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?

Base: ------------ % Component ----------- Total Heavy Heavy% of of Total of Heavy of of Heavy Shampoo Shampoo Suave SuaveTotal Shampoo Shampoo Suave Suave Users Users Users Users

Psychographic Cluster Pop. Users Users Users Users Index Index Index Index1 Agribusiness 4.80% 5.68% 4.36% 6.20% 8.54% 118.33 90.83 129.17 177.92 2 Back Country Folks5.92% 5.45% 4.09% 9.09% 6.72% 92.06 69.09 153.55 113.51 5 Blue Chip Blues5.59% 5.96% 7.02% 7.94% 9.90% 106.62 125.58 142.04 177.10 19 Levittown, U.S.A.5.51% 5.21% 5.01% 4.21% 5.33% 94.56 90.93 76.41 96.73 20 Middle America5.94% 5.93% 7.20% 4.08% 2.82% 99.83 121.21 68.69 47.47 40 Young Suburbia6.85% 6.92% 5.55% 6.61% 8.47% 101.02 81.02 96.50 123.65

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 $7.8M in ad spending?

Break-Even Analyses: New vs. Current Users

NEW USERS:

Increase in Number of New Triers (in millions If increasing $7.8M in advertising: of people) Necessary to Break Even for 18.2754

$1 Million Increase in Advertising 2.343

Total people using shampoo 165

million people need to be reached

million new triers needed

CURRENT USERS: Suave Loyalty Index 37%

Increase in Loyalty Percentage Necessary to

Break Even for $1 Million 1.17

people in millions needed

Increase in Advertising If increasing $7.8M in advertising:9.13

million people need to be reached

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. primetime

commercials?

PRIME TIME - NETWORK DAYTIME - NETWORK

Cost of Cost ofAverage Average30-Second Women 30-Second WomenCommerc'l 25-54 Commerc'l 25-54$77,975 4.9 * $13,350 2.1 *

CPM: 15.91$ CPM: 6.36$ (Cost Per (Cost Per Thousand) Thousand)

*Estimated Audience Delivery in millions

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

Circulation Black & <- Women 18-49 ->Rate 4-Color White Audience Black &Base Page Page Reached 4-Color White

Publications (000s) Cost Cost (000's)

Fortune 690 36,020$ 23,700$ 660 55$ 36$ National Enquirer 5,075 32,780$ 26,000$ 7,724 4$ 3$ The New Yorker 480 18,700$ 11,750$ 811 23$ 14$ People 2,600 49,200$ 38,175$ 10,931 5$ 3$ Time 4,600 101,825$ 65,275$ 6,500 16$ 10$ TV Guide 17,000 85,000$ 72,000$ 15,227 6$ 5$

FEMALE ORIENTATION Cosmopolitan 2,500 36,575$ 27,180$ 7,068 5$ 4$ Family Circle 7,250 68,150$ 57,275$ 10,443 7$ 5$ Glamour 1,900 31,200$ 22,100$ 5,145 6$ 4$ McCall's 6,200 64,620$ 52,560$ 9,124 7$ 6$ Redbook 3,800 46,940$ 35,495$ 5,631 8$ 6$ Working Mother 500 11,750$ 8,850$ 793 15$ 11$

*CPM

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?Advertising budget proposedPrime network $3,391,500Daytime network $3,702,900Print ads $705,600TOTAL $7,800,000

How many people will be reached with this budget?

Women reached per commercial Total

# Prime network commercials 43.49 4.9M 213.12 # Daytime network commericals 277.37 2.1M 582.48

# of print ads 13.68 *Avg. circulation 4383 *Total print ads 59,950 6.7M *

*Avg. of publication data given

Total amount of target audience reached: 802.30 M reachedPrior year (calculated by taking 1-18% of M reached in the CY) 657.89 Difference 144.41 M more reached with 1985 budget

Translation into increased persons who will buy Suave: 18.77 M

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.