Clean Edge Razor Case Study Harvard

Clean Edge Razor Splitting Hairs in Product Positioning MBA8145-Marketing Management Alpharetta, Summer-2011 GSU Individual Case Analysis Situation at Paramount Paramount had established itself as a global consumer products giant with over $13 billion in worldwide sales and $7 billion in gross profits for 2009 since it’s entry in the market in 1962. In 2009, Paramount had established itself as unit-volume market leader in 2009 based on non disposable razor product sales. The Non disposable razor category market is entering a new phase with technology products and new entrants posing a threat to capture Paramount’s Market Share.

From the target market positioning perspective the challenges can be broken down as below: • Competition: Paramount’s main competitor in non disposable razor category in 2010 are Prince, B&K, Radiance health and other substituted products. Prince sold non disposable razors in super-premium category. Prince had gained #1 spot in terms of retail dollar sales up until 2009. Notable feature of B&K another competitor was that they entered the market in this non disposable razor category only in 1985.

However, they managed to reach #3 in market share and unit-volumes by superior technology and releasing superpremium products. New entrants were coming to market with super premium products, technology and greater advertising dollars to gain market share. Paramount’s clean edge should compete with Radiance Naiv in test markets. Naiv had already acquired 13% market share in test markets. Radiance and Paramount were fierce competitors and Paramount had to launch a new technology in Super Premium segment to regain market share and continue to exist as a global leader in this category. Product Positioning: While Paramount had established as a unit-volume leader in 2009, the non disposable razor market had a significant growth only in Super-Premium segment. The rate of increase in total media advertising expenditures in this category is greater than the rate of increase in retail market sales as shown in Appendix A. Main reason for this is numerous product innovations in Super-Premium segment and advances in technology. Paramount had developed a new product in this category called “Clean Edge” based on superior technology and 5 blade designs.

This new product would give Paramount much needed boost to position itself as a leader in Super-premium segment and technology giant for non disposable category. If Paramount decides to position and market “Clean Edge” in mainstream positioning, then it will have to cannibalize existing Page 2 of 11 Paramount Pro and Paramount Avail products. This could potentially reduce loss of revenue and eliminate these products from Paramount offering resulting in losses due to “Clean Edge”. Paramount is currently not sure as to where to place this product, “niche” or “mainstream” positioning. Price: Based on the data given in this case and price set by Randall and his team for Clean Edge in either niche or mainstream positioning, I do not see any challenge for Paramount. The reason is that they are positioning this product in Super-premium segment and suggested retail unit price is $12. 99 for Razor and $10. 50 for cartridge in niche positioning, $11. 19 for Razor and $8. 89 for cartridge in mainstream positioning. This price is lower than current price in the same segment across Paramount’s competitor and even lesser when compared to Cogent Plus. Place: I don’t see any issues with Coverage, Assortment, Inventory, Transport or Locations in US market. However, distribution started to shift outside traditional food and Drug Stores. In 2000, food and drug stores sold over 50% of all razors, but by 2009 it was only 42%. So, how should Paramount leverage this shift and gain advantages to increase its sales via retail channels? • Promotion: Paramount as a corporation had decided to curb excessive marketing expenses in all product categories.

With the introduction of “Clean Edge” as a new product, Randall and his team has to convince executive leadership to allocate necessary dollars needed to establish a marketing campaign that will position “Clean Edge” as a revolutionary Super premium and technologically advance Razor into the market. The marketing campaign for “Clean Edge” has to be carefully planned in such a way that the message reaches the target market with great success and also satisfy the executive team. • Branding: Paramount executives have different opinions when it comes to branding this revolutionary “Clean Edge” product.

However, Randall and Paramount has a challenge to name come up with a name that provides the necessary boost for “Clean Edge” branding, and not cannibalize Paramount Pro and Avail products. Page 3 of 11 Paramount studies showed that consumers purchased razors and replacement cartridges more frequently than ever before in the history of Non disposable razors. Also, Paramount’s consumer research indicated that one category of consumers called “Maintenance users” that made up 33% of consumers were not interested in Superior technology. A very important finding that cannot be ignored for Paramount.

Based on the data in the case and my analysis, below are my alternatives that can be used to develop a market strategy that will position Paramount as a market leader in Non Disposable razor category with “Clean Edge” product launch: 1) Launch “Clean Edge” as a “mainstream” technology product to be a market leader. 2) Launch “Clean Edge” as a “niche” revolutionary technology product to be a market leader. 3) Create a new strategy to market “Clean Edge” as a revolutionary technology product and gain market share in Super-Premium segment. ) Create a new branding strategy that will give consumers a household name called “Paramount” with technology superior product and continue to retain and gain market share with “Maintenance users”. 5) Develop a new incentive and rewards program to target “Maintenance users” and gain market share with this user segment. 6) Establish contracts with the new retail channels such as mass merchandisers and club stores so that Paramount non disposable razors can be placed at the right eye level for the users to choose Paramount products. Page 4 of 11 Analysis of Alternative Solutions

The evaluation of alternative solutions was based on the following criteria: • • • Research and analysis studies by Paramount. Marketing and sales data across Paramount and its competitors. Key Product differences and similarities between Paramount its competitors in non disposable razor category. • • • Feasibility of implementing an alternative solution suggested. Costs involved in implementing an alternative solution. Costs such as manufacturing, production, advertising, marketing and any cannibalization that could result with marketing strategy adopted by Paramount. •

Benefits Paramount will receive by implementing an alternative solution. Benefits such as increased market share with target customers resulting in increased profitability, enhanced brand name equity for Paramount and utilizing Paramount existing products to gain market share among “Maintenance users” Please refer to 1) Appendix B for evaluation of above alternatives 2) Appendix C for quantitative analysis of Financial Forecasts based on Exhibit 7 3) Appending D for quantitative analysis of Financial Forecasts based on Exhibit 7, but identical unit volumes between “Niche Positioning” and “Mainstream Positioning”

Page 5 of 11 Recommendation Based on my analysis, I recommend a strategy that will launch the new product with tremendous success to reach #1 position in terms of product sales, revenue and operating profits for Paramount. This strategy will also retain Paramount Pro & Avail existing products and go after “Maintenance users” that make up 33% of consumers. The branding concept launched with this product will make Paramount a house hold name and give the necessary return on investment for Paramount. 1) Launch “Clean Edge” as a “niche” revolutionary technology product to be a market leader.

This will enable Paramount to as a technology and revolutionary leader in non disposable razor segment. The Super-Premium category will enable Paramount for higher pricing. This will not cannibalize it’s existing products. Based on quantitative analysis from Appendix D and Appendix E, I see that he profit before taxes for niche positioning is higher than mainstream positioning. Also, when I modified the numbers to match unit volume sales across niche and mainstream category, I noticed losses in Year 1. This is the most important learning and observation from forecasted numbers that suggests that Paramount should launch in niche positioning. ) Create a new strategy to market “Clean Edge” as a revolutionary technology product and gain market share in Super-Premium segment. The marketing budget allocated should be carefully planned so that it will give the necessary boost in sales for the new product and also retain enough marketing dollars for other product categories in the company. 3) Create a new branding strategy that will give consumers a household name called “Paramount” with technology superior product and continue to retain and gain market share with “Maintenance users”. ) Develop a new incentive and rewards program to target “Maintenance users” and gain market share with this user segment. Page 6 of 11 5) Establish contracts with the new retail channels such as mass merchandisers and club stores so that Paramount non disposable razors can be placed at the right eye level for the users to choose Paramount products. APPENDIX A Non Disposable Razor Media Advertising $$ Increase Rate By Company From 2009 – 2010 Company Benet & Klein Prince Paramount Simpsons Increase Rate (%) . 54% 5. 04% 5. 76% 533. 33% Non Disposable Razor Sales Increase Rate by Retail Channel From 2009 – 2010 Company Food Stores Drugstores Mass merchandisers Club Stores Other Increase Rate (%) 1% 2% 1% 1% 0% Page 7 of 11 APPENDIX B- Evaluating Alternative Solutions 1) Launch “Clean Edge” as a “mainstream” technology product to be a market leader. PROS: • • Increased profits and market share. Opportunity for higher profit margin with new “premium” product launched across larger percentage of user segment.

CONS: • Potentially could result in elimination of Paramount Pro and Avail products from paramount product offering. • Opportunity to utilize existing products and gain increased sales by rewards and incentives is lost. • Paramount will not be focusing “Maintenance users” with new product lines. 2) Launch “Clean Edge” as a “niche” revolutionary technology product to be a market leader. PROS: • • • • Increased profits and market share. Opportunity for higher profit margin with new “premium” product launched with Super-premium segment.

Existing products can be retained and used to target “Maintenance users” Branding strategy can be carefully planned and deployed for maximum success and household name recognition. CONS: • Increased marketing budget costs to launch the new product and provide incentives to “Maintenance users” 3) Create a new strategy to market “Clean Edge” as a revolutionary technology product and gain market share in Super-Premium segment. PROS: • • • Increased profits and market share. Consumers will change Paramount image and will be established as a technology leader. Opportunity to enter in Super-Premium segment with big bang.

CONS: • Increased marketing budget costs to launch the new product and provide incentives to “Maintenance users” Page 8 of 11 4) Create a new branding strategy that will give consumers a household name called “Paramount Clean Edge” with technology superior product and continue to retain and gain market share with “Maintenance users”. PROS: • Provide the right brand name and image to Paramount. • Paramount name will now be part of all of its products.. CONS: • Paramount has to maintain the Quality of all these products since now all are associated with the company name.

Any deterioration in the quality could potentially hurt sales of other products. 5) Develop a new incentive and rewards program to target “Maintenance users” and gain market share with this user segment. PROS: • Gain greater market share and sales revenue utilizing existing products. • “Maintenance users” are given importance and Paramount is not loosing it’s existing product.. CONS: • Paramount will have to continue to revolutionize Paramount Pro and Avail with new introductions to compete in this segment and target “Maintenance users”. ) Establish contracts with the new retail channels such as mass merchandisers and club stores so that Paramount non disposable razors can be placed at the right eye level for the users to choose Paramount products. PROS: • Gain appropriate product placement that could potentially increase sales across any consumer looking at Non disposable razors. • Utilize the new retail channels in targeting users due to recent shifts in distribution. . CONS: • Increased costs to establish contracts with new retail channels. Page 9 of 11 DFDFD Page 10 of 11 DDFD Page 11 of 11

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Case Study

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Clean Edge Razor Section C

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Group 11

PGP 2011-13 Page 3

On Trade

- The retail margins associated with the razors is considerably higher and thereforewith a large number of new entrants the distributors are responding to the growth byincreasing their shelf space for the product category. Distribution is also reaching out from foodand drug stores (42%) to mass merchandisers (21%) and club stores (5%).

On Media Expenditure

- As per 2009 data the total media expenditure (excluding trade andconsumer promotion) is $103.6 m while this number is expected to reach $137.7 m in 2010, arise of 33% in a year.Looking at some of the prime

competitor’s

figures we get- Revenues for PRINCE are $224 m,operating profit $ 45 m, media expense $27.8 m in 2009 and expected $ 29.2 in 2010. For Benetand Klein the media expense is $35.2 m in 2009 and expected $36.8 m in 2010. For Paramountthe revenue for 2009 is $170 m, operating profit is $26 m and total media advertisementexpense is $ 44.3 m. Thus the immense competition has lead to over promotion and mediaexpenditure by the companies which is difficult to maintain given the operating profit margins.

POSITIONING:

Clean Edge’s improved desig

n provided superior performance. Within the super-premiumsegment, Clean Edge could be positioned either as Niche product focusing on high involvement,fastidious groomers looking for a superior shaving experience, or a mainstream productfocusing on the broad advantage of offering the closest possible shave. Each positioning has itsown pros and cons.

Niche positioning

:

Pros

:Positioning Clean Edge as niche will comp

lement company’s existing product portfolio perfectly.

From the exhibits, it’s visible that it will result in high and consistent profit margins for the

company and the risk involved will be less. Apart from that Niche positioning will require $15million in total marketing expenditures in the first year as opposed to $42 million in mainstream

Cons

:First of all it has a limited consumer base and secondly

the company’s current products Pro and

Avail had not introduced any innovations in the last five years. Pro is in the mature phase and

there’s a high probability of its sales declining soon. Therefore by launching in this segment

Paramount will lose their loyal customer base which is there with Pro and Avail.

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