Clean Edge Razor
Essay Preview: Clean Edge Razor
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Use “niche market” positioning concept
Randall should use the “niche market” positioning concept. As the case points out, both “niche” and “mainstream” strategy will help Paramount to raise its market share in super-premium non disposable razor segment. But the “niche” strategy will enables Clean Edge Razor to contribute profit and at the same time, limit the effect of cannibalizing Paramounts existing products. Two reasons Randall should use the strategy are presented below:
After quantitative analysis, from Exhibit 7 we see the total estimated profit generated by mainstream strategy in Year 1 & 2 is $64 million, bigger than $46.6 million generated by niche market strategy. However, because Paramount only have the budget totaled $48.3 million on advertising and promotions in 2010, it means if Randall requires $42 million to use mainstream strategy to promote Clean Edge Razor, the expense will account for 87% of the companys annually marketing budget, which will definitely squeeze the budget of Paramounts other cash cow products, and thus cause the tremendously potential risks on other products competitiveness in Moderate and value market.
Secondly, after deducting the cannibalization effect, the profit come from “Paramounts new customers” who buy Clean Edge Razor under niche strategy scenario in Year 1& 2 is $30.3 million, bigger than $25.6 million under mainstream strategy scenario. In other words, although the sales volume is evidently large by using mainstream strategy which William Kim suggests, Paramount can earn more money from new customers if it chooses to use niche strategy.
Notes
Though the profit generated by “new customers” under niche strategy scenario is $4.7 million more than mainstream strategy, it is still necessary to look into the additional profit generated from exist customers who switch from Paramounts other products to Clean Edge Razor. Unfortunately, the case does not provide the sales volume and margin profit of Paramounts other products, therefore can not calculate the additional profit due to the switch. But if the additional profit using mainstream strategy is $4.7 million bigger than niche market strategy, this could suggest overall the mainstream strategy can generate more profit compared to niche market strategy.
Other issues
To minimize the cannibalization effect and attract more new-user under niche market strategy scenario, Randall should use “Clean Edge by Paramount” as the brand name on packaging and advertising.
Randall should also adopt new retail channels such as mass merchandisers and club stores, as exhibit 4 shows the percentage sales of the above