This document analyzes the marketing strategy for Clean Edge Razor, a new non-disposable razor by Paramount. It finds that positioning Clean Edge as a niche product for the first two years then transitioning to mainstream would be most profitable and reduce cannibalization of existing Paramount products. Specifically, it would tap higher profit margins, win shelf space, reduce cannibalization rates from 35% to 60%, and allow a soft entry into the lucrative super-premium market segment. The document recommends naming the product "Clean Edge by Paramount" to distinguish it while associating it with Paramount's brand equity.
This document analyzes the marketing strategy for Clean Edge Razor, a new non-disposable razor by Paramount. It finds that positioning Clean Edge as a niche product for the first two years then transitioning to mainstream would be most profitable and reduce cannibalization of existing Paramount products. Specifically, it would tap higher profit margins, win shelf space, reduce cannibalization rates from 35% to 60%, and allow a soft entry into the lucrative super-premium market segment. The document recommends naming the product "Clean Edge by Paramount" to distinguish it while associating it with Paramount's brand equity.
This document analyzes the marketing strategy for Clean Edge Razor, a new non-disposable razor by Paramount. It finds that positioning Clean Edge as a niche product for the first two years then transitioning to mainstream would be most profitable and reduce cannibalization of existing Paramount products. Specifically, it would tap higher profit margins, win shelf space, reduce cannibalization rates from 35% to 60%, and allow a soft entry into the lucrative super-premium market segment. The document recommends naming the product "Clean Edge by Paramount" to distinguish it while associating it with Paramount's brand equity.
Marketing Solutions INTRODUCTION Non-Disposable Razor Market Consumer Frequent brand switching Replacement cycle shortened since consumers trying new products &
67% Involved Non-Disposable Razor Users
Market Trend 5% growth per year In sales of Non-disposable Razors from 2007 to 2010
Significant growth in Super-Premium Segment Driven by product innovation
Male-specific personal care products became more mainstream
Competitor Continuous Innovation in non-disposable razor category
Expansion of Advertising and Promotion Expenditures
Intensify competition to obtain retail space
Distribution Channel Outlets Increase Shelf Space for non-disposable razor category.
Shift of distribution channel from Food & Drugs stores to Mass Merchandisers
THE DILEMMA Primary Issues Where should the Clean Edge Razor be positioned?
ISSUES Niche Main Stream Secondary Issues Brand name positioning of Clean Edge Razor
Separating Clean Edge from existing Product Line Associating Paramount to the brand as part of overall Corporate Strategy to build Paramount brand equity Clean Edge by Paramount
Paramount Clean Edge RAZOR MARKET COMPETITIVE MAPPING Benet & Klein Vitric Advanced Vitric Master Prince Cogent Cogent Plus Radiance Naiv Simpsons Tempest Benet & Klein Vitric Paramount Paramount Pro Paramount Paramount Avail Market Share - by Market Segment
RAZOR MARKET ANALYSIS Market Share by Brand
Super Premium, 36.4% Moderate, 38.5% Value, 4.9% Source: Exhibit 5 RAZOR MARKET ANALYSIS Sales by Segment
Source: Table B 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 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
Opportunity
1. Established brand that consumers already trust and hold strong and positive association with. 2. Paramount can afford $19 million in advertising 3. Best product in the market (Technologically advanced and tested) 4. Nothing currently in the market like it.
1. Growth in the super premium segment 2. Mainstream market is highly profitable. 3. Increased in mens grooming. 4. Uninvolved razor users (maintenance users) is untapped consumer base.
Weakness
1. Launching the Clean Edge Razor in the wrong segment could potentially canabilise the Paramount Pro. 2. Does not hold a position in the super premium segment of the mainstream market which accounts for 37.2%of the total non-disposable razor market. 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.
Threat
1. Positioning in the Mainstream market could lead to cannibalization of existing Paramount product 2. Super-premium market segment is highly influenced by market and technology changes on razor functionality and design.
MARKETING STRATEGY ANALYSIS Year 1 Year 2 Year 1 Year 2 Unit Sales Razors 1 1.5 3.3 4 Dollar Sales Razors 9.09 $ 13.64 $ 25.84 $ 31.32 $ Unit Sales Cartridges 4 10 9.9 21.9 Dollar Sales Cartridges 29.40 $ 73.50 $ 61.58 $ 136.22 $ Total Dollar Sales 38.49 $ 87.14 $ 87.42 $ 167.54 $ Production Cost Razor 5.00 $ 7.50 $ 15.64 $ 18.96 $ Production Cost Cartridges 9.72 $ 24.30 $ 22.18 $ 49.06 $ Capacity Cost 0.61 $ 0.87 $ 1.71 $ 2.45 $ Advertising & Promotions 15.00 $ 16.00 $ 42.00 $ 39.00 $ Total Cost 30.33 $ 48.67 $ 81.53 $ 109.47 $ Operating Profits 8.16 $ 38.47 $ 5.89 $ 58.07 $ Profits as % of Sales 21% 44% 7% 35% Cost of Cannabilisation Razors 0.62 $ 0.92 $ 3.48 $ 4.22 $ Cost of Cannibalisation Cartridges 3.92 $ 9.80 $ 16.63 $ 36.79 $ Total Cannibalisation 4.54 $ 10.72 $ 20.12 $ 41.02 $ Profits After Cannabilisation 3.62 $ 27.74 $ (14.23) $ 17.06 $ Niche Mainstream Profit and Loss Forecast for Clean Edge Under Niche and Mainstream Scenarios (in $ Millions)
Profit Projection as Percentage of Sales
21% 44% 7% 35% 0% 10% 20% 30% 40% 50% Year 1 Year 2 GP Margin (%) Niche Mainstream MARKETING STRATEGY ANALYSIS Niche positioning offers higher projected profit comparatively to Mainstream Positioning. Key Highlights from Profit and Loss Forecast for Clean Edge in two (2) different Brand Positioning
MARKETING STRATEGY ANALYSIS 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. Operating Cost Niche Mainstream Projection Year 1 Year 2 Year 1 Year 2 Advertising & Promotions $ 15.00 $ 16.00 $ 42.00 $ 39.00 Key Highlights from Profit and Loss Forecast for Clean Edge in two (2) different Brand Positioning
Advertising and Promotion Effort ($ Million)
MARKETING STRATEGY ANALYSIS Cannibalisation rate for Niche Positioning = 35% Cannibalisation Rate for Mainstream Positioning = 60% Cannibalisation Niche Mainstream Projection Year 1 Year 2 Year 1 Year 2 Total Cannibalisation $ 4.54 $ 10.72 $ 20.12 $ 41.02 Key Highlights from Profit and Loss Forecast for Clean Edge in two (2) different Brand Positioning
Cannibalisation Rate ($ Million)
MARKETING SOLUTIONS 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 Where should the Clean Edge Razor be positioned?
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.