Mba 630 - Soft and Silky

Soft and Silky Shaving Gel - case study

John Trammell

MBA 630

Case #2

Soft and Silky Shaving Gel

I. The issues facing Soft and Silky are as follows:

1) Phoebe Masters, the newly appointed Product Manager, must decide whether Ms-Tique Corporation should adopt a new product package design for its Soft and Silky Shaving Gel, due to recent declines in sales volume, strained manufacturing capability, a lack of manufacturing capability expansion plans, and increased market demand for aerosol based products. Her choices are either to continue producing the 5 ½ oz tube product alone, or add either a new aerosol 5 ½ oz can or 10 oz can to the product line along with the original tube.

2) Masters must decide whether to approve a market test of the new products to a limited cross-section of drug and food-and-drug stores. The estimated cost of the test is $30,000, along with a $10,000 supplier set-up charge. A 20,000 unit minimum order for each package size is also required. Estimated total cost of the test market is as follows:

  $30,000 Test Market cost

+Â Â 10,000 Set-up cost

+Â Â Â 5,800 10 oz can Production cost

+Â Â Â 4,800 5 ½ oz can Production cost

 $40,600 Total test Market cost

II. Based of Soft and Silky’s performance through 2000, results from the focus group studies, and the performance of analogous products, the aerosol container concept should be produced further. This conclusion is based on the following Pro’s outweighing the Con’s.

Pros:

1) Per unit variable cost is much less for 10 oz and 5 ½ oz aerosol cans than 5 ½ tube. That is, $.40 per unit for 5 ½ oz tubes compared to $.29 per 10 oz aerosol or $.24 for 5 ½ oz aerosols.

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2) Outsourcing opportunities exist for Ms-Tique in which the product can be produced by a contract filler that can produce and ship the product directly from its manufacturing facility at a lower price per unit than the tubes, and maintain an adequate safety stock of inventory.

3) Aerosol cans has become the dominant design preference among consumers. Ms-Tique.

4) The contract filler will produce product containers that are rust free, and produce no CFCs. These attributes are appealing to the market and can be used to better market the product.

5) Market tests revealed that noncustomers would purchase the product, despite feelings that it was some what pricy, due to the value-added features.

6) Current customers like the new product, 20% would switch to 10 oz can and 25% would switch to the 5 ½ oz can.

7) 25% of noncustomers would switch to Soft and Silky, according to the focus group.

Cons:

1) Only 5 ½ oz or 10 oz cans can be produced, while the typical market size for women’s shaving s gels is 6 – 10 oz cans.

2) Additional spending will need to be made in order to make the product available. The market test, if used will cost $40,600, and the production portion will cost either a minimum of $29,000 for 10 oz cans or $24,000 for 5 ½ oz cans.

3) Some confusion will exist as to where the product can be found in stores, according to the focus group.

III.

5 ½ Oz. Tube Pricing:

5 ½ Oz. Aerosol Pricing:

10 Oz. Aerosol Pricing:

Retail Pricing

 $ 3.95

Retail Pricing

 $ 3.50

Retail Pricing

 $ 4.25

÷

1.4

÷

1.4

÷

1.4

Rack Jobber Pricing

 $ 2.82

Rack Jobber Pricing

 $ 2.50

Rack Jobber Pricing

 $ 3.04

÷

1.2

÷

1.2

÷

1.2

Manufacture Pricing

 $ 2.35

Manufacture Pricing

 $ 2.08

Manufacture Pricing

 $ 2.53

Less: Unit Variable Cost

 $(0.40)

Less: Unit Variable Cost

Â