Analysis of Clean Edge Razor: Splitting Hairs in Product Positioning
Paramount is preparing to launch a novel and latest technologically advanced vibrating razor called as
the Clean Edge Razor. One strategy is to launch Clean Edge razor as a "niche" retail consumer product.
Another strategy is to release the product in the highly competitive mainstream razor market. In order
to recommend a strategy in positioning Clean Edge, Jackson Randall, Product Manager for Clean Edge,
should consider the undermentioned analysis.
1. Situation Analysis
1.1. Changes occurring in the three domain of Non-Disposable Razor (NDR) category:
Companies - Three major players, with their market shares, in NDR category are-
1. Paramount with the market share of 21.4%. Major products are Paramount pro and Avail.
2. Benet & Klein with the market share of 21.1%. Major products are Vitric Advanced and Master.
3. Prince with the market share of 26.2%. Major products are Cogent and Cogent Plus.
Two new Entrants –
4. Simpsons with the market share of 5.7%. Major product is Tempset.
5. Radiance with the market share of 2.6%. Major product is Naiv which is a new competitor.
Products - Major growth in this category is in Super Premium Market. 22 new Stock Keeping Units (SKU)
are being introduced between the year 2008 and 2009. Product and Technology innovations are being
done in this category because of the higher profit margins.
Customer and Retailers - The number of customers has increased by 5% per year from 2007 to 2010.
Their perceptions have changed and now they have reduced the replacement time of the razors. Shelf
space in the distribution outlets has also increased. This change is due to the extensive advertising. Total
media advertising expenditure in this category has also risen by 4.5% in a year.
Sales has increased from $178 in 2005 to $218 in 2010.
1.2 Competitive Positioning of Paramount:
Paramount Prince Benet & Klein
1) a) Dollar Share – 23.4% a) Dollar Share – 30.7% a) Dollar Share – 22%
b) Unit Share – 23.3% b) Unit Share – 23.1% b) Unit Share – 19.2%
2) Operating Profit – 15% Operating Profit – 20%
1
1.3 Strategic Life Cycle:
The company has not done any technological inventions in the last five years and there is a high need of a new
product to be introduced. As seen in the extracts of the Life Cycle graphs given below, Pro is in the growth phase
and soon would reach maturity phase whereas Avail is in the decline phase.
Fig: Life cycle of Pro and Avail in the mainstream market
2. Comparison between Niche and Mainstream Market:
a) Niche market:
Advantages -
● Low cannibalization impact (35%)
● Less marketing cost ($15 million)
● Chance of earning equal profit as mainstream market by charging higher premium
● 22 new SKUs being introduced. Targeted towards super-premium segment.
Disadvantages -
● Market size smaller than mainstream
● Chance of strong competition from Naiv by Radiance due to huge advertising campaigns
b) Mainstream market:
Advantages -
● Volume of sales = 3 X niche market
● Increase in product diversity
● Possibility of becoming a market leader with largest volume in non-disposable razor
2
● Huge loyal customer base
● Chance of replacing the product moving towards decline (Pro) with new product (Clean Edge)
Disadvantages -
● No technological innovation in last 5 years
● More cannibalization impact (60%)
● High marketing cost ($42 million)
3. Behavioural Segmentation based on Needs and Benefits:
NEED
TYPE Social Aesthetic Maintenance
Super-Premium ✔✔ ✔✔ ✖
Moderate ✔ ✔ ✔
Value ✖ ✖ ✔✔
✔✔ - Strong Need | ✔ - Need is present | ✖ - No Need
4. Profit and Loss Forecast for Niche and Mainstream Analysis
Below is the detailed Cost-Benefit report of the Niche and Mainstream market:
Particulars Niche Mainstream
Year 1 Year 2 Year 1 Year 2
Razor Unit Volume (Millions) 1 1.5 3.3 4
Razor Manufacture Price $9.09 $7.83
Total Razor Sales (A) $9.09 $13.635 $25.839 $31.32
Cartridges Unit Volume (Millions) 4 10 9.9 21.9
Cartridges Manufacture Price $7.35 $6.22
Cartridges Sales (B) $29.4 $73.5 $61.578 $136.218
Total Sales [C=(A+B)] $38.49 $87.14 $87.42 $167.54
Razor Production Unit Cost $5 $4.74
Total Razor Production Cost (D) $5 $7.5 $15.642 $18.96
Cartridges Production Unit Cost $2.43 $2.24
Total Cartridges Production Cost(E) $9.72 $24.30 $22.18 $49.06
Capacity Cost $0.61 $0.87 $1.71 $2.45
Advertising $7 $7 $19 $17
Consumer Promotion $6 $6 $17 $14
Trade Promotion $2 $3 $6 $8
3
Total Cost (F) $30.33 $48.67 $81.53 $109.47
Operating Profit [G=(B-F)] $8.16 $38.47 $5.89 $58.07
Razor Unit Volume after Cannibalization (Millions) 0.35 0.53 1.98 2.4
Contribution per unit for Razor $1.76
Total Cannibalization for Razor (H) $0.62 $0.92 $3.48 $4.22
Cartridges Unit Volume after Cannibalization 1.4 3.5 5.94 13.14
(Millions)
Contribution per unit for Cartridges $2.80
Total Cannibalization for Cartridges (I) $3.92 $9.80 $16.63 $36.79
Total Cannibalization [J=(H+I)] $4.54 $10.72 $20.12 $41.02
Profit after Cannibalization [K=(G-J)] $3.62 $27.74 $(14.23) $17.06
Total Profit after 2 years $31.37 $2.83
Conclusion:
We can see that the Operating Profit in Niche market in year 1 is more than the Mainstream market in
year 1 whereas the Operating Profit in Niche market in Year 2 is less than the Mainstream market in year
2. There is a huge allocation of expenditure in marketing, advertising and promotion of the product in
the Mainstream market as compared to the Niche market. However, after considering cannibalization
cost, the total profit in the Mainstream market reduces significantly in both the years as compared to
Niche market. It is the cannibalization cost that makes a drastic difference in framing the opinion as to
which market is better. Thus, the economic analysis of the product clearly gives us an indication that
product must be launched in the Niche market.
Since Paramount precisely targets the niche market, Clean Edge by Paramount will be recommended as
the brand name to differentiate from other Paramount products, reinforce the super-premium segment
and highlight its technology. Since it’s been five years to introduce any new technology, “Clean Edge by
Paramount” will stand out from the current product lines which have less technology and target lower
price markets thereby promoting Paramount’s revolutionary product to attract involved razor users.
