Clean Edge Razor Markrting

Clean Edge Razor-Case Analysis Executive summary Paramount is planning to launch a non disposable razor ‘Clean Edge’. This company is a market leader in the non disposable razor market. Currently it is offering Paramount pro and Paramount Avail. The product based categorisation in hair removal market is non disposable razor, disposable razor, cartridges, shaving cream and depilatories. The non disposable razor and refill cartridge market is divided into three segments based on price and quality – Moderate, Value and Super premium.

Based on product benefits there are three groups of people- maintenance shavers, Social or emotional shavers and Aesthetic shavers. The super premium category has the highest growth among the three categories. Paramount doesn’t have an offering in the super premium segment. Clean edge was developed after a thorough research and is a technologically superior product. The company is not sure how to best position clean edge.

They have 2 options, either to position it as a niche product targeting highly involved fastidious groomers looking for superior shaving experience or to position it as a main stream positioning focussing on the broad advantage of the closet possible shave. The factors to be considered are the volumes, cost of production, impact of cannibalization and advertisement cost. Alternatives available Niche product • This will increase the diversity of the portfolio. • Less cannibalization of sales from existing products. Mainstream product • Sales volumes for the product will be high. Existing sales and distribution suitable for this segment. • 60% cannibalization of sales of the existing products. • Advertising expenditure is high. Financial Analysis of the options available Analysis: The cost of cannibalisation is calculated from the data given below 60% of Clean Edge sales would likely to come from current Pro/Avail customers in a mainstream positioning 35% of Clean Edge sales would likely to come from current Pro/Avail customers in a niche positioning. The average contribution per unit for Avail and Pro combined was $1. 76 for razors and $2. 8 for cartridges.

We calculated the contribution of clean edge razors and cartridges by subtracting the production costs (i. e. variable costs) from the total sales revenue. This contribution is reduced by the cost of cannibalisation to get overall margin after cannibalisation. |  |Niche |Mainstream | |  |Year1 |Year2 |Year1 |Year2 | |Razor(unit sales) |1. 00 |1. 50 |3. 30 |4. 0 | |Sales price per unit |9. 09 |9. 09 |7. 83 |7. 83 | |Razor(SalesValue) |9. 09 |13. 64 |25. 84 |31. 32 | |Catridge-unit sales |4. 00 |10. 00 |9. 90 |21. 90 | |Sales price per unit |7. 35 |7. 35 |6. 22 |6. 22 | |Catridge sales value |29. 40 |73. 50 |61. 58 |136. 2 | |Total Sales(in value) |38. 49 |87. 14 |87. 42 |167. 54 | | |  |  |  |  | |Razor(Production Cost)/unit |5. 00 |5. 00 |4. 74 |4. 74 | |Razor(Production Cost) |5. 00 |7. 50 |15. 64 |18. 96 | |Catridge(Production Cost)/unit |2. 43 |2. 43 |2. 24 |2. 24 | |Catridge(Production Cost) |9. 2 |24. 30 |22. 18 |49. 06 | |Capacity Cost |0. 61 |0. 87 |1. 71 |2. 45 | |Advertising/promotion |15. 00 |16. 00 |42. 00 |39. 00 | |TotalCosts |30. 33 |48. 67 |81. 53 |109. 47 | |  |  |  |  |  | |Operating Profit |8. 6 |38. 47 |5. 89 |58. 07 | |  |  |  |  |  | |Profit as% of sales |21. 20 |44. 14 |6. 74 |34. 66 | |  |  |  |  |  | |% cannibalisation |0. 35 |0. 35 |0. 0 |0. 60 | |Average contribution per razor |1. 76 |1. 76 |1. 76 |1. 76 | |Razor-Cost of Cannibalisation |0. 62 |0. 92 |3. 48 |4. 22 | |Average contribution per cartridge |2. 80 |2. 80 |2. 80 |2. 80 | |Catridges -Cost of Cannibalisation |3. 92 |9. 80 |16. 63 |36. 9 | |  |  |  |  |  | |Total cost of cannibalisation |4. 54 |10. 72 |20. 12 |41. 02 | |Profit After Cannibalisation |3. 62 |27. 74 |-14. 23 |17. 06 | |Contribution of Clean Edge |23. 77 |55. 34 |49. 60 |99. 52 | |Contribution of Clean Edge/unit |2. 36 |3. 66 |1. 70 |2. 2 | Conclusion From the above table, although the total profit after Cannibalisation in the Niche (31. 37mm) is more than that of Mainstream positioning(2. 53mm), the niche positioning strategy gives more margins after accounting for the cannibalisation of sales of Paramount Pro and Avail. Therefore positioning the product in the niche market. We can brand the new product as Clean edge by paramount which would attract more customers in the super premium sector. However by branding it as Paramount clean edge we would capitalise on the brand value of the parent name “Paramount”.

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