Please provide Qualitative Analsis for the attached
file….thank
you………………………………………………………………………………………………………………………………………………………………………………………………………Queen
of Shaves
On Friday, January 7, 2000, Kelsey Keeler, the newly appointed
Product Manager for hand and body lotions at Queen of Shaves, was
faced with her first decision one day after her promotion. She had
to decide whether to introduce a new package design for the
company’s Silky Smooth Shaving Gel. The major questions were
whether a 5 ½-ounce or a 10-ounce aerosol container should be
introduced and whether she should approve additional funds for a
market test. Timing was critical because the incidence of women’s
shaving would increase during the spring months and reach its peak
during the summer months. ♦ THE COMPANY AND THE PRODUCT
Silky Smooth Shaving Gel is marketed by Queen of Shaves, a
manufacturer of women’s personal care products with sales of $225
million in 1999. The company’s line of products includes facial
creams, hand and body lotions, and a full line of women’s
toiletries. Products are sold by drug and food-and-drug stores
through rack jobbers. Rack jobbers are actually wholesalers that
set up retail displays and keep them stocked with merchandise. They
receive a margin of 20% off the sales price to retailers. Silky
Smooth Shaving Gel was introduced in the spring of 1986. The
product was viewed as a logical extension of the company’s line of
hand and body lotions and required few changes in packaging and
manufacturing. The unique dimension of the introduction was that
Silky Smooth Shaving Gel was positioned as a high-quality women’s
shaving gel. The positioning strategy was successful in
differentiating Silky Smooth Shaving Gel from existing men’s and
women’s shaving creams and gels at the time. Moreover, rack jobbers
were able to obtain product placement in the women’s personal-care
section of drug and food-and-drug stores, thus emphasizing the
product’s positioning statement. Furthermore, placement apart from
men’s shavings products minimized direct price comparisons with
men’s shaving creams, since Silky Smooth Shaving Gel was premium
priced – with a suggested retail price of $3.95 per 5 1/2 ounce
tube. Retailers received a 40 percent margin on the suggested
retail selling price. Silky Smooth Shaving Gel has been sold in a
tube since its introduction. This packaging was adopted because the
company did not have the technology to produce aerosol containers
in 1986. Furthermore, the company’s manufacturing policy was and
continues to be to utilize existing production capacity whenever
possible. As of early 2000, all products sold by Queen of Shaves
were packaged in tubes, bottles, or jars. Silky Smooth Shaving Gel
had been profitable from the time of its introduction. Although the
market for women’s shaving cream and gels was small, compared to
men’s shaving cream and gels, Silky Smooth’s unique positioning had
created a “customer franchise,” in the words of Barbara Johnson,
the Silky Smooth brand assistant. “We have a unique product for the
feminine woman who considers herself special.” Silky Smooth Shaving
Gel sales were $3,724,000 in 1999 with a 1,960,000 unit volume
(Exhibit 1).  
EXHIBIT 1 Silky Smooth Shaving Gel Income
Statement    for Year Ending December 31, 1999
Sales   $3,724,000 Cost of goods sold (incl.
freight)a   784,000 Gross profit   $2,940,000
Assignable costs:     Advertising and promotion
$1,154,540    Overhead and administrative 421,560
$1,576,100 Brand contribution   $1,363,900 a For analysis
purposes, treat the cost of goods sold and freight as the only
variable costs. ♦WOMEN’S SHAVING
Research on women’s shaving commissioned by Keeler’s predecessors
over the past decade have produced a number of findings useful in
preparing annual marketing plans for Silky Smooth Shaving Gel. The
major findings and selected marketing actions prompted by these
findings are described below.
Methods of Hair Removal and Shaving Frequency
Women use a variety of methods for hair removal. The most popular
method is simply shaving with razors and soap and water. Shaving
with razors and shaving cream and gels is the next most used
method, followed by shaving with electric razors. Women typically
have their own razors and purchase their own supplies of blades.
Approximately 45 million women shave with a razor; 15 million women
use electric shavers. Over 80 percent of women shave at least once
per week, and women who work outside the home shave more frequently
than those who do not. On average, women shave 11 times per month
and nine times more skin than men per shaving occasion (men shave
24 times per month on average). Shaving frequency varies by season,
with the summer months producing the greatest shaving activity
(Exhibit 2). Accordingly, in-store promotions and multipack deals
were scheduled during the summer.
EXHIBIT 2 Seasonality of Women’s Shaving and Shaving
Area   (Percentage of U.S. Women)
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Attitudes toward Shaving
Women view shaving as a necessary evil. When queried about their
ideal shaving cream or gel, women typically respond that they want
a product that contains a moisturizer, reduces irritation, and
makes shaving easier. It appears that four out of five women use a
moisturizer after shaving. These specific findings resulted in a
change in the Silky Smooth Shaving Gel ingredient formulation in
1990. Prior to 1990, the product contained only aloe. In 1990,
three additional moisturizers were added to the product, including
vitamin E. These ingredients were emphasized on the package,
in-store promotions, and media advertising.
Market Size and Competitive Products
Industry sources estimate the U.S. dollar value of women’s “wet
shaving” products to be over $300 million in 1999, at
manufacturer’s prices. Sales growth has been in the range of three
to five percent per year since 1994. Razors account for the bulk of
sales growth in annual sales. Historically, women who used shaving
cream or gels had few “women’s-only” products to choose from.
However, since 1994, a vibrant women’s shaving cream and gel
category has emerged due to new-product activity, increased
advertising and promotion, and improved shaving technology. Some
industry analysts pointed toward the introduction of Gillette
Sensor Razor for women as one important growth stimulant. Other
analysts cited improvements in the quality of shaving creams and
gels for women and increased advertising. Until late 1993, only two
competitive products were normally available in the drug and
food-and-drug stores served by Queen of Shaves rack jobbers. These
products were S.C. Johnson’s Skintimate (formerly called Soft
Sense) and Soft Shave, a lotion sold by White Laboratories. By late
1999, seven major competing brands existed in the women’s shaving
cream or gel category even though all were not stocked by stores
that carried Silky Smooth Shaving Gel. Exhibit 3 shows
representative brands, sizes, forms (cream, gel, lotion), and
typical retail prices.  
EXHIBIT 3 Representative Women’s Shaving Products
Brand (Manufacturer) Size a Form Price – Per Oz. Skintimate (S.C.
Johnson) 7 oz. Gel $2.48 – $.35 Skintimate (S.C. Johnson) 10 oz.
Cream $2.48 – $.25 Satin Care (Gillette) 6 oz. Gel $1.97 – $.33
Hers (Medtech Labs) 10 oz. Cream $1.78 – $.18 Soft Shave (White
Labs) 8 oz. Lotion $1.82 – $.23 Barbasol Pure Silk (Pfizer) 7 oz.
Cream $1.99 – $.28 Aveeno (Ryoelle Labs, Div. of S.C. Johnson) 7
oz. Gel $3.69 – $.53 Inverness Ultra-Lubricating Shaving Gel
(Inverness) 6 oz. Gel $2.15 – $.36 Silky Smooth Shaving Gel (Queen
of Shaves) 5 ½ oz. Gel $3.95 – $.72 a Several manufacturers also
sold smaller 2, 2 1/2, and 2 3/4 ounce sizes designed for travel
purposes.
Queen of Shaves advertising and promotion for Silky Smooth Shaving
Gel had responded to the increase in competition. Expenditures had
increased each year since 1994, reaching 31% of sales in
1999.
By 1999, the dominant packaging for women’s shaving cream or gels
had become the aerosol container. Only a few shaving gels and
brands were sold in tubes or plastic bottles, including Silky
Smooth Shaving Gel, Soft Shave Lotion, and Inverness
UltraLubricating Shaving Gel.  
♦NEW PACKAGE DESIGN
The idea for a new package design was provided by Keeler’s brand
assistant, Barbara Johnson. She originally proposed a new package
to Keeler’s predecessor in July 1999. Her recommendation was based
on four developments. First, unit sales volume for Silky Smooth
Shaving Gel had plateaued and then declined in recent years
(Exhibit 4). Second, the growth of Silky Smooth Shaving Gel had
strained manufacturing capacity. In the past, production of Silky
Smooth Shaving Gel had been easily integrated into the firm’s
production schedules; however growth in the entire line of hand and
body lotions, coupled with Silky Smooth Shaving Gel sales, had
overburdened production capacity and scheduling. Moreover,
inspection of shipping records indicated that the product’s fill
rate (that is, Queen of Shaves’ ability to supply quantities
requested by retailers) had dropped, leading to an out of stock
situations and lost sales. Third, the company had no manufacturing
capacity expansion plans for the next three years. And finally,
aerosol packaging had become the dominant design for women’s
shaving creams and gels by 1999.
EXHIBIT 4 Silky Smooth Shaving Gel Unit Sales Volume,
1986-1999
Johnson’s observations prompted a preliminary study of outsourcing
opportunities for a new package design. Her study included visits
to several firms specializing in “contract filling” and requests
for production proposals. A contract filler purchases cans,
propellants, caps, and valves from a variety of sources and then
assembles these components, including the product fill (that is,
shaving gel), into the final container. The production method is
called pressure filling. In this method, the cap and valve
are
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inserted in the can and then sealed. At the same time, a vacuum is
created in the container. The product fill and propellant are then
injected under high pressure through the valve into the can. Her
review of supplier proposals led her to choose one that was capable
of meeting production requirements and providing certain “value
added” features. For example, the chosen supplier could deliver a
propellant with no chlorofluorocarbons (CFCs), which are harmful to
the earth’s ozone layer. Also, the container bottom would be
rust-proof and leave no rust ring when wet. This feature was
desired 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. In addition, the supplier could produce and ship product
directly from its manufacturing facility in lower per unit cost
than the tube container and was prepared to maintain an adequate
safety stock of inventory. The only drawback in the supplier’s
proposal was that only 5 ½- and 10-ounce containers could be
produced without making significant and expensive changes in its
equipment. The typical sizes for women’s shaving creams and gels
were 7-ounce and 10 ounce-containers. The estimated total cost of
producing and delivering to rack jobbers a 10-ounce aerosol can of
shaving gel was $.29. A minimum order of 100,000 10-ounce cans
would be required. Johnson believed the suggested retail price
would be set at $4.25 per 10- ounce can, reflecting Silky Smooth’s
premium price strategy. The estimated total cost of producing and
delivering to rack jobbers a 5 ½-ounce aerosol can of shaving gel
was $.24 and the suggested retail price would be $3.50. A 100,000
unit minimum order would be required. Johnson recognized that the
price per ounce for the aerosol containers was lower than the price
per ounce for the tube package. She said the lower price reflected
competitive realities in the category: “The dominant players (S.C.
Johnson and Gillette) are very price competitive. We can retain our
relative premium image even at the lower prices. I fully expect
some cannibalization of the tube will take place just as I’m
confident the incremental volume will more than offset it.” A
one-time setup charge for the Silky Smooth Shaving Gel production
line and package graphics was $10,000, due and payable by Queen of
Shaves upon the signing of the supply agreement. This charge would
be the same whether one or both sizes were produced.
♦PRELIMINARY TESTS
In November 1999, Johnson received authorization from Keeler’s
predecessor to spend $35,000 to assess consumer response to the
proposed container. Her proposal was approved on the basis of the
cost data provided in the recognition that use of a contract filler
would require no incremental investment and company manufacturing
capacity. Johnson commissioned a large marketing research firm to
conduct four focus-group studies. Two focus groups would involve
current users of Silky Smooth Shaving Gel, and two focus groups
would involve users of shaving creams and gels other than Silky
Smooth Shaving Gel and soap and water users. The principal
information sought from these focus group studies was as
follows:
1. Are present customers and noncustomers receptive to the new
package? 2. At what rate would present customers convert to the
aerosol can, and would non-   customers switch over to
Silky Smooth Shaving Gel?
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3. Where, in drug and food-and-drug-stores, would customers and
noncustomers    expect to find the aerosol can? 4.
Is the suggested retail price acceptable? In addition, the
marketing research firm was asked to examine analogous situations
of package changes and report its findings. In late December 1999,
the marketing research firm presented its findings to Johnson, two
days after Keeler’s predecessor resigned to take a position with
another company. There were five principal findings from the focus
groups:
1. Customers and noncustomers were unanimously in favor of the
aerosol can. The    10 ounce can was the favorite,
since it would require fewer purchases. 2. Twenty percent of Silky
Smooth Shaving Gel customers said they would
convert    to the 10-ounce cans; 25 percent said
they would convert to the 5 ½-ounce can. 3. One-fourth of the
noncustomers said they would switch over to the aerosol
can    irrespective of cans size. These consumers’
preference for the aerosol over the    tube package
was their principal reason (in addition to price) for not buying
Silky   Smooth Shaving Gel previously. 4. Customers
expected to find the aerosol can next to the tube container.
Non-   customers expected to find the aerosol container
stocked with women’s toiletries. 5. The pricing was acceptable and
actually favored by current customers. Non-   
customers thought the suggested retail price was somewhat high, but
liked the    value-added features and would try the
product.
In addition to these findings, the marketing research firm
presented ten case histories in which marketers of men’s shaving
cream had introduced a new package. (There was no distinction made
with respect to size of package, whether the package change was
from aerosol to non-aerosol, or vice versa, or previous sales
performance.) Two statistics were highlighted: first-year sales
with the combined packages and the cannibalization rate for the
existing package. According to the report,
It is difficult to draw direct comparisons between the experience
of other shaving creams and gels and that of Silky Smooth Shaving
Gel, given its unique market position. We have tried to do so after
examining ten product-design changes.  
Our estimates (Exhibit 5) are broken down into a “high” and “low”
forecast for each package size. Seven out of the ten products
studied experienced the high situation presented; three experienced
a low situation. We see the 10-ounce package as producing the
largest increase in ounces sold. Even with the cannibalism effect,
we believe that an additional package will produce higher sales, in
ounces, than the Silky Smooth Shaving Gel forecasted volume of
10,745,174 ounces (1,953,668 5 ½-ounce tubes) for 2000. Only a
market test can indicate what will actually occur.
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EXHIBIT 5 Silky Smooth Shaving Gel Sales
Forecast      by Size and Type of
Container (in ounces)
Forecast A: Low estimate for 5 ½-ounce aerosol package
addition      5 ½-ounce tube package
volume 8,600,000     5 ½-ounce aerosol package
volume:      Cannibalized volume
2,145,174     Net new volume 300,000 2,445,174
11,045,174 Forecast B: High estimate for 5 ½-ounce aerosol package
addition      5 ½-ounce tube package
volume 8,400,000     5 ½-ounce aerosol package
volume:      Cannibalized volume
2,345,174     Net new volume 500,000 2,845,174
11,245,174 Forecast C: Low estimate for 10-ounce aerosol package
addition      5 ½-ounce tube package
volume 9,000,000     10-ounce aerosol package
volume:      Cannibalized volume
1,745,174     Net new volume 800,000 2,545,174
11,545,174 Forecast D: High estimate for 10-ounce aerosol package
addition      5 ½-ounce tube package
volume 9,600,000     10-ounce aerosol package
volume:      Cannibalized volume
1,145,174     Net new volume 1,500,000
2,645,174 12,245,174
♦THE PACKAGING AND TEST MARKET DECISION
Johnson presented the research firm’s findings to Kelsey Keeler on
January 7, 2000, one day after Keeler became Product Manager for
hand and body lotions. Keeler listened attentively as Johnson
summarized the research findings and recommended that a market test
be conducted to determine the best package size. Johnson’s
test-market recommendation included a proposal to introduce the new
package design in a limited cross-section of drug and food-and-drug
stores, including heavy-volume and low-volume stores that presently
carried Silky Smooth Shaving Gel. Test stores would be isolated
geographically from nontest stores. The new package would be placed
among women’s toiletries, and the test would run for three months,
beginning April 1, 2000. The April 1 start date was necessary to
ensure that adequate supply of the new package was available.
One-half of the stores would carry the 5 ½- ounce container and the
other half would carry the 10-ounce container. The test would
include a full complement of promotional aids, including newspaper
ads and point-of-purchase displays, and would approximate a
full-scale introduction.