商贸案例分析.doc

Soft and Silky Shaving Gel
Introduction
Shaving armpits has been a habit of people for so long. Because people think that a clean body is much more beautiful.
Nowadays there are three main methods for women to shave: the most popular one is shaving with soap, water and razors. The second one is shaving with razor and shaving cream and gels. The third one is shaving with electric razors. As for the shaving frequency: it has been estimated that 80% women will shave themselves once a week. The working class will shave more times than the housewife. In summer, as we know, people will wear less so in summer, people shave a lot. Compared with men, women shave more times than men. Therefore, shaving armpits products is a potential market.
This is a case about Soft and Silky Shaving Gel. Ms-Tique Corporation was a manufacturer of women’s personal-care products, with sales of $122.5 million in 1996. Their products were sold by drug and food-and-drug stores. The company’s manufacturing policy was and continued to be utilize existing production capacity whenever possible.
In order to improve the sale, this manufacture held the attitudes that because women hoped their products can contain a moisturizer to reduce irritation, and make shaving easier. So in 1987, more additional moisturizer were added. As a retailer, the spot of the goods matter. On the other hand, the company also set aside money for the rack jobbers. Because they are the wholesalers who set up retail display and kept them stocking with merchandise. They received a margin of 20% off the sales price to retailers and obtain product placement in the women’s personal-care, emphasizing the production’s positioning statement and minimizing direct price comparisons with men’s shaving creams.

From this picture, it is clear that from 1987 to 1996, this product made huge profits. The gross profit is $1,862,000. The assignable costs are the advertising and promotion costs and overhead and administrative costs, which took up $788,000. All in all the brand contribution is $682,000. So we can conclude that it was successful.
In this way, the company decided to increase their sales further as their one of their future strategies.
However, in this company, there is another relationship problem between the boss and the employee. Phoebe Masters was the newly appointed Product Manager for hand and body lotions at Ms-Tique Corporation. She had to make decision and this decision would affect her working relationship with Courtwright. While Heather Courtwright provided new package design, originally proposed the new package to Master’s Predecessor in July 1996. After Master became product manager, she also provided test market recommendation. As we can see, Phoebe appeared to take the place of Courtwright, who had been sacrificed a lot to the company and thought to be the next manner. The new Phoebe had to cope with the complicated complex between her and Courtwright for the ultimate goal--- greater sales.
Analysis of the Present Condition
Market size:
Industry sources estimate the U.S. Dollars value of women’s “wet shaving” products to be over $150 million in 1996 at manufacturer’s prices. Sales growth has been in the range of 3 to 5 % per year since 1991.
Competitors:
The Ms-Tique Corporation has faced great competitions since 1991.
In 1991, the competitions included Gillette’s Sensor Razor for Women, the quality of shaving creams and gels for women and increased advertising.
In 1993, two competitive products came out, the first one is S.C. Johnson’s Skintimate, and formerly called Soft Sense and the second one is Soft Shave, a lotion sold by White Laboratories’s.
In 1996, there were 7 major competitors: even though all were not stocked by stores that carried Soft and Silky Shaving Gel.

The table shows the representative brands, sizes, forms (cream, gel, lotion), and typical retail price. We can see from it that the Soft and Silky Shaving Gel is the most expensive one among all the competitive products.
Ms-Tique Corporation invested more money in advertising and promotion for Soft and Silky Shaving Gel had responded to the increasing competition. Expenditure had increased each year since 1993, reaching 31% of sales in 1996.
New package design:
To meet the increasing competition, Masters’ brand assistant Heather Courtwright provided an idea for new package design. Her recommendation was based on 4 developments:
1. Unit sales volume for Soft and Silky Shaving Gel had declined and then plateaued in recent years.
2. The growth of Soft and Silky Shaving Gel had strained manufacturing capacity: the product’s full rate had dropped, leading to out-of-stock situations and lost sales.
3. The company had no manufacturing capacity-expansion plans for the next three years.
4. The aerosol packaging had become the dominant design for women’s shaving creams and gels by 1996.
Her observations promoted a preliminary study of outsourcing opportunities for a new package design, a contract-filler. Her review of supplier proposals led her to choose one that was capable of meeting production requirements and providing certain “value-added” features:
1. Environmentally friendly, that is the supplier could deliver a propellant with no chlorofluorocarbons which is harmful to the earth’s ozone layer;
2. The container’s bottom would be rust-proof and leave no rust ring when wet, because most women shave in the bathtub or shower and tend to leave a wet can on the tub’s porcelain, which can leave a rust stain;
3. The supplier could produce and ship product directly from its manufacturing facility at a lower per unit cost than the tube container and was prepared to maintain an adequate safety stock of inventory.
However, there was a drawback of the new package-- that is only 5.5- and 10-ounce containers could be produced without making significant and expensive changes in its equipment.
What’s more, one-time set-up charge for the Soft and Silky Shaving Gel production line and package graphics was $5,000, and this charge would be the same whether one or both sizes were produced.
Preliminary tests:
Courtwright spend $25,000 to assess consumer response to the proposed container. Her proposal was approved on the basis of the cost data provided and the recognition that use of a contract-filler would require no incremental investment in company manufacturing capacity.
Principle findings:
1. Both customers and noncustomers were unanimously in favor of the aerosol can. 10-ounce can was the favorable, since it would require fewer purchases.
2. 20% customers said they would convert to the 10-ounce can; 25% customers said they would like to buy the 5.5-ounce can.
3. 25% non-customers would switch over the aerosol can irrespective of the can size. Their preference for the aerosol over the tube package was their principle reason (in addition to price) for not buying Soft and Silky Shaving Gel previously.
4. As for the section in which the product could be found, the customers expected to find the aerosol can next to the tube container, while non-customers expected to find it stocked with women’s toiletries.
5. The pricing was acceptable and favored by current customers. Non-suctomers thought the SRP was somewhat high, but linked the value-added features and would try the product.
Relationship Problem:
What’s more, there was a little relationship problem between Masters and Courtwrigt.
First of all, the new package had become a pet project for Courtwright.
In addition, Masters had heard that Courtwright felt that she, not Masters, should have been promoted to Product Manager for hand and body lotions given her association with the line for five years.
Given the situation, Masters believed that her handling of this decision would affect her working relationship with Courtwright.
Problem Definition
Whether a 5.5-ounce or a 10-ounce aerosol container should be introduced and whether Phoebe Masters should approve additional funds for a market test?
Evaluation of Decisive Factors
Based on the problem definition, we have generated three action plans. The first is to fund the test market. The second is to introduce a 5.5 ounce aerosol container without funding the test market. The third one is to introduce a 10 ounce aerosol container without funding the test market. Next is the evaluation of these three plans.
Plan A: fund the test market.
The advantages are as follow. Compared with the preliminary test, the test market can help us know the preference of the customers and the market trend further, so that we can provide more suitable products to the customers. In addition, in this case, Masters was a newly appointed Product Manager and funding the test market was the plan of Courtwright who didn’t really like Masters. Therefore, accepting Courtwright’s plan may help Masters avoid possible conflicts between them.
But the problem was，Courtwright's estimated cost for the test market was 15,000 dollars and the 5000 dollars supplier setup charge would have to be paid. In addition, the test would run for 3 month, beginning on April 1. It seemed that the money and time we would spend in the test market was a bit more.
Plan B: introduce a 5.5 ounce aerosol container without funding the test market.
The advantage of this plan is we can spend less time and money comparing with plan A. But the adverse effect is that only through the preliminary test we cannot know the preference of the customers and the market trend well, which means we cannot provide relatively suitable products to the customers.
When selecting the size, according to the preliminary test, 25% regular customers would convert to the 5.5 ounce container and 20% say that they would convert to the 10 ounce can. We can see more old customers would convert to the smaller one so if we introduce the 5.5 ounce container, we can satisfy more regular customers.
But on the whole, both regular customers and new customers in the preliminary test were not so interested in the 5.5 ounce container because compared with the 10 ounce container, it required more purchases. Moreover, the price of a 5.5 ounce container was 3.5 dollars. Its average price was 0.64 dollars per ounce. The price of a 10 ounce can was 4.25 dollars. Its average price was 0.425 dollars per ounce. So the 5.5 ounce can was not cost-effective. The only difference between these two containers is their size. Whether the product is cost-effective or not can be an important factor to the customers when they are selecting the products.
Plan C: Introduce a 10 ounce can instead of a 5.5 ounce one.
Like plan B, this plan can spend less time and money but cannot know the preference of the customers and the market trend. But compared with Plan B, it requires fewer purchases and is more cost-effective.
After evaluating the three plans, we should also consider a little question in plan B and C: where should we put the new package design? According to the preliminary test, we can see that regular customers expected to find the aerosol container next to the tune container while new customers expected to find it stocked with women's toiletries.
Recommendations
According to previous analysis, we can see that the advantages of doing market research outweigh its disadvantages, so we recommend doing the market research. Here are the details about the market research:
Market test proposal:
Volume: 20,000 cans for each size
From April to June, 3 months
In a limited cross- section of drug and food-and-drug stores
Test stores would be isolated geographically from nontest stores.
One half of the stores would carry the 5.5-ounce container, and the other half would carry the 10-ounce container.
According to previous researches and data we already have, our final recommendation is listed as follows:
Package: 10-ounce aerosol container
Pricing: $ 4.25 per can ($0.425 per ounce)
Channel: drug, food & drug stores
Section: placed among women’s toiletries

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