Paramount Clean Edge Ultra: Marketing Analysis

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The total marketing and promotional expenditure of all companies in the market was $85MM in 2009, which will grow by 39% in 2010 to an estimated absolute expenditure of $118MM (Exhibit 5). In 2009, the incumbents, Prince, B&K, and Paramount, controlled 97.2% of the share of voice, while Simpsons claimed only 2.8% ($2MM). However, in 2010, the incumbents will claim only 73.4% share of voice, giving up 12.9% and 13.7% to Simpsons and Radiance, respectively. This is a result of the incumbents increasing their expenditures by a combined estimated amount of $4MM, while Simpsons and Radiance will spend $13MM and $16MM. Thus, in 2010, Paramount will spend an estimated $20MM and control a 17.2% share of voice, which is third behind Prince and B&K. This will also constitute a -5.4% change in share of voice from 2009 because of the aggressive spending by Simpsons and Radiance.

All of the above data reinforces our recommendations. Currently, our margins have eroded and our products are becoming commoditized, because we have not responded to the demand of the consumer for innovative products as found in the super-premium segment. By launching as a niche product, we can establish Paramount as the industry innovation leader, improve our margins, and leverage our place in the super-premium segment toward the broader success of the company. Clinical testing shows that our product has better performance than competitors, which is the most decisive factor for the purchasing decision of the target segment. Significant sales can be generated by targeting our message to the involved segment and communicating the superior performance of Clean Edge Ultra. This has the added benefit of retaining available funds to market the Pro while its sales potential is still viable. By naming the product “Paramount Clean Edge Ultra,” the Paramount brand name is extended in the mind of the consumer. Selective channel positioning in food and drug stores and exclusive mass market retail will reinforce our brand cachet.

To better understand the super-premium market, Exhibit 6 provides a plot giving a clear picture of our competitors’ attempts to gain market share.

Projections:

In year one, we expect sales of $38.5MM, followed by sales in year 2 of $87MM , resulting in Net Profits of $23.8MM and $55.3MM, respectively, and net profit margins of 21% and 44% (Exhibit 7). In addition, our market share would grow from 11% in year one to 23% in year two, establishing a clear presence in the super-premium segment with our innovative new product. We would further recommend reduction in pricing of the Pro and Avail razors in conjunction with targeted promotional efforts to spur sales. This would serve to incentivize price-conscious consumers to embrace the Paramount brand, while acknowledging the shifting market dynamic caused by innovation in other segments. To be successful, we would want to maintain or increase volume share via the reduction in pricing until the next marketing rollout in 24 months’ time. We expect a new Paramount Razor to be launched as a niche product in the super-premium segment, allowing for the Clean Edge to transition into the mainstream segment, the Pro to convert to the value segment, and the Avail to be phased out from the lineup. We would define success in this endeavor if Paramount could achieve total market share of 25% or greater volume by percentage of sales. Further evidence of success in the launch of the Paramount Clean Edge Ultra would be the establishment of the dominant design of this product over the Radiance Naiv; we would establish success of the dominant design over Naiv if our sales within two years were twice those of Naiv.

Exhibit 1

US Shaving and Hair Removal Products: Retails Sales ($MM) and Revenue Market Share (%)

[pic 1]

Exhibit 2

US Sales of Paramount Pro and Avail ($MM; 2008-2009)

Sales ($MM)

2008

2009

2010

%Change 2008-2009

%Change 2009-2010

Pro

$154

$192

$198

25.0%

3.0%

Avail

$62.8

$51.0

$31.1

-18.9%

-39.1%

Paramount Total

$217

$243

$229

12.3%

-5.8%

Exhibit 3

Revenue and Unit-Volume Share of US Non-Disposable Razor and Refill Cartridge Segments: Paramount and Paramount’s Pro and Avail Brands

[pic 2]

Exhibit 4

Relative Prices1 of Major Non-Disposable Razor Brands (2008-2009)

Relative Price

Brand

Segment

2008

2009

2010

Paramount Pro

Moderate

1.11

1.09

1.07

Paramount Avail

Value

0.77

0.77

0.59

Cogent

Super Premium

1.33

1.33

1.32