Vaishnavi Varshney 1

Clean Edge Razor – Decision Sheet

Decision Dilemma:
The executives have to decide on a positioning strategy for Clean Edge – Niche or
Mainstream, brand name – “Clean Edge by Paramount” or “Paramount Clean Edge” and the
allocation of market budget.
Analysis and Recommendation:
Positioning –
Let’s first look at the pros and cons of Niche vs. Mainstream –
Niche: Pros – Mainstream: Pros –
• Total marketing expenditure- $15m • Since the backbone of the company,
• Less advertisement and promotions Pro, is in its mature stage, launching
expenditures - $31 million this product can maintain loyal
• Reduce the cannibalization – 35% customers of the company
of Clean Edge sales would likely • The volume of the market is higher;
come from the current Pro/Avail expected higher sales
customers
Mainstream: Cons –
• Less saturated market and has a
high growth potential • Total marketing expenditure - $42m
• Since the Pro’s product manager – higher than Niche
categorized the product in the • Advertisement and promotions
super-premium segment, targeting expenditure - $42m
a niche market will make more • Cannibalization is high – 60%
sense.
Niche: Cons –
• Since niche market- superior shaving
experience implies fewer customers
and hence, fewer sales
Comparing the pros and cons and the profit and loss pro forma, positioning the product is
recommended using Niche targeting. Also, after adjusting cannibalization, we have a clear
winner, i.e., Niche Market, as in 2 years, it will generate more profit than the mainstream
market.
Branding –
Options available – Paramount Clean Edge or Clean Edge by Paramount
Since the other products by Paramount belong to the moderate and value section only
(mainstream), to differentiate a premium product (niche), it is advisable to use a different
naming convention. Therefore, Clean Edge by Paramount is the suggested brand name
because it sets the product apart from the current moderate and value products.
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APPENDIX:
Calculations: Profit and Loss pro forma –
Values from Exhibit 7 NICHE NICHE MAINSTREAM MAINSTREAM
YEAR 1 YEAR2 YEAR 1 YEAR 2
I)Razor Unit Volume 1 1.5 3.3 4
II)Razor Manufacturing $9.09 $7.83
Price
III)Razor Sales (I*II) $9.09 $13.64 $25.84 $31.32
IV)Cartridges Unit 4 10 9.9 21.9
Volume
V)Cartridges Manufacture $7.35 $6.22
Price
VI)Cartridges Sales $29.4 $73.5 $61.58 $136.22
(IV*V)
Total Sales (III+VI) $38.49 $87.14 $87.42 $167.54

I)Razor Unit Volume 1 1.5 3.3 4

II)Razor Production Unit $5 $4.74
Cost
III)Razor Production Cost $5 $7.5 $15.64 $18.96
(I*II)
IV)Cartridges Unit 4 10 9.9 21.9
Volume
V)Cartridges $2.43 $2.24
Manufacturing Price
VI)Cartridges Sales $9.72 $24.3 $22.18 $49.06
(IV*V)
VII)Capacity Cost $0.61 $0.87 $1.71 $2.45
VIII)Advertising $7 $7 $19 $17
IX)Consumer Promotion $6 $6 $17 $14
X)Trade Promotion $2 $3 $6 $8
Total Cost $30.33 $48.67 $81.53 $109.47
(III+VI+VII+VIII+IX+X)

Operating Profit (Total $8.16 $38.47 $5.89 $58.07

Sales – Total Cost)

I)Razor Unit Volume after 0.35 0.53 1.98 2.4

Cannibalization (Razor
Unit
Volume * Cannibalization
rate)
II)Contribution per Unit $1.76
For Razor
III)Cartridges Unit Volume 1.4 3.5 5.94 13.14
after Cannibalization
(Cartridges unit volume *
 Vaishnavi Varshney 3

Cannibalization rate)
IV)Contribution per Unit $2.8
for Cartridges
Total Cannibalization $4.54 $10.73 $20.12 $41.02
(I*II*III*IV)
Profit after $3.62 $27.74 -$14.23 $17.05
Cannibalization
(Operating Profit – Total
Cannibalization)

Total Profit after two $31.37 $2.82

years