Colgate-Palmolive Co.

: The Precision Toothbrush

Case Study

Shubham Wagdarkar & Dylan Sanders

Background
In August 1992, Colgate-Palmolive (CP) Oral Card department developed a new

toothbrush over three years which was technologically superior and poised to launch this

toothbrush in the United States, tentatively named Colgate Precision.

In 1992, Colgate-Palmolive (CP) faced a dilemma regarding the release and positioning

of a new technologically advanced toothbrush – the Precision. Susan Steinberg, Precision

product manager, was weighing the option of introducing the new toothbrush to a niche market

or to a mainstream market. Both options had potential benefits and challenges.

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 two years ($12,527,333). In the

niche position, an estimated 35% of sales would come from other products decreasing Colgate’s

overall toothbrush net profit by $2,507,400 in year one and $3,970,050 in the year year 2. The

mainstream net profit over two years is estimated at $9,515,33 an estimated 60% of sales would

come from existing products decreasing Colgate’s overall toothbrush net profit by $15,044,400

in year one and $21,133,800 in year two. Exhibit 1 shows unit volumes that reach the consumer.

CP should go with niche, including the cannibalization effect, only niche market

generates a profit over a two-year period. Exhibit 2 shows Positioning Scenarios for Precision

Retail Price Trade Price Manufacture Price

Main stream strategy $2.49 $1.85 $1.76

Nich market strategy $2.89 $2.13 $2.02

Dentist 80% - $0.79 20%- $0.95

Company
 In 1806 Colgate was founded by William Colgate in New York initially Colgate sold soap

and candles. In 1991 Colgate was a global leader in household and personal care products with

sales of $6.06 billion and a gross profit of $2.76 billion, development expenditures were $114

million and media advertising expenditures total $428 million. CP held 43% of the world

toothpaste market and 16% of the world toothbrush market.

Reuben Mark, CP’s C.E.O since 1984, had been widely praised for his leadership which

increased company profit. In 1985 gross margin increased from 39% to 45% and annual growth

averaged 5% since 1986. In 1991, 22% of the total sales of CP’s was from oral products which

increased 12% to $1.3 billion. With operating profits of $9.8 million, U.S. toothbrush sales

reached $77 million. CP’s oral products were number one position in the U.S. toothbrush market

with 23.3% volume.

From 1991 to 1995 CP prioritized new product launches and entry into new geographic markets

with improving efficiencies in manufacturing and distribution. In 1991, 275 new products were

launched worldwide, and several acquisitions were completed, 25 manufacturing plants were

upgraded and manufacturing started in China and Eastern Europe.

Competition

CP’s international sales remained strong accounting for 64% of sales and 67% of profits,

but the company faced strong competition from Oral-B, Procter & Gamble (P&G), Johnson &

Johnson (J&J), Henkel of Germany, and Kao of Japan.

Oral-B had been the market leader since the 1960s. The oral-B focus was on professional

endorsements and known as “the dentist’s toothbrush”. With 27 stock-keeping units (SKUs) it

held a 23.1% volume market share and a 30.7% share of U.S retail sales in 1991.
Oral-B used promotional offers like “buy-one-get-one-free”, $1.00 off coupons, and $2.00 mail-

in refunds which were expected to cost $4.5 million which was 5% of sales in 1992. Oral-B’s

estimated operating margin on toothbrushes was 20% of factory sales after advertising and

promotion costs.

Johnson & Johnson entered the U.S toothbrush market in the 1970s. In 1991, J&J ranked

third in the U.S. retail market. In 1991, they launched a new product with an advanced reach

design which helped consumer brush at a 45% angle with features like Rubber-ridged and non-

slip handles.

J&J used promotional offers like “buy-two-get-one-free”, 60¢ coupons, and a $1.00

refund by mail expected to cost $4.6 million (8.6% of sales). J&J expected operating margin was

8.4% of factory sales.

Procter & Gamble was the newcomer in the toothbrush market with the brand name Crest. In

August 1991 Crest was tested in the Houston and San Antonia markets which captured a 13%

value share in the market. In 1992 Crest was ready to launch in the U.S market expected to

capture the same market share. The brush had long, rippled bristles of different lengths with were

claimed to reach between the teeth up to 37% farther than other brushes.

Crest used promotions like 55¢ coupons and $1.99 refunds on toothbrushes purchased

from the floor stands. Media expenditures in 1992 last quarter were estimated at $6.4 million.

Customer

CP’s consumer research indicated that adults born from 1940 to the early 1960s were

becoming aware of the health of gums to prevent the cavity and was willing to pay for new

premium products. Consumers chose a brush to fit individual needs, brand choice was based on

features (Exhibit 3).

 Due to offers like “two-for-one” toothbrush purchase frequency was 11.6 months in 1991.

Like toothpaste, the toothbrush is not shared with the household members. According to CP’s

research, 48% of consumers change their toothbrushes every three months, 70% of consumers

buy new toothbrushes when the toothbrush bristles get worn and 11% buy new toothbrushes

when suggested by dentists. The consumer brushing cycle is summarized in Table A.

Table A Consumer Brushing cycle

Time Percentage of Consumer

Before Breakfast 45%

After Breakfast 57%

After Lunch 28%

After Dinner 24%

Before Bed 71%

Segmentation

In the 1980s, the toothbrush was categorized into two segments: value and professional.

In the late 1980s new segment emerged as super-premium. By 1992, super-premium accounted

for 35% of unit volume, Professional accounted for 41% and value brushes accounted for 24% of

unit volume. The CP’s clinical test Precision toothbrush removes 35% more plaque compared to

other brushes.
 Based on the two variables, the Reason for buying the toothbrush and preference for the

feature, People can be split into market segments as follows,

· Most interested in discounts and deals on products.

· Most concerned about gum health.

· Most interested in brush features.

Targeting

The Precision toothbrush should target the group of people who are more concerned

about gum health because they are most likely to buy new toothbrushes regularly and most likely

visit the dentist who may decide to buy new toothbrushes.

Positioning

Based on the Precision clinical tests, toothbrush removes 35% more and are even more

effective, achieving double plaque removal scores compared to other brushes. So Precision

toothbrush can come up with its positioning statement as, “A better product with better

performance”.

Product

Dental hygiene is something thats supposed to be done twice a day by everyone on earth,

this is the ideal situation, in reality products like tooth brushes are used by adult men and women

who care of thier oral hygene and come from urban eras and developed nations. Which is still a

noticeable portion of the world population the majority population in western countries.
Price

Colgates prices vary by product but are in the middle of the range of its competitors on

average. Their average product is 3.75$ which is right in the middle of the 2 $ - 6.52 $ range that

represents the average costs of all of their competitors. Colgate also uses coupons and buy 1 get

1 half off discounts to bring their prices to consumers down.

Placement

Colgate as a toothpaste/brush company does have an advantage for product placement its

very easy for their brand to be seen in popular movies and Tv shows without people thinking

twice about, this leads to a subconscious placement of the product in peoples minds. Other then

that they also go through all the normal Product avenues using Magazine, and Cable Comericals

to help their product placement. Of course they also use in store display racks in pharmacies, and

similar stores, since a large portion of the populace puts no thought into buying toohbrushes and

gets the first one they see when they go to the store to get one, or remember that they need a

toothbrush right before they leave the store prompting the displays to be placed near the exit and

entrances.

Promotion

Colgate uses concept test on consumers to see what their thoughts are on their tooth

brushes compared to their competitors. The main issue they came across was that consumers

thought their new design looked weird as it substantially differentiated from normal brush

designs. The solution to this was by using coupons, discounts and buy 1 get 1 half off deals to

help consumers overlook their initial bias against the product. Their commercials and advertising

was also shifted to inform consumers about the superiority of their product from a technical
perspective after the research showed a direct correlation between a consumers knowledge of the

product and their likely hood to buy the product.

Conclusion

Colgate Prescision should be marketed as a niche product rather than a mainstrem

product, the toothbrush was designed for a certain population of individuals that want the

absolute best performance from their toothbrush. These individuals are not among the majority

who replace their toothbrush every 11 months but fall into the smaller population of individuals

who care about dental hygene and replace their tooth brush every 3 months independent of the

toothpaste. This higher turnover is more adept at generating profit then hoping that a generic

customer will pick your middle range toothbrush from the other generic competitors that all sit

on the same rack. General consumers dont have a logical reason why they picked their

toothbrush brand, the only population that has or buys a brand for a specific reason are

individuals with dental consciousness such as those with sensitive gums or teeth. This means that

there is not straight forward approach to market to the generic consumer or to market the Colgate

Prescion as a mainstream product. Its for this reason that the product will fair far better as a niche

product that costs a little more but clearly relates the services it can do that other brands cannot.

This does go against the case’s conclusion. “Susan Steinberg product manager managed the

entire product development of Precision and believed that Precision was more than a niche

product that benefits consumers to a technological breakthrough. Nigel Burton general manager

recommended Steinberg for positioning, branding, and communication strategies of the new

Precision product. But now CP facing a highly competitive market with new product activity.

Steinberg had to develop a marketing mix and profit and loss that would reach Precision’s full

potential and be accepted by the Colgate Plus product manager.” (Pg. 13) In conclusion we
recommend that the Colgate Prescion was designed as a niche product and should be marketed as

such.

Appendix

Exhibit 1 Unit volumes reach consumer

Exhibit 2 Positioning Scenarios for Precision

Exhibit 3 Brand Decision Factors for Consumers