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).
Base:
------------ % Component ----------Total
Heavy
% of
of Total of Heavy
of
of Heavy Shampoo Shampoo
Total
Shampoo Shampoo Suave
Suave
Users
Users
Psychographic Cluster Pop.
Users
Users
Users
Users
Index
Index
1
Agribusiness 4.80%
5.68%
4.36%
6.20%
8.54%
118.33
90.83
2
Back Country Folks
5.92%
5.45%
4.09%
9.09%
6.72%
92.06
69.09
5
Blue Chip Blues5.59%
5.96%
7.02%
7.94%
9.90%
106.62
125.58
19
Levittown, U.S.A.
5.51%
5.21%
5.01%
4.21%
5.33%
94.56
90.93
20
Middle America5.94%
5.93%
7.20%
4.08%
2.82%
99.83
121.21
40
Young Suburbia6.85%
6.92%
5.55%
6.61%
8.47%
101.02
81.02
Suave
Users
Index
129.17
153.55
142.04
76.41
68.69
96.50
Heavy
Suave
Users
Index
177.92
113.51
177.10
96.73
47.47
123.65
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
of people) Necessary to Break Even for
$1 Million Increase in Advertising
Total people
using shampoo
2.343 165
million new triers needed
If increasing $7.8M in advertising:
18.2754
million people need to be reached
CURRENT USERS:
Suave Loyalty Index
37%
Increase in Loyalty Percentage Necessary to
Break Even for $1 Million
Increase in Advertising
people in
millions
1.17 needed
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
Cost of
Average
30-Second
Commerc'l
$77,975
CPM:
(Cost Per
Thousand)
DAYTIME - NETWORK
Women
25-54
4.9 *
$ 15.91
*Estimated Audience Delivery in millions
Cost of
Average
30-Second
Commerc'l
$13,350
CPM:
(Cost Per
Thousand)
Women
25-54
2.1 *
$
6.36
Using our target audience (W 18-49), what is
the cost of publications?
Publications
Fortune
National Enquirer
The New Yorker
People
Time
TV Guide
FEMALE ORIENTATION
Cosmopolitan
Family Circle
Glamour
McCall's
Redbook
Working Mother
*CPM
Circulation
Rate
Base
(000s)
4-Color
Page
Cost
Black &
<- Women 18-49 ->
White Audience
Black &
Page
Reached 4-Color
White
Cost
(000's)
690
5,075
480
2,600
4,600
17,000
$
$
$
$
$
$
36,020
32,780
18,700
49,200
101,825
85,000
$
$
$
$
$
$
23,700
26,000
11,750
38,175
65,275
72,000
660
7,724
811
10,931
6,500
15,227
$
$
$
$
$
$
55
4
23
5
16
6
$
$
$
$
$
$
36
3
14
3
10
5
2,500
7,250
1,900
6,200
3,800
500
$
$
$
$
$
$
36,575
68,150
31,200
64,620
46,940
11,750
$
$
$
$
$
$
27,180
57,275
22,100
52,560
35,495
8,850
7,068
10,443
5,145
9,124
5,631
793
$
$
$
$
$
$
5
7
6
7
8
15
$
$
$
$
$
$
4
5
4
6
6
11
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 proposed
Prime network
Daytime network
Print ads
TOTAL
$3,391,500
$3,702,900
$705,600
$7,800,000
How many people will be reached with this budget?
# Prime network commercials
# Daytime network commericals
43.49
277.37
Women
reached per
commercial
4.9M
2.1M
# of print ads
Avg. circulation
Total print ads
13.68 *
4383 *
59,950
6.7M
Total
213.12
582.48
*
*Avg. of publication data given
Total amount of target audience reached:
Prior year (calculated by taking 1-18% of M reached in the CY)
Difference
Translation into increased persons who will buy Suave:
802.30 M reached
657.89
144.41 M more reached with 1985 budget
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.