CLEAN EDGE RAZOR

CASE ANALYSIS

Grade ID # 41311

MBA 6623

Problem Overview

Paramount Health and Beauty Company is ready to launch it’s newest non disposable

razor, Clean Edge Razor, that will improve men’s shaving experience. Already decided to be

priced in the super-premium segment of the market, Paramount is faced with the dilemma of the

product’s positioning. They have the options of an intensely involved niche market, or in a broad

mainstream market. This analysis will allow for an overview of both markets advantages and

disadvantages and what positioning Paramount will gain the most return.

Competition

Main competition for the non disposable razor market consist of Prince, Benet & Klein

and new entrants, Radiance and Simpson. Prince holds market share with 30.7% with their

products Cogent and Cogent Plus, both considered super-premium products. Paramount’s has a

slight lead of market share at 23.4% over Benet & Klein’s 22%. However, Paramount’s main

cause for concern is Radiance’s new product Naiv, similar to Clean Edge, that is due to launch

September 2010 in a super-premium (see Exhibit 1). According to the market share 2010

forecast both Prince and Benet & Klein’s super-premium razors will lose their market share.

Which puts Paramount in a good position to launch their Clean Edge Razor.

Analysis by Market

Niche Market

According to the pro forma profit and loss analysis, positioning in the niche market will allow

for a 2-year profit of $31.37 million after cannibalization (see Exhibit 2). This is a $28.54

million increase from positioning in a mainstream market. Another advantage that the niche

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market offers is the marketing expenditures required only amount to $15 million the first year as

opposed to $42 million that mainstream market would have to disburse (see Exhibit 3) this is

almost 3 times less marketing efforts then what the mainstream market would have to put forth.

Positioning in a niche market will also allow for more uniformity with what Paramount wants to

portray with the Clean Edge Razor, which is being innovative and offering high quality, to set in

the super-premium market. The niche positioning strategy allows for Paramount to have products

in each market segment and have a better fit for the suggested razor price of $12.99. The niche

market does have a disadvantage in that the volume sales are moderately less than it would be in

the mainstream market, the niche markets first year unit volume being 1 in contrast to the

mainstream market of 3.3unit volume in the first year.

Mainstream Market

The foremost advantage that the mainstream market has over the niche market is that Paramount

would already have a consumer base in place and by introducing a new product, Clean Edge, in

that market might spike interest for other products. Another advantage to pace Clean Edge in the

mainstream market is that Paramount’s other razor, Paramount Pro, is in the mature phase of the

product lifestyle and could decline in the near future. If they position Clean Edge in the

mainstream market, then when Pro does decline they will be able to keep their loyal customers

from converting to other super-premium brands. A few issues could arise if placing Clean Edge

in the mainstream market. The cannibalization rate is at 60%, while in the niche market the

cannibalization rate would only be 35%. By placing Clean Edge in the mainstream market,

Paramount would see a net decrease of -$14.23 million in it’s first year due to the high

cannibalization rate.

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Recommendation

After analysis of the data in the pro forma profit and loss, Clean Edge could realize a

profit of $31.37 million in 2 years when positioned into the niche market, as opposed to $2.82

million when positioned in the mainstream market. Therefore, the recommendation is for the

Clean Edge Razor to be positioned into a niche market, subsequently targeting involved razor

consumers; social/emotional shavers and aesthetic shavers.

In their attempt to position in a niche market, the brand name recommended to

Paramount executives should be Clean Edge by Paramount, thus distinguishing Clean Edge from

other Paramount products. This would help reduce the cannibalization impact to Paramount Pro

and Paramount Avail. However, the downside to emphasizing the Clean Edge name, Paramount

assumes the risk of people not associating the razor to the Paramount brand. By positioning

Clean Edge in the niche market, Paramount frees up a large amount of their 2010E $48.3 million

marketing budget to be allocated to their other products because Clean Edge is only estimated to

use $16 million.

In addition to the above mentioned recommendation, the distribution channel Paramount

decides to place Clean Edge will play a crucial part in penetrating the market. With the trend

shifting outside of the traditional food and drug stores as well as an increase of new stock

keeping units (SKUs) Paramount can penetrate the market with their new super-premium razor

and be sold through mass merchandise outlets to help increase the sales of Clean Edge by

Paramount.

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Exhibit 2: Clean Edge Razor Pro Forma Income Statement  Niche Mainstream  Year 1 Year 2 Year 1 Year 2Razor Unit Volume 1 1.5 3.3 4

Razor Manufacturer Price $9.09 $13.64 $25.8

4 $31.32 Cartridge Unit Volume 4 10 9.9 21.9

Cartridge Manufacturer Price $29.40 $73.50 $61.5

8 $136.2

Total Revenue $38.49 $87.14 $87.4

2 $167.5

4  

Razor Production Price $5.00 $7.50 $15.6

4 $18.96

Cartridge Production Price $9.72 $24.30 $22.1

8 $49.06 Capacity Price $0.61 $0.87 $1.71 $2.45

Advertising & Promotion $15.00 $16.00 $42.0

0 $39.00

Total Expenses $30.33 $48.67 $81.5

3 $109.4

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Operating Profit $8.16 $38.47 $5.89 $58.07  

Cannibalized Razors $0.62 $0.92 $3.48 $4.22

Cannibalized Cartridges $3.92 $9.80 $16.6

3 $36.79

Total Cannibalization $4.54 $10.72 $20.1

2 $41.02  

Total Income after Cannibalization $3.62 $27.74 -

$14.23 $17.06

Profit After 2 years $

31.37 $

2.83

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Exhibit 3: Advertising and Promotion in Millions  

  Niche Mainstream

Year 1 Year 2 Year 1 Year 2

Ads & Promo $15.00 $16.00 $42.00 $39.00

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