The product’s suggested retail price allows retailers to receive a 40% margin. The product is marketed as a high-quality women’s shaving gel and includes value-added components like aloe, lanolin, and vitamin E (added in 1995 based on market input). Since 1991, the company has been selling its popular brand of women’s shaving gel, “Soft and Silky Shaving Gel,” in tube form. In 2004, sales of the shaving gel reached $3,724,000 accounting for 1 unit. To address stock level issues and meet demand, an assistant to the marketing manager suggests packaging the shaving gel into an aerosol container (either a 55 oz.or 10 oz.can). This suggestion is prompted by current sales figures indicating that Soft and Silky Shaving Gel is in the maturation and saturation stage of its product life cycle. Furthermore, growth has strained the company’s capacity to maintain sufficient stock levels resulting in out-of-stock situations and lost sales. Despite no plans to expand production capabilities over the next 3 years, aerosol packaging for women’s shaving gel has become popular and dominant according to market trends. Therefore, the firm must decide whether or not to introduce this new packaging for its long-time popular product Soft and Silky Shaving Gel. Making this decision at the right time is crucial considering timing factors.The reason for this is that women typically shave more frequently in the spring and summer months, which will soon occur (specifically in January 2005, as stated in this case). The strengths identified from a SWOT analysis demonstrate a steady increase in sales of the company’s shaving gel between 1991 and 2004.
Sales of the product have steadily increased from approximately 400,000 units in 1991 to units in 2004, showcasing its market success. The company’s extensive 13-year experience in selling this product has fostered a deep understanding of it. Nonetheless, the company is presently encountering difficulties due to reaching its production capacity and being unable to meet demand effectively. Furthermore, the company lacks the essential technical expertise required for creating an aerosol-based delivery system for Soft and Silky Shaving Gel.
Regarding the dominance of aerosol cans as the primary packaging for women’s shaving gel, this presents an opportunity to expand into that market. By offering the preferred product to consumers, the company can aim to capture a currently untapped segment. However, a threat arises from the company’s current inability to manufacture this type of product, which makes it vulnerable to competing companies who possess such capability.
There is increased pressure to stay technologically equal to or more advanced than the competition, as there are more competitors in the market today compared to when the product was introduced.
In late December 2004, the firm hired a large marketing firm to conduct a focus group analysis. The analysis aimed to gather information about the following:
1. The reception of the new package by both present customers and uncustomary customers. Both groups unanimously favored the aerosol can, with the 10 oz. can being the favorite due to requiring fewer purchases.
2. The conversion rate of present customers to the aerosol can and the likelihood of uncustomary customers switching to Soft and Silky Shaving Gel. It was found that a significant percentage of current customers would convert to either a 10 oz. or 5.5 oz. can. Additionally, one-fourth of uncustomary customers expressed their intention to switch to the product regardless of its ounce size. The reasons for being uncustomary were mostly related to the absence of non-aerosol options and price.
3. The expected locations for finding the aerosol can in drug and food-and-drug stores, as perceived by both present customers and uncustomary customers.
When considering which package to launch, it is important to take into account the following information: the 5.5 oz. or 10 oz. package. However, there are also drawbacks that must be considered. These drawbacks include a projected cost of $30,000 for launching the test market and a set-up fee of $10,000 that needs to be paid to the supplier.
The test case suggests negotiating at least 20,000 units for the test. However, this may not be the best course of action as earlier it was mentioned that the company could obtain 100,000 units for the same $10,000.
If this test is conducted, its timing should also be reassessed.
The test is scheduled to be launched on April 1, 2005, at the start of the busiest period for selling this product. However, this small test market would not fully exploit the entire market during the upcoming busy season from spring through summer. Therefore, it is not advisable to proceed with it. Instead, it is recommended to commit to a full product launch in order to maximize benefits from the busy season. According to research conducted by the marketing firm, launching a new product would lead to greater profitability regardless of whether the projected forecast is high or low.
Considering the circumstances, it is logical to introduce the new product. After analyzing data from the focus group, there appears to be enough interest in both the 5.5 and 10 oz. containers from current customers and non-customers alike. Therefore, we are planning to launch both products. The cost will remain unchanged since our outsourced manufacturer can produce both canister sizes for the same setup price. Once launched, we can evaluate whether it is wise to maintain both product lines or adjust production based on fluctuations in demand.
Moreover, in the event that one product surpasses the other in sales by a considerable amount, the less profitable product could be gradually discontinued in favor of the more successful one. The combined predictions for both the 5.5 and 10 oz. containers, comprising minimum and maximum estimates, suggest that there would be a total of 11,520,174 ounces of product sold, generating $3,180,650 in revenue. This signifies a growth of 775,000 ounces and an increase in revenue by $257,963 (detailed analysis located at the bottom of the Excel spreadsheet).
It is recommended to conduct a market wide launch of the new products, positioning them next to existing products. Additionally, if possible, some products should be placed in the women’s toiletry section of drug and food-and-drug stores. The decision to do so is based on the observation that non-customers are more likely to expect finding the product there. Moreover, it is advised to schedule the launch during the busiest selling period of the year, specifically from spring through summer. This timing will attract more women who are actively seeking this type of product, increasing the potential for establishing long-term relationships with customers after they try the product.
There should be an effort to highlight the beneficial features of the new product, including its lack of chlorofluorocarbons and rustproof canister. These advantages should be communicated to potential customers through packaging design or in-store signage. These unique qualities can be seen as indicators of higher quality and justify the slightly higher price of the original product. Furthermore, the case also mentioned that the new product manager had concerns about making a decision regarding the next steps for the new product because of the firm’s chain of command.
Although not given significant weight, it is important to recognize the required hierarchies within companies for an effective workplace. Managers’ decisions should be justified and followed. It is possible that these decisions may not always be right, but upper management should evaluate this matter. Based on the case, an assistant employee feels they were passed over for promotion while the promoted individual has concerns about any decision affecting their working relationship.
In this situation, the assistant devised a plan with both positive and negative aspects. As my plan incorporates some elements of the original plan and leads to the introduction of a new product, I do not think there will be any enduring consequences among the colleagues.