Clean Edge Razor case
What changes are occurring in the non-disposable razor category? Assess Paramounts competitive position. What are the strategic life-cycle challenges for Paramounts current products as well as Clean Edge? Changes in the non-disposable razor category in the recent years: It has become harder for newer and smaller players to grab the market share because of increased advertising expenses. However, for bigger and established players it has not increased significantly. 1. With the advent of male-specific personal care products, male grooming products seems to be a growing in the industry; growth in this segment has outpaced that of womens personal care market. 2. 5 percent growth per year from 2007 to 2010, attributed to innovations and product introductions. 3. Diversified as better margin derived from the product brought in retailers in the form of club stores and other stores. Competitive Position: Earning over $13 billion in revenue and $7 billion in profits during 2009, Paramount has become a global consumer product giant. Its competitive position include: 1. A respected brand in non-disposable razor market. 2. 23.3% market share by volume of overall non-disposable razor unit and market leader in moderate non-disposable razor unit both by volume and dollar. 3. Having said this, new players with technologically enhanced products pose a threat to the company. Strategic Life Cycle Challenges: Clean Edge Razor A product that uses superior: technology and a 5 blade design. It would give enormous boost in sales provided that it does not cannibalize the existing non-disposable razor segment which is doing moderately well for the company. With this objective in mind, company had to choose between three alternative strategies which are: a. To launch the Clean Edge razor as a mainstream technology product, b. To launch the razor as a niche revolutionary technology product, or c. To create a new strategy to market the razor as a revolutionary technology
How is the non-disposable razor market segmented? Examine consumer behavior for nondisposable razors. The non-disposable razor market is segmented into three, based on price and quality: 1. Value segment, 2. Moderate segment, and 3. Super-premium segment Based on estimates from 2010, non-disposable razors constitute close to 11.23 percentage of the U.S razor market which is nearly worth about $2 billion. Consumer Behavior On looking closely at the consumer behavior for non-disposable razors, I can see that that consumers now are focusing a lot more on the premium segment. This indicates that the modern customer is more tuned to the changing times and are becoming more and more sophisticated. They expect new technologies to fasten and smoothen the shaving process. I think Paramount should capitalize on this and look to invest in the premium products segment. However, it should be kept in mind that, this strategy could create an opportunity for cannibalism on pro-products, whose sales are already on shaky grounds.
What are the arguments for launching Clean Edge as (a) a niche product and (b) a mainstream brand? Which would you recommend? What are the strategic implications of your recommendation? The niche strategy: Prevents cannibalization of sales from existing products Prevents decline of overall market share. Helps earn a profit of $19 million, through new customers in years one and two
The mainstream strategy Capacity to earn higher profits after years one and two After years one and two, profit could be as high as $39 million To promote this strategy, Paramount has to spend $42 million, or 87 percent of total allocated promotion and advertisement expenses If 87 percent of the budget is used towards this strategy, then only 13 percent will be available for promoting other profitable products. This could hurt their market share.
Recommendation My strategy would be to Launch Clean Edge as a niche product. This will help the company to become a market leader in the non-disposable razor segment. The Super-premium category will
enable the company to charge higher prices and earn more profit, without cannibalizing sales of existing products. The strategic implication If the other products have a higher margin compared to Clean Edge, then mainstream strategy would not work. This is because the promotional expenses would be spent on advertising the new product, rather than on advertising products which give higher margins. However, if Clean Edge has a higher margin than the other products, then mainstream would be the right choice for strategy implementation.
Based on your positioning strategy, what brand name and marketing budget allocations would you advice? Considering the fact that Paramount is the leader in the industry, while maintaining marketing expenses on the lower end, I derive that Paramount is a known and respected brand in the razor industry. So, to capitalize on this, I would use the companys name in the product. I suggest naming the product Paramounts Clean Edge Razor. This money saved by capitalizing on the companys name can be spent on promoting other product lines, so that the new product does not cannibalize on the sales of other products. This strategy will also help keep the promotional budgets under control, while enabling higher sales of all products.
