Clean Edge Razor Case

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Clean Edge Razor Case

[pic] Table of content

1. Executive Summary………………………………………………………………….3

2. Problem/Issue Statement………………………………………………………..4

3. Situation Analysis…………………………………………………………………….4

4. Alternatives……………………………………………………………………………..8

5. Evaluation of Alternatives………………………………………………….…….8

6. Recommendation(s), Action Plan/Implementation…………………..9

7. Appendix…………………………………………………………………………………11

1. Executive summary As a marketing advisor, my role is to analyse the Clean Edge Razor Case in terms of the inner and external situation, the alternative solutions and assess each solution, then give recommendations on which alternative solution to choose, what the advantages and disadvantages are. Finally, suggest implementations that should be taken in order to achieve the goal. www.termpaperwarehouse.com/print/Clean-Edge-Razor-Case/244312

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Clean Edge Razor Case

As a leader in the heath product and grooming manufacturer company, Paramount is introducing a more technologically revolutionary nondisposable razor into the super-premium market to maintain market share. However, there are many competitors in this segment and Paramount is considering the proper the positioning method to choose to gain the most market shares. Both niche positioning and mainstream positioning have pros and cons. Niche positioning focus on specific group of male that are very concerned with the functionality and the messaging of the razor. They seek superior shaving experience and consider shaving as daily grooming ritual. Mainstream positioning focus on a broad market and target at the consumers that have ordinary shaving needs. However, the key issue is that mainstream positioning may cause cannibalization effect, triggering decline in sales of the company’s old products due to the intrusion of new advanced products. Without cannibalization, net profit is higher in mainstream positioning. However, considering the effect of cannibalization, the result is completely different. Brand name of Clean Edge is also important since it may affect consumer behaviour. The company hasn’t reached an agreement on if the brand name should emphasize on the company or the product itself. The marketing budget should also be determined after the brand name is chosen. The market budget for media advertising, consumer and trade promotions should be proposed according to the estimate of revenue and other costs. According to the limited information given, I recommend to use niche positioning because it makes greater net profit than mainstream positioning in a long run. The brand name should be “Clean Edge by Paramount” because it impresses the potential consumers with the product innovation, showing the consumers provides clean shaving result which directly satisfies consumer needs. Paramount should saturate the market by expanding its distribution channel, focusing on television and online advertising to stimulate demand, encourage consumers to purchase by giving out coupons and give free samples to improve product awareness. Sponsorship and celebrity can also help increase the product presence. 2. Problem/Issue Statement Paramount is introducing Clean Edge Razor, a revolutionary nondisposable razor to the men’s grooming market. This technologically advanced product is predicted to have a significant mainstream potential in the superior-premium market segment due to its ease to use and shaving effectiveness. However, Jackson Randall, the product manager of Clean Edge Razor still can’t come to an agreement with other company directors on how to position this product. There are two positioning options that are considered optimal by the Paramount directors. One is niche product positioning, which mainly focuses on highly involved groomers looking for a fabulous and superior shaving experience. The other one is mainstream positioning which focuses on a broad men’s market. However, both of these two positioning method have advantage and disadvantage. Basically, niche marketing can satisfy the needs of a certain group of men who is highly concerned with the shaving experience thus, manage to seize the superior razor market and build a highly recognized company reputation. However, niche marketing narrows the market size and thus, reduces the potential sales and revenue. On the other hand, mainstream positioning can appeal to a larger group of male with being recognized as the most effective razor in the market. However, mainstream strategy may cannibalize themselves by diluting the brand power of another Paramount’s razor product Pro, which is positioned in the moderate segment and is deemed as the companies “backbone”. Therefore, mainstream positioning cannot acquire lots of new customers. The branding of Clean Edge Razor is not determined as well. “Paramount Clean Edge” and “Clean Edge by Paramount” are two brand names that emphasize on the uniqueness of the product itself and the whole company respectively. The two different names will affect the consumer’s cognitive process and consequently influence the rate of cannibalization. Last but not least, the marketing budget for the launch should be provided to the director of Paramount. 3. Situation analysis www.termpaperwarehouse.com/print/Clean-Edge-Razor-Case/244312

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Clean Edge Razor Case

Product characteristics Clean Edge is a nondisposable razor that is designed by Paramount in 2007. It is a technologically advance product that establish Paramount as an innovation leader in the razor market. It integrates an ultra-thin five blades design which causes less skin irritation and a lager heavier handle that allow better grip and control while shaving. But its most important feature is its vibrating technology. The vibration stimulates hair follicles. The clinical test shows that Clean Edge achieves a 25% increase in hair removal compared with other leading nondisposable razors and it is also beneficial to the skin condition. These innovation advantages allow Clean Edge to stand out among its competitors, impress the consumers thus, help Paramount become a more professional company in terms of the grooming expertise. Company Overview Paramount is a global manufacturing company that provides health, cleaning, beauty and grooming products. The company made a gross profit of 7 billion out of its 13 billion sales in total in 2009. Its flagship nondisposable razors, Pro and Avail, along with refill cartridges contributed 170 million in revenue and a gross profit of 92 million. Pro and Avail are positioned in moderate and value segment respectively and together they captured 23.3% market shares of the unit-volume market. However, neither Pro nor Avail have introduced technology advance in the past 5 years. Therefore, Clean Edge will make a breakthrough and represent Paramount in the super-premium segment which perfectly complements the company’s competing territory. Clean Edge will stand out among other less advanced razors and elevate Paramount’s power to a higher level in the razor market. Other than those people who have ordinary taste, this is a good opportunity for Paramount to attract a new group of consumers, those who are highly concerned with the effectiveness of the product and seek superior shaving experience. Background The U.S razor market is broken up into several categories including nondisposable razor, refill cartridge, disposable razor, shaving cream, and depilatories. Paramount Clean Edge razor competes in the fast growing nondisposable razor category and refill cartridge category. According to Table A, nondisposable razors and refill cartridge experienced a 5% and 2% growth respectively from 2007 to 2010 due to the product innovation. The fast growing industry will propel Clean Edge to gain popularity and succeed in the men’s grooming market. Market characteristics Currently, the nondisposable razor market is divided into three segments based on price and quality: value, moderate and super-premium. Clean Edge is competing in the superior-premium segment. Due to the numerous innovations, the superior-premium segment experienced a significant sales growth of 25% in dollars in 2009. Consumers purchased razors and cartridges more frequently than they did in previous year since consumers are more interested in trying new products and the ceaseless advertising that suggests frequent blade replacements. There are 3 groups of razor consumers that are distinguished by the level of involvement. According to the exhibit 1, the involved social/emotional shavers, which hold 39% of nondisposable razor users, are those who not only care about the product functionality, but also the messaging the product is conveying. Therefore, they are most likely to purchase the products in superior-premium segment. Involved aesthetic shavers, which hold 28% of nondisposable razor users, are those who only care about the functionality of the product, so they are more interested in the products in moderate segment. The rest nondisposable razor users are those who don’t have consistent shaving habit and lack interest in product category, therefore, they probably just buy product in value segments. In summary, we can infer that the www.termpaperwarehouse.com/print/Clean-Edge-Razor-Case/244312

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technologically advanced Clean Edge razor will attract the attention of involved social/emotional users and become their ideal razor option. In addition, the distribution channel of the product changed slightly over the past 5 years. According to Exhibit 4, food stores and drug stores hold 74% retail channel, however, this number decreased and a portion of it shifts to mass merchandisers. Trends As more and more new razor products entering the market, the number of advertising for the razors increased quickly in the recent years in order to trigger people to buy those products. Therefore, the advertising expenditures increased as well. According to Exhibit 2, nondisposable razor media advertising expenditures for Simpsons and Radiance increased the most from 2009 to 2010 compared to other companies by 12.8 and 16.1 million respectively. This is because both of the Simpson and Radiance are new companies to the razor market and they are launching new razors into the market, so they want to increase the advertising power to propagate their new product to the target consumers and establish a good reputation in the market. Exhibit 3 shows how advertising and promotion expenditures for nondisposable razors of Paramount are allocated in 2009 and 2010. The cost in media is increased by 1.1 million which is 8% in percentage and this increase in lower than any other competitors. This is because that Paramount has already been established a brand equity as a mature and leading manufacturer for nondisposable razor and it already has a consumer base. It is the source of “word of mouth” advertising and it helps Paramount spread their names, get the people surround them interested and become the potential buyer. Consumer promotions and trade promotions increased by 1.6 million (13.9%)and 1.3 million (9.5%)respectively. The total advertising and promotion expenditures for nondisposable razors increased by 4 million which is 9%. Competitors Prince: Prince is a health and beauty company that sells oral and skin care products. It has been a market leader in the nondisposable razor since 1950s and held the number one position in terms of retail dollar sales in 2009 with 224 million in revenue and 45 million in gross profit. Its two nondisposable razor products are called Cogent and Cogent Plus, both focus on super-premium market. According to the line chart, we can see that even though Cogent is the bestselling nondisposable razor in the market, it suffers a significant drop in sales by 33% from 2008 to 2010 which indicates it is not as popular as before. Congent Plus, as an improved product entered market in 2009 and achieved 1.3% and 4.9% market shares in 2009 and 2010 respectively which complements the falling sales of Cogent. The increasing sales of Cogent plus is ok compared to other new razors. However, the total market share Prince takes decreases from 31.7% to 26.2% in the past five years. This decrease on sales is due to the introduction of new nondisposable razors into the market. According to Exhibit 6, both Cogent Plus and Cogent are in super-premium segment and the price is the highest in this segment and newer product Cogent Plus is more expensive than old product Cogent. However, Cogent’s market shares decrease while Cogent plus increase, therefore, we can tell that the consumers are not price motivated, but is more interested in newly introduce advanced product. Consumer’s lifestyle and quality are higher. In summary, the competition in the super-premium segment of nondisposable razor is getting tougher while opportunities exist. Benet&Klein (B&K): B&K is a health and beauty company that sells vitamins,shaving products and hair product etc. It first entered the nondisposable razor market in 1985 and introduced Vitric master in 2009, a nondisposable razor that has advanced lubricant strip, nonslip handle and superior anti-corrosive technology blades. According to the line chart, this product gained a 5.2% market share in 2010 which is a huge increase. However, the diminishing sale of Vitric and Vitric Advance causes the total sales of B&K dropped from 23.2% to 21.1%. Even though B&K works hard to introduce advanced new products and tries to retain the market share, the sales still shrink because of new products entered the market and drew the www.termpaperwarehouse.com/print/Clean-Edge-Razor-Case/244312

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Clean Edge Razor Case

consumers away. According to Exhibit 6, we can see that Vitric is a value offering product which is only $5.75, but it stills can’t ward off the threat of the new products. Both Vitric Advanced and Vitric Master are in super-premium segment, the more recently launched Vitric Master achieve an increase in market share while Vitric Advanced decreased due to the entrance of new products. Therefore, we can conclude that consumers are more interested in the new products in the super-premium segment and they start to raise their grooming quality and pay more attention to the product quality as well as the experienced they get from it. New Entrants: Simpsons launched a new product called Tempest using its deodorant brand. Tempest has an advanced pivoting head that allow smoother shave. Radiance is also introducing its deodorant brand Naiv to the nondisposable razor market. The product has pulsing feature which is similar to Clean Edge and it is going to be launched in September 2009, very close to the launch time of Clean Edge. This product is predicted to attain 13% market shares after being launched and it is the fierce competitor of Clean Edge. According to the line chart, Simpson’s Tempest achieved a significant increase in market share by 5.7% which is higher than any other new products. We can infer that its pivoting head is very popular. Naiv gained 2.6% in the first year after being revealed which is higher than the first year increase of Tempest, Cogent Plus and Vitric Master. According to Exhibit 6, all the new products are in super-premium segment and are achieved increase in market shares. This indicates that consumers are more concerned with product quality, functionality and the message the product conveys instead of the price. Therefore, we can see that Naiv has lots of potential and is Paramount’s fierce competitor. Both Tempest and Naiv are Clean Edge’s big competitors. Paramount is also very competitive in the nondisposable razor market. We can see from the line chart that the backbone product Paramount Pro achieves a continuous increase of market shares from 2007 to 2009. However, it stops increasing in 2010 which is a signal warning of sales decrease due to the new products. Paramount Avail show consistent decrease from 2007 to 2010. The decrease of Paramount’s total market shares shrinks 2% in 2010 shows it is also affected by the new advanced products. We can conclude that consumers are more and more interested in the new technologically advanced products, therefore, while every competitor is launching new products in super-premium segment, it is really necessary and urgent for Paramount to launch a new superior revolutionary product Clean Edge to the market to compete with them, satisfy consumer needs and regain the market shares. Swot analysis: See the appendix 4. Alternatives and evaluations Niche positioning: Advantage: Positioning Clean Edge as niche will complement the Paramount existing product portfolio. Targeting at the involved social/emotional users is more effective than targeting at mainstream because involved users need not only good quality, but also fabulous shaving experience. Clean Edge can directly satisfy all their needs. In addition, niche marketing is requires 15 million of advertising expenditure compared to mainstream positioning with 42 million. Niche marketing is more affordable and Paramount will get the most return out of every cent they spend because it focuses on those that are most likely to purchase. There are fewer competitors in the niche market. Cannibalization is 35% which is lower than mainstream 60%. Disadvange: It will be difficult to gain high profit levels due to smaller market size. Since it only target a smaller group of people, it would be difficult to spread the company’s name to a wide audience. In addition, since Pro and Avail are both in the mature/decline phase, ignoring moderate and value segments may lose the consumers in this segment. Clean Edge by Paramount: www.termpaperwarehouse.com/print/Clean-Edge-Razor-Case/244312

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Clean Edge Razor Case

Paramount Clean Edge: Mainstream positioning: Advantage: Since Pro and Avail are experiencing mature/declining phase, the sales may probably decline, therefore, mainstream positioning can prevent consumers in value and moderate segments from being wooed away to more innovative brands thus retain the market share, dominate the market and quickly gain mass appeal. Disadvantage: Mainstream positioning may dilute the power of Pro and Avail due to cannibalization. The test shows that 60% of the Clean Edge sales are from current Pro and Avail users. However, this number is only 35% for niche positioning. Cannibalization occurs when a new product intrudes the market and “eats” the old product of the same company. Therefore, it cannot appeal to a new segment market and cannot increase the market base. This is very bad because it forces the existing products to end prematurely. Advertising expenditure is larger than niche. 5. Recommendation, Marketing plan and implementations According to the income statement (Appendix), we can see that the revenue of niche (39.9 million)is higher than mainstream (28.7 million). Thus we choose niche positioning. The target consumers are involved social/emotional and aesthetic users, male between 30 to 60 years old that have higher disposable income and cares about the grooming and shaving quality. There are two options for the brand name: “Clean Edge by Paramount” and “Paramount Clean Edge”. The former is suitable because the company wants to emphasize the product as a unique breakthrough product. Since Paramount is using niche positioning and targets at involved male users, Clean Edge by Paramount is better to emphasize more on the product than the company. This product may stand out among its competitor and impress the consumers by the innovations itself. 1. Increase the product awareness within the super-premium segment. The actions should be taken are making more advertisement on internet and tv, saturate the market by continuous distribution in merchandise stores, food store, drug store and health clubs. Most men in health clubs are involved users and cares about health and grooming. Establish partnership with airlines and give free samples to the first class people who have superior taste. 2. Ensure 1 million units of razors and 4 million units of cartridge are sold in the first year. Increase the presence of the products in the public media. Paramount should select proper advertising method such as tv ads and get the sponsorship of NHL. Create a website for the product and enable online shopping and give discounts and coupons to attract more consumers.

Alternative scenarios 1. Competitor: Naiv implement aggressive promotion strategy Solution: highly saturate in the media advertising. Focus on various distribution channels. www.termpaperwarehouse.com/print/Clean-Edge-Razor-Case/244312

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Clean Edge Razor Case

2. Technology: Similar products enter the mainstream market Solution: Focus on spreading messages that Clean Edge has good quality and provide wonderful shaving experience. Get celebrities like Brad Pitt to be the spokesman for elite status of Clean Edge. 3. Channel sales: lagging sales in distribution channel Solutions: Give out dollar off coupons and package the razor with shaving cream sample or remove this channel. Implementation timeline: See appendix Budgeting allocation: See appendix

Appendix

SWOT Analysis Strength

Opportunities

Weakness

Threats

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Clean Edge Razor Case

Nondisposable Razor Market share by brand 2007-2010E [pic]

Income Statement [pic] [pic]

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-----------------------revolutionary product with ultra-thin five blades that provide complete hair removal, vibration technology that www.termpaperwarehouse.com/print/Clean-Edge-Razor-Case/244312

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Clean Edge Razor Case

prevent skin irritation, provide good shaving experience, better than other products in super-premium segment -Good company brand equity, good reputation, professional expertise - possess large consumer base

-lack innovation experience -Clean Edge is still not perfect; it doesn’t have some features that other products have. - not number one in the market -so many competitors that provides similar products in the same segment That may compete for market shares. -Cannibalization -consumers need not only quality product but also good shaving experience; the super-premium segment is an opportunity to exploit. -lots of available distribution channels and media advertising opportunities Clean Edge Razor

Jiexiu Jessie Chen 212423141 Professor: Linda Reeser March 4, 2014 Professor: Linda Reener 3/4/2014

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