Clean Edge Razor Case

Topics: Marketing, Generally Accepted Accounting Principles, Economics Pages: 2 (589 words) Published: February 23, 2013
Clean Edge Razor Case
What is the marketing management problem or opportunity the case protagonist faces?

Paramount must decide how it wants to position the Clean Edge Razor in the market. With the men’s grooming market segment poised for growth, it must figure out where the most profit opportunity lies (i.e., super-premium, mainstream, etc.) and then proceed with an implementation plan.

 What alternative courses of action can the protagonist pursue to address the case problem?

One option is to release the Clean Edge in the mainstream market – while there’s an overall greater opportunity for more sales, especially cartridges (albeit with a lower profit margin), they risk cannibalization of the Pro/Avail product lines of up to 60%. Paramount could, in theory, also reduce the cost per unit by taking advantage of economies of scale. This option would also require more capital for marketing – about $42 million.

Another option is to release Clean Edge as a super-premium product. This is the least exploited market by Paramount and only has a 35% estimated cannibalization rate from Pro/Avail customers. While there would be fewer sales, there would be a higher markup with the ability to sell more of the Pro/Avail line. However, Clean Edge could be a replacement for the Pro in the mainstream market segment. Marketing for a super-premium product would be an estimated $15 million.

Which of the identified alternatives is most attractive and why?

If we take a look at the financial forecasts for positioning Clean Edge as a niche or mainstream product we can make the following observations:

| Niche Y1| Niche Y2| Mainstream Y1| Mainstream Y2|
Capacity Cost| $610,000| $870,000| $1,710,000| $2,450,000| Razor Prod. Cost| $5,000,000| $7,500,000| $15,642,000| $18,960,000| Cart. Prod. Cost| $9,720,000| $24,300,000| $22,176,000| $49,056,000| Ad/Promo. Cost| $15,000,000| $16,000,000| $42,000,000| $39,000,000| Total Costs|...
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