The beauty game has changed and the old rules no longer apply.

This story first appeared in the May 22, 2009 issue of WWD. Subscribe Today.

That was the message from students graduating from FIT’s master’s degree program in cosmetics and fragrance marketing management during their capstone presentations held last week at the Institute’s Katie Murphy Amphitheater. With the guidance of the program’s chairman, Stephan Kanlian, students addressed new ways for brands to speak to consumers in one of the bleakest markets in decades.

“The beauty industry has an imperative from a consumer whose mind-set has permanently shifted,” said Kanlian. “The consumer faces a new reality, and we can either be there for them or risk losing them.” Kanlian said the solution is simple: Find influential consumer segments, including urbanites, the middle class and Baby Boomers, and get inside their heads.

The best way to do that? Electronic social media. “As intimate as our products are, social media provides an opportunity to reinvigorate and redefine the conversation with our consumer,” said Kanlian. “Beauty needs to allow co-creation, encourage online dialogue and engage our consumers in a way that respects them as brand apostles.”

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Added Marc Pritchard, a group mentor and global marketing officer for Procter & Gamble: “Electronic social media is absolutely critical to the beauty industry because it affords us the opportunity to have a more human and authentic connection to the consumer.”

Pritchard’s five-student team said while it is tough for brands to give up control and show some vulnerability to the new medium, it is absolutely essential for them to get involved in this new digital space, whether that means designing a Facebook page, opening a Twitter account or perusing blogs to engage consumers in conversation about their products.

The students proposed an integrated marketing strategy for a fictitious product called “the latest lipstick” that would be created with the help of the brand’s online community, allowing consumers to influence shade names, color range and spokesperson. Before the launch of the lipstick, students said, the brand would launch a webcast of the press party, which the spokesperson would “tweet” about on her way to the press conference, building buzz about the product before it even hits counters. At launch time, the group furthered, consumers would see a TV commercial for the product and learn that, if they text the word “lipstick,” they could join the brand’s exclusive community and receive a mobile coupon for a discount. At the same time, students said, consumers would log on to their favorite beauty blog and read rave reviews about the new product.

“This integrated approach has just tripled the reach of your traditional campaign,” said team member Melinda Katz, who serves as L’Oréal USA’s director of corporate communications. “Digital media should be layered on top of traditional media from the beginning — its reach can be endless and costs a fraction of traditional media.”

Still other graduating students pointed to the urban consumer as a rapidly growing and increasingly important demographic. As urban populations continue to grow at a rapid rate, with one in every two people in the world living in cities, brands, they argued, need to learn to speak to this diverse and nontraditional segment.

“The urbanite is not just a demographic, it’s a mind-set, a lifestyle and a way of thinking,” explained team leader Bill Hughes of MAC Cosmetics. “When you capture urbanites, the rest of the world follows, because urbanites set the trends.”

In order to reach this growing and highly influential group, students said brands must speak to and incorporate urbanites’ five common values: time, because city dwellers are deprived of it; community, since urbanites thrive on human connection; experience, because people in cities need constant and complete stimulation; authenticity, because urbanites cannot be fooled, and simplicity to counterbalance complicated and busy lives.

Students drew up plans for concepts that would talk “with” rather than “to” this sophisticated and hip consumer base. They conceptualized a vending machine called a “Beautique” that would stock and dispense trial sizes of prestige beauty products at affordable prices for discerning-yet-cost-conscious urbanites, as well as a five-floor store, dubbed “The Fragrance Loft,” that would allow urban consumers complete engagement and interaction with all aspects of fragrance.

Another demographic that students said companies would be foolish to ignore is the over-50 crowd, which, they said, presents a large marketing opportunity. “They spend 30 percent more than the 18- to 49-year-olds and are more willing to spend on products,” said team leader and marketing manager at L’Oréal Professionnel, Laurie Lam, whose team was mentored by The NPD Group’s senior beauty industry analyst Karen Grant.

Also not to be underestimated? The middle class, which is emerging from the financial crisis with new values and an altered outlook on shopping and spending money. Trading down and cutting back is the new mind-set, students said, and companies need to acknowledge this by taking a more holistic approach to marketing.