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Problem Statement:
‘Paramount Health and Beauty ‘ Company is launching a new non-disposable razor, Clean Edge that boasts about superior performance by utilizing a vibrating technology that stimulates hair follicles and lifts the hair from the skin allowing a thorough shave. This is a cutting edge technology that is expected to take the market by storm. This product Paramount has two existing products in the market – Paramount Pro and Paramount Avail. Neither of them has introduced significant technology innovations in the last five years.
Yet, Pro was the market leader in 2009. Up till now, the non-disposable razor and refill cartridge market was dominated by three multinational players: Paramount, Prince and Benet & Klein. New entrants, Radiance Health Inc. and Simpsons have recently intensified the competition in this space. The market can be segmented into three categories based on price and quality – value, moderate and super-premium. Paramount Pro is positioned in the mainstream moderate market while Avail sells in the ‘value’ market. As far as the company is concerned, it had not yet tapped the niche ‘Super-premium’ market.
Based on consumer behaviour, the market can be divided into ‘Maintenance shavers’ and ‘Involved shavers (Social/emotional, aesthetic)’. This product is planned to be launched in the male specific personal care products market before it can be positioned for the women’s beauty market. Based on this, product manager in Paramount, Randall is faced with the following questions – a. What is the target market for launch? (Involved social/emotional shavers or the aesthetic shavers)
b. Which segment is ideal for the positioning of Clean Edge considering the product price and proposed sales price? (Value, Moderate or Super-premium) c. Considering the marketing budget cuts imposed, what would the marketing strategy be and how can the expenses be shared amongst the three products? d. How can cannibalization be avoided with the Pro and Avail products? Case analysis:
The following things have been considered while evaluating the strategy options.
* The 3 C’s
* Customer
* Company
Nondisposable razor unit and dollar market share of Paramount Pro
Nondisposable razor unit and dollar market share of Paramount Avail
Total market share:-
* Competition
Market share of competing brands:-
* The 4 Ps
* Product
The Clean edge razor has the following properties –
1. Revolutionary product – vibrating, ultra thin 5-blade design that needs just 1 AAA battery that provides the vibrations to simulate hair follicles 2. Heavier handle that allows better balance, grip and control while shaving 3. Ultra thin blade design reduces irritation
4. Extensive clinical trials indicate a 25% increase in hair removal 5. Benefits skin condition with more even skin tone and improved skin texture
* Placement
The product has the option of being placed in the moderate or super-premium market depending on whether the company chooses to go after the margins or the volumes. However one point that has been noted is that the super-premium market has seen an increase in recent times.
* Promotion
The proposed advertising and marketing budgets for 2 years are as follows –
| Nice positioning| Mainstream positioning|
Advertising ($in millions)| 14| 36|
Consumer promotions ($in millions)| 12| 31|
Trade promotions ($ in millions)| 5| 14|
* Price
| Nice positioning| Mainstream positioning|
Razor| $12.99| $11.19|
Refill cartridge| $10.50| $8.89|
Evaluated options –
1.) Position the new razor (Clean Edge) in the mainstream market for the involved razor users. Pros
* Higher Market share
* Higher profits ??
Cons
* Cannibalization of Paramount Pro (60%)
* High Advertisement and Promotion Costs in the first year itself ( 19+17+6 = $42 million) 2.) Launch it in Super-Premium Segment
Pros
* Based on Exhibit1 (Behavioral Segmentation), the total targeted consumer segment will be 39+28= 67% of the total Nondisposable Razor Users. So, we will be targeting a huge segment. * Entry in the Niche Segment – Till now, Clean Edge hasn’t been a player in the niche market. This will be their first product, thus opening up more business avenues. * Lower advertising budget requirements (Just $15 million in the first year) * In the last decade, this segment has experienced significant growth.
Cons
* 22 new SKUs have been introduced between the year 2008 and 2009 and most of them targeted the Super-Premium or the Niche segment. Most of them promoted benefits from advances in technology. Clean edge is also banking upon the new technology. The plan may back-fire just in case the new technology doesn’t generate enough curiosity/interest in the customers.
* The brand ‘Naiv’ launched by Radiance in 2010 is based on a similar technology and is already positioned in the niche market and is gathering share. It is also priced at a slightly smaller price point. ($11.80 for the razor and $9.45 for the cartridge) * Once positioned for the niche market, repositioning and tapping the mass market may be difficult. 3.) Target Super-Premium market first, enjoy Paramount Pro’s returns till they last and then establish yourself in the Moderate Segment.
Pros
* Paramount Pro from the mainstream market is in the mature phase of the product lifecycle. It’s decline can start any time. So, “Milk the cow till it lasts”. Till then, position the new razor in the Super-Premium market. As soon as sales start dropping considerably for Paramount Pro, reposition the Clean edge razor for the mass market by more advertising and dropping the price to $11.19.
Cons
* The product stands a chance of being wiped out because the segment shift may cause a loss of market share from the Super-Premium segment if the customers might have a perception that “Clean Edge’s prices have lowered — They must have degraded the quality of the product!!” * And if lower cost options with advanced technology are available then in the mainstream market, Clean edge would be left with no consumers. * This will also leave Paramount with no product again in the niche market unless something new is launched.
