1. What changes are occurring in the non-disposable razor category? The non-disposable razor category has experienced tremendous growth in recent years, boasting a steady 5% growth per year from 2007 to 2010. This growth can be attributed to introduction of new innovative products; 22 between 2008 and 2009. There is increased competition for shelf space, which was forcing distribution to shift outside traditional food and drug stores. In 2000, food stores sold over half of all razors, but by 2009 they represented only 42% of sales.
As a result of the rising product introduction, the non-disposable razor category also experienced rising advertising expenditures. Between 2009 and 2010, advertising expenditures increased by 39%; faster than overall sales which only saw a 5% increase. Due to the heavy emphasis on advertisement, consumers in this category have become well informed making it easier for consumers, shavers to switch across brand in order to evaluate new products. There is an increasing shift towards super premium products especially among “involved” shavers.
There has also been a shift in men’s grooming routine’s which now went beyond “shaving and after shave” to other products like body spray, fragranced shower gel, and skin care line. Male-specific personal care products have outpaced the growth in the women’s beauty market as these products have become more mainstream. This trend is due to more media attention on grooming issues and also a reduction in stigma associated with men’s preening. Assess Paramount’s competitive position. Paramount entered the non-disposable razor market in 1962 to become one of the leaders in the industry.
This is evident from the fact that paramount has maintained the unit-volume market-leader position for 2 years straight boasting a 23. 3% share in 2009 and 22. 2% in 2010. However, Paramount’s operating profits are lagging behind that of one it’s closest competitors Prince which has maintained the unit –sales market leader position since 2009 with a 2009 operating profit of $45 million compared to paramount’s $26 million. This may due in part to the fact that Paramount currently has no products in the super-premium category. In addition, paramount has not had any product innovations for the past 5 years.
This is concerning especially since their products are either in the mature or declining phase of their products life cycle. What are the strategic life cycle challenges for paramount’s current products as well as for Clean Edge? Paramount’s current products are either in the mature or declining phase of their product life cycle; paramount is faced with the challenge of stimulating sales at this phase. Replacement cycles have been reduced this coupled with the heavy advertisement in this market category means that there is an increased chance for consumers to switch to other products.
In addition, introducing a product especially if it is in the same product category as the existing products can have a big effect as a result of cannibalization. On the other hand, Clean Edge poses the challenge of positioning; the product will need to be positioned in such a way as to minimize the effect of cannibalization and maximize market share. Furthermore, since Clean Edge is in it is early stages it is going to face competition from existing products with similar capabilities. 2. How is the nondisposable razor market segmented? Discuss consumer behavior for non-disposable razors?
The market is segmented into value, moderate, and super-premium on the basis of price and quality. In addition to the traditional price/quality segments there is also a distinct segmentation in terms of product benefits and consumer behavior. The non-disposable razor market is segmented into 3 categories: Involved users (social/emotional shavers) who differentiate among products in terms of functionality and messaging; this type of shavers accounted for 39% of the total razor market. These users see shaving as an important part of their daily ritual as it makes them feel more attractive and confident.
The second group consists of involved users who are aesthetic shavers and look for products that effectively remove hair. Shaving to them is a means to smooth skin they desire; this type of shavers accounted for 33% of the total razor market. Finally, the last group are the uninvolved users aka maintenance shavers who view all the products to be the same; this type of shavers accounted for 33% of the total razor market. Their shaving routine is usually inconsistent and shaving to them is a chore they’d like to complete as quickly as possible. 3. What are the arguments for launching Clean edge as (a) a niche product and (b) a mainstream brand?
For Niche Pro is a strong mainstream brand, launching Clean edge as a Niche product would aid sales and avoid too much cannibalization (only 35% compared to 60% for mainstream launch). If niche is successful, positioning could be later broadened “test and invest”. But it is important to keep in mind that Pro is currently in its maturity/declining stage and that sales could be lost to other competitors due to lack of innovation from Paramount’s mainstream market. Furthermore, Launching the product as a Niche product would require a marketing expenditure costs of $15 million in year 1 as opposed to $42 million with mainstream positioning.
Finally, launching as a Niche product is inline with current market trends. The super-premium category is growing at a steady rate of 5% which suggest that Paramount can benefit from this growing market segment by launching their first as a Niche category. This is especially important since Paramount does not have any product in the super-premium category. For Mainstream Pro is in its mature phase of the product lifecycle and will soon experience a decline in sales. Positioning clean edge as a mainstream product will prevent loyal paramount customers from leaving and becoming more interested in other products.
This is especially important considering the fact that Paramount has not had any product innovations for the past five years. Clean Edge’s technical innovation could make paramount a category leader with broad market appeal. Which would you recommend? What are the strategic implications of your recommendation? According to Table 1 in appendix A, although the mainstream launch would bring about higher total dollars in sales for the first 2 years compared to Niche, it also brings about higher total costs. In addition, launching clean edge as a mainstream brand would bring about a higher cost f cannibalization 60% compared to 35% seen with Niche. As a result, launching clean edge as a Niche brand would result in a profit that is $17million greater than that from mainstream in the first year and $10 million more in the second year. Without adjusting for time value of money, the Niche approach will generate a total of $31 million compared to $3 million with the mainstream approach. Based on these findings, it would be best to launch clean edge under a Niche positioning at least for the first 2 years, “test and invest” and then position as a mainstream product based on initial performance.
With this approach, Paramount will still face the issues cannibalization after the test and invest period; the cannibalization costs could even be higher at this time. Furthermore, paramount could face an even stiffer competition in the super-premium category from Radiance whose new product, Naiv having similar capabilities as clean edge, is scheduled to launch before Paramount’s clean edge. 4. Develop forecasted Profit and Loss pro-forma statements for Clean Edge under Niche and Mainstream Scenarios for the first two years. Use Exhibit A in the next page as a guide. See appendix A for a pro forma statement.
