Clean Edge Razor Case Study Paramount Health

Clean Edge Razor Case Study

Paramount Health established itself as a consumer giant with global sales of over $13 billion. Since 2009, it was the unit-volume market leader for non-disposable razor products. However, that category is entering a new phase based on technological innovations, particularly in the super-premium categories. This resulted in the need to continually innovate and improve razor technology. Paramount now must face issues and decisions regarding positioning of new products, alignment with past products, and future expenditures.

Changes in the category? Competition, Strategic life cycle? Technology is the largest driver in the changes to the non-disposable razor product. This has resulted in a sub-category, the super-premium segment, growing faster than expected, and increased competition from other companies with a more innovative technological push causing a true fight for market share. The market is huge, over $1 billion in potential sales in the U.S. alone per annum and 34% of that from the super-premium niche. The category, in fact, has changed from being based on utility and cost (value and premium), to aesthetics, innovation, and consumer perception of quality. Additionally, a challenge for Paramount is that each market share point is worth several million dollars, and even small delays in new product launches have the potential to result in millions in sales losses. This, though, also presents a challenge to the Research and Development departments. Paramount must re-evaluate their expenditures and ability to stay well ahead of the curve in terms of niche development. Clearly, the market responds to a more aggressive approach for innovation, design, and uniqueness. To remain market leader, Paramount must continue to innovate and outpace its competitors.

Part 2 -- Segmentation of the market and consumer behaviour -- The non-disposable market has three main components ranging from low to high in both price and expectation: value, moderate and super-premium. The value segment opts for price and utility, has very little interest in technological innovation or design, and expects the product to work well for the price. The moderate and super-premium market consists of both men and women who are divided into numerous sub-groups that have different views on design, aesthetics, experience, color, price, and technology.

For decades, consumers saw the razor as a tool to accomplish a task -- with basic design, color and utility functions remaining the same. In the 21st century, however, greater attention has been placed not only on personal hygiene, but on the experience and comfort of shaving. Men's facial care segments have grown wildly, and the razor industry responded with features like heat, gel, vibration, recharging, double, triple and quadruple blades, and a more upscale feel and design than ever before. This, of course, has also increased the cost, but now the mid and upper level accounts for 68% of the market and almost 80% of the dollar volume of the segment.

Part 3 -- Arguments for niche or mainstream? Strategic implications? Paramount is in a rather unique position because of its ownership of market share in the category. It could launch as niche or mainstream, and will likely receive strong growth numbers regardless. If they choose to launch niche, they could continue to increase products while not cannibalizing from their current brands, and thus adding another niche to increase market share. This would likely result in about a $19-20 million increase, well ahead of any R&D concerns for this launch. To launch as a mainstream, though, might result in an almost $40 million initial profit spike. To adequately launch mainstream, though, the company would have to spend a great deal more on advertising and marketing, and might eventually hurt its market share because of disproportional focus on one product at the expense of others. We do not have the figures for other products, so strategically we can only base information off the case -- and the profit of $19 million without extensive cannibalization and new advertising would actually benefit the company more in the long-term as a viable, strong, and robust niche product.