Dermavescent Laboratories, Essay Example

Introduction

Dermavescent laboratory Inc is a manufacturer of women personal care product. The company line of product includes hand and body lotions, facial cream and a full line of women toiletries sold under different brand names. Their products are sold by food and drugs shop through Jack robbers.  Soft and silky shaving gel is one of its products introduced in 1991. The product is positioned as unique women’s shaving gel.

Problem identification

A new product manager, Phoebe Master, has to decide whether to introduce new package design for soft and silky shaving gel. The need of new packaging designs is due to increased demand of aerosols based product, strained manufacturing capabilities and recent decline in sales of soft and silky gel. Among the decisions she must make is whether the company should introduce 5.5 ounces and 10 ounces aerosols packaging. Also, she must decide whether the company should approve additional marketing fund.  The timing is right because the incidences of women shaving would increase in the next summer months.

Summary of fact

The fact about the company and the product

• Current sale of the Dermavescent – It had a sale of $258 million in 2005, the sale of soft and silky shaving gel $3.724, 000 at 1.96$ units in 2005. This was a downtrend, and as at now 0.32 % decline is expected if new products are not introduced.
• Competition- There are several brands of women shaving gel in the market
• Product –soft and silky gel is a high-quality woman shaving gel, the product was introduced in year 1991; product lifecycle- the product is in declining stage.
• Price- premium price is at $3.95 per 5.5-ounce tube; the retailer gets twenty percent of the retailing price.
• Promotion- the product is traded as high-quality women gel, jack jobbers are the retailing company, for the past two years customer had not used competing product.

New package design idea- The idea was from the master’s assistant Heather Courtwright. Due to the company’s limited manufacturing capacity, Courtwright proposed outsourcing the new package design.

From her review of the company, she proposed a company that was capable of meeting production requirement and providing certain added value. The proposed company was only capable of producing 5.5 ounces and 10 ounces without making big expensive changes in the equipment.

The estimated cost of producing 5.5 ounce and delivering to jobbers would be $0.24; the retail price would be $3.5. For 10 ounce the cost would be $0.29; the retailing price would be $4.25.  In both cases, a minimum of 100,000unit is required. Courtwright has negotiated for minimum of 20,000 units.

The cost per ounce of aerosols container is lower than the cost per ounce of tube package,

The one time set charges for soft and silky shaving gel production line and package graphic was $10,000

In November 2005, Courtwright commissioned market research to assess consumer response to the proposed container. The result of the market research is:

• Both Customer and noncustomer favored new aerosol packaging. 10 ounces was favored most.
• 20% of soft and sickly gel customers, would convert to 10 ounce; 25% would convert to 5.5 ounce
• ¼ of noncustomer would convert to any of any of the aerosols can
• While customers expected to find aerosol gel stocked next to tube container, noncustomer expected it in next to women toiletries.
• Customer favored the new price; noncustomer thought the price is high
• The customer is more loyal

The result of sale forecast by size and type of container

5. a) Low estimate for 5.5 ounce package additional 11,044.174
6. b) High estimate for 5.5 ounce additional parkaging 11,245,174.
7. c) Low estimate for 10-ounce additional packaging l11, 545,174
8. d) High estimate for 10 ounce additional packaging 12, 245, 174

Recommendations

The result of sale forecast by size and type of container showed that 10 ounces produced the largest increase in ounce. Even after considering the cannibalism, additional package would produce higher sale in ounce than the forecasted volume without additional packaging (10,745,174 ounces).

I suggest that phoebe approve the market research and use the result to make future decision.  It is possible that the test from the market is not hundred Percent correct.  If the result from test market is not as expected, then the new figures and result will inform the next move.

The result from market research showed the ratio of the customer who preferred the 10 ounce is higher than those that preferred 5.5 ounces. Therefore, there exists higher probability that the higher end forecast will be true. I suggest that the company pursue the 10 ounce additional production packaging.  The Dermavescent Inc will sell 1500,000 ounces more than what it stands to make if the company does not produce a new product (12, 245, 174-10,745,174). However, there is a possible risk if the company fails to meet the high-end sale volume forecast. It is worthwhile taking the risk because of the trend of the increased demand of aerosol product; the company will be forced to do so in the near future. Again, even if the company does not break even, one undeniable benefit that it will gain is that, it will remain competitive and gain more knowledge of what the consumers want.