MEM Company, Inc.

In December 1980, Gay Mayer, president of MEM Company, Inc., was considering how to increase
sales of the company's line of men's toilet- ries, which included the English Leather brand. Sales had
risen 10 per- cent in 1979 over the previous year but had flattened in 1980. Several options to
improve sales growth existed, but the two that interested Mayer the most were expansion of
distribution into food stores and introduction of a new brand.

Company Background

In 1883 Mark Edward Mayer opened a first-class women's perfume and soap store in Vienna. Exports
to the United States began in 1920. Sales were so strong that the company moved to the United
States in 1935. It began to shift emphasis to men's fragrances after one of its department store
accounts accidentally displayed MEM cologne for women in the men's department, where it rapidly
sold out. The company developed a more masculine-looking package, changed the fragrance formula
slightly. and introduced a men's cologne under the generic name Russian Leather. In 1947 the name
was changed to English Leather in response to the cold war and a Fifth Avenue buyer's desire to
merchandise MEM products in conjunction with high-quality English clothing. Sales growth
accelerated after the company went public in 1966. ap- proaching $60 million in 1979. Approximately
one-third of these sales were derived from two subsidiaries, Tom Fields Ltd. (which manufac- tured
the Tinkerbell line of children's toiletries) and Lebanon Packaging Company, acquired in 1969. Sixty
percent of MEM sales were accounted for by six lines of men's toiletries: English Leather (introduced
in 1947): Lime (1968); Timberline (1970); Wind Drift (1972); Musk (1975); and Rac- quet Club (1978).
Lime and Musk had been developed in response to similar competitive fragrances. Timberline and
Wind Drift appealed to men who enjoyed the outdoors and the sea; Racquet Club had been intro.
duced to capitalize on the growing popularity of tennis and other racquet sports

All six lines, carried the English Leather name on product labels, and all were sold in similar packages.
They covered three broad product cate gories: (1) face savers, including all-purpose lotion, after
shave, and shav ing cream: (2) headliners, including shampoo and hair tonic; and (3) body guards,
including cologne, deodorants, bath soaps, and tale. A break- down of MEM men's toiletries by line
and product category is shown in Table A. MEM Company, Inc.

In December 1980, Gay Mayer, president of MEM Company, Inc., was considering how to increase
sales of the company's line of men's toilet- ries, which included the English Leather brand. Sales had
risen 10 per- cent in 1979 over the previous year but had flattened in 1980. Several options to
improve sales growth existed, but the two that interested Mayer the most were expansion of
distribution into food stores and introduction of a new brand.

Company Background
In 1883 Mark Edward Mayer opened a first-class women's perfume and soap store in Vienna. Exports
to the United States began in 1920. Sales were so strong that the company moved to the United
States in 1935. It began to shift emphasis to men's fragrances after one of its department store
accounts accidentally displayed MEM cologne for women in the men's department, where it rapidly
sold out. The company developed a more masculine-looking package, changed the fragrance formula
slightly. and introduced a men's cologne under the generic name Russian Leather. In 1947 the name
was changed to English Leather in response to the cold war and a Fifth Avenue buyer's desire to
merchandise MEM products in conjunction with high-quality English clothing. Sales growth
accelerated after the company went public in 1966. ap- proaching $60 million in 1979. Approximately
one-third of these sales were derived from two subsidiaries, Tom Fields Ltd. (which manufac- tured
the Tinkerbell line of children's toiletries) and Lebanon Packaging Company, acquired in 1969. Sixty
percent of MEM sales were accounted for by six lines of men's toiletries: English Leather (introduced
in 1947): Lime (1968); Timberline (1970); Wind Drift (1972); Musk (1975); and Rac- quet Club (1978).
Lime and Musk had been developed in response to similar competitive fragrances. Timberline and
Wind Drift appealed to men who enjoyed the outdoors and the sea; Racquet Club had been intro.
duced to capitalize on the growing popularity of tennis and other racquet sports

All six lines, carried the English Leather name on product labels, and all were sold in similar packages.
They covered three broad product cate gories: (1) face savers, including all-purpose lotion, after
shave, and shav ing cream: (2) headliners, including shampoo and hair tonic; and (3) body guards,
including cologne, deodorants, bath soaps, and tale. A break- down of MEM men's toiletries by line
and product category is shown in Table A.

TABLE A MEM's Toiletries for Men

Face Headliners Body Gift Total

Savers Guards Sets
English 20 3 11 19 53
Leather
Lime 3 0 2 4 9
Musk 7 0 2 3 12
Timberline 5 0 2 4 11
Wind Drift 5 0 2 4 11
Racquet 6 0 3 5 14
Club
Total 46 3 22 39 11

During 1979, 39 percent of English Leather dollar sales were in face savers, I percent in headliners,
and 14 percent in body guards. Of the remainder, 37 percent were accounted for by gift sets and 9
percent by mixed prepacks. The breakdown was similar for the other five lines. except that gift sets
accounted for, on average, only 20 percent of sales Although individual slow-selling items were
sometimes dropped. MEM had never discontinued an entire line.

The MEM company distributed under license the expensive John Weitz designer and Acqua di Selva
lines of men's toiletries to about 1.000 department store and men's specialty store accounts. It also
sold the Embracing line of lower-priced women's spray and splash colognes Blondit creme bleach for
facial and body hair, and a variety of novelty and boutique soaps. In aggregate these products
accounted for 5 percent of MEM sales in 1979.

Production Process

After-shaves and colognes are fragrances blended with varying quantities of other raw materials,
principally water and alcohol. After-shaves contain more water, less alcohol, and less fragrance than
colognes. Once packaged, both remain chemically stable unless exposed to heat or light. When
applied to the skin, evaporation releases the fragrance. It is important to ensure that the ingredients
evaporate simultaneously and that the chemistry of the reaction is constant among consumers
despite differences in body metabolisms.

Like its major competitors, MEM did not develop or manufacture most of the fragrances in its
toiletries; these were supplied by about 30 international companies including Roure-Dupont,
Givaudan, and International Flavors and Fragrances. Development of a fragrance involved skilled
compounding by specialist chemists of as many as 50 raw materials, both natural and synthetic.
Fragrance formulas were not usually divulged, in order to ensure the loyalty of buyers to their
original suppliers.

Typically MEM would invite about six manufacturers to submit fragrance samples on a speculative
basis. The company would specify a price range and target consumer group. Samples would be
evaluated on a range of attitudinal dimensions by MEM employees. after which one or two would be
chosen for testing in selected markets. Such research often proved inconclusive, so the judgment of
senior management was usually paramount in the final selection of new fragrances.

The MEM company subcontracted manufacture of its shaving creams and some deodorant sticks. It
compounded and packaged most of its products at its 205,000-square-foot Northvale, New Jersey,
plant. Production efficiency was limited by the breadth of the product line, frequent need for short
production runs, and seasonality of sales. Packaging, particularly of gift sets, remained labor
intensive and largely unautomated. And although floor space was not fully utilized, much had to be
devoted to storing over 200 lots of individual plastic, wood, paper, and glass pack- ages and
containers.

The Men's Toiletries Market

Data on the men's toiletries market were sparse, partly because of the fragmentation of the industry,
partly because substantial male use of products targeted at women was believed to occur. Some 60
companies and 200 brands competed for consumer purchases of men's cologne and after-shave,
Retail sales of those products through all classes of trade during 1979 were estimated at $224 million
and $189 million respectively. up 10 percent and 4 percent over 1978 and six times greater than in
1965 (see Exhibit 1). Retail sales of men's deodorants, shaving creams, and hairdressings were
estimated at $330 million, $135 million, and $150 million, respectively. Mayer divided the men's
toiletries market into three groups, based on price point (see Exhibit 2). The exclusive group included
designer-name brands, such as Pierre Cardin and Oleg Cassini, with retail selling prices over $10 for a
4-ounce bottle of cologne. These were distributed primarily through department stores and men's
specialty stores and were advertised in men's, women's, and dual-audience magazines.

EXHIBIT & Men's Toiletries for Three Classes of Trade, 1979 (dollars and unit sales in millions)

Retail Dollar Sales Unit Sales

After Cologne Total Percent Tota Percent
shave Increase l increase
over over
1978 1978
Chain and $78 $71 $149 15% 43 5%
independent
drug stores
Mass 38 26 64 15 23 5
merchandise
and discount
stores
Food stores 29 4 33 10 16 0
$145 $101 $246 13% 82 3%

EXHIBIT 2 Retail Price Points for MEM Men's Toiletries and Competitive Brands, July 1980

After Cologne After Cologne After Cologne

shave 2 oz shave 4 oz shave 8 oz
2 oz 4 oz 8 oz
English $2.50 $3.00 $4.00 $6.00 $5.50 $8.00
Leather
Lime 2.50 3.00 3.50 5.50 5.00 7.50
Musk 3.00 3.50 6.00
Timberline 2.50 3.00 3.50 5.50 5.00 7.50
Wind Drift 2.50 3.00 3.50 5.50 5.00 7.50
Racquet 3.00 4.50 5.00 6.50
Club
Acqua di 7.50 8.40 11.00 13.50 21.00
Selva
(1.75) (1.75) (3.50) (3.50) (7.00)
Aramis 8.50 9.00 12.50 15.00 22.00
British 3.50 7.00 7.00 7.50 9.50
Sterling
Brut 4.50 9.00
(1.50) (3.20) 15.00
(6.40)
Brut 33 2.50 2.50 4.15
(3.50) (3.50) (6.00)

Brut 33
Musk
 Cardin 6.00 8.00 8.50 12.50 15.00 22.50
Chaps 6.50 8.50 9.50 12.50 14.50
Denim 3.00 5.00 7.50
Monsieur 3.50 7.00 7.50 10.50 11.00
Jovan
Old Spice 3.00 4.50 4.75 6.50
(4.25) (4.25) (8.50) (8.50)
Oleg Cassini 7.00 11.50

The MEM products competed principally in the medium-priced group, in which a 4-ounce bottle of
cologne typically sold for between $4 and $10. English Leather's principal competitors were Old
Spice, manu- factured by the Shulton division of American Cyanamid; British Sterling. manufactured
by the Spiedel division of Textron; Jovan, manufactured by Beecham, a major British pharmaceutical
company; and Brut, manufac- tured by Fabergé, a public company with annual sales estimated at
$250 million. Next to Old Spice, MEM had the broadest product line among these competitors.
Mayer believed that English Leather users were typi- cally somewhat younger than users of either
British Sterling or Old Spice.

The third, mass group of brands, selling below 54, included Aqua Velva (manufactured by J. B.
Williams Co.). Mennen Skin Bracer, and Brut 33. These brands were also thought to appeal to an
older age group than English Leather. They were distributed primarily through food stores,
drugstores, and mass merchandisers and discount stores such as Kmart.

Several trends were evident in the market during the late 1970s. Many independent manufacturers
were acquired by large corporations attracted by their high profit margins. Further, many
manufacturers were active in more than one segment. Shulton marketed both the Old Spice and the
exclusive Pierre Cardin brands. Fabergé marketed Brut in the medium-priced segment and Brut 33 in
the mass segment. Mennen marketed Mennen Skin Bracer in the mass segment and had recently
introduced Millionaire in the medium-priced segment.

Many new products were introduced during the late 1970s. In the exclusive market segment, new
brands with designer names were frequently launched, partly because national distribution and
heavy advertising were not considered essential to success. More surprising to MEM executives was
the number of new products in the medium-priced segment backed by substantial advertising
expenditures. In 1979, for example, the Ralph Lauren division of Warner Communications introduced
Chaps, Jovan introduced Oleg Cassini, and Lever Bros. introduced Denim. Combined advertising
expenditures on these three brands approached $7 million in 1979.

Media advertising expenditures on men's after-shave and cologne in 1979 totaled $45 million, of
which 80 percent was spent on television and 18 percent in consumer magazines. These represented
a 30 percent in- crease over 1978, although media costs had increased only 15 percent. The top 12
brands accounted for 62 percent of expenditures in 1979, up from 52 percent in 1978. Shulton spent
50 percent more to advertise Old Spice than MEM spent on all six of its lines in 1979. In 1980 it
appeared that English Leather would be outspent by Brut as well, as MEM's share of industry
advertising declined. A consumer survey showed English Leather ranking second only to Brut in
unaided advertising awareness (see Exhibit 3).

Brand Advertising
Awareness Awareness
Unaided Total Unaided Total Correct Brands Brand Brands
Slogan Ever Now Used
Identification Used Used Most
Often
Aqua Vulva 13% 94% 2% 86% Na 4% Na Na
Aramis 40 83 3 53 9% 28 22% 22%
British Na Na Na Na 4 4 Na
Sterling
Brut 52 96 28 84 80 24 8 6
Canoe Na Na Na Na Na 22 14 10
Denim 9 62 4 57 21 4 2 Na
English 41 96 27 85 45 30 12 4
Leather
Jovan 12 72 6 68 Na 8 4 4
Mennen 19 88 1 77 Na 16 12 8
Skin Bracer
Old Spice 48 93 24 83 74 30 20 20
Pierre Na Na Na Na Na 6 4 Na
Cardin
Royal 15 50 4 43 Na 10 8 6
Copenhagen

Sales and Distribution

MEM men's toiletries were distributed through a variety of channels representing about 24,000 retail
outlets (see Exhibit 4). The percentages of sales by line and class of trade for 1979 and 1980 are
reported in Exhibit 5. Although MEM's distribution penetration was less than that achieved by Old
Spice, company executives believed that their current general merchandise, mass merchandise, and
drug accounts were responsible for at least 80 percent of men's fragrance sales through these classes
of trade All shipments were made direct to retail stores or to the regional ware- houses of retail
chains. Wholesalers were not significantly involved in MEM's distribution. In 1960 MEM products had
been distributed primarily through department stores and men's specialty stores. However, changes
in consumer shopping patterns, the broadening popularity of MEM products, and the substantial
merchandising support required by department stores caused the company to expand distribution.
By 1980 English Leather was the highest-selling line of men's toiletries carried by general
merchandise chains such as Sears, Roebuck & Co. and J. C. Penney. Nevertheless, as indicated in
Exhibit 6. English Leather placed second to Old Spice in dollar market share in drugstores and mass
merchandise outlets. Distribution through food stores accounted for less than 2 percent of sales in
1980; however. MEM executives were receiving an increasing number of inquiries from food chains
about carrying a limited selection of their faster- moving items.
The company's accounts were classified by sales revenue potential. Frequency of calls by MEM
salespeople varied accordingly. Buyers at important headquarters accounts of major chains would be
visited six times a year. Several thousand accounts bought in quantities too small to justify any sales
call and were serviced through the mail. The MEM sales force of 50 was one of the largest in the
industry. Each salesperson was responsible for all accounts in a geographic territory. Some
salespeople were required not to call on the outlets of certain national accounts located in their
territories. (For example, Kmart allowed no supplier sales- people in its retail stores.) Because the
sales force was able to visit and provide merchandising assistance to 14,000 retail outlets three times
a year on average, MEM had achieved better distribution penetration than most of its competitors,
particularly in independent drugstores.

The average salesperson compensation package of over $30,000 included 70 percent salary and 30
percent commission. (Most manufacturers of men's toiletries did not offer such a high commission
component but, unlike MEM, they typically reimbursed expenses.) Partly as a result. MEM's sales
force turnover was low and MEM salespeople were considered above the industry average in both
quality and experience. They had to be versatile to sell in several classes of trade, which differed
widely in merchandising objectives and practices. Retail sales were concentrated around the Father's
Day, graduation, and Christmas gift-giving periods. Over 40 percent of annual retail sales of MEM
men's toiletries occurred during November and December, and three-quarters of these were
believed to be gift purchases. Because of this seasonality, MEM commonly held a cash surplus during
the first half of each year, but had to borrow during the second half to finance its dating program.
Under this program, the trade was not required to pay invoices on midyear orders for Christmas
shipments until year-end. A sliding scale of discounts for prepayment of invoices before the dating
deadline was also offered.

EXHIBIT 6 Market Shares of Major Men's Toiletries Brands for Three Classes of Trade, 1979

Independent Mass Food

and Chain Merchandisers Stores
Drugstores and Discount
Stores
English 14.5% 12.7% Na
Leather
Old 16.4 20.5 20.8%
Spice
Menne 7.5 10.6 27.9
n Skin
Bracer
Brut 10.7 12.4 14.9
Four 49.1% 56.2% 63.6%
brand
share
total
Pricing Policy

Products were shipped by MEM with freight prepaid and typically al- lowed the trade a 40 percent
margin. Suggested retail prices were maintained in most outlets. Rapid increases in the cost of raw
materials for fragrance compounding and packaging caused retail prices of men's toiletries to rise
dramatically during the 1970s, and the industry became concerned that competitiveness of their
products in the gift marketplace might be jeopardized. The MEM company had not raised its prices
as fast as the industry, and, partly as a result, its line had become increasingly acceptable to more
price-oriented classes of trade.

An income statement outlining the cost structure for MEM men's toiletries is presented in Exhibit 7.
The contribution margin varied widely item by item, it was highest on colognes packaged in plastic
containers. (Executives believed that the significant cost difference between glass and plastic
packaging would not be credible to consumers if fully reflected in a retail price differential.) Margins
were lower on more frequently used products, including after-shaves, deodorants, and shaving
creams, and also on gift sets. Gift sets were priced as the sum of the prices of the component items,
but because of incremental packaging and labor costs their percentage margins were lower than the
average on the component items.

EXHIBIT 7 1979 Income Statement for Men's Toiletries (percent)

Gross sales: 100%

Raw materials: 37.55

Direct labor: 7.17

Contribution margin: 55.28

Manufacturing overhead: 2.34

Real estate, taxes, insurance, utilities, depreciation: 2.02

Shipping: 8.09

Advertising and promotion: 20.52

Field sales force: 7.52

General and administrative: 7.17

Net pretax income from operations: 7.62

Other income: 1.47

The MEM company sometimes offered its products to the trade at promotional prices. During 1980
about 10 percent of its men's toiletries were sold at prices that allowed 45 percent or 50 percent
margins as opposed to the usual 40 percent. Trade interest was maintained through frequent
prepacks shipped with counter or shelf display units and through gift-with-purchase, purchase-with-
purchase, and self-liquidating premium consumer promotions.

Less-expensive brands of men's toiletries typically offered more price-oriented consumer

promotions, such as coupons and refunds. Pro- motions for MEM men's toiletries during 1980 are
summarized in Exhibit 8. A merchandising tear sheet for one of these promotions is reproduced in
Figure A.

EXHIBIT 8 Summary of 1980 Promotions and Trade Deals

1. Prepack containing 24 English Leather Power Foam for the price of 22 (2 free with 22), providing
the trade a 45 percent margin at suggested retail price of $2.00.

2. Prepack of 12 four-piece gift sets containing cologne and after-shave in both English Leather and
Musk. Tied into a SuperShooter consumer sweepstakes promotion, each package flagged "Regular
$8.75 value, now $6.00."T

3. Prepack containing 12 16 oz.-size English Leather Shampoo for the price of 11 of the regular 9-oz.
size (1 free with 11), providing the trade a 45 percent margin at suggested retail price of $2.50 each.

4. Basket display prepack containing 1-oz. sizes of English Leather Cologne (72). Wind Drift and Musk
(24 of each), and Lime and Timberline (12 of each), each priced at $1.00. Profit margin to trade-40
percent.

5. Prepack containing 12 English Leather Special Formula Deodorant Sticks for the price of 11 (1 free
with 11), providing the trade a 45 percent margin at suggested retail price of $2.50 each.
6. Prepack containing 48 V-oz. trial-size Musk Cologne for Men, priced at $1.50 each for impulse
purchases. Profit margin to trade-40 percent.

7. Prepack containing 36 Pocket Mist-ers in six fragrances, priced at $2.50 each. Profit margin to
trade-40 percent.

8. Prepack containing 36 1-oz. travel-size Racquet Club Cologne, priced at $1.50 each. Profit margin
to trade-40 percent.

9. Prepack containing six 4-oz. English Leather Cologne and six 3-oz. Musk Cologne with new pump
spray caps. Profit margin to trade 40 percent. 10. Prepack containing 12 5-oz. Musk Cologne for Men.
Each package is flagged "Save $1.50. Regularly $6.50-Now Only $5.00 Profit margin to trade 40
percent

11. A $6.00 value men's nail-care set offered for $3.00 with any $6.00 purchase of English Leather
toiletries 12. A $3.00 value English Leather gift set (containing after shave, shave cream, and
shampoo travel sizes) free with any $6.00 purchase of English Leather toiletries

13. An executive briefcase plus a travel set of l-oz-size colognes in English Leather.

Lime, Wind Drift, and Timberline, valued at $29.00, priced at $10.00

Marketing Communications

As indicated in Exhibit 9, 20 percent of MEM men's toiletries sales dollars were spent on marketing
communications, principally advertising and promotion. The vice president of finance hoped to
maintain this ratio in 1981 even if the company introduced a new line.

Advertising for MEM men's toiletries was aimed at males and females, aged 18 to 34. in households
with annual incomes over $10.000. Men in this age group were believed to be the heaviest users of
men's toiletries and the most likely to switch brands. Since 1967 MEM had employed the theme "All
my men wear English Leather, or they wear nothing at all. Some MEM executives believed this theme
was becoming "tired." and "a less provocative approach might be better suited for the 1980s."
Slogans used by competitive brands tended to emphasize either a macho or a success theme (see
Exhibit 10).

Measured media advertising expenditures, summarized in Exhibit 11. emphasized national television
and consumer magazines with support from network radio. Some MEM executives believed that the
budget should be concentrated entirely in television. Advertising on television was devoted
exclusively to English Leather and was aired primarily during prime time, late fringe, and late night.
Magazine advertising in 1980 covered all six lines of MEM men's toiletries and was placed primarily
during June and the fourth quarter in a diverse group of 25 magazines such as People, Playboy, and
Cosmopolitan, Radio was used as a supportive medium immediately before the Christmas holiday; it
afforded scheduling and copy flexibility and added to the frequency with which the advertising
message was delivered. About 20 percent of advertisements in all media promoted gift sets.

In addition to national advertising, there were three other major areas of expenditure in the MEM
communications budget. First, the company offered the trade a cooperative advertising program
under which it contributed toward the cost of store advertisements that prominently featured MEM
merchandise (contribution was up to 5 percent of the value of store purchases from MEM). Second,
MEM was a prominent and frequent sponsor, under the English Leather name, of championship
sports events in tennis, skiing, and auto racing. The company also jointly promoted local events with
retailers who carried MEM merchandise. Finally. MEM, like other manufacturers of men's toiletries,
made substantial use of both free samples to be distributed by sales clerks, and testers to be used by
customers at the point of purchase.

Sales Growth

Mayer and other MEM executives believed that periodic new product introductions were essential in
the men's toiletries market to maintain consumer and trade interest and to sustain sales growth. It
had been over two years since Racquet Club had been introduced.

A new brand, tentatively named Cambridge. was under consideration for introduction in 1981. A
fragrance had been selected and focus group interviews with target consumers had been conducted
(see Exhibit 12). Reaction to the Cambridge name in association with a line of men's toiletries was
favorable, so a preliminary marketing program was developed (see summary in Exhibit 13). It called
for Cambridge to be targeted at men aged 18 to 34 and to sell at $10 retail for a 4-ounce bottle of
cologne. Mayer believed Cambridge would gain sales primarily at the expense of British Sterling and
other brands in the $7 to $10 range.

Yet, the level of advertising expenditures which would support a Cambridge introduction was still
unresolved. The company's advertising agency had been asked to develop three media plans for
high, medium. and low expenditure (see Exhibit 14). Mayer believed that the lowest expenditure
level represented the minimum necessary to achieve his 1981 target of $3 million in factory sales.

Not all MEM executives were enthusiastic about the Cambridge pro- gram. Some argued that even
the lowest of the media budgets was unaf- fordable and that the level of advertising needed to
launch the new brand could be greatly reduced if the well-known English Leather name was included
both on the package and in the advertising. These executives wished to call the brand "Cambridge by
English Leather." Others believed that the potential of Racquet Club had not yet been exhausted and
that another new product in the medium-price range would be wasteful. They pointed out that
Racquet Club's initial sales were made largely at the expense of Lime, Musk, Timberline, and Wind
Drift, be- cause many retailers, especially chain drug buyers, had not been willing to provide
additional shelf facings for MEM products.

Some of those who favored a product launch believed that MEM should give first priority to a low-
priced brand to penetrate food stores. Although food stores had long carried men's toiletries, MEM
had been reluctant to sell through this channel. The men's toiletries sections in many food stores had
traditionally been serviced by rack jobbers. The MEM company preferred to sell only direct to retail
accounts to maintain consistent product margins. During the 1970s, however, many major food
chains merged with or established their own drugstore chains. (For example, Medi Mart drugstores
and Stop & Shop supermarkets were owned by the same company.) As a result, their direct buying
from men's toiletries manufacturers increased. Mayer knew that food chains typically stocked only
the high-turnover items in a product line and that they pressed for frequent trade deals and year-
round national television advertising. He wondered, however, whether the MEM sales force should
now attempt to sell to the major food chains, particularly those that emphasized assort- ment and
service rather than low prices. If he proceeded in this direction Mayer wondered which, if any, items
in the six existing lines should be offered to the food chains or whether a new brand would be more
acceptable.

EXHIBIT 12 1980 Focus Group Session: Summary of Findings

During April 1979 in New York City 12 women (average age 25) participated in a focus group session
conducted by one of the company's advertising agencies. Chalk, Nissen. Hanft. Inc. Key findings
included the following:

Respondents preferred clean, natural fragrances for men. Strong fragrances for men were disliked;
they were associated with a woman reeking of perfume. Men favorably remembered English Leather
as the fragrance of their youth-the brand "all the guys wore in college." Other fragrances were now
perceived as more sophisticated. Old Spice was typically remembered as "the fragrance my father
used."

Respondents agreed that men lack knowledge of fragrances. When buying men's fragrances as gifts,
some respondents stated that they would follow their own preferences: others would follow the
perceived preferences of the recipient.

Designer fragrances were expected to reflect the fashion images of the designers. Respondents were
skeptical that a dual set of fragrances such as Jovan Man and Jovan Woman could succeed in
satisfying the fragrance needs of the male and the female

The name Cambridge in association with a men's fragrance was seen as classic. understated, and
dignified. Respondents would expect the package design to reflect the traditional quality of the
name.

EXHIBIT 13 Proposed New Product Introduction Program

Brand name: Cambridge

Target customer: Men, aged 18 to 34

Product line: After shave, cologne, hath soap, deodorant stick, shaving stick. gift sets

Retail price point: $10 for 4-oz. cologne, variable cost structure similar to other MEM men's
toiletries.

Trade margin: 40 percent

Introductory deals: 5 and 10 percent off-invoice allowances on small and large-size prepacks; sales of
each prepack were expected to account for one-third of 1981 Cambridge sales

Sampling: Production of one million 4-oz. samples to be distributed free at the point of sale at a cost
of $200.000

Merchandising aids: Counter display materials, brochures, and testers at a cost in 1981 of $50,000

Timing of launch: First orders accepted in April 1981; first shipments in September 1981

Sales target: Gross factory sales of $3 million in 1981

SOURCE: Company records.

EXHIBIT 14 Three Media Plans for Cambridge Introduction

Plan 1 Plan 2 Plan 3

Network $249,18 $570,480 $1,140,96
Television 0 0
Spot 384,000 411,116 1,016,070
Television
Consumer 286,058 379,213 609,925
Magazine
s
Trade 9,900 13,000 26,000
Magazine
s
Productio 70,052 70,174 100,000
n
 Reserve - 56,017 107,045
$999,19 $1,500,00 $3,000,00
0 0 0

Conclusion

On December 20, 1980, Mayer learned that Shulton was planning to launch its first new brand of
men's toiletries since the introduction of Old Spice in 1936. Under the brand name Blue Stratos, an
after-shave and cologne would be available for shipment to the trade in March 1981, to be followed
by a bath soap, stick deodorant, shave cream, and body talc. The 4-ounce bottle of cologne would
carry a suggested retail price of around $10. The trade press reported that advertising would feature
the slogan "Unleash the spirit" and use a hang-gliding motif to symbolize the freedom and adventure
of the sky. Shulton announced that the Blue Stra- tos national rollout would be supported by a $12-
million communications budget. In addition to network television and full-page advertisements in
Playboy, People, and Sports Illustrated, Shulton planned to mail 10.3 million samples of three-pack
product wipes to reach one-third of all men aged 18 to 34. Recognizing that Blue Stratos was
targeted at the same market as Cambridge, Mayer wondered whether he should cancel or de- lay the
Cambridge introduction and commit his entire 1981 communica- tions budget to reinforcing the six
existing lines.