Gillette Safety Razor Analysis

Gillette Safety Razor Division Analysis

By Sarah Brown

U0741750

MKTG 4020-001

9/8/15

Introduction

After splitting off of the Toiletries Division, the Gillette Safety Razor Division (SRD) must add new product categories to the product line to meet the earnings growth target.  Mr. Bingham, Vice President of SRD is considering entering the cassette tape market for potential profitable opportunities to utilize their well-developed strengths.  To test if the cassette market will be beneficial to Gillette an analysis must be conducted on the market and the internal resources.  The analysis will offer greater direction and allow for more accurate recommendations.          

Analysis

There are three compelling reasons why SRD should consider including blank cassettes in their product line.  The initial reason would be because there is no industry leader simply manufacturing cassettes that can be recorded and rerecorded.  The market for recordable cassettes recently emerged without a top competitor taking up market space.  The existing market is saturated with low quality cassettes that create many problems for users including: improperly fitting into machines, poor sound quality, low-grade quality tape and internal cassette structure and other problems emerging from cheap parts in order to reduce costs.  Gillette is known for quality and would be able to market their cassettes with the same reliable brand.

The second reason Gillette should be considering entering the cassette market is because their greatest strength lies within mass-distributed packaged goods.  They have already established a sales force for plastic products with many connections to 500,000 retailers including discount, department and drug stores that would all be interested in selling this product.  Their brand strengths would allow them to market themselves as a higher quality product and gain value and brand loyalty from the consumer and the retailers.  

Finally, from 1969 to 1970 there was a 60% increase in cassette sales with a forecasted rate to continue at 30% year after year through the 1970s.  If Gillette were to enter this growing market and offer competitive prices combined with their associated and trustworthy brand name, they could motivate consumers to buy based on their reputation.  Assuming that time to break even would be short because of the projected average annual rate of 30% then they would be able to meet their target earnings (see Appendix).

The main concerns that Gillette should be wary of when differentiating their product line is that their marketing program will only allot 10% of their time to marketing the new cassettes.  This is an insufficient amount of time to establish leadership of a new product as a leader in this booming market.  The advertising budget may also fall short of the needs of building recognition against competitor campaigns.  The pricing of the product will play a vital role in the success of the product and Gillette should only enter after extensive research of introductory price to avoid consumer rejection.  

Recommendations

Gillette should enter the market by offering professional tapes priced at $2.98 and standard tapes at $1.87.  These are the best prices to offer because they are competitive and yet still allow for profit after the break-even point.  Gillette should target a younger demographic because they make up over 60% of the current cassette users and will be the ones who continue to use them as they get older.  The projected annual growth rate shows promise that it will be profitable in the future and their current ties to over 500,000 retailers will prove beneficial to their product distribution.  

Appendix

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