L'Oreal's Digital Spending Boost Is Paying Off Big Time
After spending as much on digital in 2011 as it did the prior two years combined, L'Oreal is devoting more than 10% of its marketing to digital in the U.S.
Now L'Oreal USA CMO Marc Speichert, who has made developing the company's digital-marketing capability a centerpiece of his work since joining from Colgate-Palmolive Co. in 2010, is taking some time to evaluate how that effort has paid off. The verdict: He's pretty happy.
And no wonder. L'Oreal's North American sales were up 7.9% in the first half. In food, drug, mass, Walmart, club and dollar stores, sales grew 5.4% for the 52 weeks ended Aug. 12, easily besting its mass beauty rivals.
Of course, those sales gains also come amid increases in overall marketing spending. Last year L'Oreal rose to ninth in overall U.S. advertising spending, up 7.4% to $2.1 billion, according to the Advertising Age DataCenter.
Ad Age : You've ramped up digital spending a lot the past couple of years. How is that working out for you?
Mr. Speichert: So far we've been able to increase both the digital spend and the overall spend at the same time. We're continuing to gain share of voice through all media.
The one thing that 's interesting is that we are, in partnership with our TV and print partners, starting to understand the digital linkage, or how digital is starting to impact [the effectiveness of ] traditional TV and print.
Ad Age : How would you describe the role of digital at this point in L'Oreal's marketing mix, and do you see a time where it's going to be the biggest piece?
Mr. Speichert: We had a get-together recently, and the whole theme was "marketing reinvented." The reason is because we felt digital is at the center of everything the marketer is touching. Everyone is recognizing digital is impacting media, the whole path to purchase and how digital is changing that dynamic.
But also, very importantly, digital is changing how we should think about creative, how we should think about retail and how we should think about products and business models. So suddenly digital becomes the catalyst for thinking differently about marketing. So it's very much at the core, and that 's why every marketer in this organization should care for it.
It's not necessarily yet the No. 1 place we put spending. But it is very much for me a catalyst on all areas where spending is allocated.
Ad Age : How is digital doing from an ROI standpoint?
Mr. Speichert: One of the things we've started to do is really dig deep on some of the initiatives we've put in place. One of the initiatives that 's been quite meaningful for us are those beauty TV channels we created on YouTube. One of them is called Destination Beauty.
Given the investment level we've put behind this -- it is the No. 1 partner channel out there on YouTube -- we're really able to get scale. And as we were thinking about creating more channels, we wanted to make sure we got a good sense of what the ROI behind that investment was. So we did some ROI calculations on people exposed to the channel vs. those not exposed and then measured it back to point-of -sale data, and we were quite pleased with the numbers. That's why we're continuing to believe in those channels and think about what new channel opportunities exist.
We're also initiating a big partnership with Facebook, a big ROI study, similar to the one I described with YouTube, looking at exposed to Facebook vs. not exposed and tying it back to point-of -sale data.
Ad Age : You've said digital has a different place on the path to purchase -- in the evaluation phase rather than awareness. Is that always the case?
Mr. Speichert: Absolutely. For me it covers many steps of the path to purchase. When you think about it, we created a channel in partnership with YouTube. It's an awareness play, because when people get on that channel 100% of the advertising is L'Oreal advertising. But, importantly, we also provide them with a humongous number of how-to videos, which gets into the evaluation phase. It's a very nice mix of both.
Ad Age : Tell me about the fund L'Oreal created to promote digital innovation.
Mr. Speichert: Because of our obsession around driving media and digital innovation, we created the Next Fund. We launched it officially in 2011.
People felt there was not enough sharing around innovation, so we wanted to put a system in place where people could share innovation, not only what works but what doesn't. [They also felt] that often innovation was the first thing to get cut from the budget, and therefore people would stay with things that had been proven and successful in the past. The Next Fund is a corporate budget, so the funds are protected in the budgetary process.
We've been meeting with a lot of companies with our area of focus, such as content. Then we decide to run pilots with companies we believe have the most potential. ... Demand Media [which ultimately created dozens of microsites on specific beauty topics in an effort to capture search traffic for L'Oreal] was one of the pilots two years ago. It was a successful pilot, and then we rolled it out to make it a L'Oreal USA solution.