New Product Development of SK-II

Table of Content

The Procter & Gamble Company (P&G) boasts boatloads of brands. The world’s top maker of household products courts market share and billion-dollar names. The company divided into three global units which are household care, beauty and grooming, and health and well-being. The company also makes pet food and water filters and produces a soap opera. P&G’s many famous brand are under P&G Multinational Corporation which included Febreze, Fusion, Always, Braun, Bounty, Charmin, Crest, Downy or Lenor, Gillette, Iams, Olay, Pampers, Pantene, Pringles, Tide, SK-II, and so on.

Their market capitalization is greater than the GDP of many nations. They penetrate more than 180 nations of the world. Their purpose is to come out with the branded products and services of superior quality and value that improve the lives of the world’s consumer. In return, the consumer will reward the P&G with leadership sales, profit and value creation (P&G, 2011). SK-II is a one of the Procter & Gamble Beauty brand. This product has been launched in Japan market since 1980. SK-II can be considered as the one of the most expensive beauty brands in the world until today.

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SK-II history started at 30 years ago, when a scientist in Japan noticed that old women who working in a Japanese Sake brewery have very soft and youthful hands accidentally. The scientist was curious with that incident. So, they started conducting a research to find out the answer (Wikipedia, 2011). During that research, the scientist used 5 years to screen over 300 types of yeasts and refined the precise conditions for fermentation. Through these precise conditions for fermentation process, it would lead to the discovery of SK-II’s signature ingredient which is “Pitera”.

According to the SK-II Singapore (2011), Pitera is a blend of vitamins, contain of amino acids, minerals, and organic acids. These ingredients will work together to allow the skin’s natural surface rejuvenation process to function at its prime and also enhancing the renewal of the skin’s outer layer. If the consumer used the Pitera continuously, they will have a clearer looking and smoother skin. So, SK-II Company assumed that Pitera is the secret key for those who wished to have a beautiful skin. In 1980, the Japanese branch of Max Factor acquired rights to the ingredient, and launched the first cosmetic product containing the ingredient.

As the result, they are quiet successful and managed to get a lot of loyalty customers. So, Max Factor decided to expand the range and renaming it Max Factor SK-II. However Max Factor had flipped through five different owners, all of the owner neglected the SK-II product. Till 1995, the current owner Procter and Gamble executive and brand manager A. G. Lafley was sent to Japan to solve P&G’s declining business in Asia. Lafley made many changes at Max Factor and he noted that Japanese women disliked the brand, so he decided to focus on the SK-II.

After that, SK-II became Japan’s top prestige cosmetics brand and the sales were better than Shiseido within five years. Then, SK-II expanded into several markets, but the products sold outside the Asia do not bear the Max Factor name. They called the product as “SK-II”. In Japan, and most of Asia, SK-II is a sub-brand of Max Factor, and still bears his name. When the time goes by, people just mention about SK-II instead of Max Factor SK-II (Wikipedia, 2008). In this paper we will look through new product development stages of SK-II. 2. New Product Development of SK-II In order to develop a new product, SK-II had to go through the strategy stage, ideal generation, screening, concept development and testing, business analysis, product development and testing, test marketing, and lastly only they launch their product in the market. 2. 1 Strategy Over a quarter of a century ago, a chance discovery of soft and beautiful hand of shake workers inspired research into yeast fermentation process by accidently. This means that, the research was not required by the top management.

At the same time, they might want to compete with the competitor such as Shiseido (Wikipedia, 2008). The researcher found that the workers had wrinkled faces, but extraordinary soft and youthful hands. These hands were in constant contact with the sake fermentation process. It took many years for the scientists to isolate the ingredient Pitera, which is a naturally occurring liquid from the yeast fermentation process (Younger You, 2011). At the same time, we also believe that, the strategy or innovator of SK-II is coming out with the product that can make customer to have beautiful skin.

This company also have their own focus which is they have a clear technology dimension such as science, a material that use in create SK-II product and process skill to develop the product. They use the newness technology to make sure the product can satisfy consumers. Besides that, R&D department also important and they use their abilities to make sure the product is in good quality (P&G Japan, 2004). Their goal objective in a short term is that, the first target market is in local market (in Japan).

In 1999, Paolo de Cesare come out with the idea and suggest with Global Leadership Team (GTL) of P&G Beauty Care Business Unit (GBU) and also present his analysis of whether SK-II, a prestige skin care line from Japan should become a global P&G brand. The firm objective is to tailor their product to meet consumer demands in each market or nation. In, 1986, P&G’s seven division in the U. S organization were broken into 36 product categories, each with its own product development, product supply and sales, and marketing capabilities. These new roles were given for developing in global strategy.

At the same time, they also target the market by focus on advantages of the product that make users have is clearer and more translucent skin compared to non users. So that, they can get better skin conditions such as lighter skin tone, compared to non users and better sebum condition. This is their target marketing to all women in Asia that want to have a healthy skin and beautiful look (P&G Japan, 2004). SK-II guidelines are parallel with the P&G, which is to provide products of superior quality and value that improve the lives of the customers all over the world (P&G, 2011). 2. 2 Idea Generation

The idea for the creation of SK-II was begun at a sake brewery in Japan, where a visiting Japanese monk noticed the elderly workers had wrinkles faces, but they have extraordinary soft and youthful hands. This is because, they constant contact with the sake for fermentation process. Firstly, their idea generations came from the external sources because the SK-II’s product was found by the researcher when they saw the incident when the workers work at brewery in Japan. Then, they try to develop and found out the answer why these workers had a soft and youthful hands but different with their face.

After 5 years of research in their internal sources, R&D department, scientists isolated the clear, nutrient-rich liquid formed during the process. In this unique, natural ingredient lay the secret to youthful skin. They called it “Pitera” able to enhance our skin’s natural cell renewal cycle, giving us crystal clear skin (SK-II Singapore, 2011). They get the idea from the incident and try to develop the idea. The key of finding was the company had recognized the distinctive need and habits of very demanding Japanese consumers (Women Online Spa, 2009).

In our opinion, the company on that time might think to come out with any beauty and skin care product for both to take care on face, neck, hand, foot, skin of the whole body. Instead of that, we think that they consider to come out the product whether in liquid or in cream. So that, if will easy for the user to use it anytime. Next, they might also consider making the product that can be ate or wash in order to keep their customer’s beauty. As the evidences according to SK-II (2011), women nowadays have pleasure of luxury which the elderly Japanese women unwittingly enjoy.

They come out with the idea using Pitera that contains vitamins, minerals and proteins which are all required by the skin to help maintain its natural functions. They also get the idea to help women in the world because of consumer skin changes from time to time. For example, when you were young, your skin may be oil and acne-prone. But at thirty, you may worry about your skin slops or the darkening of your skin. In your forties, you may trouble by wrinkles. This idea was created once customer research found that despite regional differences process was an opportunity worldwide for facial cleansing.

This technology team developed a new facial cleansing product that world serve as a foundation for P&G to customize and market in various nation. For example, the Japanese team added to the foundation product that would satisfy the need of Japanese consumer (SK-II, 2011). 2. 3 Screening In this stage, SK-II decided to come out a beauty care product for women. Due to they know that, women have faced a challenge to maintain the beauty or to have a beautiful skin (Wikipedia, 2011). Therefore, the company decided to come out the product that contains of Pitera.

Through the ideal have chosen, they wish this product could bring many benefits to the customers. Firstly, they wished the product could help customer’s skin brighter, fairer, and more translucent. Secondly, they wished this product can help the skin shed off its dull outer surface layer and leading to increased evenness in customer skin tone. Thirdly, they hope the product can help to balance the skin sebum secretion. Fourthly, they want the product to help the customer adjust the skin PH to a balanced state to keep it healthy and glowing.

Lastly, they wished the product can helps the skin texture and smoothens the skin surface as well help to increased moisture in skin and prevent dryness (SK-II, 2011). Besides that, they also have come out with a new philosophy ‘Beautifying Aging’ and ‘skin power’ to encourage the women to change their attitude. From our group opinion, these philosophies actually to attract the women with less emphasis on the appearance of increased age. As time goes on, today P&G is enables to come out with a few SK-II beauty skincare products to meet customer demand.

This product is designed to various types of skin and for all genders. No matter how old or young, this product is easy to use. Nowadays, P&G not only focused on product based on cream but also product based on liquid. In our group perspectives, this will help customer among the male and female that usually busy with their work to protect their skin from aging. For example, ‘Essential care’ product has come out with a set of product for customer which consist of purify, clarify, vitalize, moisturize and protection (SK-II, 2011). 2. Concept development and testing In this stage, SK-II product was inspired by yeas fermentation process where the scientists noticed that elderly workers had wrinkled faces, but extraordinarily soft and youthful-looking hands. SK II promised the product could help customer’s skin brighter, fairer, and more translucent. Secondly, they promised this product can help the skin shed off its dull outer surface layer and leading to increased evenness in customer skin tone. Thirdly, they promised the product could help to balance the skin sebum secretion.

Fourthly, they promised the product to help the customer adjust the skin PH to a balanced state to keep it healthy and glowing. Lastly, they promised the product can helps the skin texture and smoothens the skin surface as well help to increased moisture in skin and prevent dryness (SK-II, 2011). At the same time, the P&G used the initials ‘SK’ to form the name SK-II Pitera which is believes that is a Secret Key to beautiful skin. In order to positioning the product different from others, P&G has made different a positioning product then the others.

In prior time, the Max factor usually did not focused all the time for SK-II. When A. G. Lafley was send to the Japan in 1995, he made several changes to SK-II product including the Max Factor. After discovered the market, he noticed that Japanese women did not like the product. In our group opinion, on that time, probably this product are unstable in the market owing to the product is still unable to convince consumers to choose this brand as the max factor often neglected the SK-II.

Thus, as a measure to meet the needs of users, they only concern on SK-II cream on that time. For examples, SK-II has launched facial masks. It is the first brands that combine two key mask innovations, which are come out with two pieces for a variety of skin types and as a mask (Procter and Gamble, 2011). Nowadays, the skincare beauty no longer is a requirement but it is a necessity for those who care about their health and skin care. This is proved by many celebrities in the world believes the effectiveness of the SK II.

According to the famous celebrity Qiqi, she believed that SK-II has been her constant companion on this journey through life when she looked her skin many ways but more importantly, it has pampered her soul (SK–II MALAYSIA, 2011). 2. 5 Business analysis The SK-II Company has done the market analysis. For example of SK-II in China, Chinese women are becoming increasingly important consumers in their own right, with average female disposable income increasing by nearly 50% to US$520 or 52 euro’s (RMB4,264) a year in 2005 (vs. 2001) (Euro monitor 2007a).

Chinese women, like women around the world. They are willing to spend sizeable amounts of their disposable income on premium cosmetics. As the evidences, in 2004 China became one of the global top 10 cosmetics markets, one of the top 5 growth markets, and 2006 estimates of total sales were at US$1. 3 billion (Whiteman and Krug, 2006). At the same time, Paolo De Cesare (President of Max Factor) have a meeting with the Global Leadership Team (GLC) of P&G’s Beauty Care Global Business Unit (GBU) to present the analysis whether the SK-II can become a global P&G brand or not.

Then, P&G’s Beauty Care Global Business Unit approved the ideal from Paolo De Cesare. So, he does expansion plans for a Japanese product was the latest step in a process of internationalization. Next, SK-II’s success in Taiwan and Hong Kong by 1999, 45% of total SK-II sales had already encouraged management to begin expansion into three other regional markets which are Singapore, Malaysia, and South Korea under the Paolo De Cesare management. As the result, beauty care management team for Greater China was interested in expanding on SK-II into mainland China (P&G Japan, 2004).

In term of technical aspects, they are also using the Japanese technicians’ skills in miniaturization and software development and working to create a simplified version of scientific equipment used by P&G lab technicians to qualify new skin care products by measuring improvements in skin condition (P&G Japan, 2004). The project fit perfectly with de Cesare’s vision for SK-II to become the brand that solved individual skin care problems and could build significant loyalty in the analytically inclined Japanese consumer (P&G Japan,2004).

The Procter Gamble’s (P&G) success in marketing the best SK-II brand in the Japanese market shows that SK-II has the potential to become a global brand, with the ability to enter and establish a wide consumer support in the domestic Japanese market, the emerging Chinese cosmetics market, and the mature European market(Ja Haley,2009). This is confirmed that SK-II Company’s product development achieved its objective which is successfully provide branded products and services with superior quality globally (Mighty Students, 2011). 2. Product Development and Testing The SK-II company conducts in–house trial to test the product’s potential customers among the employees to evaluate the general impression towards the new product . As a evident the scientist conduct research for 5 years to screen over 300 types of yeasts and developed the specific conditions for fermentation until they able to product the Pitera (Wikipedia, 2011). This research result that precise conditions for fermentation process, it would lead to the finding of SK-II’s signature ingredient which is ‘’Pitera’’.

According to the SK-II Singapore (2011), Pitera successfully will work together to allow the skins ‘natural surface rejuvenation process to function at its prime and also enhancing the renewal of the skins outer layer. This revealed that if the consumer used the Pitera continuously they will have a clearer looking and smoother skin. Through this research ,SK-II company assume this product was accept by the consumers and in market. SK-II successfully fits with the consumer needs and proved it was a safe product. 2. 7 Test Marketing In this stage, are going to use both simulated test marketing and real test marketing.

In simulated test marketing (STM), SK-II will create a blog to the public or potential customer. In that particular forum, they provided the questionnaire link for the visitor to fill in. Then, the responder will get the information about which types of SK-II products is suitable for them. Next, if the responders need to sign as a member through the SK-II website. After that, they will receive a free sample coupon for SK-II. For example in 2009, SK-II Singapore used that strategy to do their test marketing. For further information please refer to http://sgcgo. com/get-30ml-sk-ii-facial-treatment-essence-sample/ (sgcGo, 2009).

At the same, the company also produces their products in “Mini Size” and sells it at level price. This is because they want their customer to buy and try the mini size product first. If that product really can suit to them, then they can buy the whole package which is more bigger and expensive one. For example, SK-II Whitening Source Clear Lotion (11ml x 5) only cost around $22. 00 but only available in US. The advertisement about the product only available on that website, they have the products in the mini size, and displayed it in the website (Beautykat, 2011). 2. 8 Commercial and launch

Firstly, SK-II was sold about 31 years in the market that it origin from Kobe, Japan. Then, Protect and Gamble (P&G) expanded SK-II Brand internationally. PG export SK-II to People’s Republic of China (including Hong Kong), South Korea, Indonesia, Thailand, Singapore, Malaysia, United Kingdom, United States, Australia, Canada and Spain. Most of the SK-II’s users are the women between the ages 25 to 34 (Multiply, 2007). P&G acquired from Revlon Max Factor and set up a Japanese company Procter & Gamble Co in 1991 and responsible to develop SK-II to global market (Baidu, 2010). In 1997, SK-II goes into Taiwan market.

The result was amazed the world. In1998, SK-II brand go into China market. In 2003, SK-II is burgundy cyclone blowing in Europe, and sell in the United Kingdom (UK) and other places. SK-II crystal clear in writing a myth of the American continent, the first 11 counters in United States authorized the most high-end luxury stores – Sake Fifth Avenue in the formal business. Only opened for 5 weeks for skin care product, it was achieved of top 5 for sales ranking (Baidu, 2010). SK-II products successfully launched in the global market cause of the products have standard quality, size, and price.

SK-II manage to cover the critical issue in 2005, because they believe that their product always at the standard quality. So after the investigate for the issue, they really prove that the product no harm to human health. SK-II has fixed the size and price for their product that fulfill the market demand. When they fixed the size and price for the product, the customers may not feel they are cheated by the company when they purchase the SK-II products. 3. 0 Critical Issue of SK-II SK-II Care Cream was born in 1980, one of the best sold skin care products in ASIA and Europe.

Due to it can reduce one’s wrinkles by 47 percent and make one 12 years younger if used for 28 days successive days, so the SK-II users call it as “Fairy Water”. But it is sad to said, in 2005, a Chinese woman, named Lu Ping filed a lawsuit against P&G for SK-II product in China. Lu Ping used the SK-II de-wrinkle cream for 840 Yuan (US$102) for improving her skin, but the cream made her skin itch and ache. As the result, Lu Ping demanded a refund for the price of the product, and an additional of 1000 Yuan compensation for mental stress and undisclosed amount for medical treatment (Ivythesis, 2009).

According to the findings, SK-II products got excessive amount of chromium and neodymium which can cause skin disease like allergic dermatitis and eczema. These diseases are very hard to cure. At the same time Neodymium also can cause irritation of the eyes and the mucosa, and if inhaled, it can damage the lungs and the liver (Ivythesis, 2009). Instead of that, the China’s General Administration of Quality Supervision detected SK-II’s products contain chromium and neodymium which can cause skin disease like allergic dermatitis and eczema.

The first things the P&G did were to claim the product was safe. The SK-II company said that the report got mistake. That particular action will reflect that, SK-II Company do not respect the China government. The China citizen will trust the government more than a company. At the end, SK-II’s products have been removed from China (Young and Liu, 2006). However, the Korea Food and Drug Association of South Korea, the Department of Health of Taiwan, the Health Sciences Authority of Singapore and the Customs and Excise Department of Hong Kong announced that SK-II posed no harm to human health.

Finally, on October 23, General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) and the Ministry of Health of China jointly stated that the P&G products were safe to use although they did not admit their initial mistake (Xinhua English, 2006). 4. 0 Conclusion In conclusion, SK-II was successfully launched into the market. As the evidences, we can buy the SK-II’s products not only in Japan but in others countries as well such like Malaysia, Singapore, Taiwan, and Hong Kong and so on.

This situation showed that, SK-II Company already successfully access the international market and global market as well. In our group opinion, SK-II products can be successfully launched in the market because they have a strong distribution channel. As all we know, SK-II is a one of the Procter & Gamble Beauty brand. Since P&G have a lot of experience to penetrate in many different countries, so their experiences will give a lot of help for the SK-II to go internationally and globally.

The second reason is, brand manager A. G. Lafley successfully do the reposition in Japan during 1995, and managed to make it became one of the Japan’s top prestige cosmetics brand. Another reason is Business analysis was done by Paolo De Cesare (President of Max Factor) very accurate and supported GBU. If not that particular ideal and project cannot move smoothly. Next, the SK-II company have structured slogan such as lean a little closer, just 14 days you can have your white skin back, and just 1 hour sleep a day (Roll, 2006).


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