Colgate-Palmolive Company: The Precision Toothbrush

About Colgate-Palmolive (CP)

CP is a global leader in household and personal care products Produces toothpaste, toothbrush and other oral care products like dental floss and mouth rinses Sales of $ 6.06 bn (1991) Gross Profit- $ 2.76 bn (1991) Gross margins up from 39% to 45% since 1986, with an average volume growth of 5% Poised to make its presence felt in the super premium segment of toothbrushes by launching its new product- Colgate Precision

External Analysis
ECONOMIC
Entry of new players in early 90s. Eg-P&G (Crest) and Smithkline (Aquafresh Flex)Beecham Super premium positioning

TECHNOLOGICAL
New products in late 80s & early 90s Super premium brushes-focus on greater plaque removal & gum care Designs of handle, head and bristles

SOCIAL
Consumers willing to experiment with new toothbrushes Baby boom generation-childrens market with Glow-in-the-dark handles; cartoon characters Concern for gum heath as opposed to cavity prevention- People willing to pay more for products designed for gum care Brand choice based on features, comfort, professional recommendations

Note: Political factors are not significant in this case

Demand Analysis
Current US toothbrush market- USD 453 million ($ sale value) CPs toothbrush sales- USD 77 million (1991) Market growth- 9.3% per annum since 1987 ($ sale value) 1992 market growth rate @ 18% (by volume) and 21% (by $ sale)

Industry Trends
Customer preferences based on product performance rather than price Brand choice based on features, comfort & professional recommendations Aesthetic features & technical performance improvement new products Shift of customer preference from hard bristles to soft bristles

Competitive Position of Colgate-Palmolive

Super Premium Segment CP- No Presence Professional Segment Colgate Plus- 18.5% Value Segment Colgate Classic-4.9% Pepsodent Regular- 6.6% (incl. Prof.)

Oral B- 30.7%
J&J Reach Advanced- 0.9% Aquafresh Flex- 1.1% P&G Crest- No presence

J&J Reach Regular- 20%

Pepsodent Prof.- 6.6% (incl. regular)

Toothbrush Brand Share ($ value)

ButlerAquafresh Private 2% 2% Labels (Others) Lever 12% 7% Colgate 23%

J&J 22%

Oral B 31%

CP has #1 position in US market with 23.3% volume share CPs position weak in terms of media advertising- Highest share of voice is of J&J (42%), followed by Oral B (27%), and then CP (19%)

1991 figures

Problem Definition
Despite being the market leader in Oral Care industry no strong presence in toothbrush super niche segment Colgate Plus not the market leader in any of the 3 consumer segment

Objective
To come up with the positioning, branding and communication strategies for Colgate Precision such that the cannibalization of Colgate Plus is minimum

Alternatives
Alternative 1 Positioned as niche product targeted at customers concerned about gum disease

Alternative 2 Positioned as mainstream brush, with appeal of being the most effective brush available in the market

Value Proposition
Technological breakthrough which provides triple action brushing effect (Gum line, between the teeth & teeth surface) 35% more plaque removal when compared to Reach and Oral-B At the gum line & between the teeth 50% more plaque removal

SWOT Analysis for Colgate Palmolive

Strengths 1) Market Leader in oral care 2) Intensive research & development 3) Breakthrough products like: Colgate plus wild ones, Colgate baking soda toothpaste 4) Aggressive Advertising Weaknesses Non presence in the super niche market

Opportunities Shift in consumer needs from economic function emotional

Threats 1) Penetration levels are already high 2) Resultantly new products eat into others market share 3) Intensive competition and high infusion of new products in the market

Perceptual Map
High effective bristles
Colgate Precision J&J Reach Adv Oral B indicator

Crest Complete

Less comfort
AquaFresh Flex

High comfort

Less effective bristles

Customer Segmentation
Type of consumer % of adults Habits Brush twice a day- 85% Therapeutic brushers 46 Use professional brush- 62% Floss regularly- 54% Oral B Angle, Oral B Regular, Colgate Plus Major brands

Brush twice a day- 85%

Use mouthwash- 81% Cosmetic brushers 21 Breath fresheners- 54% Floss- 69% Professional brush- 54% Brush once a day or less- 20% Uninvolved consumers 33 Use only regular tooth brushes- 28% Floss- 54% Mouthwash- 66% Colgate Classic, Oral B Regular, Colate Plus

Colgate Classic, Oral B Regular, Colate Plus

Toothbrush Market ( By Volume)

Principal toothbrush Brand unit market share: Food
Colgate

Principal toothbrush brand unit market share: Drugs

Colgate

12% 5% 5% 9% 23%

Oral B

26%

J&J Lever

26% 0% 7% 19%

17%

Oral B J&J

20%

P&G Aquafresh Others

31%

Lever P&G Aquafresh Others

Principal toothbrush brand unit market share: Mass

4% 26% 0% 6% 16%
Colgate

CP must increase its focus in the drugstore channel

Oral B

29%

J&J

19%

Lever P&G Aquafresh Others

Communication Strategy
Advertising Channels Emphasis on Colgate should focus on : Endorsements from dentists approvals from the American Dental Association This will help to : Create awareness and educate the audience Induce trial of the product

Magazines

Billboards

Precision

Radio

You can really feel it working

TV Commercials

Branding
Emphasizing the Colgate name on the Precision toothbrush would cause cannibalization But use of Colgate name would be congruent with its strategy of building brand equity Thereby, Precision should be focused on to limit the cannibalization

Recommendations
Advertising & promotion budget

Marketing mix

Launching Strategy

Profit loss pro-forma

Advertising Hire celebrities for the advertisement Increase the volume of CSR activities to leverage the build in good image Target market to be clearly emphasized Can emphasize on digital branding.
Advertising & promotion budget 1993 budget: Increase overall toothbrush Ads & promotion budget by $19.2 mn (80% over estimated $ 24 mn) Devote $ 32.5 mn to Precision, $ 10.8 mn to Plus Ads focused on prevention of gum disease , toothbrush effectiveness (Need to develop superiority claim)

Marketing mix Precision Toothbrush placed in Niche market and after maturity repositioned to mainstream market
Marketing Mix More value to consumers than competitors prices
Price

Precision continue to address targeted consumer's specific need - plaque Removal/attractive packaging Product Leveraging of intensive distribution channels. e.g. : toiletries, unique display model, vendor relationship Invest industry-standard amounts of capital for the new toothbrush promotion - target youth and dentists majorly

Place

Promoti on

Launching strategy
Target therapeutic and cosmetic brushers Enter the super premium niche market Move to Mainstream market Distribute to Dentists and drug stores

Pro-forma Income Statement Cannibalization Analysis

As Niche product
Y1 Net sales Cost of sales Advertising Operating profit Plus price: $1.35 Classic price: $0.69 Gross margin: 50% Quantity(MM) Advertising (M) Net profit(M) $26.26 M $ 8.58 M $11.2 M $6.48 M Y2 $40.4 M $13.2 M $11.7 M $15.5 M

As mainstream product
Y1 $73.92 M $26.88 M $32.8 M $14.24 M Y2 $103.84 M $37.76 M $29 M $37.08 M

100 % from plus

35% Y1 14.7 9.92 4.32 Y2 20.65 13.94 23.14 60% Y1 25.2 17.0 1 -2.77 Y2 35.4 23.9 13.9

50 % plus 50 % classic
35% Y1 7.35 7.35 7.5 6.74 Y2 10.325 10.325 10.53 26.55 60% Y1 12.6 12.6 12.85 1.39 Y2 17.7 17.7 18.05 19.03

Short term , Niche => Long term , Mainstream

Thank you!