1. What are the major changes the product category has witnessed?

Clean Edge Razor belongs to the non-disposable and refill cartridge razor category. Recently, this category has gone through numerous changes. The major ones are as follows: On account of innovations and new products coming up the market, the non-disposable category has seen a growth of 22.5% through 2007 to 2010 in sales, whereas the refill cartridge category saw a lower growth of 11.8%. Between 2008 and 2009, the categories saw an introduction of 22 new SKU, which was highest for the categories until now, although most of them were mere line extensions from general products to premium ones. Based on the studies conducted by Paramount, we can conclude that people have begun to try out newer products and thus 2009 saw the highest sales of razors and replacement cartridges although the brand loyalty of consumers has diminished and they kept on switching between brands. Total expenditure by 5 major companies (Benet & Klein, Prince, Paramount, Simpsons and Radiance) in the non-disposable razors category spent a total of $84.5 million in 2009 while in 2010 they spent $117.5 million, which is a growth of 39.05%. Such a leap can be attributes increased competition and innovation due to advance in technology. Growth in grooming and personal care products targeting males had outweighed the growth in the same for females. This was caused due to societal acceptance to male grooming and removal of stigma associated with it. The growth of the category also resulted in increase in the shelf-space provided by distribution channels for non-disposable razors. The sales of non-disposable razors through Club Stores had significantly gone up in 2010 as compared with 2007. A growth of 400% (by volume) was seen in that case while in other cases it had either declined a little or remained stagnant. This indicates the inclination of customers of purchasing razors in bulk. Several players targeted the super-premium category which offered attributes like 5-blade technology, glide strips, lather bar, low, resistance blade coating, etc. The upsurge of such products was responsible for growth of the category. Increased advertisements and sponsored articles encouraged customers to try new products and hence reduced replacement cycles.

Q2. How is the market segmented? What elements of the consumer behavior should be considered? Clean Edge by Paramount competes in the non-disposable razor and refill cartridge category of the US razor market. This category has been segmented by industry experts on the basis of price and quality into three types: value, moderate and super-premium. Clean Edge is clearly in the super-premium segment. Based on the four major factors viz. geographic, demographic, psychographic and behavioral the attitude of different types of consumers towards Clean Edge is as follows. Geographic Segmentation Looking from the perspective of Clean Edge, which is priced at $12.99, it is going to be more favored by consumers in urban areas and Tier I cities. The advanced and innovative technology that is introduced in Clean Edge is going to be easy to market among people who are more aware and conscious about grooming. Also people in urban areas work in white-collar sectors, which require them to be neat and presentable. Hence it is likely that this super-premium segment will succeed in cities and urban markets. Demographic Segmentation Clean Edge is a product aimed initially at male consumers, the segment where Paramount has strong presence. However Paramount is also considering developing Clean Edge for women consumers soon after the initial launch for men becomes stable. Also the case mentions that younger consumers prefer razors (73%) while electric shavers appealed more to older consumers (27%). Clean Edge also has relatively better chance at catering to young unmarried men who are more appearance conscious. Now looking at the price point suggested for Clean Edge it is targeted towards consumers with higher income groups and the sophisticated five-blade technology with improved shaving performance (referred by the test group as closest, cleanest and smoothest shave they had encountered) is going to be preferred among high social class. Psychographic Segmentation Based on the popular VALS framework, consumers of Clean Edge razor fall under the category of groups with higher resources i.e. innovators, thinkers, achievers and experiencers. Since Clean Edge is a new technology, and also an innovative technology, innovative consumers will be more attracted towards the same because of their inclination towards upscale and niche-oriented products. Achievers being successful and goal oriented people who look for premium products to demonstrate their success is also a potential segment. Experiencers mainly comprises of young and enthusiastic people who spend high proportions on fashion. Hence they are likely to try out a new premium product in the grooming segment. However thinkers are less likely to be segment since they seek durability and value in their products. Among the four groups in lower resources category of VALS framework viz. believers, strivers, makers and survivors, only the group of strivers can be a potential segment since that group favors stylish products that emulate products purchased by wealthier groups. Behavioral Segmentation

Based on the market research done by Paramount, non-disposable razor consumers comprised of three categories based on their extent of involvement in the process.
Social/Emotional Shavers Aesthetic Shavers (28%) (39%) Capable of product Emphasis on most differentiation effective hair removal Emphasis on functionality Shaving is an essential Shaving is done daily grooming ritual consistently to remove unwanted hair Look forward to enhance Desire smooth skin attractiveness and confidence Maintenance Shavers (33%) No differentiation Lack of interest Inconsistent routine

View shaving as just another chore

On the basis of need and want based segmentation the first two categories, having a combined potential sales of 139 million from the 2009 forecast, are the markets for Clean Edge. Basing on consumer expectations, Aesthetic Shavers will be more attracted towards Clean Edge because of its ability to thoroughly remove facial hair. Apart from needs and wants the other consumer behavior elements that should be considered are decision roles of consumers (initiator, influence, decider, buyer and user). Except the influence, other three elements are mainly a function of the end users behavior only since razor is a personal care product. Influence is a function of expert reviews, advertisements and promotions. Now based on real user and usage-related variables, the consumer can also be segmented by various aspects: (a) Occasions: A razor is a daily usage product and hence occasion plays no role in the consumer buying decision. (b) User Status: Existing users of Paramounts Pro can upgrade to the superpremium category since it is the first innovation in the last five years. Also new users who are willing to try on a product with innovative technology. (c) User Rate: Social/Emotional Users and Aesthetic users fall into the category of heavy users and make up for high percentage of the total consumption. People who are already brand loyal form a good fraction of heavy users. Other consumer behavior elements that play a role in segmenting are loyalty status and attitude towards the product. With shortened replacement cycles, new products, aggressive advertising and increased awareness in the male grooming, consumers are less likely to maintain long term brand loyalty. Q.3 Niche vs Mainstream? What is your call? Why? What are the implications? We recommend that the product should be launched in Niche segment.

Because of the following reasons: 1) From Exhibit 1 we can conclude that the segment of Social/Emotional shavers and Aesthetic Shavers accounted for combined 67% of the total market segments. These are segments also considered super-premium segments. 2) Niche will complement companys existing product portfolio perfectly. 3) Its visible that it will result in high and consistent profit margins for the company and the risk involved will be less. From Table A the retail sales are increasing form 2007 to 2010 in non-disposable razors segment. 4) Niche positioning will require $15 million in total marketing expenditures in the first year as opposed to $42 million in mainstream. 5) From the Table B the dollar return (i.e. 34%) is comparatively more for a Volume of 25% in Super-premium segment. 6) Randalls team determined that the cannibalization would occur more in mainstream segment i.e. 60% and the cannibalization occurred in premium segment is 35%.

Q.4 What is the financial impact of your decision? 1)