Clean Edge Razor Case Study
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Clean Edge Razor Case StudyProblem StatementJackson Randall, product manager for Clean Edge Razor, must determine in which segment his product should compete in order to be most profitable for Paramount. The positioning of Paramount’s newest non disposable product, Clean Edge, is causing dissension amongst the executives of the company. Paramount’s Pro product manager highly opposed positioning Clean Edge in a mainstream super-premium segment stating that by doing so it would risk the cannibalization of Paramount’s Pro shaver and should; therefore, compete in a niche market focussing on highly involved customers. Others believed that positioning Clean Edge in a mainstream market would gain much mass appeal and become a new standard in men’s shaving. Randall must determine the optimal positioning strategy for the entire company. The question remains as to in which segment Clean Edge should compete in order to maximize the bottom line profitability of Paramount? Situational Analysis (SWOT)This section of the case study focusses on the internal and external factors that are and that could possibly influence Paramount’s integration of Clean Edge. To begin, an analysis of the company’s current state in the market was conducted. Paramount:ProsConsStrengthsStrong market shareGrowth opportunity in non disposable razors and refill cartridges marketSatisfies the social and aesthetic shaversUnit volume leaderWeaknessesCurrent products lack innovationNo presence in Super-Premium marketOpportunitiesIncrease self space for razor productsGrowth in men’s grooming productsNew distribution opportunitiesThreatsCompetitive marketIncreasing substitute productsMedia expenditures > retail market salesAs it is shown, Paramount currently holds a very strong position in the market with opportunities arising for further growth. However, in order to stay leaders, Paramount must present a new innovation product in a market where there are many competitors and many substitute products. The following tables represents the factors that would benefit and would possibly threaten Paramount if they were to position Clean Edge in a niche and mainstream market. NicheProsConsStrengthsLow cannibalization impactComplement existing product portfolioCreation of a new market segmentWeaknessesHigh advertisement costsNot a lot of space for new entrantsOpportunities5% growth in non disposable razors67% of target market are involved shaversGood segment for super premium productsThreatsTakes 35% of sales away from the Pro/AvailLaunch of Naive RadianceTest market was very positive for the Naive productA big media lunch planned by RadianceEstimate of 15 million dollars in the advertisement & promotion budget for the first year, 16 million dollars for the second yearMainstreamProsConsStrengthsMarket leader and biggest unit volume in non disposable razorsInnovative productMore product diverseClean Edge would prevent customers from being wooed to other more innovative productsWeaknessesA lot of products in the mainstream segmentLack of technological innovation in 5 yearsOpportunities5% growth in non disposable razors67% of target market are involved shaversPro in mature phase of product life cycleThe sales volume captured with a mainstream strategy would be 3 times the sales volume acquired from a niche strategyThreats· High Cannibalization of the Pro/AvailIdentification and Evaluation of Alternatives StrategiesJackson Randall, product manager for Clean Edge Razor is faced with a positioning dilemma for his new product. If positioned as a super-premium product in a niche market, Clean Edge would compete in a segment perfect for super-premium products with low cannibalization impact on the Pro/Avail. However, if Clean Edge was to compete in a mainstream market, Paramount would not have to compete with Radiance’s similar product Naive, and would keep their customer base from looking for innovative products elsewhere. Based on this initial analysis, it is very difficult to judge which alternative will best benefit Paramount. As both segments have very good advantages and considerable threats, measuring cannibalization impact on revenue would enable Randall to make an informed decision about a positioning strategy for Clean Edge. The following formula was used in our calculations in order to find cannibalization impact for both segments at the end of year 1 and 2. Cannibalization = (cannibalization %) (unit sales) (Contribution/unit)As it is shown in the table below (results in millions of dollars), the cannibalization impact is much higher in year one if Clean Edge was to compete in a mainstream market with a impact of 20,116,800$ as opposed to 4,536,000$ in a niche market. In a mainstream segment, Clean Edge would bring total revenue to -14,227,800$. In this case, Paramount would be losing a lot of money from cannibalization of the Pro/Avail shaver as opposed to 3,624,000$ in revenue after cannibalization in the niche segment. If is therefore far to state that based on the calculations from year 1, Randall should recommend positioning Clean Edge Razor in a niche market.
Clean Edge Razor Case Study