Define the problem
John Sherman, the product development manager of Johnson & Company, had to take a decision about the future of Enhanced, a new instant hair conditioner. The issues faced by Johnson Wax are whether to launch 'Enhance' right now, launch it after some modifications or abandon the product.
They wanted a new product with the same success that Agree, the company first care product but they also wanted to reduce the costs of the product development process.
Formulate the alternatives
1. Launch Enhance as it is right now
2. Make some modifications to the product or its positioning
3. Abandon the product
Analyze the alternatives
Johnson Wax is successful in a specific segment of the hair conditioning market with his product Agree. So they decided to offer another personal-care product line being Enhanced. This is an instant hair conditioner targeted toward woman 25-45 years old with dry hair and was formulated to appeal to that audience.
The market of the conditioner in which Johnson Wax want to introduce Enhance counts 6 important companies in 1978: Johnson’s Agree (15,2%), Wella Balsam (4,7%), Clairol Condition (9,95), Flex (13,4 %), Tame (5,4%), and Sasson. The firm has previously done Blind-Use test, which actually showed that the consumers don’t distinguish great differences between different brands of conditioner. Tests have shown that one of the most important dimensions for the customers is the conditioning factor. But during the phase of callback the respondents mentioned most frequently manageability and conditioning came third. This means that the company should reposition itself. The market is open for new products that focus on manageability. An incentive to launch the product is that Agree would lose less than half a share point to Enhance.
Enhance was available in two sizes for both regular and extra conditioning formulations. It had one facing for each size and formulation. Enhance was offered in 8 and 16 ounce sizes in either clear or opaque plastic bottles with nozzle tops.
Research have shown that sampling is not successful and a waste of resources. Another way must be used to promote the product. One way is advertising on TV or in magazines with the use of a celebrity. The downside of this is, that it could be quiet expensive.
The distribution channels that Johnson might and should use are wholesalers and retailers through a system of manufacturers’ representatives and factory salesmen. Johnson has created a well established network throughout the years and if they use it to distribute the Enhance product it will reduce transportation cost due to economies of scale.
Another benefits will be the reduction of costs through the already established knowledge of the manufacturers’ representatives and factory salesmen.
As suggested in the ‘Trail Estimation’, Enhance was offered in 8 and 16 ounces sizes at $1,31 and $1,94 respectively. With these figures the trial rate of Enhance was estimated at 23%. If we look at the comparison to all ASSESSOR-tested health and beauty aids products, we can see that Enhance can be placed in the group between 20-30 %, which indicates a group percentage of 27,1%. Afterwards the repeat rate was estimated through telephone call back interviews and they came to the conclusion that the repeat rate among buyers in the laboratory was 60%. If we compare that to the all ASSESSOR-tested health and beauty aids products, we can conclude that Enhance has a high repeat purchase rate.
The overall conclusion is that we can set the prices at the level suggested in the ‘Trial Estimation’ because survey have shown that those prices will be accepted by the customers.
The steps to the optimal solution
1) Recommend a solution...