Parvaderm Case Analysis

Parvaderm Case Analysis

Case Sypnosis

Background info

* Parvaderm's 2004 sales were $258,000,000

o Soft & Silky Gel sales in 2004: $3,724,000

o Unit volume: $1,960,000

o Brand contribution: $1,363,900

* Parvaderm places the Soft & Silky shave gel as a higher quality, higher priced product for a woman who "considers herself special."

* Soft & Silky was introduced 14 years prior to the time of the case in 2004

* Soft & Silky Shaving cream had always been sold in a tube due to lack of technology to produce aerosol containers. All products were sold in tubes, bottles, and jars

* Soft and Silky Shaving gel tube package would produce a 0.32% decrease in sales in 2005 if no new package was introduced

* Currently only produces 5.5oz tube container priced at $3.95 retail

* Rack Jobbers were used for product placement in personal care sections of the store and they received a margin of 20% off retail prices

* Retailers also received 40% off suggested retail price

Problem Definition

How can Parvaderm introduce the most desirable package for Soft & Silky shave gel to increase unit sales and obtain more brand loyal customers given the uncertainty of market acceptance of container sizes, cannibalization rate, and incremental sales growth?

Alternative Identification

* Introduce products with no market test

o Introduce 5.5 oz

 $10,000 set up charge for production line & graphics

 100,0000 minimum order with cost of $0.24 each

 Uncertainty of customer response

o Introduce 10 oz

 $10,000 set up charge for production line & graphics

 100,000 minimum order with cost of $0.29 each

 Uncertainty of customer response

* Conduct market test

o $10,000 set up charge for production line & graphics

o $35,000 to assess consumer response to proposed container

o 20,000 minimum order with 10oz cost of $0.29 and 5.5oz cost of $0.24

* Do nothing

o Continue using tube containers

o Keep current 5.5oz size

o Lose 0.32% decrease in sales

 Produce estimated 1,953,668 unit sales

Relative Information: Internal Factors

Objectives, etc.

* New package design was based on:

o The decrease in sales volume

o Growth strained manufacturing capacity which caused the fill rate to drop, losing sales

o No expansion plans for the next 3 years

o Aerosol had become the dominant container to use

* Outsourcing a contract filling company

o There were rust proof cans, no chlorofluorocarbons, an adequate safety stock can be maintained, and product can be produced and shipped from the facility at a lower cost than tube containers are manufactured by Parvaderm. They can only produce 5.5 oz and 10 oz containers

o Costs:

 $0.29 per 10 oz container, minimum 100,000 unit order

* $4.25 retail price

 $0.24 per 5.5 oz container, minimum 100,000 unit order

* $3.50 retail price

* Parvaderm increased advertising each year since 1995, reaching 31% of sales in 2004$79,980,000

* Unit