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Dermavescent copy

  1. 1. Dermavescent Laboratories I. C. Summary of Facts A. Market - Women's personal-care products 1. Methods of shaving a. Electric shavers b. Blade and razor shavers 2. Factors of shaving a. Seasons of the year b. Frequency of shaving 3. Trends in shaving a. Attitudes towards shaving b. Market size 4. Economic market a. Monopolistic Competition b. Many sellers with a range of prices B. Product 1. Dermavescent Laboratories Products a. Soft and Silky shaving gels b. Hand/Body lotions, facial creams and women’s toiletries 2. Benefits a. Core - Assist with removing hair b. Protection against skin problems and razor bumps c. Limits dry skin by using moisturizer d. Makes shaving easier by using a sticky thick cream e. Some gels are scented, which allows for a clean smell and feel 3. PLC a. Maturity Stage b. Slowed growth in sales with intensified competition Price 1. Retailers receive a 40% margin on the suggested retail selling price a. 5.5-ounce tube: $3.95 * 40% = $1.58 ($3.95 - $1.58 = $2.37) b. 5.5-ounce aerosol: $3.50 * 40% = $1.40 ($3.50 - $1.40 = $2.10) c. 10-ounce aerosol: $4.25 * 40% = $1.70 ($4.25 - $1.70 = $2.55) 2. Wholesalers receive a 20% margin on suggested retail price a. 5.5-ounce tube: $3.95 * 20% =$0 .79 ($3.95 - $.79 = $3.16) b. 5.5-ounce aerosol: $3.50 * 20% = $0.70 ($3.50 - $.70 = $2.80) c. 10-ounce aerosol: $4.25 * 20% =$0.85 ($4.25 - $.85 = $3.40) 3. Variable Costs a. 5.5-ounce tube suggested retail price: $3.95 b. 5.5-ounce aerosol suggested retail price: $3.50 c. 10-ounce aerosol suggested retail price: $4.25 4. Allocated costs a. $35,000 on market research focus groups b. $10,000 one time setup fee for line and package costs c. $30,000 costs on test market 5. Manufacturing Costs
  2. 2. a. 5.5-ounce aerosol: $0.24 b. 10-ounce aerosol: $0.29 6. Sales of $3,724,000 in 2005 with a 1,960,000 unit volume 7. Elasticity a. Relatively Elastic b. Customers settle for the lowest price D. Promotion 1. Product placement from rack jobbers 2. In-store promotions, multi-pack deals, and media advertising 3. Market test using newspaper ads and point-of-purchase displays 4. Expansibility a. Highly expandable b. Sales are affected by industry marketing E. Place 1. Drug stores and Food-and-drug stores 2. Channel: Dermavescent Laboratories-Rack Jobbers-Retailers-Consumers F. Other 1. Production issues a. Production schedules not integrated b. Not able to meet retailers supply requests c. Hand and body lotions overburdened capacity d. No manufacturing capacity expansion plans for next 3 years 2. New packaging design a. Using an aerosol container b. Many competitors are already using the aerosol packaging c. Rust proof bottom and earth friendly with no chlorofluorocarbon emissions 3. Outsourcing a. Pressure filling production method b. Ability to provide “value-added” features c. Meet potential production requirements d. Supplier could produce and ship products directly from facility at lower price e. Maintain an adequate safety stock of inventory II. Problem/Opportunity A. Primary – Whether to introduce an aerosol container B. Secondary 1. Production issues 2. Aerosol container size 3. Future of the tube package design III. Recommended Action A. Primary – Introduce aerosol containers B. Secondary 1. Outsource production to a manufacturing company 2. Introduce both sizes' of the container 3. Stop producing tube packaging
  3. 3. I. Plan of Action A. The plan of action for Soft and Silky Shaving Gel begins with introducing an aerosol container. Currently, Soft and Silky uses a tube packaging design for their products. Many competitors are using the aerosol container, which makes the switch even more important. Trends are showing that the dominant packaging for women's shaving creams and gels are aerosol containers. Soft and Silky needs to be aligned with their competitors to improve their revenue and increase their sales growth. B. Soft and Silky should produce the 5.5-ounce and the 10-ounce aerosol containers for their shaving gel. By having both sizes' of aerosol products, Soft and Silky will appeal to both markets for women. They will appeal to women purchasing a 10-ounce can, which allows for less repeat purchases and most likely a cheaper long-term cost effect for the customer. The 5.5-ounce container will appeal to routine customers who bought the 5.5ounce tube version size. In addition, the 10-ounce and 5.5-ounce containers will appeal to both first time customers, who have an unknown and indifferent preference. Soft and Silky can become a trend leader by expanding their shaving gels into many different sizes. C. By introducing and developing the aerosol containers, Soft and Silky will have to outsource their production to a manufacturing company. The manufacturing company will be able to process requests and add value-added features. The company will specialize in contract and pressure filling for their shaving gel. By outsourcing their shaving gel aerosol containers, Soft and Silky will not have to make expansion plans or build their own facility. In addition, outsourcing will eliminate extra production costs and substantially decrease their manufacturing costs.
  4. 4. D. By having two sizes of the aerosol container, Soft and Silky should not continue to sell the tube packaging. The tube packaging is more expensive to produce than the aerosol container. In addition, the current tube sales are decreasing and can have an effect on their current products. Soft and Silky will follow their competitors and become more efficient and effective in their production. Soft and Silky will still be able to use the current production facility for their facial creams, body and hand lotions, and women's toiletries. E. Soft and Silky should reject the proposal for the limited cross-section store market testing. The potential proposal was to aide in the decision making of the two aerosol containers. Soft and Silky will introduce both sizes, which will eliminate the allocated costs towards market testing and can be used in another area of the company. F. Soft and Silky needs to increase their marketing and advertising efforts. With the tube container, Soft and Silky Shaving gel was decreasing in sales. The promotions used were product placement features, multi-pack deals, and in-store promotions. By not producing a market test, Soft and Silky can use the budget towards increased marketing and advertising efforts and ultimately increase their sales. II. Plausible Alternatives A. Soft and Silky has several optimal alternatives to establish success and revenue for their company. Soft and Silky could easily keep their shaving gel product exactly the same. In return, the company could put more focus on their other line of products. Their shaving gel product is very established and successful with their customers. Even though the sales growth rates have been decreasing, the company is still positioned fairly high with their competitors for success.
  5. 5. B. Another alternative for Soft and Silky is to keep their tube packaging and only introduce one size of the aerosol container. The tube packaging is already a successful product so the addition of one size of aerosol container would complement the recent trends with competitors. In addition it can be less risky for Soft and Silky to only introduce only one aerosol size. The company will have lower costs and can slowly step into the aerosol container market. C. Soft and Silky could also expand on their own production and manufacturing facility. The company currently houses their products of hand lotions and toiletries. The company was not planning any construction for the next 3 years, but the expansion would limit outsourcing costs to another company. D. Soft and Silky could slowly introduce the aerosol container by establishing a market test. A test market would provide additional recommendations and statistics towards the appeals of customers. Soft and Silky can see the see market tests results before fully introducing the aerosol container. It will be less risky and provide knowledge for the company. E. Finally, Soft and Silky has the option of merging with another competitor. Many of Soft and Silkys' competitors are already using aerosol containers, which would allow for a smooth transition. By merging with another competitor, Soft and Silky could save on their operating and research expenses. III. Supporting Arguments A. Introducing the aerosol container will be beneficial for Soft and Silky Shaving gel. In 2005, the dominant packaging for women's shaving creams and gels was aerosol. In addition, Soft and Silky has extremely loyal customers, which would make the switch to
  6. 6. an aerosol container a smooth transition. Soft and Silky funded a focus group survey in November 2005. The results showed that 25% of the noncustomers said they would switch over to the aerosol container. In addition, these customers said the aerosol can was the main reason for not using the Soft and Silky product. Soft and Silky needs to introduce the aerosol container to compete with their competitors and satisfy customers. B. Soft and Silky definitely needs to sell both aerosol container sizes. By selling both containers, they will please all their customers and hopefully gain new customers. The focus group study results showed that 20% of customers said they would convert to the 10-ounce style and 25% would convert to the 5.5-ounce container. In addition, the 10ounce was the favorite choice among the participants. Soft and Silky needs to produce both sizes of aerosol products to appeal to both of their markets. C. Soft and Silky needs to outsource shaving creams and gels. By outsourcing their products, Soft and Silky will be able to develop aerosol containers. It will be more cost effective and efficient for them to use another manufacturing company. Currently, Soft and Silky has production capacity which has caused issues with fill rates, lost sales and out-of-stock issues. In addition, Soft and Silky does not have any expansion plans for the next 3 years. By waiting 3 years to expand their production, Soft and Silky will affect their growth and revenue. Outsourcing will also allow Soft and Silky to use the facility for their other product lines while meeting the expectations for the shaving gel trends. D. Soft and Silky Shaving gel should stop producing the tube packaging. Soft and Silky had sales of 1,953,668 units, which would account for a 0.32 percent decrease from the prior year. In addition, the price per ounce for the aerosol containers are lower than the price per ounce for the tube package, which is another great reason to eliminate this type
  7. 7. of packaging. The tube packaging for Soft and Silky is not as environmentally friendly as the aerosol container. The aerosol supply would not use emission carbons, which are harmful to the planet. By eliminating the tube packaging, Soft and Silky will have lower costs, increased sales, and an environmental friendly product. E. Soft and Silky should reject the proposal for market testing. The costs of market testing would be $30,000. In addition, the company spent $35,000 to have a market research company conduct four focus group studies. It does not seem cost effective to develop a market test after learning quality information from the focus groups. Soft and Silky should use the budget for the potential market test towards the development of the aerosol containers. F. Soft and Silky needs to increase their marketing and advertising efforts. For an example, Soft and Silky could do e-mail marketing with e-mail coupons directly on their smart phones. In addition, Soft and Silky can utilize social media to promote their products. Social media is a free marketing tool. The company could emphasize their shaving gels towards Pinterest since many women use this social media site. Soft and Silky could also put advertisements in newspapers, magazines, and possibility even billboards. These marketing and advertising efforts could allow Soft and Silky to increase sales and revenue.