1. What is the marketing management problem or opportunity the case protagonist faces?
Paramount must decide how it wants to position the Clean Edge Razor in the market. With the men’s grooming market segment poised for growth, it must figure out where the most profit opportunity lies (i.e., super-premium, mainstream, etc.) and then proceed with an implementation plan.
2.What alternative courses of action can the protagonist pursue to address the case problem?
One option is to release the Clean Edge in the mainstream market – while there’s an overall greater opportunity for more sales, especially cartridges (albeit with a lower profit margin), they risk cannibalization of the Pro/Avail product lines of up to 60%.
Paramount could, in theory, also reduce the cost per unit by taking advantage of economies of scale. This option would also require more capital for marketing – about $42 million.
Another option is to release Clean Edge as a super-premium product. This is the least exploited market by Paramount and only has a 35% estimated cannibalization rate from Pro/Avail customers.
While there would be fewer sales, there would be a higher markup with the ability to sell more of the Pro/Avail line. However, Clean Edge could be a replacement for the Pro in the mainstream market segment. Marketing for a super-premium product would be an estimated $15 million.
3. Which of the identified alternatives is most attractive and why?
If we take a look at the financial forecasts for positioning Clean Edge as a niche or mainstream product we can make the following observations:
In the first year, Paramount would indeed make more money with the niche market. However, the profits skyrocket in the second year in the mainstream market.
One of the main issues that needs to be addressed, however, is how do these figures modify the bottom line if we account for cannibalization of the Pro/Avail lines. Currently, Paramount does not have a super-premium offering which is why it may make sense to position the Clean Edge in that market. However, the numbers may not support that as the best market, assuming less cannibalization.
4. What course of action should the case protagonist pursue?
Jackson Randall has a very strong case to roll out Clean Edge in the mainstream market. The profit calculations should be enough to convince any naysayers in the company. However, Jackson will have to work with his team to make sure that cannibalization of the Pro/Avail lines does not become an issue. The company also needs to decide if the Clean Edge will be a replacement for the Pro line or can they co-exist in the market.