Clean Edge Razor:Splitting Hairs in Product

Positioning

IM4 1st EditionRobert Napoli

Meriç Özgürman Emanuele TabarroDaria BashkarevaLorena Gutiérrez

Alara Tokgöz

• Entered Razor Market in 1962• Quickly became Market Leader• Global consumer products

company with $13 billion in worldwide sales and $7 billion in profit (2009)

• Razor sales account for $170 million in revenue and $92 million in gross profit

• Currently offers 2 products in this category: Paramount Pro (moderate segment) and Paramount Avail (value segment)

• Unit-volume market leader in 2009 with 23.3% retail unit share

Paramount Overview

• Wants to launch a new product into the market

• Revolutionary Product: vibrating, ultra-thin, five blade design

• 25% increase in hair removal vs competition in clinical trials

• Competes in non disposable razor and refill cartridge categories

• Non disposable markets has seen approximately 5% YoY for last 3 years and refill seeing 2% growth

Changes in Market and Consumer Behaviors

• “Social/Emotional”- 39% -willing to experiment with new technology. Motivated by overall shaving experience- Targeting

• “Aesthetic” - 28%- willing to experiment with new technology. Interested in cosmetic results-Targeting

• “Maintenance Shavers”- 33% -disinterested in this product- not targeting

• New Product introductions into non disposable and refill cartridges have accelerated- 22 new sku’s between 2008-2009

• Increased advertising and $ investment in media.

• Change in Distribution channels outside of normal locations

• Overall view of men’s grooming was evolving due to media attention and less stigma

• Shift in major purchase from Value products, to more consumers purchasing Moderate and Super-Premium product

Current Market Segmentation

Changes in Market and Consumer Behaviors

Value22%

Moderate44%

Super-Premium34%

Sales

Value32%

Moderate43%

Super-Premium

25%

Volume

*retail sales non disposable and refill cartridges 2009

Paramount Product Offerings• Market Leader 2009:

• Volume: 23.3%• $ (2nd): 23.4%

• No innovations or new products in last 5 years

• Avail:• Value Segment• Smaller competition and private

labels in segment• declining stage

• Pro:• Moderate Segment• Growth/Maturity Stage• Backbone product

• Clean Edge:• Super Premium• Advance in Technology• to be launched

ProAvail

Clean Edge

BCG Matrix: Paramout Portfolio

Competition and Market Share• Paramount: 21.4% MS• Prince: Market Leaders since 1950- Current Market Leader- 26.2% MS

• Cogent - Super-Premium Product• Cogent Plus -Super-Premium Product

• Benet & Klein: entered non disposable market in 1985 3rd in market- 21.1% MS• Vitric• Vitric Advanced• Vitric Master (introduced in 2009) innovative technology with advanced

lubrication strip, non-slip handle, and superior anti-corrosive technology blades• Simpsons: 5.7% MS

• Tempest (launched in 2009)• Radiance: 2.6% MS

• Naiv (due to launch in 2010)• New entrants like Naiv have done well in test markets, Paramount projects Radiance

will spend over $16 million on the launch of Naiv, along with a promotion roll out

• These new entrants are pushing competition to increase spend in media advertising to keep and retain market share

*MS numbers are based on 2010E of Exhibit 5

Non Disposable Razor Market Share in Dollars 2010E

21.4%

26.2%21.1%

2.6%5.7%

23.0% ParamountPrinceBenet&KleinRadianceSimpsonsOther

Non Disposable Razor Market: Positioning Map

SWOT AnalysisStrengths:• Paramount is a leading global

consumer product giant• Strong Market Share• Unit Volume Market Leader (2009)• Breakthrough Technology/R&D

Weaknesses:• Lack of Innovation in technology on

current products• Less expenditure in media

advertising compared to main two competitors

• No presence in Super-Premium Market

Opportunities:• Focus on male grooming, became

mainstream, the “Shaving Experience”• Fast growing markets in Super-Premium• Increased shelf space for razor products• Shortened purchase cycle• Over the last 5 years no new significant

innovation from Paramount• Change in consumer behavior from value

to Moderate and Super Premium Products

Threats:• New product introductions• Media expenditures rising faster than

retail sales• Lots of competition• Many substitute products available

Strategic Brand Decisions

“Paramount Clean Edge”Pros:• Build on brand equity• Consistency with overall corporate

strategy on building Paramount Brand• Paramount is a recognized and

established brandCons:• Consumers could view older product

lines as inferior or not as advanced• Could cause higher cannibalization

from loyal consumers wanting to upgrade

• Because of consumer loyalty, customers loyal to other brands might not switch because of Paramount Brand

“Clean Edge by Paramount”Pros:• Stand apart from current products• Emphasis on “Clean Edge” name to

attract and associate with “New” and “Innovative Technology”

• Focusing on the “Shaving Experience”

• Could attract loyal consumers of competition due to being seen as its own brand

Cons:• Consumers not recognize or be

favorable to new “brand”• Might not be able to capitalize on

current brand loyalty

Should Paramount launch new product as a brand extension with the name “Paramount Clean Edge” and build off brand equity? Or as a new product line called “Clean Edge by Paramount”?

Mainstream Positioning: Paramount Clean Edge

Paramount Clean Edge Marketing Plan:

Positioning: MAINSTREAM SUPER PREMIUM SEGMENT• Paramount Clean Edge’s improved design provided superior performance by utilizing a vibrating technology to

stimulate hair follicles and lift the hair from the skin, allowing for a more thorough shave.

Why using mainstream with Paramount by Clean Edge? • Executive’s views on the name “Paramount by Clean Edge” are in line with our Mainstream Marketing Plan

(giving the Paramount brand top billing, Consistent with the overall corporate strategy, concentrated on building Paramount brand equity.

Product:• Tech specs: vibrating, ultra-thin five blades (less irritation) design, AAA battery, housed in the handle of the

razor vibrations that stimulated hair follicles. Larger heavy handle allowed for better balanced, grip and control while shaving. 25% increasing hair removal and benefits in skin condition.

Price:• Razor Price: $11.19• Cartridge Price: $8.89Place:• Large Distribution Channels: Food Stores (42%), Mass Merchandisers (21%), Club Stores (5%)- *Club Stores

share is rising especially in mainstreamPromotion:• Advertising ($19 Million Budget) TV, Magazine, Newspapers, Social Media, Online• Consumer Promotions ($17 Million) Coupons, Events, Store Displays, Bonus Packs• Trade Promotions: ($6 Million) PoP, Trade Shows, Co-Op Ads

Mainstream Position: Paramount Clean Edge Budget Allocation

Changes in allocation Not allocation

Niche Positioning: Clean Edge by ParamountClean Edge by Paramount Marketing Plan:

Positioning: NICHE SUPER PREMIUM SEGMENT• Clean Edge´s improved design provided superior performance by utilizing a vibrating technology to stimulate hair follicles and lift

the hair from the skin, allowing for a more thorough shave.

Why use Niche with Clean Edge by Paramount?• To create a stand along brand inspired by “innovation” and “technology” and to create a brand focused on the total “Shaving

Experience”

Product:• Tech specs: vibrating, ultra-thin five blades (less irritation) design, AAA battery, housed in the handle of the razor vibrations that

stimulated hair follicles. Larger heavy handle allowed for better balanced, grip and control while shaving. 25% increasing hair removal and benefits in skin condition.

• Enhance Brand Recognition through Packaging:• Color: appeals to men as color of innovation, elegant design, and sophistication• Drastically different to that of existing products Pro and Avail

Price:• Razor Price: $12.99• Cartridge Price: $10.50

• This is the main driver to define our customer segment as super-premium, want to position and align ourselves with the highest price competitor int he market and price just above due to its innovation and breakthrough.

Place:• Clean Edge by Paramount should be alleviated in places that meet exception of Super-Premium Customer Experience and

Service as Drug Stores (45%) and Mass Merchandisers (55%)Promotion:• Advertising: TV, Magazine, Newspapers, Social Media, Online, Event sponsorship • Consumer Promotions: Cent-off coupons, Bonus Packs• Trade Promotions: In-store displays,Trade allowances, Sales training• In order to gain premium costumer some promotions have to be considered such as Cents-off Coupons and Bonus Pack in a way

to trial the costumer attention and experience our superior technology advanced quality. • For catching the costumer attention, Clean Edge´s trade promotion should be through PoP material displayed in the places of

distribution and also sales training.

Niche Position: Clean Edge by Paramount Budget Allocation

Changes in allocation Not allocation

Budget Allocation: Reasoning

Budget Allocation: Reasoning

Budget allocation is done by basing on Nielsen data about customers’ trust degree on different advertisement forms and effectiveness of the advertisement tools on new product purchase • Since TV has the most effectiveness, big part of the budget is spent on TV advertisement in

both positioning strategies. Additionally investments are done in Press, Websites, Social Media, Sponsorship, Radio and Outdoor due to having more than 50% reliability according to the research results.

• Since Niche is a differentiated positioning strategy; Radio, Outdoor, Free Sample and Special Discounts are not included in niche budget. Instead of these, budget is spent on Trade Allowances and Sales Trainings differently than mainstream budget.

• According to Nielsen research results, 70% of research participants buy new product after trying the free sample of the product. This is the reason why 30% of consumer promotion budget spent to free razor distribution in Mainstream Positioning Strategy.• With $5.100.000,00 spent on it, the company will distribute 730,659 free sample which will

contain 1 razor and 4 cartridges at the first year. • In Year 2 this number is decreased to 100,286 with free samples accounting for 5% of the

budget. Free samples will also create word of mouth effect which has an important influence on making people buy new products according to the Nielsen data.

• In order to gain Super-Premium Customers some promotions have to be considered such as Cents-off Coupons and Bonus Pack in a way to trial the costumer attention and experience our superior technology advanced quality

• As another way of catching the costumer attention, Clean Edge´s trade promotion should be through POP material displayed in the places of distribution

Budget Allocation: Reasoning

Cost and Effects of Cannibalization

• As a result of analyzing our strategic marketing plan both for Clean Edge by Paramount and Paramount Clean Edge and according to the Pro Forma Profit/Loss Forecast, we established that Niche market is the most appropriate and profitable position for several reasons:

1. Clean Edge could make more profit if positioned into Niche Market: the Total Profit after two years including cannibalization results in a profit of $31.37 million compared to profit form launching in the Mainstream market is only $2.82 million.

2. Targeting the largest and most appealing segments present in the market : the Social-Emotional and Aesthetic shavers that are the 67% of total razor users.

3. Competing in the mainstream market could incur in price pressure against competition.4. Launching our product in the Niche Market we predict a cannibalization effect of 35%

compared to that of launching in the Mainstream Market where we would compete with our current “bread-and-better” product, the Paramount Pro, which would result in a prediction of 60% cannibalization.

5. Further, as a positive result of that strategy the Pro’s lifecycle will be extended with launching our new product in a different segment.

• In conclusion it can be said that in order to maximize Clean Edge profit, we can compete for the first two yearsin the Niche market in order to capture our breakthrough innovation, then as customer awareness and loyalty increase, and further innovation occurs, we can transition the product into the mainstream segment. Thus giving us the ability to maximize profit on shared costs and our experience curve.

Conclusion