RECOMMENDATION MEMOS

1. OUR RECOMMENDATION
This paragraph expresses your intent or action (“This recommends…”).
 The [pro-forma income statement] analysis shows that Paramount will earn $X of
accumulated operating profit in the Niche scenario after 2 years while it will only earn
$X in the Mainstream scenario
 Launching Clean Edge as a Niche product helps Paramount to increase x% of market
share while launching the product as a Mainstream product helps gain y% of market
share. ROI in each scenario is…
 Therefore, we recommend Paramount to launch Clean Edge as the X product in the
super-premium segment under the brand Y

2. BACKGROUND
This paragraph explains why we are talking about this today. It lays out the story.
 Historical:
 Paramount is a global consumer products giant with $13B in worldwide sales and $7
billion in gross profits in 2009. Within the non-disposable razor/refillable cartridge
market, Paramount is the No.1 player by sales volume and No.2 by sales value.
 Paramount’s main competitors in the non-disposable/refillable cartridge market
include Prince and Benet & Klein (B&K). Prince operates predominantly in the
Super-Premium market under the brand names of Cogent and Cogent Plus with an
estimated market share (by $) of 21.3%. B&K on the other hand operates
predominantly in the Moderate and Super-Premium markets with an expected total
market share of 21.1% in 2011
 Highlights what brought us to this moment, why we are in this position, what brought
about the need to make this decision:
 However, Paramount had only two products in the Moderate and Value segments
and no presence in the Super-Premium segment, which accounts for 25% of total
sales volume and 34% of total sales value. This represents a significant opportunity
for Paramount to break into the Super-Premium segment via the Clean Edge product.

 In the last decade, the industry has experienced significant growth in the super-
premium segment driven by numerous product innovations.
 67% of users are involved users who differentiate among products and prioritize
functionality and are willing to switch to new products because of advanced
technology or aesthetic effect.
 If Paramount does not launch a new product in the Super-Premium segment, their
customers might easily be wooed away by other brands, potentially by Prince or
Radiance, which will launch a new products (Naiv) in the Super-Premium segment in
Sep 2010 and will potentially acquire a 13% share within one year.
 The problem is whether Paramount should launch its new product – Clean Edge as a
Niche product or a Mainstream product.
 Launching Clean Edge as a Niche product will help Paramount attract highly
involved, fastidious groomers looking for a superior shaving experience which
 accounts for 67% of total targeted users. Following the Mainstream strategy will
enable Paramount to target a broader user-base thereby widening their TAM (total
addressable market) and avoid possible isolation of more casual shavers.

 Dimensionalize the importance to the organization (e.g., important profit and/or market
share goal).
(???) Maintaining a healthy profit margin was important to Paramount (???)
Paramount’s operating profit margin is higher than Prince, its largest competitors (20%
vs. 15%).
 Constraints – such as budget, capacity, technology, people, etc.
 SC was looking to curb excessive marketing expenses in all product categories (The
MKT budget in 2010 totaled $48.3M.
 PM of Pro may be against the reallocation of a portion of the MKT budget for Pro to
Clean Edge

 This section is both brief and factual.

Checklist
 Is the background clear, concise, and easy to follow?
 Does it explain why action is needed now?
 Does the appropriate sense of urgency come across?

3. RECOMMENDATION
We recommend launching Clean Edge as a niche product targeting ego expressive “Involved Razor
Users” using X marketing strategy. Once we have proven Clean Edge’s credibility and captured
market share we will then consider pivoting Clean Edge into mainstream category.

Here, you detail what to do, when to do it, and how to do it.
 The details of “what”, “when”, and “how”. NO “why”.
 This section should be very specific (100% clear). It must be actionable (How much
will it cost, when, how, who). The reader should be able to read this and know how
to carry out this recommendation.
 Some cases may require more than one recommendation.

Checklist
1. Is the recommendation clear and actionable? Could someone else
implement it?

4. BASIS FOR RECOMMENDATION

Here the reader learns WHY each recommendation is the UNIQUE right thing to do.
2. 2-3 solid reasons are typical. Any other action should seem less
appealing.
 3. This section flows from the opening “hook”; links to the original
recommendation.
4. Support includes impact on profit, share, AND anything else
affecting long-term performance of the company/brand.
5. Analysis should address quantitative issues such as NPV,
cannibalization, breakeven analysis, pro forma statement of project,
sensitivity analysis; as well as qualitative issues such as reasons
why consumers buy the brand, impact on other brands of the firm,
impact on retail relationships, competitive reactions, etc.
6. Appeals to precedent and anecdotal evidence in absence of data, but
only in limited, carefully constrained manner.
7. Shows how the recommendation will put the brand (firm) at a
competitive advantage.
8. The goal is to read the basis and conclude the recommendation.
Checklist
 Is the recommendation an inescapable conclusion of the basis?
 Does the basis for recommendation appropriately consider:
 Market size, category trends?
 Core competencies and consistency with mission of the company?
 Consumers (builds on important insights)? Competitors?
 Financial Attractiveness (e.g., NPV, ROI, breakeven, payback)?
 Are all assumptions explicitly stated (e.g., growth rates, market size)? These
could be stated in exhibits/attachments.

5. DISCUSSION
 Outline other alternatives not selected.
 Discuss risks and key assumptions (use full disclosure, reference Options Grid) of your
recommendation.
 When you give a precise number or range, you must support the basis as well.

Checklist
 Is the analysis thorough with key alternatives fairly considered (see the attachment
OPTIONS GRID)?
 Risks associated with recommendation are properly addressed? In other words, don’t
just state the risks but try and address them through your recommendation(s) as best
as you can.

6. NEXT STEPS
 Orient to the reader
 Specify date and action needed (what will be done, by whom, and by when)

Checklist
 Clear follow-up/next steps?
 If appropriate, lay out timeline with key milestones to implement recommendation.
7. EXHIBITS
 An Exhibit can be a graph, grid, or simple table.
 List assumptions used in calculations. Do not assume that the reader can read between
the lines. So, state every assumption explicitly.
 Exhibits should have Title, sources, footnotes to calculation. The point of the Exhibit
should be instantly clear to the reader.
 Exhibits should be cited in the proper order (i.e., do not cite Exhibit 4 first in your
Memo and then Exhibit 2).

Checklist
 Is the analysis precise, accurate, and data-based?
 Are the exhibits clearly laid out, titled, and referenced in the memo?
 Is every assumption explicitly listed?

NOTE: Every memo may not include every element described above. The specific
case will dictate what must be included. An example is attached.

Exhibit 1:

Internal Analysis: SWOT

Strengths:
- Paramount is a respected global consumer products company
- Unit-volume market leader in 2009 (23.3% retail unit share)
- Strong performance in sales revenue, gross profit, operating profit in U.S market
- Paramount Pro (biggest profit driver), is 2nd place in existing Non disposable market
- Positive results for Clean Edge in clinical trials - 25% increase in hair removal vs other leading
Non disposable razor brands
- Clearly have resources and expertise to support new product launch

Weaknesses:
- Potential cannibalization from the current product lines Pro/Avail
- Concerns over increasing market budget, steering committee was looking to curb excessive
marketing expenses
- No innovation in Avail or Pro brands over the past 5 years.

Opportunities:
- High growth in non-disposable market - 5% growth from 2007-2010
- Consumers are purchasing more moderate and super-premium razors
- Rapid growth in super-premium segment driven by new innovative technology and product
launches
- Men’s grooming segment is poised for growth with proliferation of male-specific grooming
products (e.g., body spray, shower gel)
- Increase in blade replacement demonstrating customers more willing to try out new
products

Threats:
- Many substitute products and competitors like electric shavers, disposable razors
- Naiv by Radiance has similar technology to New Edge and will be launched four months
earlier than New Edge in September 2010 with over 16M media advertising budget
- Highly competitive market

Exhibit 2:

Five Forces:

Threat of Entrants: High

 Simpsons and Radiance are planning to enter the market and Radiance projects to
spend 16.1 million in advertising which is a sizable amount when compared to
Paramount’s budget.

Industry Rivalry: High

 Highly saturated, competitive market with Prince leading the market with 26.2%
market share, followed by Paramount with 21.4% of market share, Benet & Klein
with 21.1%
 Paramount’s main competitors in the non-disposable/refillable cartridge market
include Prince and Benet & Klein (B&K). Prince operates predominantly in the
Super-Premium market under the brand names of Cogent and Cogent Plus with an
estimated market share (by $) of 21.3%. B&K on the other hand operates
predominantly in the Moderate and Super-Premium markets with an expected total
market share of 21.1% in 2011

Bargaining Power of Buyers: High

 Lots of options for consumers in this market (disposable, non-disposable, refill, shaving,
depilatories)
 New entrants into the market like Simpson & Radiance will give even more power to
consumers to switch brands
 Low switching costs for customers
 Very similar price between Paramount Clean Edge main competitor Prince

Bargaining Power of Suppliers: Low

  Suppliers would not want to lose Paramount as a customer because Paramount is a well
respect global company selling a diversified range of products in Health, Beauty &
Grooming

Threat of Substitutes: Low

 Substitute products like disposable razors mainly appealed to value-oriented customers,

or customers that wanted a new blade each shave
 Electric shavers captured 27% of male market, generally appealing to older consumers
 Other substitutes included depilatory creams, waxing, laser hair removal

SAMPLE MEMO FORMAT

To: (Name of supervisor as per the case goes here; DON’T PUT THE
PROFESSOR’S NAME HERE! J)
From: Your team designation/title/cohort and number
Date:
SUBJECT: NAME OF CASE AND RECO TOPIC

This recommends

Implementation will take place within ____ days of approval. Improved sales, reliability,
profitability, productivity, and/or reduced costs will result from these actions (state specific
numbers if possible). Sales (Name), Finance (Name), and Manufacturing (Name) concur (If
applicable).
Background
 These key facts help explain why we are thinking about this situation today.
 At times, the background paragraph is a good place in a recommendation memo to
document the gap between the “real” and the “ideal”. When you use it this way, be sure
it sets up each of the reasons in the “Basis for Recommendation” section of the memo.
 Do not include obvious or unnecessary facts. Do not include information found while
looking into the situation. This is for information that caused us to look into the situation.
 It is best to simply tell a simple and concise story based on the internal and external
situation facing the company.

Recommendation
 This describes what we are going to do and how we intend to do it. Limit this section to
major points. Implementation details and caveats are discussed in the “Discussion”
section following the “Basis for Recommendation” section.
 Our objective is to

Basis for Recommendation

 We state our most important reason here. It is numbered, underlined, and stated in a full
sentence. We present data here to prove the claim made in point 1, making sure that the
first sentence of this section clearly extends from the data. The claim must be the
inescapable conclusion of the data. If there are more than four rows of data, use an
exhibit (i.e., refer to Exhibit 1). Exhibits must be clearly labeled and numbered.
 We state our second most important reason here. We present data to prove the claim
made in point 2.
 3-4 points are typical but not more or less ideal.
Discussion:
 Here we discuss a) implementation details, and b) qualifiers, such as risks and rejected
alternative solutions.

Next Steps:
 Here we tell the readers exactly what we want them to do and when we want them to do
it. We also lay out a timetable of key milestones to implement the recommendation. A
throw-away schedule should be prepared if high stakes are involved.

[YOUR MEMO SHOULD NOT EXCEED 1 ½ PAGES. THIS PAGE LIMIT IS NOT TO
RESTRICT YOUR THINKING. RATHER, IT IS MEANT TO MIMIC MANAGERIAL
PRACTICE SO YOU GET EXPERIENCE AT WRITING MEMOS IN FORMATS AS CLOSE
TO WHAT IS DONE IN PRACTICE AS POSSIBLE.

IF IT EXCEEDS 1.5 PAGES, WHATEVER IS IN EXCESS OF THIS PAGE LIMIT WILL BE

IGNORED.]