Colgate Palmolive Company - The Precision Toothbrush

Colgate-Palmolive Company:

The Precision Toothbrush

Problem Statement

To define Positioning, Branding & Communication Strategy for its new toothbrush

Colgate Precision

Major Players in Marketing Strategy of Colgate Precision

Susan Steinberg

Nigel Burton

• Precision Product Manager

• Division General Manager

Consumer Behavior

Health of Gums - Primary issue Cavity Prevention - now a secondary issue

Consumers ready to pay premium for product addressing Gum Health issue.

Three categories: 1) Value

2) Professional 3) Super Premium (Emerging Category)

Purchase Criteria - Performance Benefits

Data on Toothbrush Market in u.s.

•U.S. Oral Care Market - $2.9 billion

•U.S. Toothbrush Market - $453 million

•U.S. Market (CP - Toothbrush) - $77 million

•Dollar Sales Growth - 9.3% per annum (since 1987)

•1992 - Market Growth - 18% by volume & 21% by value

•Dollar growth exceeded volume growth due to emergence of super premium category.

•1993 - Lower projected sales growth - buildup of household inventory in 1992.

Income Statement of cp Toothbrush (1989 - 1992)

Colgate Precision

•CP is global leader in personal and household products •Strong Brand Image Worldwide •Technical Innovation - Triple Action Brushing Effect • Concepts tests - 77% found Colgate Precision more effective.

• 33% adults - Uninvolved Oral Health Consumers - Difficult to educate about the technical innovation.

• CP is not yet into the super-premium market while CP’s main competitor Oral-B has professional endorsement as dentist’s toothbrush.

• CP’s customer research revealed that 46% of adult are concerned about health of their gums.

• Customers are willing to pay a premium for new products addressing this issue.

• Willingness of customers to try new products.

• Competitors are offering incentive program to attract customers. • Innovation and additional features in competitors product • Threat of buyer/supplier growing bargaining power • Threat of New Entrants - In 1991, the toothbrush market exploded with

a dramatic increase in new entrants.

Position of Precision in the Industry

product

Niche, Super Premium Mainstream Professional

•Competitive •Effective •Unique •No CP Offering in super premium range

•Premium offering compared to others in this market segment.

product

PricePrice


•Equal to Oral-B Indicator •Premium when compared to Oral-B regular

•Best value for level of efficiency

PricePromotion


•35% more effective on the teeth surface and 100% more effective at gum line/between teeth at removing plaque when compared to product offering from the competitors

•Best of mainstream offering

PriceDistribution


•Majority through retail outlets specifically drug stores where people will be searching for best protection against gum disease.

•80% distributed through office of dental professionals •Rest through retail outlets

Financial Forecast

•A financial analysis indicates a profit over a two year time frame for both market positions.

•The niche position generates a greater estimated net profit over the two years.

•Some sales of the new product are anticipated to come at the expense of sales of other existing Colgate products.

• In the niche position, an estimated 35% of sales would come form other products decreasing Colgate’s overall toothbrush net profit.

• In the mainstream position, an estimated 60% of sales would come from exiting products decreasing Colgate’s overall toothbrush net profit.

• Including cannibalization effect, only the niche market generates a profit over a two year period.

Branding

• Emphasizing the Colgate name on the new Precision toothbrush would cause additional cannibalization of the

existing Colgate toothbrushes - estimated at 20%

• Using the Colgate name would be congruent with Colgate’s strategy to build the Colgate Brand Equity.

Communication and PR0motion

•Four concept tests conducted among 400 adult professional brush users. •Results indicate consumers were highly motivated by precision toothbrush claims. •Additional in-home usage test were conducted - 77% claimed that Precision was much more effective than their

current toothbrush - Other consumer research revealed that the higher the exposure to

the product the greater consumer acceptance

Manufacturing and Financial Resources

•Colgate Palmolive has spent $243 million to upgrade 25 of its 91 manufacturing plants

•Participated in several strategic acquisitions.

•Manufacturing capabilities began in China and Eastern Europe.

•If needed, some production can be re-directed to manufacturing sub-contractors which CP currently uses for other products.

•CP holds 43 % of the global toothpaste market and 16% of the global toothbrush market

•Sales have increased 12% to $1.3 billion, accounting for 22% of CP’s total sales

•Toothbrush sales amounted to $77 million with operating profit of $9.8 million

Advantages and Disadvantages of Mainstream Marketing

Advantages Disadvantages

•Product is accessible to a larger market

• Marketing to more diverse audience - simple and direct

campaign - address all common concerns of all

toothbrush buyers.

• In the mainstream market a higher price makes a product less attractive to the average

consumer. • There is a variance amongst

consumers in relation to oral hygiene.

• Inadequate supply of the product due to huge demand

• Including Precision as a high-end, mainstream product could

potentially “cannibalize” Colgate Plus sales.

Advantages and Disadvantages of Niche Marketing

Advantages Disadvantages• Concentrated, specific advertising campaign,

targeted to a specific demographic, psychographic, behavioral or geographic segment - efficient use of advertising

budgets • Developed to be the best toothbrush possible

and placed in the super-premium category, this toothbrush is inherently a niche product.

• Customers would appreciate the scientific data Colgate-Palmolive has complied on this

toothbrush. • Niche market participants are also more likely

to pay a premium for this product due to the fact that Precision caters to a distinct set of

needs they have. • To keep Precision as a specialized product

means that the new product is less likely to invade the market share of other Colgate-Palmolive products, like the Colgate Plus.

• Niche markets historically attract fewer competitors.

• Marketing the Precision product to a niche market would generate less revenue for Colgate-Palmolive than a

mainstream approach.

Conclusion

• Colgate Palmolive should position the precision toothbrush as a niche market product during introductory and growth life cycle.

• Benefits and values are best suited for niche costumer and would therefore enjoy the greatest success in such a market.

• R&D investments suggest that Super Premium Niche segment is more consistent than mainstream market for advanced gum care.

Thank You