Chapter 12: Services and Nonprofit Organization Marketing
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Critical Thinking Case
Prestige Brands, Inc.: Transforming the Business
Prestige Brands markets, sells, and distributes over-the-counter healthcare and household
cleaning products to retail outlets in the United States, Canada, and certain international markets.
In September 2010, the company’s over-the-counter (OTC) healthcare products included:
Chloraseptic® Sore Throat Relief
Clear Eyes®
Cloverine®
Household brands included:
Chore Boy®
Cinch®
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Chapter 12: Services and Nonprofit Organization Marketing
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Shareholder Value Creation Strategy
Shareholder value creation at Prestige Brands follows a three-pronged strategic approach:
driving core organic growth, a merger-and-acquisition effort focusing exclusively on OTC, and
strategic portfolio management. To drive organic growth, the company focuses on five key areas:
A Transformational Acquisition: Blacksmith Brands
With core organic growth and strategic portfolio management in mind, Prestige Brands acquired
Blacksmith Brands in the fall of 2010. Blacksmith Brands owned five leading consumer OTC
brands:
Efferdent® Denture Cleanser
Effergrip® Denture Adhesive
This was considered a transformational acquisition for the company, as it was a meaningful step
in its long-term strategy of an increasing presence in the OTC healthcare arena and in building a
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Chapter 12: Services and Nonprofit Organization Marketing
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OTC Category Brands
Cough/Cold Chloraseptic®, Luden’s®, Pediacare®, Little Remedies®, Nasalcrom®
Increased support of the core OTC healthcare franchise after the acquisition of Blacksmith
Brands focused on innovative advertising and promotional campaigns and new product launches.
A Major Milestone
Prestige Brands’ net revenue for the first nine months of fiscal 2011 grew by 8 percent to $240.1
million. As a result of the increased advertising and support behind the core OTC healthcare
franchise, the core OTC portfolio significantly outperformed their respective categories for the
2011).
Open-Ended Questions
1. What role can acquisitions play in building a product portfolio?
At Prestige Brands, acquisitions played a critical role in the development of the company’s
product portfolio. For example, the acquisition of Blacksmith Brands was considered a
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Chapter 12: Services and Nonprofit Organization Marketing
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Acquiring strong brands made it easier for Prestige to build its product offerings.
2. Outline the product line depth, product mix width, and individual product items at
Prestige Brands.
Students should be directed to go to www.prestigebrands.com to learn more about each of
the company’s product offerings. The product mix is comprised of five major product
categories: oral care, eye and ear care, skin care, cough/cold/allergy/sinus, and house and
home.
Oral Care is five deep:
The Doctor’s® Brush Picks®
Eye & Ear Care is five deep:
Clear Eyes®
Skin Care is ten deep:
Cloverine®
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Chapter 12: Services and Nonprofit Organization Marketing
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New-Skin® Liquid Bandage
Outgro®
Cough/Cold/Allergy/Sinus is five deep:
Chloraseptic® Sore Throat Relief
House & Home is five deep:
Chore Boy®
The company also has two brands that do not fit easily into any of the major product
categories:
Naturally, the pace at which company management is acquiring brands means that this
categorization is changing quickly. For example, soon after this case was written, Prestige
Brands acquired Dramamine®, which fits nicely with the Compoz® product offering—
suggesting that the company has plans for that product category.
Close-Ended Questions
True/False
1. Looking at its list of OTC healthcare products, Prestige Brands did not improve its
positioning in eye care products.
PTS: 1 OBJ: 10-3 TOP: AACSB Reflective Thinking
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Chapter 12: Services and Nonprofit Organization Marketing
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KEY: CB&E Model Product MSC: BLOOMS Level I Knowledge
2. The acquisition of Blacksmith left Prestige’s depth in household brands unchanged.
PTS: 1 OBJ: 10-3 TOP: AACSB Reflective Thinking
KEY: CB&E Model Strategy MSC: BLOOMS Level I Knowledge
3. Given some redundancy in its product mix, Prestige is not immune from cannibalization.
PTS: 1 OBJ: 10-3 TOP: AACSB Reflective Thinking
KEY: CB&E Model Product MSC: BLOOMS Level I Knowledge
4. One benefit that Prestige probably does not enjoy is an extreme economy of scale in its
advertising.
PTS: 1 OBJ: 10-3 TOP: AACSB Reflective Thinking
KEY: CB&E Model Product MSC: BLOOMS Level I Knowledge
Multiple Choice
1. Efferdent, PediaCare, and the other products Prestige picked up from its Blacksmith
acquisition should be more correctly seen as __________ rather than __________.
a. product mixes/brands
b
.
product lines/product items
c. product items/product lines
d
.
product items/brands
e. product mixes/product lines
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Chapter 12: Services and Nonprofit Organization Marketing
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PTS: 1 OBJ: 10-3 TOP: AACSB Reflective Thinking
KEY: CB&E Model Product MSC: BLOOMS Level II Comprehension
2. One aspect of expanding a portfolio through acquisition is a new product mix. Compoz and
Momentum brands have a product depth of 1. What term best describes them?
a. unsought products
b
.
noncore brands
c. convenience products
d
.
product lines
e. All of the above
PTS: 1 OBJ: 10-3 TOP: AACSB Reflective Thinking
KEY: CB&E Model ProductMSC: BLOOMS Level II Comprehension
3. The acquisition of Blacksmith is called a “transformational acquisition” for what reason?
a. It made Prestige an even larger niche marketer of minor brands.
b
.
It addressed stockholder concerns about a lack of focus.
c. It eliminated a competitor.
d
.
It provided more product line depth to a core business.
e. It evened out a sales pattern that had been dependent on the cough, cold, and flu
season.
PTS: 1 OBJ: 10-3 TOP: AACSB Reflective Thinking
KEY: CB&E Model Strategy MSC: BLOOMS Level II Comprehension
4. The third prong of Prestige’s corporate strategy involves periodically reassessing which
brands are the best for the company in the long term from a portfolio standpoint and then
adjusting the portfolio accordingly. Peter Drucker gave this a name. What is it?
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Chapter 12: Services and Nonprofit Organization Marketing
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a. product demixing
b
.
product line attrition
c. organized abandonment
d
.
periodic audit
e. organized delisting
PTS: 1 OBJ: 11-5 TOP: AACSB Reflective Thinking
KEY: CB&E Model Strategy MSC: BLOOMS Level II Comprehension
5. Which of the following expenses does Prestige most likely not eliminate by its reliance on
acquisition over new product development?
a. R&D
b
.
test marketing
c. commercialization
d
.
business analysis
e. None of the above
PTS: 1 OBJ: 11-2 TOP: AACSB Reflective Thinking
KEY: CB&E Model ProductMSC: BLOOMS Level II Comprehension
6. Venerable brands such as Luden’s (cough drops originally formulated over a century ago)
and Efferdent (virtually synonymous with denture adhesive since the days of early
television) give Prestige what important attribute?
a. brand equity
b a major position in both segments
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Chapter 12: Services and Nonprofit Organization Marketing
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.
c. two brand marks
d
.
household words
e. manufacturing brands to go with its private brands
PTS: 1 OBJ: 10-4 TOP: AACSB Reflective Thinking
KEY: CB&E Model Product MSC: BLOOMS Level II Comprehension
© 2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.