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The Four Worst Factors in Fragrance Today, Part II

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Continued from Part I:

4. Advertising and marketing budgets

Advertising and marketing costs represent a rapidly increasing proportion of all costs for perfume companies. Here’s a quote from a previous blog post of mine dealing with this phenomenon. The source cited was published in 2005, so we are more than six years on from these figures. Imagine what they might be today, with inflation and competition for markets!
Advertising budgets have seen a considerable increase with the entry of marketing into the lists, thanks to the lessons of Suzanne Grayson [the author refers to her earlier quotation of Grayson in the trade journal American Cosmetics and Perfumery in 1972: "It's no longer the product that plays the key role, but rather the marketing."] While in 1972 ten million francs were enough to launch a perfume, in 1989, the year marketing made its appearance at Guerlain, 50 million dollars were needed to launch Samsara. And this growth has not ceased to be pursued. Seventy to a hundred million dollars were swallowed up to launch Calvin Klein CK One in 1995. According to Eurostaf, an investment of 400 to 500 million francs were already needed in 1997 for a world-wide launch of a major perfume, and only 10% of this budget represents the perfume strictly speaking.

Jean-Pierre Petitdidier, a specialist in animal materials at Hasslauer, declared in 1999 that this percentage was perhaps even less. "The policy of perfumers is no longer at all what it used to be. Before, one prized quality above all. There was little publicity, no marketing; but now more than 80% of a perfume's selling price is represented by publicity and marketing. What smells in a perfume, the perfuming composition, represents only approximately 2%. In fact, there is 98% presentation, bottle, packaging, and all kinds of pretty stories, just wind. Call it what you like. So, from the moment that it accounts for only 2%, when you buy an eau de toilette for 80 francs, that's about Fr 1.60. If there's Fr 1.60 of perfumery product, one can obviously not put in costly materials. No rose, no jasmine, but rather inexpensive synthetics. And this development, which has existed for several decades, first of all affects animal materials, which are the most burdensome [in terms of cost]. [Annick le Guérer, Le Parfum: Des Origines à nos Jours. Odile Jacob: Paris, 2005; from the chapter "Le poids de l'économie" ("The Weight of the Economy") pp.249–250]. (Translation mine.)

There you go. What are we paying for? Perfume? Very little of it. The skill of perfumers? Their art comes cheap compared to that of the admen and market analysts. The irony of this would be droll, were it not so depressing to think of the reality. We pay them mostly to sell the stuff to us. Think about that.

And then tell me if you can think of any alternative, given the fierce competition and the overloading of the market with more than 700 new perfume releases last year. This might be a real-world case in which less would be more.

Updated 12th December 2014 at 04:30 PM by JaimeB

Categories
The Fragrance Industry , The Art of Perfumery , Personal Reflections

Comments

  1. mr. reasonable's Avatar
    Thanks for this piece, Jaime - elegantly laid out required reading for anyone asking the usual questions.

    The mind boggles at the launch costs, really. I was on a Dragonair flight from HK to Ningbo in the month after Chanel Bleu was launched and it was already in the in-flight magazine and available for purchase on the plane. This is basically a 'domestic' airline. The logistics involved in getting the pre-release copy and pix out, purchasing ad spots, negotiating 'advertorial' space etc. etc. with individual publications, probably across the whole planet, must be an enormous exercise. It's all about 'getting eyeballs on the product' isn't it?

    Fascinating.
  2. sherapop's Avatar
    Very interesting stats, Jaime B! I had suspected as much when I took a look at the top ten Sephora perfumes for guys and gals. I was rather shocked actually at what people are buying in droves. It certainly cannot be based on the perfumes, so it's got to be the marketing.

    700 new perfumes last year? Wow, and I bet that a fairly large portion of them were flankers, which offer an "economy of scale" marketing strategy, since all of the cumulative marketing for the namesake helps to sell each and every one of the subsequent flankers. Doesn't matter much what they smell like--people are seduced by the ads!
  3. Birdboy48's Avatar
    Good points Jamie.

    We all know that advertizing contains high levels of BS, but in spite of that, I suspect a lot of people are still taken in by the notion that high prices are a result of high-priced materials.

    But if only 2% of an average perfume's price is in the materials, one certainly has to question claims that ultra-expensive perfumes are required to be that expensive primarily because of the added additional costs of the singularly "precious materials" that are in them.

    If the 2% figure is true for the "average" perfume, then a perfume which uses materials which are, for example, twice as expensive as those used in most perfumes should only see the cost of the perfume rise by something around another 2%.

    On top of this, many super-expensive perfumes seem *not* to be backed by major advertizing programs, or else everyone and their brother would be familiar with Clive Christian.

    I suspect it is no secret that the high prices of certain perfumes are in themselves used as selling points, and that the resulting perceptions of luxury often have more to do with the price paid than the quality of actual product itself.

    The only thing I can see on the horizon which might work against this trend is the ever-growing existence of peer and consumer-based review sites such as Basenotes and other such sites. Even publicaions such as 'The Guide' may end up having an influence.

    People in such venues currently seem able to whine a little when a perfume is expensive, and yet there still seems to be a certain public cachet attached to the idea that one is proving themselves a "real fraghound" if they will pay almost any price for something they like. This attitude may just add to the problem ?

    I suspect the real influence and power of such sites has yet to be realized, and will only come to the fore when users or blog owners begin to realize their power, and become more willing to put their foot down and boldly state that a certain perfumes, no matter how nice, are simply not worth the price being charged.

    Being expensive caries a certain prestige it's true, but "simply not worth the price" is a label I suspect few perfume-makers would cherish.
  4. JaimeB's Avatar
    @ Birdboy48:

    Much of what you say is true; however, there are one or two points where a little more thought can correct some misimpressions about niche houses and their prices.

    First of all, the 2% number is an average. There are some houses that can drop below that, and some that can be a bit higher. I don't think that the differences can be that big, but they are there. Because the greatest number of houses are near the bottom of the scale, they drag down the average; consequently, a very few houses being considerably higher (say around 8%) doesn't pull the average up very much because they are very low in number. Think of a student who scores 2% on a hundred tests and 8% on only two tests: his average grade is still only 2.1% (216/102).

    Secondly, remember the economies of scale. Designer and mass-market houses produce a lot more than niches houses do. The more units you produce, the cheaper it is to produce each unit, and the more units you sell, the greater your profit. And remember that this kicks in for more than just production. The same applies to distribution; it's cheaper per unit to ship more units. Even more, the more outlets that sell your product the greater market share you reach just from in-store impressions. Millions of shoppers see Curve at places like Macy's every month; perhaps only a few thousand see Creed at Neimans in a whole year.

    It costs niche perfumers more to produce their product because the perfume material in the bottle may represent four or five times the cost of what cheap designer and mass-market scents use (e. g., instead of 2%, maybe 8–10%). They spend more per unit to distribute it. More importantly still, to keep their distribution costs low and their product away from lower-end markets (where it won't sell because of its price point), they place it in fewer and more prestigious outlets.

    Bottom line: it costs niche houses more to produce and market, and then to sell fewer units. They place less publicity, and in less expensive and more restricted media markets — perhaps only in internet and print media, and in print only in glossy fashion magazines. They sell far fewer units over time, so it takes them longer to compensate their costs, and keeps their profits lower and slower in coming. They can tolerate this because they don't spend the same millions in marketing and promotion as the designers and mass-market outfits, and because their organizations are smaller with somewhat less administrative and personnel overhead.

    So you see the conditions of production, distribution, marketing, and profit margins all go to explain why niche is more expensive than lower-end scents.

    The really curious and interesting phenomenon is that now designer houses are producing niche-like fragrance collections and charging the same niche prices, but underwriting the cost of their niche-style products with the larger, faster profits from their lower-end lines. They invade a higher-end market with a lower cost structure and get more profit for it than the artisan crowd. Neat, eh?

    Well maybe not for the consumer...
    Updated 16th October 2011 at 07:54 AM by JaimeB
  5. Birdboy48's Avatar
    Quote Originally Posted by JaimeB


    The really curious and interesting phenomenon is that now designer houses are producing niche-like fragrance collections and charging the same niche prices, but underwriting the cost of their niche-style products with the larger, faster profits from their lower-end lines. They invade a higher-end market with a lower cost structure and get more profit for it than the artisan crowd.
    I'm still fairly new at all this, but I've certainly noticed that trend.

    But that seems to be the way with contemporary marketing: if a small player manages to come up with an idea that carves out an interesting and somewhat hip niche for themselves, soon enough the big boys will be there, attempting to appropriate that authenticity for themselves, but in a mass-market and ultimately more profitable sort of way.

    Within modernity's apparent paucity of personal and cultural authenticity, it seems no concept remains hip,rebellious or original for long, before some big outfit's marketing division manages to sniff it out and attempts to take it mainstream.

    For an interesting take on certain angles regarding the luxury trade, I found this book well worth the read :

    http://www.amazon.com/Deluxe-How-Lux...8785218&sr=1-1
  6. JaimeB's Avatar
    Birdboy48:

    I have the book you sent the link for, and though I haven’t read it all, I can see that it is talking about some of the same things we've mentioned here. I really must go back and read the whole thing to get their complete point of view on the luxury “industry.”.

    Thanks for pointing me in that direction once more!

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