soft and silk

University Degree Business and Administrative studies

Soft and Silky Shaving Gel

Introduction

Skin-Tique Corporation manufactures and sells women’s personal-care products such as facial creams, hand and body lotions, and a full line of women’s toiletries. Products are sold by drug and food-and-drug stores through rack jobbers. Rack jobbers are actually wholesalers that set up retail displays and keep them stocked with merchandise. They receive a margin of 20 percent off the sales price to retailers.

In 1988, Skin-Tique introduced Soft and Silky Shaving Gel. The unique dimension of the introduction was that Soft and Silky Shaving Gel was positioned as a high-quality women’s shaving gel. The positioning strategy was successful in differentiating Soft and Silky Shaving Gel from existing men’s and women’s shaving creams and gels at the time. And it has been sold in a tube since its introduction. This packaging was adopted because the company did not have the technology to produce aerosol containers in 1988. Furthermore, the company’s manufacturing policy was and continues to be to utilize existing production capacity whenever possible. As of early 2001, all products sold by Ms-Tique Corporation were packaged in tubes, bottles, or jars.

However, competition had increased and the new aerosol can was introduced as a new form of packaging for women’s shaving gel or leave it in the tube package. Furthermore, the manager needs to decide if a test market is necessary to evaluate the new packaging.

The Analysis of The Case

The Current Situation

(1) Women’s Shaving

There are some different ways to remove hair. The most popular method is simply shaving with razors and soap. The next most used method is shaving gels with razors. On average, women shave eleven times per month and shave nine times more skin than men per shaving occasion. Shaving frequency varies by season, with the summer months producing the greatest shaving activity. According to the research, most women want a product that contains a moisturizer, reduces irritation, and makes shaving easier. It also appears that four out of five women use a moisturizer after shaving. Prior to 1993, the product contained only aloe. In 1993, three additional moisturizers were added to the product, including vitamin E.

(2) Market Size and Competitive Products

Industry sources estimate the U.S. dollar value of women’s “wet shaving” products to be over $400 million in 2000, at manufacturer’s prices. Sales growth has been in the range of 3 to 5 percent per year since 1997. Since 1997, a women’s shaving cream and gel category has emerged due to new-product activity, increased advertising and promotion, and improved shaving technology. Until late 1995, only two competitive products were normally available in the drug and food-and-drug stores served by Skin-Tique Corporation rack jobbers. These products were S.C. Johnson's Skintimate and Soft Shave, a lotion ...

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(2) Market Size and Competitive Products

By 2002, the dominant packaging for women’s shaving cream or gels had become the aerosol container. Only a few shaving gels and brands were sold in tubes or plastic bottles, including Soft and Silky Shaving Gel, Soft Shave lotion, and Inverness Ultra-Lubricating Shaving Gel.

2. Issues of The Case

(1) New Package Design

Product Manager recommended the new package because of four developments. First, unit sales volume for Soft and Silky Shaving Gel had slowed and then plateaued in recent years. Second, the growth of Soft and Silky Shaving Gel had been strained manufacturing capacity. Growth in the entire line of hand and body lotions, coupled with Soft and Silky Shaving Gel sales, had overburdened production capacity and scheduling. Third, the company had no manufacturing capacity expansion plans for the next three years. And finally, the aerosol packaging had become the dominant design for women’s shaving creams and gels. She also estimate the total cost of producing and delivering to retailers a 5 ½-ounce tube, 5 ½-ounce aerosol can, 10-ounce aerosol can. And she recognized that the price per ounce for the aerosol containers was lower than the equivalent price per ounce for the tube package.

(2) Preliminary Test

Courtwright’s test-market recommendation included a proposal to introduce the new package design in a limited cross-section of drug and food-and-drug stores, including heavy-volume and low-volume store, that presently carried Soft and Silky Shaving Gel. Test stores would be isolated geographically from nontest stores. Her estimated cost for the test market was $30,000, which include the cost of gathering marketing research data on the cannibalization rate and incremental sales growth. In addition, the $10,000 supplier set-up charge would have to be paid. She wondered whether her test-market proposal should be adopted.

3. Financial View

(1) Contribution Analysis

(2) Forecast Analysis

(3) Fixed Cost Analysis

Fixed Cost under original forecast of tube packages: $1,576,100 (Same cost as year 2002)

Fixed Costs under 4 forecasts of combo packages:

$1,154,540 Advertisings & Promotions (Same as 2002)

$ 421,560 Overhead and Administrative (Same as 2002)

$30,000 Add: Cost of the Test Market

$10,000 Add: Supplier One-time Setup Charge

$1,616,100

(3) Expected Monetary Value

III. Conclusion

There are 3 choices in this case. First, we do change nothing. It means that we abandon the new aerosol package design. Second, we can introduce a new aerosol package design and perform the market test. However, we need to think about the size (5 ½ oz vs. 10 oz). Third, we can introduce a new aerosol package design and do not perform the market test. It also needs to consider about the size.

In my opinion, I would choose the introduction of the new 10 oz aerosol package design but not the market test because the lowest per oz cost, the highest contribution margin, and the highest expected monetary value.

Pros

As of 2000, aerosol packaging had become the dominant design for women’s shaving creams and gel
Customers and non-customers were unanimously in favor of the aerosol can