Reference no: EM133238539

Picture Perfect of Los Angeles, CA (In business for 8 months)

Sarah-Jane Stevens founded Charisma cosmetics. Her company targeted professional dealers serving make-up artists in the film, TV, and theater industries. Charisma cosmetics had an excellent reputation as a high quality manufacturer, a loyal customer base, and a major share of the market. However, Sarah-Jane also saw new competitors slowly chipping away at her customer base. To remain competitive, she decided to expand her company. In the fall of 1999, she rolled out a separate brand, Picture Perfect by Charisma. This brand was specifically designed to be sold in department stores.

But the new strategy angered the professional make-up dealers who were the core customers. Their competitive advantage had been to use better products that were not available elsewhere. Now the Picture Perfect brand was cropping up in many department stores and the dealers felt betrayed. The dealers could no longer use the upscale Charisma name as a selling point to their clients.

"We were determined to grow, and we strayed from our root value. Our customers told us point blank that they didn't like what we were doing." Just 8 months after getting into the department store market, Sarah-Jane got Charisma out. "It was a huge loss and a big lesson." The company ended up losing hundreds of thousands of dollars and went out of business.

1. What problem was created by the "Picture Perfect by Charisma" brand?

2. How might Sarah-Jane have avoided angering her dealers yet still have expanded distribution? Offer two solutions.