Gillette thus showing different varying volume over

Gillette
Clean Edge Razor Case Study

Changes in the non-disposable razor category

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The non-disposable
razor category has been experiencing a mixed reaction to market forces, thus
showing different varying volume over the period analyzed in the case. While
looking at Table A, US shaving and hair removal products have shown the non-disposable
razor category to have a $34 million increase from 2005 – 2006, and a decline
in the next year before stabilizing in the subsequent years. Some of the
attributed causes of varying profit and loss margins can be attributed to
issues which are both internal and or external to the company and have had
direct impacts to the sales and profitability of the organization. Competition
and the threat of substitute goods displays that the company must continue to
develop new and innovative products and continue to allocate resources to
research and development. The super-premium segment of the non-razor category is also experiencing
significant growth due to innovation, as seen in the invention of 5- blade
technology, low resistant blade coating and leather bar. This has placed companies
competing in this market segment in the position to consistently implement plans
that correspond to the market demands.

Paramount’s competitive position

Paramount Razors,
through its brands Paramount Pro and Paramount Avail have shown mixed market
share results as depicted throughout 2007 – 2010. Sales volume increased by 1.3%
in 2008, followed by a rise of 1.5% in the next year before experiencing a decline
of (1.1%) in 2010.  Through analyzing the
competitive position of the company, brand pricing in the markets have been the
driving factor attributed to the sales volume fluctuations. Despite increasing
capital for advertising and promotion expenditures from $44.3 million in 2009
to $48.3 million in 2010, the company experienced a reduction in sales volume
during this time. Some of the elements of Paramount’s competitive position
include competition from companies like Prince, Benet & Klein, Radiance and
Simpsons which represent the prevalent competitors in the non-disposable razor
category segment. The competitive environment is based on the direct success of
product resonation with consumers, as well as the threat of having substitute
products within the market.

Strategic lifecycle challenges for Paramount’s
current products as well as for Clean Edge

Paramount has endured stagnant
market share periods that directly correlate with its products in the market. The
market share for Paramount Avail has been experiencing a significant decline.
However, the market share of the Paramount Pro has been experiencing a steady
increase. The Paramount Pro has also developed new products for super-premium
markets such as Clean Edge based on 5 blade design and superior technology.
However, it has had to use profits from Paramount Pro to finance the new Clean
Edge products. The introduction of new products such as Naiv by Simpson would
significantly affect Clean Edge. The launch of the new products would
cannibalize the consumers of the Paramount Avail and Pro up to 60% of the
mainstream customer and 35% of the niche positioned products. Clean Edge would
also face challenges within their marketing budget and possible resistance from
customers due to the availability of many substitute products. Clean Edge has
differentiated itself from the current products in the market due to its
ultra-thin 5 blade designs, larger heavier handle that creates balance, grip as
well as control.

Market Segmentation

The non-disposable
razor market is segmented based on the demographic features, with a focus on
male grooming through the production of hygienic razors. The segment also considers
the behavioral and psychographic components of the market. Clean Edge, thus
targets this segment through looking at ways of differentiating aesthetic
shavers which helps in removing unwanted hairs and distinguishing it from other
shavers that are disposable. The non-disposable razor market has three segments:
moderate, value and super-premium. Quality and price create these segments. A
study conducted in 2009 indicate that the super-premium segment contributed to
25% of the razor market in the non-disposable razor segment. The moderate and
value segment had 43% and 32% of the volume of the product in the market
respectively (Table B).  The super-premium, value and moderate
contributed 34%, 22% and 44% of the retail sales in the non-disposable market
correspondingly (Table B).  Research conducted
by Paramount indicates that the market has distinct segmentation, and these
include social/ emotional shavers, maintenance shavers and aesthetic shavers
(Exhibit 1).

Consumer Behavior

The maintenance shavers
are consumed by low involvement customers who are price sensitive and easily
switch brands. These consumers are indifferent toward the different products,
and they have inconsistent shaving partners. The maintenance shavers perceive
shaving as any other core behavior that they need to finish as soon as
possible. They occupy 33% of the market (Exhibit 1). The social or emotional
users are differentiated between the market products. These consumers make a
purchase decision based on their overall experience of the product. The
emotional users differentiate between products and search for the products
based on the message and functionality surrounding the product’s attributes.
These consumers perceive shaving as an essential part of daily grooming that
makes them attractive and confident. They depict regular shaving as a necessity
and therefore buy razors and replace cartridges frequently. The emotional or
social consumers occupy 39% of the non-disposable razor market (Exhibit 1). The aesthetic users make up the remaining
28% of the market (Exhibit 1). These consumers actively search for cosmetics to
fulfil their intrinsic desires. They search for products that are effective in
removing hair and lead to smooth skin. The aesthetic and social/emotional users
are high involvement consumers because they place a high value on the features
of the razors and the brands they represent. Thus, they can act as early
adopters or innovators of new products in the market.

 

 

 

Product Launch

I recommend Paramount
Company launch Clean Edge as a niche product that would create a strong brand
that can incorporate market needs within the specialty segment of the razor
market. Part of the selling points for the company is the design of the product
as well as the associated costs to market the product that will determine the consumers
ability to make a purchase. The brand name that the company intends to sell
with is as important as the strategy that it employs to go to market with. The
brand identity of Clean Edge incorporates what the management, under the
leadership of Randall wants to achieve while minimizing cannibalization on the
Pro razor. This product launch strategy will increase the company’s profit
margin once the product gains substantial market share. While looking at the
market dynamics of the product, the overall intention should be aimed at
looking at the long-term goal of broadening product sales beyond the current
market. This would allow Paramount to integrate into the mainstream system
where its revenue stream would also contribute to a greater percentage of the
company’s revenue after year two. Positioning Clean Edge in the niche segment
will complement the company’s existing product portfolio in a seamless manner. From
the exhibits, a conclusion can be reached that reflects higher profit margins
for the company and the risk involved will be minimized to existing product lines.

The
mainstream goal of launching Clean Edge could be argued to replace Pro, which
has been receiving mixed reactions to its market segment. To achieve this,
Paramount would have to monitor the products cycle curve, which determines how
the products perform. The technological advancements that the product features
could ensure that competition is going to be minimized in the long run, as the
selling point is a better non-disposable razor that can be used in a wide array
of sectors. The technological innovation could guarantee an advantage that is
currently lacking in this segment of the mainstream razor market. Paramount
already has product in mainstream positioning, Paramount Pro, so launching it
as a mainstream product will dilute the brand power and would lead to
cannibalization. More marketing support will be needed to reach the target
masses. The company would require an extensive advertising campaign, considerable
consumer promotions would be needed and thus the expenses associated with them
would be immense. To reach full sales potential with this positioning, a $42
million marketing budget would be needed for year one.

Strategic Implications

As the company intends
to continue building confidence levels of the existing and target consumers, it
will be enable Paramount to execute intensive marketing to create awareness and
other marketing techniques to meet the long-term strategic plan of building the
brand. It will also prevent cannibalization of the existing products of
Paramount such as Pro and Avail by launching as a niche product. Overall, niche
positioning will lower cannibalization impacts and soften advertising costs. Although
reduced profits will be incurred in the short-term compared to mainstream,
considering advertising and other related expenses, niche placement will result
in better net results.

Positioning/Marketing Allocations

The clean edge will be positioned
in the name of “CLEAN EDGE BY PARAMOUNT”. This will allow Paramount to focus on
the product and differentiate this item from the other brands Pro and Avail
models that will aid in the reduction of cannibalization. This will allow
consumers to have enhanced awareness that a new product has entered the market
and from the company they currently trust. Being the product is new,
emphasizing on the product name will help it grow, rather than emphasizing
on the company name which is within the razor market.

A mainstream product launch would be three times higher than the niche
product in advertising expenses. Though the mainstream launch would lead to could
initially lead to a stronger market share in year one, a niche product launch
would reduce the market expenditures as well as consumer promotions and trade promos,
resulting in lower marketing expenses of $56 million year over year (Table 1). The
company would need $25 million in marketing funds to launch as a niche product,
compared to the mainstream approach which is approximately $81 million. This
would save Paramount approximately $27 million in market expenditures and allow
the product to become a profitable piece of the company’s portfolio.