Clean Edge Razor: Splitting Hairs in Product Positioning Case Solution

1. What changes are occurring in the non-disposable razor category? Assess Paramount's competitive position. What are the current strategic challenges for Paramount's current products as well as for Clean Edge?

Non-disposable razor category had an estimated retail sales volume of US$ 218 million, in 2010. This category has experienced a tremendous growth rate of 5%, in the last four years, mainly because of the significant growth in the super-premium segment. All the major companies and newcomers have introduced numerous innovative products in this segment, which include 5-blade technology, glide strips, lather bar, low resistance blade coating, etc. In addition to this, companies are introducing an increasing number of stock-keeping units (SKUs) as a line extension targeting the super-premium segment. Moreover, to stimulate additional demand for this category, companies have, over the years, considerably increased their advertising budget.

Paramount is a global consumer giant with worldwide sales of US$13 billion. It entered the non-disposable razor market, in 1962, and since then has developed itself into a respectable brand. Presently, it has two brands (Paramount Pro and Avail), in the market, one in each moderate and value segment. In 2009, it was the market leader, in terms of volume, with a market share of 23.3%; whereas, its revenue share was second to Prince only. Despite having a competitive position in the market, Paramount faces a big challenge for the launch and positioning of its new razor ‘Clean Edge'. Paramount Pro, with its market share of 17%, has been the backbone of the company, in this product category, but the issue is that it is already in the mature stage of the product lifecycle, and it wouldn't be long before its demand starts to decline. In addition, Paramount Avail's revenue has dropped more than 50%, in the last three years. The company faces a tough task of deciding whether to launch ‘Clean Edge' as mainstream or a niche product.

2. How is the non-disposable razor market segmented? Examine consumer behavior for non-disposable razors.

Non-disposable razor market is basically divided into three segments based on price and quality; super-premium, moderate and value. In terms of volume, Moderate segment has the highest market share of 43% followed by Value and Super-premium segments with 32% and 25% share respectively, but in term of revenue, Super-premium segment takes a lead of 8% over Value segment while the Moderate segment continues to fetch the largest share of revenue for the companies. In addition to the present price-quality division, a consumer research carried out by Paramount, in 2009, showed a different segmentation based on consumer involvement and product benefits. These segments are social/emotional shavers, aesthetic shavers, and maintenance shavers. The first two segments belong to involved users while the maintenance shavers are considered to be uninvolved users. Interestingly, the highest market share, 39% is of social/emotional shavers who differentiate among products and consider the product functionality and message before making their buying decision. In addition, this group takes shaving as an essential part of daily grooming as it makes them look attractive and feel confident. The second highest market share, 33%, is of maintenance shavers who see all products as same and are completely uninvolved in the product category. Last, aesthetic shavers with a market share of 28% also look for the right and suitable product for their skin as they are highly concerned about their looks.

3. What are the arguments for launching Clean Edge as a) a niche product, b) as a mainstream brand, and c) as a product based on another strategy? Which would you recommend? What are the strategic implications of your recommendation?

A. The company has the option of launching Clean Edge as a niche product by targeting the highly involved users who are looking for a superior shaving experience. The company can focus on product benefits like larger, heavier handle for better grip and control and ultra-thin blade design for reduced irritation and improved skin tone and texture while communicating the message. This strategy will also allow the company to avoid the cannibalization of its own brands (Paramount Pro and Avail).

B. If the company plans to launch Clean Edge as a mainstream brand, it will increase the potential of earning higher revenues and profit margins because of a larger market base. In addition, during the last five years, the company has not launched any technologically advanced or innovative product in this segment; whereas, competitors have continuously brought in new products. Consumers, over the years, have become more sophisticated and involved and expect better products. Moreover, the company's new corporate marketing director, William Kim, feels that Paramount Pro has already reached the mature stage in its product life cycle, and it wouldn't be long before the demand starts to decrease.

C. Another possibility could be of launching Clean Edge as a niche brand initially, then gradually bringing it into the mainstream market. This option is backed by the argument that top executives are considering limiting the marketing expense, and there is a high chance that the marketing budget stays constant for the upcoming year.

Considering the above-mentioned reason, I feel Clean Edge should be launched as a niche brand initially and then gradually introduced in the mainstream market. This decision would allow the company to launch its new brand successfully without increasing its marketing expenses considerably.

4. Be prepared to support your stand with qualitative, as well as, quantitative reasoning and arguments. Clearly articulate any assumptions that you may have made in your analysis.

Based on the current situation of the company, the ideal decision would be to launch Clean Edge as a niche brand and then gradually introduce it to the mainstream market. The current marketing expense of the company is $48.3 million and to launch Clean Edge in the mainstream would require $42 million. This means that the company would be left with a little amount to promote its two already existing brands, and it would not be a wise decision to promote a new brand at the cost of old ones. If the brand is launched as a niche brand, it would only require $15 million, which can be adjusted in the marketing budget by decreasing the share of its dying brand, Avail. In addition, this strategy would allow the company to avoid the cannibalization of its own brand. Once Paramount Pro's demand starts declining naturally, the company can introduce Clean Edge into the mainstream market to hold loyal customers and also attract the new ones.

Though pursuing this strategy would mean lower utilization of the market and lesser profit margin for the initial years, but considering the overall company situation, it is the most feasible option.