Clean Edge Razor Case Study

CASE STUDY 1 CLEAN EDGE RAZOR

BY SARAH MOHAMAD NOR UTM KL

PRESENTATION OUTLINE  Introduction  Issues  Analysis of Marketing Strategy  Razor Market Analysis  Marketing Strategy Analysis

 Marketing Solutions

INTRODUCTION Non-Disposable Razor Market Consumer

Market Trend

Frequent brand switching

5% growth per year

67%

Significant growth in Super-Premium Segment

Replacement cycle shortened consumers trying new products &

since

Involved Non-Disposable Razor Users

In sales of Non-disposable Razors from 2007 to 2010

Driven by product innovation

Distribution Channel Outlets Space

Increase

Male-specific care products

Shelf

for non-disposable razor category.

Shift of distribution channel from Food & Drugs stores to Mass Merchandisers

became more mainstream

personal

Competitor Continuous Innovation in non-disposable razor category

Advertising and Promotion Expenditures Expansion of

Intensify competition obtain retail space

to

THE DILEMMA…

ISSUES Primary Issues Where should the

Niche

Clean Edge Razor

be positioned?

Main Stream Secondary Issues

Brand name

Separating Clean Edge from existing Product Line

Clean Edge by Paramount

positioning of Clean Edge Razor

Associating Paramount to the brand as part of overall Corporate Strategy to build Paramount brand equity

Paramount Clean Edge

RAZOR MARKET – COMPETITIVE MAPPING Prince Cogent Cogent Plus

Benet & Klein Vitric Advanced Vitric Master

Benet & Klein Vitric

Paramount Paramount Pro

Radiance Naiv

Paramount Paramount Avail

Simpsons Tempest

RAZOR MARKET ANALYSIS Market Share – by Brand

Market Share - by Market Segment Value, 4.9% Super Premium, 36.4% Moderate, 38.5%

Source: Exhibit 5

RAZOR MARKET ANALYSIS Sales by Segment Product Segment

Volume (%)

Dollar (%)

Volume to Dollar Ratio

Super-premium

25

34

1 : 1.4

Moderate

43

44

1 : 1.0

Value

32

22

1 : 0.7

Source: Table B

Although Moderate Market captures the highest percentage of volume and dollar value, the super-premium gives the higher return in terms of dollar value per volume produced. On the other hand, value market segment gives lower market value per volume produced.

RAZOR MARKET ANALYSIS SWOT Analysis Strength 1. Established brand that consumers already trust and hold strong and positive association with.

Opportunity 1. Growth in the super premium segment 2. Mainstream market is highly profitable.

2. Paramount can afford $19 million in advertising

3. Increased in men’s grooming.

3. Best product in the market (Technologically advanced and

4. Uninvolved razor users (maintenance users) is untapped

tested)

consumer base.

4. Nothing currently in the market like it.

Weakness

Threat

1. Launching the Clean Edge Razor in the wrong segment

1. Positioning in the Mainstream market could lead to

could potentially canabilise the Paramount Pro.

cannibalization of existing Paramount product

2. Does not hold a position in the super premium segment of

2. Super-premium market segment is highly influenced by

the mainstream market which accounts for 37.2%of the

market and technology changes on razor functionality

total non-disposable razor market.

and design.

3. Competitors in the market may released similar products. 4. Naiv, a competitor brand of non-disposable razor has similar vibrating technology to Clean Edge.

MARKETING STRATEGY ANALYSIS Profit and Loss Forecast for Clean Edge Under Niche and Mainstream Scenarios (in $ Millions)

Niche

Unit Sales Razors Dollar Sales Razors Unit Sales Cartridges Dollar Sales Cartridges Total Dollar Sales

Mainstream Year 1 Year 2 Year 1 Year 2 1 1.5 3.3 4 $ 9.09 $ 13.64 $ 25.84 $ 31.32 4 10 9.9 21.9 $ 29.40 $ 73.50 $ 61.58 $ 136.22 $ 38.49 $ 87.14 $ 87.42 $ 167.54

Production Cost Razor Production Cost Cartridges Capacity Cost Advertising & Promotions Total Cost

$ $ $ $ $

Operating Profits Profits as % of Sales

$

5.00 9.72 0.61 15.00 30.33

$ $ $ $ $

7.50 24.30 0.87 16.00 48.67

$ $ $ $ $

15.64 22.18 1.71 42.00 81.53

$ 18.96 $ 49.06 $ 2.45 $ 39.00 $ 109.47

8.16 $ 38.47 $ 5.89 $ 58.07 21% 44% 7% 35%

Cost of Cannabilisation Razors $ Cost of Cannibalisation Cartridges $ Total Cannibalisation $

0.62 $ 3.92 $ 4.54 $

0.92 $ 9.80 $ 10.72 $

3.48 $ 16.63 $ 20.12 $

4.22 36.79 41.02

Profits After Cannabilisation

3.62 $

27.74 $ (14.23) $

17.06

$

MARKETING STRATEGY ANALYSIS Key Highlights from Profit and Loss Forecast for Clean Edge in two (2) different Brand Positioning

Profit Projection as Percentage of Sales GP Margin (%) 50% 44% 40% 35% 30% 20%

21% Niche

10% 7%

Mainstream

0% Year 1

Year 2

Niche positioning offers higher projected profit comparatively to Mainstream Positioning.

MARKETING STRATEGY ANALYSIS Key Highlights from Profit and Loss Forecast for Clean Edge in two (2) different Brand Positioning

Advertising and Promotion Effort ($’ Million)

Operating Cost

Niche

Projection Advertising & Promotions

Year 1 $

15.00

Year 2 $

16.00

Mainstream Year 1 $

42.00

Year 2 $

39.00

Advertising and Promotion is projected to take up approximately 40% of the Total Cost. Based on the projection, Mainstream market positioning strategy requires three times more marketing effort (budget) as compared to Niche market positioning strategy.

MARKETING STRATEGY ANALYSIS Key Highlights from Profit and Loss Forecast for Clean Edge in two (2) different Brand Positioning

Cannibalisation Rate ($’ Million)

Cannibalisation

Niche

Projection Total Cannibalisation

Year 1 $

4.54

Year 2 $

10.72

Mainstream Year 1 $

20.12

Cannibalisation rate for Niche Positioning = 35% Cannibalisation Rate for Mainstream Positioning = 60%

Year 2 $

41.02

MARKETING SOLUTIONS Where should the Clean Edge Razor be positioned?

To launch Clean Edge as niche technology product for the first two years, and subsequently as a mainstream product. This will benefit Paramount to: 1.

Tap higher profit margin

2.

Win over shelf space at distribution channel

3.

Reduce cannibalisation effect of existing products

4.

A soft entry approach to super-premium segment through niche positioning

Brand name positioning of Clean Edge Razor

As a niche product, Clean Edge should be distinguished from other brands, as well as Paramount existing line. Therefore, “Clean Edge by Paramount” will attract customers and reduce the cannibalisation impact to the Paramount Avail and Paramount Pro.