waltonfeed.com/old/soap/soap.html

Freundl, Diana. “Smart marketing helps the Cosmetics Industry”. Taipei Times, March 24th, 2005.

Harvest Consulting Group (2001). “BrandSense™: Building brands with sensory experience”. www.brandaroma.com/FragranceBranding/Downloads/BrandSense.pdf

Huang, Chin-Wen & Tai, Ai-Ping (2003). “A Cross Cultural Comparison of Customer Value Perception for Products: Consumer Aspects in East Asia”. Cross Management, Vol. 10, No. 4.

Johri, Lalit & Sahasakmontri, Kanokthip (1998). “Green marketing of cosmetics and toiletries in Thailand”. Journal of Consumer Marketing, Vol. 15, No. 3.

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Taiwan Soaps

Laroche, Michael; Bergeron, Jasmin & Barbaro-Forleo, Guido (2001). “Targeting consumers who are willing to pay more for environmentally friendly products”. Journal of Consumer Marketing”, Vol. 18, No. 6.

Lindstrom, Martin (2005). “Designing Ambiance ‘It’s a Sensory Experience’”. Create Magazine.

L’Occitane Wep Page. www.loccitane.com

LUSH Web Page. http://www.LUSH.com

Neil Corporation. “Why Carry AVEDA”. http://www.neill.net/AVEDA

Rawe, July. “LUSH is in no Rush”. Time Magazine, Inside Business/Retail, Nov. 2003, page A24.

Real Business.co.uk. “I will have what Mark Constantine is having” http://www.realbusinesssolution.co.uk

Super Survey. http://knowledge-base.supersurvey.com/survey-questions.htm

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13. Appendix

a. English survey

National Chengchi University IMBA Marketing Survey1. You are? □ Male □ Female2. How old are you? □ < 15 □ 15~25 □ 26~35 □ 36~45歲 □ > 453. How often do you buy LUSH products?

□ This is my first time.□ I usually buy products twice or three times a month.□ I usually buy products more than three times a month.

4. What soaps do you use?□ Use only LUSH soaps.□ Use only other brand soaps.□ Use both LUSH and other brand soaps.

5. How did you know LUSH (First time)□ Word-of-mouth□ Advertisement□ Noticed the store (i.e. passing by)

6. Are you buying for□ yourself□ someone else (i.e. gift)□ both

7. Ranking most important attribute when purchasing soap (1 to 12).1 being the most important and 12 the least.

__ Safe for skin__ Product performance__ Ingredients__ Cost__ Outlet atmosphere__ Not tested on animals__ Product fragrance__ Hand made__ Packaging__ Product Appearance (e.g. color, shape etc)__ Opportunity to pre-test__ Location convenience

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b. Chinese Survey

政治大學 國際經營管理研究所 行銷學 問卷調查1基本資料

請問你的性別是 □ 男性 □ 女性 2請問你的年齡是 □ 15歲 以下 □ 15~25歲 □ 26~35歲

□ 36~45歲 □ 45歲以上3請問你多久來 LUSH買一次東西?

□ 今天是第一次□ 一個月買兩次或三次□ 一個月買超過三次

4請問妳使用的肥皂是□ 只有用 LUSH的□ 只有使用其他廠牌的肥皂□ LUSH和其他廠牌的都有

5請問你從哪裡得知 LUSH的產品□ 親朋好友的介紹□ 廣告□ 剛好經過這家店看到的

6請問你是替誰買 LUSH的產品□ 自己□ 替別人購買（當作禮物）□ 自己和別人

7請問你在購買肥皂時，你最在意的條件是什麼，請用 1到 5分來表示（1表示最不在乎，5表示最在乎）

＿＿用起來對皮膚是安全的＿＿產品的品質＿＿產品的成分＿＿產品的價錢＿＿商店的氣氛＿＿品牌的形象＿＿產品沒有使用動物去做測試＿＿手工製造＿＿產品香味＿＿產品包裝＿＿產品的外觀＿＿可以試用

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＿＿方便的購買43

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c. Results of survey

Varialbes Total %Sex Male 5 17%

Female 25 83%0 - 15 0 0%16 - 25 15 50%

Age Groups 26 - 35 7 23%36 - 45 5 17%45+ 3 10%

How often do First time 8 27% you buy LUSH Sometimes (1-2x per month) 20 67%

Frequently (more than 2x per month) 2 7%What soap do Only Lush Soaps 2 7%

you use? Only Others Soaps 16 53%Both 12 40%

How did you Word-of-mouth 7 23%learn about LUSH? Advertisement 4 13%

Noticed the store 19 63%Are you buying Yourself 12 40%

LUSH for: Someone else 8 27%Both 9 30%

Total Rank Safe for skin 90 1Product performance 105 2Ingredients 122 3Cost 164 5Outlet atmosphere 237 7

Ranking from 1 to 12 not tested on animals 255 11hand made 241 8product fragrance 141 4packaging 258 12product appearance 253 10opportunity to pre-test 221 6location convenience 253 9

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