The non-disposable razor market, as a whole, experienced roughly an 5 % growth from 2007 to 2010. The majority of the growth was fueled by innovations and new products that were introduced into the market. In particular, the super-premium market segment, in the last decade, experienced significant growth in large part to new product innovations and advancements in technology. Innovative new products in this super-premium market included such designs as 5-blade technology, lather bars, low resistance blade coating, and glide strips.
Furthermore, studies showed that from 2009 more consumers were purchasing razors and replacing cartridges more frequently than ever before. This was believed to have been attributed by consumes testing new razors as well as advertising that promoted the benefits for replacing the blade more frequently. The change in both consumer behavior and advertising strategies were important changes in the market that helped spur the growth of the non-disposable razor industry. Another significant change was in the area of men’s grooming habits.
There was an emerging trend that suggested that men were changing from their simple and quick shave, splash, and dash, routines. Instead, men were becoming more sophisticated in their grooming practices. As a result, studies indicated that men were purchasing products such as body spray and fragranced shower gel. Suddenly male-specific personal care products were fast becoming mainstream and even outpacing the growth in women's beauty market. Competitive Product Positioning In 1962, the Paramount company began selling non-disposable razors and fast established itself as a well-respected brand in the industry..
By 2009, Paramount had become a global consumer products giant with sales worldwide reaching $13 billion and $7 billion in gross profits. The company's U. S sales of non-disposable and refill razors contributed to $170 million in total revenue, $92 million in gross profit, and $26 million in operating profit. At the time of publication of this case, Paramount offered two lines of non-disposable razors and refill cartridges (Paramount Pro and Paramount Avail). In 2009 the two product lines combined total sales allowed Paramount to capture the unit-volume market-leader position, with a 23. % retail unit share.
The non-disposable razor category market is entering a new phase with technology products and new competitors entering the market, posing a threat to Paramount. Strategic Life Cycle Challenge One of the most important realities that Paramount faced was in terms of rapid technological advances in the design of non-disposable razors. The Paramount Pro razor did not provide consumers with the latest technological advancement. Therefore, it will be more likely that this product will fall into the maturity phase of the product lifecycle.
The strong growth sales have likely started to diminish and more competitors have started to sell similar razors products. Furthermore, as a result of the lack of innovative new upgrades, the Pro will ultimately move into the Decline phase as sales will likely decline. Paramount will need to develop a plan of action once the Pro reaches the Decline phase. It can continue to keep the Pro and possibly rejuvenate it by enhancing the design of the razor. In addition, the company can reduce the cost of the Paramount Pro and perhaps move it into a niche segment.
Finally Paramount may decide to discontinue the product altogether. On the other hand, Paramount executives viewed The Clear Edge razor as having the potential to dominate the market. With its revolutionary product design, Paramount believes that the Clear Edge will be a first of its kind in the market. Since the Clear Edge will enter the Introduction Stage of the product lifecycle, Paramount must create strategic marketing and advertising campaigns aimed at the innovators and early adopter customers.
Furthermore, since the technology is new, Paramount would likely need to create marketing and ad campaigns that not only promote the features of the new razor, but also explain how the new technology can benefit Paramount’s target customer. Non-Disposable Market Segment Currently industry experts classify the non-disposable and refill cartridge market into three segments based on price and quality: value, moderate and super-premium. Today consumers of non-disposable razors are increasingly ecoming more sophisticated and many are expecting new technological advancements in the products that they purchase.
Therefore, the Involved Razor Users category of consumers, those who value a smooth shaving experience, will likely pay extra to purchase a razor that satisfy their shaving experience. On the other hand, there is another category of consumers, “Maintenance users”, that made up 33% of the market. These consumers lack interest in one particular product and more than likely not interested in purchasing products with the latest technology design.
However, this particular group of consumers make up 33% of the non-disposable razor market. Therefore, these consumers should not be ignored. The Paramount Pro was positioned in the moderate segment while the Paramount Avail was positioned in the value category. However, none of the two product lines offered technological enhancements to the designs in the last five years.. The Clear Edge Razor, on the other hand, was being priced in the super-premium segment of the market and contained various product innovations that Paramount though would spur sales.
The key question that Paramount had was whether to position Clear Edge in as a niche or mainstream product. Paramount believed its new Clear Edge Razor product used revolutionary technology that had a vibrating , ultra thin five blade design. Paramount believed the benefit from the vibration would stimulate hair follicles. The new Clean Edge razor also was designed to have a larger, heavier Paramount Razor Products Strategic Life Cycle Challenges Furthermore, consumers were increasing expecting technological advancement to improve the features of the razors.
As heavily as Paramount has relied on its current products, Pro and Avail, it needed to foresee that its current razor product line will become obsolete in the not so distant future. William Kim, Corporate Marketing Director at Paramount, recognized this issue and stated to Paramount executives that "Pro is in the mature phase of the product lifecycle. " He continued to warn that "it is only a matter of time before we see the decline. " How is the non-disposable razor market segmented?
Examine customer behavior for non-disposable razors. Non-disposable razors are divided into three segments that are based on price and quality: value, moderate, and super-premium. Studies have shown that consumers purchase razors and replaced cartridges more frequently than in the past. This was perhaps caused by consumers testing new razor products and an increase in advertising that promoted the benefits of replacing the blades more frequently.
Arguments for Launching Clear Edge as a Niche Product By positioning the Clear Edge razor as a niche product, Paramount would then be targeting the Social/Emotional shavers who deeply value their shaving experience. The decision to position Clear Edge as a niche product will result in a 35% cannibalizing of the company’s current Paramount Pro and Avail sales. Paramount executives in favor of positioning the Clear Edge as a niche product would likely argue that it could help the company to increase its market presence and may even capture the Aesthetic shavers who, among other things, search for razor products that most effectively remove hair.
Arguments for Launching Clear Edge as a Mainstream Product By positioning Clear Edge as a mainstream product, Paramount could be in a position to offer its new line extension to a broader consumer base than if were positioned in the niche product market. This would help to further grow market share and strength Paramount’s brand name. Since many consumer purchase razors are influenced by technological advancements of new non-disposable razor products, Paramount would have the first mover advantage.
Furthermore, if Paramount ultimately decided to position Clear Edge as a mainstream product, it can then target the Pro to the Maintenance Shavers, which make up 33% of non-disposable razor users. Positioning Recommendation: I launch the Clear Edge razor as a niche product for the first two years after its launch and then re-position it into the mainstream market. Appeasing Paramount Pro’s product manager, Albert Rosenberg would not have been my primary objective in reaching my decision. However, I would agree with Mr.
Rosenberg assessment that positioning Clear Edge in the same mainstream market as Paramount Pro and Avail would have siphoned off consumers from purchasing the Pro. Initially launching Clear Edge as niche product would cause less of a cannibalization effect on Pro and Avail product lines. There would likely be a cannibalization effect of 35% if Clear Edge is launched as a niche product. However, there would likely be a cannibalization effect of 60% if Clear Edge was launched as a mainstream product.
The niche positioning strategy would enable Clean Edge Razor to contribute profit and at the same time, limit the effect of cannibalizing Paramount’s existing products and Paramount would have an opportunity to still capture the unit-volume market leader position in 2009. Furthermore, if Clear Edge was initially launched as a niche product there would be significantly lower marketing cost than if it were launched into the mainstream product. Year one in niche market position, the marketing costs would be $15 million. In year two the marketing expenses will increase to $16 million.
By comparison the mainstream marketing expenses for year one would be $42 million and year two would cost $40 million. The total media advertising expenditures had been climbing sharply due to a demand to increase advertising exposure that would promote the advantages of using razors with ‘revolutionary’ technology. However, I would also be cognizant of the fact that neither the Pro nor Avail had not offered any significant technological innovations in the last five years. If Paramount’s decision was to not make radical changes to the design of the two products then the product lines will soon reach the decline stage.
William Kim, Paramount corporate marketing director, foresaw this occurrence and urged that Clear Edge be positioned as a mainstream product since consumers are looking for technological enhancements in razors. As he mentioned “research shows that our consumers are becoming more sophisticated and expect more advanced technology. ” He also declared that since Pro and Avail were not innovative products then Paramount must act aggressively to stop its customer base from switching to competitors that are making innovative razor products. “Clean Edge, Mr. Kim stated, “has the potential for true market domination and needs to be positioned as such. ”
Therefore, once the Pro and Avail product lines have reached its Decline Stage, Clear Edge should be re-positioned into the mainstream market. Likely in two years time newer technology will enhance Clear Edge when it its re-positioned in the mainstream. I would also recommend that the Clear Edge razor be launched as ‘Paramount Clear Edge’. This would be consistent with the company’s current product names of Paramount Pro and Paramount Avail and would further help build equity in the Paramount brand name.