Clean Edge Razor Essay Example

K outspent Paramount by more than 84 percent, while Prince spent 45. 6 percent more.

This was due, most likely, to the introduction of new products with the requisite need for an intensive introductory marketing campaign. Despite the advertising funds expended, Paramount still has a larger percentage of the market. This indicates that Paramount is a trusted brand that produces excellent products and has excellent brand name recognition with consumers. When the Clean Edge is introduced and if it is properly marketed, this should be a sufficient boost to propel Paramount ahead of its rivals to a significant degree. What are the strategic life cycle challenges for Paramount’s current products as well as for Clean Edge?

Despite the fact that the Paramount Pro and Avail series of razors have not undergone significant technology innovations in the past five years, they still led with the largest market share in 2009. The life cycle of those products are approaching, if not already arrived at the point of no longer being competitive in this market. The impending introduction of the Clean Edge will deflect a degree of the focus away from current products for a time, but they should plan to make improvements to the existing razors, as soon as it is feasible, to stay competitive in the mid and lower range segments of the market.

They may wish to transfer some of the technology from the Clean Edge to the less expensive brands to differentiate them from their direct competitors. In the case of the Clean Edge, its life cycle will be as long as it can remain a superior device in the eyes

of the consumer. Technological differentiation or consumer acceptance of the other competitors’ products will ultimately determine the length of the life span of the Clean Edge. How is the non-disposable razor market segmented?

The non-disposable razor market is made up of three segments: the high end or super-premium, the moderate and the lower cost or value segments. The low or value segment of the market does not have a great degree of interest in the differences between products, whereas the moderate has more interest and is willing to try new products and technologies. The moderate, as well as the super-premium portion of the market includes men and women who are further sub-divided into groups that are more concerned about aesthetics, or the social/emotional aspect of the shaving experience.

Examine consumer behavior for non-disposable razors. In the past, a razor was much like a simple tool used to accomplish a task and for many years, the basic design and function of a razor changed little. More recently, with the focus of grooming and personal hygiene being a more prominent consideration for many, especially men, there has been an increasing focus on features, comfort and the experience of shaving. Although the lower priced offerings for razors may be perfectly acceptable to many, the trend has been to expect more from a razor.

The industry has responded with more expensive, feature laden razors that vibrate, lubricate, have more blades and are more ergonomically appealing to both men and women. In some respects, shaving has progressed from a task or chore to the realm of a pleasurable experience. The use of complementary grooming products, especially geared

toward men, were a non-existent market a generation ago, yet make up an increasing portion of the personal grooming revenue today. What are the arguments for launching the Clean Edge as niche product?

Clean Edge could be launched as a niche or a mainstream strategy because the market share for Paramount in the super-premium non disposable razor market will increase regardless of which strategy is chosen. The niche strategy allows profit to be contributed while also largely preventing Paramount from allowing sales to be cannibalized from existing products and thus lowering the overall market share. Another reason the niche strategy is favorable is the profit would be $19 million coming from Paramount’s new customers under the niche strategy for years one and two.

What are the arguments for launching the Clean Edge as (b) mainstream brand? The positive aspect to launching as a mainstream brand is the profit would be much higher after years one and two. For a mainstream brand after years one and two the profit would be $39 million, which is much higher than the $19 million expected from the launching of the niche product.

Although the mainstream strategy will have an estimated profit of $39 million, the company is only budgeted for $48. million for the use of promoting and advertising products. Randall is requiring $42 million to promote using the mainstream strategy which is 87 percent of the total budget. If 87 percent of the budget is used for mainstreaming Clean Edge Razor then only 13 percent will be used to be allocated for the cash cow products of Paramount and could ultimately hurt their market share.

The strategic implication is that sales volume and marginal profit of the other products offered by Paramount is not presented in the case.

If the other products by Paramount have a higher profit than the difference of the niche and mainstream new customer profit expectations, then mainstream should have been the correct choice in strategy implementation. This would also prove that the cannibalism between the Paramount cash cow products does not exist. Which strategy do we recommend? What are the strategic implications of our recommendations? We recommend introducing the Clean Edge as a niche product, provided arketing expenditures are accurate and estimates of cannibalization from the Pro and Avail are inaccurate, as explained below.

The implications of this decision are based on the following facts, but also the use of some estimates to prove our assertions. Paramount earned $170 million in revenue and $26 million in operating profit from the sales of the Pro and Avail brands in 2009. Based on their estimates, they will earn an operating profit of approximately $19 million if the Clean Edge is launched as a niche brand or about $39 million if introduced in the mainstream market.

Given that the difference in marketing expenditures for the two alternatives is $42 million for mainstream and $15 million for a niche product, it will cost an additional $27 million to introduce it as mainstream, thus negating any difference (approximately $20 million) in revenue between the two launch alternatives. We do not have enough information to ascertain as to whether advertising expenditures were included in the revenue estimates, so this assertion may well be a moot point.

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importantly, however, are other factors to consider in this decision other than estimated profits for the next two years. Paramount is not represented in the niche market at this point. Six competitors’ razors are price higher than the Pro model, with the Avail razor priced more than $3. 00 less than any other brand. By virtue of their market share, Paramount is a trusted and respected brand, but they are exposed by not having a product in the premium line as do their competitors.

It was stated that Paramount estimates the losses for the Pro and Avail lines would be 60 percent ($15. 6 million in operating profit) if the Clean Edge were marketed as a mainstream razor or 35 percent ($9. 1 million in operating profit) if introduced as a niche product. This would indicate the company would make more gross revenue and more operating profit by introducing the Clean Edge as a mainstream product if the difference in gains from other niche razor users or in marketing expenses is not taken into consideration.

If the figures for lost customers are inaccurate, this could also affect the operating profit in a positive or negative way for either scenario. There is no way to accurately predict what will happen, but if the Clean Edge is introduced as a niche product and the Pro and Avail razors are given an update, utilizing some of the Clean Edge Technology, then we feel this would be the best course of action for Paramount to pursue. In the event that the premium niche is found to be less successful han anticipated, the Clean Edge could be marketed

as a mainstream razor at a later date. Based on your positioning strategy, what brand name and marketing budget allocations would you advise? Considering that Paramount spends much less than its’ competitors do on advertising and still remains the leader in the industry shows that the Paramount name is a trusted and well respected household name in the razor industry.

This in itself is enough to keep the Paramount name tied to the name of the Clean Edge razor. We suggest naming the razor the “Paramount Clean Edge. This allows Paramount to use its name to help in the marketing process, when a consumer sees the trusted Paramount name they will be more inclined to pay the premium price versus simply seeing Clean Edge on the package. Seeing the Paramount name on the package will help curve the marketing budget simply by tagging the Paramount name. Knowing this and knowing Paramount doesn’t want to add any more marketing expense, we feel they should cut the other product lines by 10% and allocate those funds to the Clean Edge product line.

This will keep the marketing budget in line and between the Paramount name on the package and the revenue reallocated from the other product lines should allow for a successful launch of the Clean Edge razor. The following table compares projected revenue, gross profit and operating profit, based on figures from the case and extrapolated percentages taken from those figures. The percentages were derived from: $170 million revenue, $92 million in gross profit (54. 12% of revenue) and $26 million in operating profit (15. 29% of revenue).