Suave Analysis 7 years of experience – why $7.8M is the proper advertising budget figure

Suave’s business model summary and history Offer a low priced good to the customer Maintain the same quality as competitors’ products Operate at a slim margin, with little ‘frill’ costs Market share is at 9% (2nd in market) and only 5.1% of advertising spending Sales have increased year after year, however margins have slightly decreased in 1984 to approx. 19%

Current Market conditions/concerns Sales in the industry have flat lined Grappling for market share becoming more intense Other competitors to introduce low cost products in the next year “Middle being squeezed” – i.e. products priced in the mid-range Historically, Suave as had the highest rate of loyal customers, however, in general, customers are finicky with shampoo purchases

Two brand manager’s ideas Background – in 1985, Suave will increase their advertising budget, due to the uncertainty of market share in future years Ellen Vallera, brand manager for 7 years, promotes a $7.8M budget with $700K of that dedicated to print advertising Tom Kuyendall, new to Helene Curtis, promotes a budget of $10.2M all (except for $700K print ads) dedicated to prime time TV advertising

Shampoo and Suave user demographics – who are our customers? In reviewing the psychographic data of all shampoo users, it is clear that the highest shampoo users overlap with Suave users in 4 out of 6 clusters below (highlighted in blue). Also, market research has concluded that the lower strata of income levels correlates to high levels of Suave use (i.e. the majority of Suave users earn less than $20K). The demographic data above overall correlates to those lower income levels of overall shampoo use.

Characteristics of our customers Mothers Home Makers Large families with young children Price Sensitive Blue collar Rural, Suburban These characteristics are also reflected in the demographic data previously presented

How many people need to be reached in order to justify $7 How many people need to be reached in order to justify $7.8M in ad spending?

How do we reach the people? To break even in reaching all new users, 18.27M persons must become new users of Suave To break even in reaching current users, 9.13M persons must use more Suave As defined by our demographic data, our current users are households with homemakers in the low to middle income range (generally), therefore we will target women in this age range

Using our target audience (W 18-49), what is the cost of daytime vs Using our target audience (W 18-49), what is the cost of daytime vs. primetime commercials?

Using our target audience (W 18-49), what is the cost of publications?

Proposed Budget - assumptions 4.9M and 2.1M women will be reached with each commercial airing Publication ad readings can be calculated by taking an average of circulations and women reached for all those publications that women would read Prior year reached consumers can be calculated by taking current year’s and subtracting the budget increase percentage As ad awareness is 29%, and those who try Suave based on ads is 45% (per data analysis), therefore 13% of all people exposed to Suave ads will try Suave NOTE – the totals are times the ad is viewed in total. The same women may view a particular ad twice, which skews the numbers upward.

Proposed budget – how many total target audience members will be reached?

Results of budget analysis With the proposed increase in budget, 18.77 will try Suave, which will result in approx. $29M in sales (assuming $1.50 per bottle) This is well over the break even points for new or existing consumers to try Suave for every advertising dollar spent

Other factors to consider Print ads – these will reach far more than just our target audience. Women of all types read these publications and will boost awareness. This is a way to reach upper strata income levels (which is an area for growth) without spending additional money to reach them. Based on our demographic data, increasing into the prime time market is not necessary, since we are targeting homemakers. Both daytime and primetime ads will reach more people than our target audience as well, resulting in increased awareness.

Awareness and Sales The idea behind this campaign is not to raise total awareness, but to urge consumers who are aware of Suave to try it.

Summary The data presented above proves that an advertising budget of $7.8M is more than enough for an increase in Suave awareness and market share. Any larger increase would result in higher prices to the customers, which would cause us to lose our most loyal customers as the increase in expenditures would be reflected in bottom line price.