L'Oreal -- Defying Supply and Demand

When I was living in Korea, one of my friend's dad was in charge of marketing for L'Oreal in Korea. When L'Oreal first arrived in South Korea, it faced poor sales and limited demand by the Koreans. This perplexed my friend's dad because there would be no reason for Koreans not to buy L'Oreal as it provided quality cosmetics as decent price.

So what's the problem with that?

Well, it turns out that the affordability was exactly what was causing the problem. Koreans place the quality of a cosmetic based on the price and will buy more of a product if the price is higher.

That's a bit different from what we all learn in ECON 101. I was always told that as price decreases, demand increases.....right?

As it turned out, as soon as the L'Oreal raised their prices, Koreans began buying a lot more of L'Oreal cosmetics. This strategy worked so well that L'Oreal is now one of the most frequently purchased cosmetic brand in Korea.

L'Oreal in Korea 

This all goes to show the difference in consumer behavior around the world. One might assume that females in Korea and America are similar as they both wear make-up and probably want to find some for a reasonable price. However, making those assumptions can hurt a company when bring a new product taking it overseas without understanding the way the customers there behave.

In addition, it is also important to look at all aspects of a product (remember the 4 P's!). Just because the Product itself appears to have a demand and all the changes have been made to the Packaging, the Price and Promotion also need to be considered as important aspects of the marketing. 

What Do You Think: Can you think of any other products that as the prices increases, the demand also increases?