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JANUARY 19, 2011

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JOHN A. QUELCH

HEATHER BECKHAM

TEACHING NOTE

Clean Edge Razor:

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Splitting Hairs in Product Positioning
Note: The Clean Edge Razor case has two additional supplements in Excel format, both available
free of charge from HBP.

Product 4252 is a Student Spreadsheet that Harvard Business Publishing makes widely available. It
contains the data-based exhibits in the case.
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Product 4253 is restricted to Instructors Only. It contains the same case exhibits as the Student
Spreadsheet, plus a “model solution” to the basic quantitative assignment that students are expected
to complete as part of case analysis.
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Synopsis
In August 2010, after three years of development, Paramount Health and Beauty Company
(Paramount) is crafting a launch strategy for its technologically advanced vibrating razor, Clean
Edge. Clean Edge’s improved design provides superior performance by stimulating hair follicles to
lift the hair from the skin, allowing for a more thorough shave. Jackson Randall, Clean Edge product
manager, has been grappling with how to position the product for the upcoming launch. Some
executives at Paramount believe Clean Edge should be positioned as a mainstream entry in the super-
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premium segment, with the broad appeal of being the most effective razor available in the market.
Others feel a niche strategy, targeting a small subset of the super-premium consumers, would be
optimal. Randall must provide his recommendation for product positioning with supporting
economic analysis as well as guidance on a brand name for the product and marketing budget
allocations.

________________________________________________________________________________________________________________
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This note was prepared by HBS Professor John A. Quelch and writer Heather Beckham for the sole purpose of aiding classroom instructors in the
use of case study “Clean Edge Razor: Splitting Hairs in Product Positioning” (HBP No. 4249). It provides analysis and questions that are
intended to present alternative approaches to deepening students’ comprehension of business issues and energizing classroom discussion. HBP
cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or
illustrations of effective or ineffective management.

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Harvard Business Publishing, Boston, MA 02163, or go to [Link] No part of this publication may be reproduced, stored
in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or
otherwise—without the permission of Harvard Business Publishing.

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 4250 | Teaching Note—Clean Edge Razor: Splitting Hairs in Product Positioning

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Teaching Objectives
The case has four primary teaching objectives:

1. Explore issues associated with strategic product positioning.

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2. Review the importance of evaluating product-company and product-market fit in assessing
new product opportunities.

3. Discuss product life cycle considerations and the challenges of achieving a differentiated
position in a crowded marketplace.

4. Develop a forecasted profit and loss statement for a new product.

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Use of the Case
The Clean Edge Razor case will fit well in the first-year MBA level course in Marketing
Management. It is also a good match for more concentrated courses in Marketing Strategy,
Consumer Marketing, Marketing Research, or New Product Development.
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Preparing for Class Discussion
Students should read the case and come to class prepared to discuss the following questions:

1. What changes are occurring in the nondisposable razor category? Assess Paramount’s
competitive position. What are the strategic life cycle challenges for Paramount’s current
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products as well as for Clean Edge?

2. How is the nondisposable razor market segmented? Examine consumer behavior for
nondisposable razors.

3. What are the arguments for launching Clean Edge as (a) a niche product and (b) a
mainstream brand? Which would you recommend? What are the strategic implications of
your recommendation?
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4. Based on your positioning strategy, what brand name and marketing budget allocations
would you advise?

Organizing Discussion (assumes 90-minute class)

1. Class Opening: Allow students to provide initial reactions to key decision in the case. (10
minutes)
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2. What changes are occurring in the nondisposable razor category? Assess Paramount’s
competitive position. What are the strategic life cycle challenges for Paramount’s current
products as well as for Clean Edge? (15 minutes)

3. How is the nondisposable razor market segmented? Examine consumer behavior for
nondisposable razors. (10 minutes)

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 Teaching Note—Clean Edge Razor: Splitting Hairs in Product Positioning | 4250

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4. What are the arguments for launching Clean Edge as (a) a niche product and (b) a
mainstream brand? (40 minutes)

5. Based on your positioning strategy, what brand name and marketing budget allocations
would you advise? (15 minutes)

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Teaching the Case: Brief Overview of Analysis and Discussion
Class Opening: Allow students to provide initial reactions to key decision in the case.

The instructor can focus initially on the key decision in the case: whether Paramount’s new razor
should be launched as a niche or a mainstream entry. Students participating in this segment of the

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discussion should be required to state their conclusions up front as the price of admission. Most of
the (dis)advantages of the niche and mainstream options relate to the expected reactions of key
stakeholders such as consumers, the trade, and product managers on the existing Paramount razor
brands.

After 10 minutes, the instructor may wish to press for a deeper analysis of the evolution of the
razor category.

What changes are occurring in the nondisposable razor category? Assess Paramount’s
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competitive position. What are the strategic life cycle challenges for Paramount’s current products
as well as for Clean Edge?

The U.S. nondisposable razor market is dominated by large multinational companies: Prince
(Cogent brands), Benet & Klein (Vitric brands) and Paramount are the three leading players. At the
time of the case, major new players (notably Simpsons and Radiance Health Inc.) are entering the
market launching new nondisposable razors under their deodorant brand umbrellas (Tempest and
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Naiv). Since their deodorant brand equities are likely to be transferable, these new entrants will
increase the competitiveness of the nondisposable razor category.

In an unprecedented flurry of activity, 22 new products and line extensions were introduced in
the nondisposable razor and refill cartridge category in 2008–2009. These new introductions appear
more seriously grounded in technical performance benefits than visual differentiation. As such, they
tend to be higher-priced, super-premium razors that appeal to involved customers interested in
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social/emotional efficacy and/or cosmetic benefits.

The heightened level of new product activity in the nondisposable-razor and refill-cartridge
category has the following consequences:

• An increase in overall marketing expenditures that promises to raise the level of competitive
intensity in the category and portends a subsequent shakeout of weaker brands. Aggregate
media advertising expenditures on nondisposable razors for Paramount, Prince, Benet &
Klein, Radiance, and Simpsons are expected to rise 39% between 2009 and 2010 ($84.5M to
$117.5M) (Case Exhibit 2), which is significantly more than the 3% increase in total retail
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dollar sales for nondisposable and refill cartridge (Case Table A).

• More competition for retail shelf space.

At the consumer level, the increase in new product introductions and associated marketing
expenditures appear to result in

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 4250 | Teaching Note—Clean Edge Razor: Splitting Hairs in Product Positioning

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• More brand switching from one purchase to the next with particular emphasis on trading up
to higher-unit-margin super-premium razors.

• A shortening of the interpurchase interval as consumers replace their razors to try new
products. However, it is not known if the interpurchase interval is declining faster than the
average usage period. If this is the case, consumer household inventories may have risen.

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Razors are easy to store at home. The implication is that recent category sales growth may be
hard to sustain.

• A shortening of the average usage period per blade due to greater recognition of the need for
earlier replacement (reminder effect of advertising).

In addition, innovative new products seem to have revived the trade’s interest in the category,
and distribution is broadening beyond the traditional food and drug store channels to mass

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merchandisers (in 2000, food stores accounted for over half of all shaving products whereas by 2009
they accounted for 42%).

With a 23.4% dollar share and 23.3% unit share in 2009, Paramount is a leading player in the U.S.
nondisposable market. However, students typically express the following concerns about
Paramount’s competitive position:

• Operating profit for the nondisposable razor/cartridge business lags behind Prince’s Cogent
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brand—Paramount’s leading competitor. Paramount Pro and Avail operating profit is
currently ~15% (from page 3 of case), compared to ~20% for Prince’s nondisposable
razors/cartridges.

• Paramount’s current razor entries—Paramount Avail and Paramount Pro—are positioned in

the value and moderate segments of the market, and may be regarded as old-fashioned and
mature. To maintain its category leadership, both in market share and image, Paramount
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needs an entry into the fast-growing super-premium segment. In the absence of such a new
product, Paramount could be caught in the middle of a market that progressively polarizes
between highly involved consumers purchasing super-premium brands and uninvolved
consumers purchasing lower-priced, unadvertised brands.

• The test marketing of Radiance’s Naiv poses a particularly strong threat. Naiv has captured a
13% share in test market. The traditional rivalry between Paramount and Radiance across
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several product categories should motivate Paramount to respond aggressively.

Students should also discuss product life cycle considerations for the Paramount products in this
category. By looking at Case Exhibit 5, students can see market share for Paramount Avail has been
shrinking. This is a good indicator that Avail is in the declining stage of the product life cycle.
Conversely, Paramount Pro’s market share has been steadily increasing. However, it is not clear
what impact competitors’ new product launches will have on Pro’s market share. As William Kim
suggests, Pro could soon be entering the declining stage of the product life cycle. The instructor can
challenge students on the appropriateness of milking a “cash cow” like Pro to fund a “star” like Clean
Edge and how to manage various products in different stages of the product life cycle. It is clear that
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Paramount’s competitors are pursuing technology advancements and other innovations at an

accelerated pace. Students can be pressed on the implications of competitors introducing new
products with ever-increasing performance benefits and how Paramount can differentiate itself in
such a crowded market space. The discussion can also explore the issues associated with these types
of innovation strategies, which tend to shorten product life cycles.

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 Teaching Note—Clean Edge Razor: Splitting Hairs in Product Positioning | 4250

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How is the nondisposable razor market segmented? Examine consumer behavior for
nondisposable razors.

A rich discussion can occur around whether, or for whom, the nondisposable razor is a high
involvement or low involvement product. A comparison of nondisposable razors in terms of
consumer involvement and other dimensions of consumer behavior can add further insights. Exhibit

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TN-A presents a diagrammatic summary of the razor market.

Nondisposable razor purchasers are involved to varying degrees in the product category.
Uninvolved consumers probably perceive little interbrand differentiation; their purchase selections
are largely motivated by price. Highly involved consumers are motivated mainly by either
social/emotional or aesthetic benefits, or by a desire for both. The male social/emotional segment
appears to be gaining sharply for the following reasons:

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• An increase in men who focus time and energy on grooming, particularly younger men who
have grown up in a culture where it is less taboo for men to care about how they look.

• Increased media attention devoted to men’s fashion and grooming issues (e.g., Queer Eye for
the Straight Guy television series and the rise in popularity of men’s magazines such as GQ,
Maxim, Esquire, Details, etc.).

• New products in other men’s grooming and personal care categories that focus on
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social/emotional benefits (e.g., fragranced shower gel, body spray, and deodorants that push
a message of desirability and virility).

Information on the female social/emotional segment specifically is not provided, but one could
assume this segment is also strong, as women have traditionally attached more of a social and
emotional value to their beauty and grooming routines.
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In general, more involved nondisposable razor purchasers probably display the following
characteristics:

• Shave more often.

• Replace razor cartridges sooner and buy razors more often.

• Brand loyalty but likely to switch to any new product proven or perceived to be superior.
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• Pay attention to razor advertising and so are aware of new products.

• Less price sensitive.

• Equally interested in other grooming/beauty products.

An important issue for discussion at this point is whether the consumer needs another razor and,
if so, whether Clean Edge is the appropriate product. Despite recent proliferation of line extensions,
students will support Clean Edge as a technologically superior, thoroughly researched product that
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offers important benefits to the expanding social/emotional benefit segment of the market. Clean
Edge is likely to draw sales primarily from involved customers, especially if it launches as a niche
product targeting the super-premium, social/emotional segment. However, it is also possible to
imagine a mainstream launch of Clean Edge generating trial purchases by many less-involved
consumers due to:

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 4250 | Teaching Note—Clean Edge Razor: Splitting Hairs in Product Positioning

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• The broad recognition and pulling power of Paramount as an acceptable name in the
category.

• The low financial risk in making a trial purchase of a new product in the category.

• Impulse and/or deal-driven purchases among non-brand loyal consumers stimulated by in-

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store displays of Clean Edge on sale at attractive introductory deal prices.

What are the arguments for launching Clean Edge as (a) a niche product and (b) a mainstream
brand.

A. Niche

• The benefits of Clean Edge appeal only to the minority of consumers for whom the most

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thorough shave possible and superior skin tone/texture are salient concerns.

• The technical features of the product can only be communicated to consumers highly involved
in the category.

• The availability and marketing of Clean Edge could increase the size of the social/emotional,
super-premium segment.

• If successful as a niche brand, the positioning could later be broadened to appeal to the
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mainstream. This is a “test and invest” strategy.

• Paramount Pro is a strong mainstream brand which could be aided rather than cannibalized
by the launch of a super-premium niche product under the Paramount umbrella.

• A mainstream positioning for Clean Edge could result in unproductive cannibalization and
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leave Paramount with two average-size brands instead of one strong one (i.e., Pro).

• Marketing investments and, therefore, financial risk are lower for the niche approach.

B. Mainstream

• Clean Edge represents an important technical innovation that can firmly establish
Paramount’s category leadership. Its potential could be underexploited if launched as a niche
product.
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• Because Paramount Pro represents old technology, its market share—though still
substantial—is vulnerable. Paramount needs a new mainstream product to defend its overall
share position in the face of increased competitive innovation in the nondisposable razor
category.

• Consumer and retailer involvement in the category has increased in recent years due to
frequent product introductions and higher advertising. The time is ripe for a new product
with demonstratable product superiority.
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• The significance of Clean Edge’s key benefits of more effective shaving and improved
grip/balance can be communicated to all consumers. However, significant investment in
advertising will be required to increase the salience of these benefits.

• An increasing percentage of razors is being sold through nontraditional channels (e.g., mass
merchandisers and club stores) which choose to stock only selected, mass appeal, fast-

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 Teaching Note—Clean Edge Razor: Splitting Hairs in Product Positioning | 4250

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turnover items. Clean Edge has to be positioned as a mainstream product to access these
channels.

• The entry into the category of Radiance’s Naiv, with strong advertising/promotion support
and innovative technology could threaten the market shares of all the established brands.
Because Naiv will likely be positioned as a mainstream product (since there are no existing

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Naiv entries to be cannibalized), Paramount should take the offense with a mainstream launch
of Clean Edge.

• No alternative big new-product ideas that could be the basis for a mainstream launch are
apparently in the pipeline. Paramount has invested three years in developing Clean Edge,
and the clinical trials are convincing; they want to push for the maximum payback on this
effort.

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A useful question to focus students during the discussion of positioning is: “Where will Clean
Edge sales come from?” As in any new product launch, the only three sources are:

(1) An increase in overall nondisposable-razor category demand.

(2) Cannibalization of Pro and Avail.

(3) Consumers switching from competitive brands.

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Typically, neither mainstream nor niche launch strategy proponents see (1) as a significant source.
Niche proponents argue that a Clean Edge premium price will draw many more buyers from (3)—
especially existing super-premium brands than (2)—whereas most mainstream advocates expect
cannibalization of Pro and Avail proportionate to their existing market shares.

A role play involving Kim (newly hired corporate marketing director) and Rosenberg (Paramount
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Pro brand manager) can highlight different assumptions about cannibalization effects and where
Clean Edge sales would come from. This role play can also highlight the internal selling challenge
Randall would face in promoting the mainstream positioning, however broad the consumer appeal of
Clean Edge’s benefits can be proven to be.

The comparative economics of the niche and mainstream launch programs over a two-year period
are presented in Exhibit TN-B.
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Students’ pro-formas will vary depending on the assumption for cannibalization. In the example
in Exhibit TN-B, cannibalization is assumed at 35% for the niche strategy and 60% for mainstream.
Under these conditions, Clean Edge is better off financially (at least in the short term) by utilizing a
niche positioning. Many students consider the “test and invest” strategy (e.g., positioning as a niche
product in the short term and moving to a mainstream product as Pro loses market share) to be
appropriate. However, as part of contingency planning, different scenarios should be considered. For
example, if cannibalization is less than estimated or if we expect Paramount Pro to lose considerable
market share to competitors now because of a lack of innovation, then the decision to go mainstream
immediately might make more sense.
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Students should also consider the strategic implications along with the financials and politics. For
example, what are the disadvantages for a “test and invest” strategy? How would a niche product
positioning launch impact consumer attitudes toward Paramount nondisposable razors in the long
term?

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 4250 | Teaching Note—Clean Edge Razor: Splitting Hairs in Product Positioning

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Based on your positioning strategy, what brand name and marketing budget allocations would
you advise?

In the final segment of the discussion, instructors may wish to discuss branding and budget
proposals that would be consistent with the niche and mainstream positioning.

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Branding. A quick discussion can occur on the relative emphasis on the “Paramount” and “Clean
Edge” brand names appropriate to each scenario. Given the economics of developing a new brand
name versus exploiting an existing brand umbrella, it is likely that the Paramount name will be
emphasized whether a niche or mainstream launch strategy is pursued. It is important for students
to be aware that doing so may aggravate cannibalization. However, consumers who switch to Clean
Edge from Pro and Avail will deliver a higher unit profit contribution to Paramount, and promotions
on Pro and Avail can be timed to load their regular consumer ahead of Clean Edge launch.
Proponents of emphasizing the Clean Edge name argue that it clearly connotes the principle product

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benefits—the most clean, complete shaving experience—which is especially consistent with the
super-premium, niche positioning, and the Paramount brand has a mainstream image which adds
little value in this case. Students typically recommend the following brand names based on
positioning:

Mainstream Niche
Brand Name Paramount Clean Edge Clean Edge by Paramount
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Budget Allocation. Students differ on whether the launch of Clean Edge requires an increase (i.e.,
$15 million for niche positioning and $42 million for mainstream) in the overall Paramount
nondisposable-razor budget or if there should be a smaller increase along with a reallocation of the
existing budget. Proponents of a mainstream launch usually contend that Paramount Clean Edge
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should become the flagship “star” brand for the line and that marketing funds should be shifted from
Pro/Avail to Clean Edge. They also argue for an overall increase in marketing expenditures, at least
in the short term, given the brand’s sales potential and the increasing competitiveness of the category.
Students favoring a niche launch strategy for Clean Edge may also argue for incremental funds but
typically support less of a reallocation from Pro and Avail. Instructors can tie this discussion back to
the product life cycle considerations.
No
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 4250 -9-

Exhibit TN A U.S. Razor Market: Product Types and Benefit Segments

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Market Share Benefit Segments

Volume Dollar Product Types Social/Emotional Value Aesthetic Uninvolved

25% 34% Super-Premium
43% 44% Moderate
32% 22% Value
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Exhibit TN B Profit and Loss Forecasts for Clean Edge Under Niche and Mainstream Scenarios ($ in Millions)

Niche Mainstream
Source of data Year 1 Year 2 Year 1 Year 2
1 Unit sales - Razors Exhibit 7 1.0 1.5 3.3 4
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2 Dollar sales - Razors (1) * manuf price (Exhibit 7) $ 9.09 $ 13.64 $ 25.84 $ 31.32
3 Unit sales - Cartridges Exhibit 7 4.0 10 9.9 21.9
4 Dollar sales - Cartridges (3) * manuf price (Exhibit 7) $ 29.40 $ 73.50 $ 61.58 $ 136.22
5 Total dollar sales (2) + (4) $ 38.49 $ 87.14 $ 87.42 $ 167.54

6 Production costs - Razors (1) * prod cost (Exhibit 7) $ 5.00 $ 7.50 $ 15.64 $ 18.96
7 Production costs - Cartridges (3) * prod cost (Exhibit 7) $ 9.72 $ 24.30 $ 22.18 $ 49.06
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8 Capacity costs Capacity costs from Exhibit 7 $ 0.61 $ 0.87 $ 1.71 $ 2.45
9 Advertising and Promotion Exhibit 7 $ 15.00 $ 16.00 $ 42.00 $ 39.00
10 Total costs (6) + (7) + (8) + (9) $ 30.33 $ 48.67 $ 81.53 $ 109.47

11 Operating Profit (5) - (10) $ 8.16 $ 38.47 $ 5.89 $ 58.07

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12 Profits as % of sales (11)/(5) 21% 44% 7% 35%
13 Cost of cannibalization - Razors (a) $ 0.62 $ 0.92 $ 3.48 $ 4.22
14 Cost of cannibalization - Cartridges (a) $ 3.92 $ 9.80 $ 16.63 $ 36.79
15 Profit after cannibalization (11) - (13) - (14) $ 3.62 $ 27.74 $ (14.23) $ 17.06

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(a) Cannibalization cost = % cannibalization from Avail and Pro (5th paragraph in case under Positioning heading) * unit sales * contribution per unit where the
contribution per unit average for Avail and Pro is $1.76 for razors and $2.80 for cartridges (case footnote 2 under Company Overview heading). Assumes
cannibalization of 35% for Niche, 60% for Mainstream.
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