by Hervé Buzot
Since Albert Klingman’s first retinoic acid anti-wrinkle formula opened the floodgates of the highly lucrative cosmeceutical market three decades ago, products of the marriage between cosmetics and pharmaceuticals have cemented their importance to United States physician practices. Cosmeceuticals have proven beneficial to patients, while remaining financially attractive to both doctors and manufacturers. In recent years, however, an ever-increasing number of new brands and products have leveraged lowered category entry barriers to compete for market share—effectively decreasing product life cycle and technological differentiation, and making marketing storytelling more important than ever before in a successful long-term strategy for brand growth.
Today’s hyper-competitive cosmeceuticals arena pushes corporations to explore alternative solutions to achieve enhanced output. Organizational restructuring can serve as an effective means to that end.
An organizational structure that minimizes functional crossover and emphasizes specialization is essential to increase brand effectiveness and new products output. By clearly separating the functions of global marketing, operational marketing and R&D departments, increasing each department’s level of specialization, and maintaining brands’ cultural assets through the location of decentralized brand teams in countries of brand origin, companies can accelerate new product entries, reinforce brand equity and strengthen the marketing activities of existing products. Ultimately, organizations that fail to assign pipeline development as a critical function of global marketing face the dual threat of weak product launches and decreased market shares.
This lesson is well understood by the beauty cosmetics giants now staking their claims in cosmeceutical territory. Their time-tested business model for launch intensification plays a key role in the rapid growth of their cosmeceuticals—living proof that the beauty industry’s business model and organizational structuring is well-suited to successfully compete in the physician dispensing market.
Divide and Conquer
Unlike organizations in which R&D and operational marketing share ownership of pipeline development, beauty companies have shifted to an organizational principle based on the clear separation of tasks between operational marketing, global marketing and R&D. Setting up an organization with no functional crossover and high levels of specialization allows each team to focus on its own mission with little or no interference from each other—resulting in greater individual function and overall output.
In this model, global marketing manages pipeline development with great advantage—one dedicated department operating within a framework of proven “brand creation" skills. Global marketing serves as the centerpiece and sole owner of brand definition, pipeline creation, products portfolio management and brand equity management. It translates need-gaps into business plans and product concepts. It defines new product ideas, molecule “cocktails," esthetic attributes, packaging features, claims, clinical requirements, future COGs and financials, and time-to-market planning. Global marketing also coordinates with logistics and manufacturing, as well as prepares launch visuals and communications.
Unencumbered by global marketing’s mission to create and define new brands, operational marketing teams can focus on marketing existing products, supporting sales activities, scheduling promotions, planning events, and coordinating public relations and advertising endeavors. Likewise, R&D is free to focus all of its departmental efforts on tasks such as researching emerging technologies and providing support for clinical briefs.
This clear separation of tasks, and the accountability it fosters, also enhances fairness. For example, R&D will no longer be judged on market performance for a new product for which that department does not control the marketing parameters—parameters paramount to strong sales—but rather will be evaluated on the proper qualitative and timely support of the briefs communicated by global marketing. By the same token, operational marketing can no longer claim business results that include a combined growth of revenue generated by both existing products and new products, thus hijacking results from global marketing while potentially falling short of target goals for existing products.
The separation of short-term operational and promotional marketing from long-term pipeline management underscores this innovative approach to organizational structuring. Global marketing can intensify pipeline creation and launch preparations; operational marketing can focus on the short-term profit and loss of existing products; and R&D can concentrate on supporting formulation briefs and clinical studies. The result? A more equitable, highly efficient and fully integrated new product development activity with the unique capability to fill strategic three-year plans that respond to the competitive need to launch new products at an unparalleled rate.