Jones Blair Situation Analysis

MKTG4781: Marketing Management Strategy

Soft and Silky: Case Write-up

11/2/06

Target Market - females age 25-45

Marketing Strategy - Price leader - Soft and Silky is the leader in price in their category (women's shaving gels)

Marketing Objectives - Projected sales with cannibalization to be significantly higher than the difference in cost to produce the 5 oz or 10 oz gel containers

Product - 5.5 oz and 10 oz aerosol shaving gels for women

Product Strategy - Product Development - if one considers Soft and Silky's offerings new, but it is an existing market

Product Objectives - customer satisfaction by providing a shaving gel that has a lotion scent, reduces skin irritation, moisturizes, and an aerosol can with no CFCs

Product Tactics - during the summer months, when shaving is more popular because women are wearing shorts/skirts, etc. in the warmer weather, we will have packaging tactics to sell more gel from one packages)

Pricing - Is competitive for the 5.5 oz aerosol and tube ($3.50 and $3.95 respectively), and the 10 oz aerosol ($4.25).

Pricing Strategy - Soft and Silky has a premium pricing strategy and they have been doing well, but they have tapered in the last four or so years in sales.

Pricing Objectives - Sales was increasing 3-5%, but we believe we can do better; also maintain margins.

Pricing Tactic - 20% margin for retailer and 40% margin for the manufacturer, keep margin the same, take away from net sales.

Promotion - Advertising

Promotion Strategy - Advertising in newspapers, in-store displays

Promotion Objectives - Encourage women to try new style

Promotion Tactics - Pull strategy will be used because we are spending a lot on advertising to build up consumer demand with the new aerosol can. Push strategy is being used to get and maintain shelf space in a particular business. Increase advertising to 35% of sales.

Channel - Indirect

Channel Strategy - Shaving gel is a shopping product for most women and they will not treat it as a convenience product. Adaptability is also a key, we need to place the aerosol gel where consumers can find easily to purchase the product.

Channel Objectives - Have one intermediary (retailers) to distribute our product.

Channel Tactics - Contacting our main shipper and maintaining business with them

Problem

Soft and Silky needs to figure out if they should pursue shaving gels in 5.5 oz aerosol cans or 10 oz aerosol cans instead of their current tube gels.

Alternatives

#1 - Pursue 5.5 oz aerosol

#2 - Pursue 10 oz aerosol

Criteria

-Projected sales - sales will be projected using sales forecast from exhibit 5. (Appendix A)

-Cannibalization - this will take into account the fact that consumers will not buy both tube and aerosol and therefore aerosol cannibalizes sales from tube gel.

-Cost of Advertising - increased percentage of sales dollars (35%) will apply to both alternatives plus estimated other media (eg. print ads)

Unit Contribution for 5.5 oz tube, 5.5 oz aerosol, and 10 oz aerosol

-5.5 oz gel tube

Retail $3.95

$2.37 (40% margin)

Mfr. Price $1.90 (20% margin)

Variable Cost $0.40

Contribution $1.50 ($0.27 per ounce)

-5.5 oz gel aerosol

Retail $3.50

$2.10 (40% margin)

Mfr. Price $1.68 (20% margin)

Variable Cost $0.24

Contribution $1.44 ($0.26 per ounce)

-10 oz gel aerosol

Retail $4.25

$2.55 (40% margin)

Mfr. Price $2.04 (20% margin)

Variable Cost $0.29

Contribution $1.75 ($0.175 per ounce)

Forecast A (low)

5.5 oz tube volume 8,600,000 oz (.27 profit per ounce) = $2,322,000

5.5 oz aerosol package volume:

Cannibalized volume 2,145,174 (.26) = $557,745

Net new volume 300,000 (.085) = $25,500 ($532,245)

Net sales: dollars $1,789,755

Forecast B (high)

5.5 oz tube volume 8,400,000 oz (.27 profit per ounce) = $2,268,000

5.5 oz aerosol package volume:

Cannibalized volume 2,345,174 (.26) = $609,745

Net new volume 500,000 (.085) = $42,500 ($567,245)

Net sales: dollars $1,700,755

Forecast C (low)

5.5 oz tube volume 9,000,000 oz (.27 profit per ounce) = $2,430,000

10 oz aerosol package volume:

Cannibalized volume 1,745,174 (.095) = ($165,791)

Net new volume 800,000 (.175) = $140,000 ($25,791)

Net sales: dollars $2,404,209

Forecast D (high)

5.5 oz tube volume 9,600,000 oz (.27 profit per ounce) = $2,592,000

10 oz aerosol package volume:

Cannibalized volume 1,145,174 (.095) = ($108,791)

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