Bic Case
Bic Case
Introduction
BiC’s Ultima Shaver is a new four-blade disposable shaver that will be the first of its kind to enter the disposable market. Currently disposable shavers are configured with up to three blades. BiC intends to introduce this new four-blade shaver configuration at a premium price point in the disposable market. Since this configuration is the first of its kind, careful consideration has been given by BiC for the positioning of this shaver. Two options remain attractive and are under consideration. The first option for BiC is to offer the new shaver as a mainstream product at a lower price (in the premium category) to maximize unit volume and revenues. The second option is to position the shaver as a sensitive skin niche product at a higher premium price. In this case, unit volume and revenues will be lower than the mainstream configuration, but overall profit will be maximized.
Mainstream Market
Positioning the new shaver in the mainstream market is a sound strategy for BiC. The company estimates unit sales at 28M units in 2007. Assuming all other factors remain constant in the shaver market, Ultima Shaver revenue would increase BiC’s revenue share 1.6 percentage points from 2006 to 2007 (see Table 1). This estimate also includes the estimated 35% cannibalization of the Comfort 3 shavers. Despite the cannibalized Comfort3 revenue, year-over-year revenue growth for the BiC shaver segment remains healthy at 30% (see Product Mix mainstream positioning).
Table 1
Mainstream
2006E
2007E
Change
Gillette
68.3%
67.2%
-1.2%
Schick
26.0%
25.6%
-0.4%
Retailing at a unit price of $1.34, the mainstream Ultima Shaver offers more blades at a lower price per blade than any other disposable razor on the market (see Price per Blade Analysis). This pricing will appeal to the value-seeking consumer who seeks to maximize quality at the lowest possible price point(see product attribute analysis). In this chart, please notice that the mainstream Ultima Shave is positioned at the high-end price point of the disposable market yet offers the features of the premium priced high-end cartridge market. This positioning makes Ultima the most advanced shaver for its price in the market.
Turning to the financials (see financial analysis), the gross profit for the mainstream configuration is 62%. This is somewhat mitigated though, as high start-up costs associated with the product launch make the product’s net margins unattractive at
-4% in year one. The margin improves to 31% in year two, returning a much-improved profit of $11.4M (up from -$1.16M). After its second year on the market the Ultima Shaver would have a total two-year profit of $10.4M.
Niche