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MKTG 368 W Assignment:Brand Case Analysis: Parvaderm Corporation 1

MKTG 368 W: Week 5Assignment:Brand Case Analysis: Parvaderm CorporationSeptember 30, 2011

Anthony Dawson

Student

Eastern Michigan University


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Overview

Parvaderm Corporation is a manufacturer of womens personal care products. Their full line of products

would include hand and body lotions, facial creams, and a full line of womens toiletries that are sold

under different brand names. The companys products are currently sold in drug and drug-and-food

retailers through rack jobbers (wholesalers that market and set up the product displays in the stores).

These rack jobbers receive a 20% margin of the retailers price. Retailers receive a 40% margin on the

suggested retail price.

The product itself is marketed as a high quality womens shaving gel. As such, the product

includes some value added components such as aloe (original component), lanolin, and vitamin E (added

in 1995 due to market input).

The company has been selling is popular brand of womens shaving gel named Soft and Silky

Shaving Gel (in tube form) since 1991. Sales of the shaving gel were $3,724,000 in 2004; equaling

1,960,000 units.

A new packaging of the companys shaving gel into an aerosol container (in either a 5.5 oz. or 10

oz. can) has been suggested by an assistant to the current marketing manager due to the following

reasons:

Current product sales figures show that the Soft and Silky Shaving Gel is in the maturation andsaturation stage of its product life cycle.

The growth over the years of Soft and Silky Shaving Gel and its other products have strained thecompanys capacity maintain adequate stock levels to satisfy demand. This situation has led to

out of stock situations and lost sales.

The company has no plans to expand production capabilities over the next 3 years.


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The market indicates that the aerosol packaging of womens shave gel had become the popularand therefore the most dominate design.

The question facing the firm is whether or not to introduce the new packaging of its long time

popular product; Soft and Silky Shaving Gel. The timing of this decision is critical due to the fact that

more women shave most frequently in the upcoming spring and summer months (this case takes place

in January 2005).

SWOT Analysis

StrengthsSales of the companys shaving gel have steadily increased over the 1991-2004 sales

periods. Sales increased from approximately 400,000 units in 1991 to 1,960,000 units in 2004. This

shows that the product has been a proven performer in the market. The company has been in the

business of selling this product for over 13 years and has a good understanding of this product.

WeaknessCurrently the company has reachedits production capabilities and cannot maintain

adequate product levels. The firm lacks the technical knowledge to produce an aerosol based delivery

system for Soft and Silky Shaving Gel.

OpportunityDue to the information that indicates that the aerosol can is the dominate form of

packaging for womens shaving gel; this would be an opportunity to cross its product over into that

market and attempt to capture some of that currently untapped segment of the market by providing to

the consumer what they prefer.

Threats Currently the company lacks the ability to manufacture this type of product which leaves itself

vulnerable to the outside competitors that have this capability. There are more competitors in the

market today as opposed to when the product was introduced; so there is increased pressure to stay

technologically equal to, or more advanced than the competition.


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Market Research

In late December 2004 the firm acquired the services of a large marketing firm to conduct a focus group

analysis of the following:

1. Are present customers and noncustomers receptive to the new package?Both customers and noncustomers were unanimously in favor of the aerosol can. The 10 oz. was the

favorite because it would require fewer purchases.

2. At what rate would present customers convert to the aerosol can, and would noncustomersswitch over to Soft and Silky Shaving Gel?

20% of current customers would convert to a 10 oz. can and 25% would convert to a 5.5 oz. can. One

fourth of noncustomers indicated they would switch to the product regardless of ounce size. The reasons

stated for why they are noncustomers were attributed to non-aerosol offering and price.

3. Where, in drug and food-and-drug stores, would customers and noncustomers expect to findthe aerosol can?

Customers expected to find the new product next to the existing tube container, and noncustomers

expected to find it in the womens toiletries.

4. Is the suggested retail price acceptable?Current customer accepted and does favor the pricing of the product; while noncustomers thought the

price was somewhat high but were willing to try the product because of the value-added features.

The marketing firm also conducted an analysis of ten case histories of new package introductions of

mens shaving cream gave the research firm a basis to estimate sales of the new package launch of Soft


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and Silky Shaving Gel. The data is separated by ounce offering and by high or low sales forecasts. This

table also explains the incremental product line contributions. This is the accumulated data:

Forecast A: Low estimate for 5 1/2 oz aerosol package addition

5 1/2 tube (oz). 8,600,000 Contribution $2,339,200.00

5 1/2 oz aerosol package (oz) 2,445,174

Cannibalized volume 2,145,174 $561,645.56

Net new volume (oz) 300,000 $78,545.45

Total Contribution $2,979,391.01

Units 2,008,213

Forecast B: High estimate for 5 1/2 oz aerosol package

addition


5 1/2 oz aerosol package (oz)


Net new volume (oz) 500,000 $130,909.09


Units 2,044,571

Forecast C: Low estimate for 10 oz aerosol package addition


10 oz aerosol package (oz)

Cannibalized volume 1,745,174 $555,282.64Net new volume (oz) 800,000 $254,545.45


Units 1,890,881

Forecast D: High estimate for 10 oz aerosol package addition


10 oz aerosol package (oz)


Net new volume (oz) 1,500,000 $477,272.73

Total Contribution $3,452,846.27Units 2,009,972


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This analysis would show that the high estimate for the 10 oz. aerosol package would be the

most profitable and also produce the most units. The research also stated that seven out of ten

experienced the high estimate and only three experienced the low estimate. This would indicate a 70%

chance of realizing the high estimate of sales.

Current and Proposed Pricing Figures

5 1/2 oz tube 5 1/2 oz aerosol 10oz aerosol

Retail Price $3.95 $3.50 $4.25

Retail Margin (40%) $1.58 $1.40 $1.70

Jobber Price $2.37 $2.10 $2.55

Jobber Margin (20%) $0.47 $0.42 $0.51

Parvaderm's Price $1.90 $1.68 $2.04

VC $0.40 $0.24 $0.29

Contribution/unit $1.50 $1.44 $1.75

Contribution/oz $0.27 $0.26 $0.32

This table shows that the new product offerings would be profitable at the current proposed

retail price. The 5.5 oz. package has a profit of $1.44 per unit and the 10 oz. package has a profit of

$1.72 per unit sold.

Pros and Cons of Test Market Plan

Positives would include the acquisition of more information about potential customers buying

preferences. This could help in the choice of which product to launch; the 5.5 oz. or 10 oz. package.

Disadvantages would include the estimated cost of $30,000 to launch the test market. Also there is the

$10,000 set-up fee that would be paid to the supplier. In the test case it was indicated that a 20,000 unit

minimum be negotiated for the test. This would not be the correct course of action to follow considering

that the firm could receive 100,000 units for the same $10,000 (as stated earlier in the case). If this test

were to be undertaken, the timing of it should also be under review. The test is slated to be launched on


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April 1, 2005; just at the beginning of the stated busiest time of the year for selling this type of product.

This small test market would not take full advantage of the entire market during the stated busy time of

the upcoming year (spring through summer) and therefore should not be undertaken. It would be

recommended to commit to a full product launch to take full advantage of the busy season.

Actions/Decisions

According to the research conducted by the marketing firm; every estimated forecast, both high and low

were more profitable than if no new product was launched. That being the case; it would be logical to

launch the new product. After analyzing the focus group data; it is believed that there is enough interest

by existing customers and non-customers in both products to make plans for launching both the 5.5 and

10 oz. container. This will not affect cost since both the 5.5 oz. and 10 oz. canisters can be produced by

the outsourced manufacturer for the same set up price. After the launch it can be further determined if

it would be advisable to continue both lines or adjust production to meet any demand fluctuations in

either product. Furthermore if sales of either product overshadow the other by large margins; one

product could be phased-out if favor of the more successful product.

An average of the forecasts for both the 5.5 and 10 oz. container including the low and high

estimates show the new sales volume would be 11,520,174 total ounces of product and would generate

$3,180,650 in revenue. This would be an increase of 775,000 ounces and a $257,963 increase in revenue

(analysis on excel at bottom)*.

There should be a market wide launch of the new products located next to existing product and

if possible, partial product placement should also be in the womens toiletry section in drug and food-

and-drug stores. This would be due to the results showing that is where the non-customers would

expect to find the product. The launch should also be launched in the time believed to be the busiest

selling time of the year (spring through summer). In this way more women will be looking for this type of


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product and this could lead to a long term relationship with the customer base once they have tried the

product.

There should also be an effort to showcase the value-added characteristics of the new

product. Benefits such as no chlorofluorocarbons (harmful to the atmosphere) and the rustproof bottom

of the canister; should be explained to any new potential customer by way of packaging design or

accompanying signage in stores. These distinctions can be equated with a higher quality and worth the

slightly higher price associated with the original product placement.

It was also mentioned in the case that the new product manager had some reservations about

making a decision about how to proceed with new product due to chain of command in the firm. This

should not be taken into much consideration; there are necessary hierarchies in firms that need to be

adhered to for the health of the workplace. The decisions of the managers can and should be explained,

but then those decisions need to be followed. These decisions might not turn out to be the correct ones,

but that is something for upper management to consider. The case states that one employee (the

assistant) believes that they were passed over for promotion and the one promoted thinks any decision

might affect their working relationship. In this case the assistant formulated a plan of action that has

some good points and bad. Since this plan that I have laid-out involves at least part of the original plan,

and does result in a new product launch; I dont believe that there should be any long lasting

ramifications between the associates. These choices involving plan, product, and relationships, should

have a beneficial effect (profit) for the firm.


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Works Cited

Kerin, Roger A., and Robert A. Peterson. Strategic marketing problems: cases and comments. 12th ed.

Alexandria, VA: Prentice Hall, 2010. Print. First in Show Pet Foods, IncPage 118

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