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Colgate Palmolive The Precision Toothbrush Abhishek Pangaria Mandeepak Singh Rajendra Inani Saravanan Logu Tarandeep Singh Vivek Edlabadkar 2. Contents Problem Statement Demand & Market Analysis Marketing Mix Marketing Strategy / Programs Recommendation 3. Problem Statement Defining the Marketing strategy (Positioning, Branding & Communication Strategies) for the New Toothbrush Colgate Precision 4. Nature of Demand Tooth brush market is close to a century old, but last few decades have witnessed many changes Now, there is a shift in demanded benefits Cavity Prevention Healthier Gums Young generation ready to pay for superior toothbrush Market is emerging from value and premium range to a third category of Super Premium range Enhanced Oral Care 5. Extend of Demand Current US Toothbrush market US $ 330 MN CPs share US $ 77 MN Market growth 9.3% per annum since 1987 ($ sale) Year 1992 Market growth 18% by volume, 21 % by $ sale $ growth exceeded volume growth due to emerge of Super Premium Toothbrush 6. Environmental Climate Political - Relatively insignificant Economic New entrants appeared in early 90s Proctor & Gamble and Smithkline Beecham Positioned in the super-premium segment Technological The new products in late 1980s & early 1990s design of the handle and head of the tooth brush the action of the bristles Super premium toothbrushes - with an emphasis on greater plaque removal and gum care 7. Environmental Climate Cont.. Social Aesthetic appeal in the late 1980 The childrens market Glow-in-the-dark handles Cartoon characters New product - technological improvements An additional social development - concern for gum health - the baby boom population Cavity prevention was the previous concern - willing to pay more for products designed for gum care 8. Environmental Climate Cont.. Current status and future trend The most current technology is the action of the bristles Concern for gum health is demonstrated by the current population New product offerings to feature technological improvements of aesthetic improvements 9. Colgate Precision Presently in Introduction stage Planned promotion for entry into Super Premium segment Expected ROI in few years Time 10. Product The Precision toothbrush is a technical innovation Using infrared motion analysis, CP developed a unique brush with bristles of 3 different lengths and orientations Three brush designs evolved with 35% more plaque removing efficiency The brush is also shown to be more effective in reducing gum disease than the leading brushes, specifically Reach and Oral-B 11. Product 12. Product 13. Price * Greater discount may be given as reflected in the financial forecasts Retail Price Trade Price Manufacture Price Main Stream Strategy $ 2.49 $ 1.85 $ 1.76 Niche Market Strategy $ 2.89 $ 2.13 $ 2.02 14. Promotion Under the niche market Aggressive advertising campaign - demonstrate technical superiority of the toothbrush Under the mainstream position Through financial incentives Coupon , buy one get one free Through professional channels Dentists Consumer promotions in strong CP market a free 5 oz. Tube of Colgate toothpaste with a Precision brush a 50%-off offer on Colgate toothpaste a 50 cent. coupon 15. 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 two years

($12,527,333) The mainstream net profit over two years is estimated at $9,515,333 In addition, some sales of the new product are anticipated to come at the expense of sales of other existing Colgate products

16. Financial Forecast continued.. In the niche position, an estimated 35% of sales would come form other products decreasing Colgates overall toothbrush net profit by $2,507,400 in year one and $3,970,050 in year 2 In the mainstream position, an estimated 60% of sales would come from exiting products decreasing Colgates overall toothbrush net profit by $15,044,400 in year one and $21,133,800 in year two. Including cannibalization effect, only the niche market generates a profit over a two year period 17. 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 Colgates strategy to build the Colgate brand equity 18. Communication & Promotion Information that may contribute to success Four concept tests conducted among 400 adult professional brush users (Colgate Plus, Reach, and Oral B) The results indicates - consumers were highly motivated by the Precision toothbrush claims Additional in-home usage tests 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 19. Skills and Financial Resources Colgate Palmolive has spent $243 million to upgrade 25 of its 91 manufacturing plants Participated in several strategic acquisitions. E.g. Mennen, a mens toiletry company 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. 20. Skills and Financial Resources Continued .. 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 CPs total sales Toothbrush sales amounted to $77 million with operating profit of $9.8 million What does this mean? Colgate Palmolive, without any doubt, has the means and abilities to take on the endeavor 21. Pros & Cons of Positioning Main Stream Strategy Pros Cons Unsatisfied demand could create the perception of a Hot product, which may increase sale Possible increase in sales Greater erosion of Colgate Plus May require dropping one of the slow moving Childrens brush from the Plus line Possible pressure on production schedules resulting in inadequate supply of product More competition 22. Pros & Cons of Positioning Niche Market Strategy Pros Cons Niche could later be broadened to a mainstream position as additional capacity came on line. This would be an easy transition in the product life cycle Less erosion of Colgate Plus. The products are more isolated Entry into new superior toothbrush market which CP currently holds no position CP would face less competition Less contribution to net profit in future years 23. CP would have a strong position against competitors on the basis of product attributes a better product with better performance The new product development was specifically focused on a gum effectiveness brush position the brush in the Super premium Segment specifically tailored to therapeutic brushers R&D investment concludes Super premium Niche segment is more consistent than mainstream market for the advanced gum care Recommendation A B C D Performance Price 24. Implementation Professional endorsement from dentists Pursue an aggressive advertising campaign Match price-points with other super-premium brands Associate a super-premium toothpaste with Precision Jan Feb Mar Apr May Jun July Sep Oct Nov Dec Task 2 Task 3 Task 4 Task 1 Milestone

Colgate palmolive case study - promotion strategyDocument Transcript

1. Running Head: Colgate-Palmolive http://www.Virtual-Dissertation.com`Colgate-Palmolive case study - Promotion Strategy[Write name appear here][Institute name appear here] 2. Colgate-Palmolive http://www.Virtual-Dissertation.comColgate-Palmolive case study Promotion StrategyColgate-Palmolive is the global leader in the domain of Personal care products includingtoothbrushes and toothpastes. During the 1990s it sales reached the pinnacle of of six milliondollar that became the catalyst of 2.76 billion US dollar profit. Furthermore, Colgate-Palmoliveis also enjoying the forty three percent of share of global toothpaste market and sixteen percentshare of global tooth brush market. in the USA its share is twenty three percent in the domain oftooth brush sales ("Our company"). For the full year 2010, worldwide sales were $15,564million, up 1.5% versus full year 2009. Global unit volume grew 3.0%, pricing was flat with theyear ago period and foreign exchange was negative 1.5%. Organic sales (excluding foreignexchange, acquisitions and divestments) grew 3.0%. Net income and diluted earnings per sharefor full year 2010 were $2,203 million and $4.31, respectively, compared to $2,291 million and$4.37, respectively, in 2009. As previously disclosed, full year 2010 results were reduced by aone-time, non-cash after tax charge of $271 million ($0.53 per diluted share) resulting from arequired accounting change related to the transition to hyperinflationary accounting in Venezuelaas of January 1, 2010. Full year 2010 results also include $61 million of after tax charges ($0.12per diluted share) for termination benefits relating to ongoing overhead reduction initiatives, a$30 million aftertax gain ($0.06 per diluted share) from the sale of non-core product lines and abenefit of $31 million ($0.06 per diluted share) resulting from a non-recurring tax initiativerelating to an overseas subsidiary. Excluding these items, net income was $2,474 million anddiluted earnings per share was $4.84, increases of 8% and 11%, respectively, versus full year2009. "Colgates global market shares in toothpaste and manual toothbrushes are both at record 3. Colgate-Palmolive http://www.Virtual-Dissertation.comhighs year to date. Colgates share of the global toothpaste market strengthened to 44.2% year todate, led by share gains in Brazil, China, India, Venezuela, France, Greece and the UnitedKingdom. Colgate also strengthened its global leadership in manual toothbrushes, with its globalmarket share in that category reaching 31.6% year to date, up 1.6 share points versus year ago.(Thompson , & Spiller)Discussion about product, product strategies, products positioning and other related aspects.Besides, Colgate-Palmolives strategy to reach and reap the cross borders market and itsbenefit is the key catalyst that gives a power to its strength. in that connection Colgate introduceda range of 275 new products globally with building the factories in Europe and china. Because ofthis unique and dedicated strategies Colgate profit and growth is increasing by leaps and boundsand during the 1990s its sales totaled to 1.03 billion US dollar with overall profit of 9.8 millionUS dollar. (Harvard). This was the time period when Colgate further thrust to its rivals byintroducing its new breed of tooth brush with unique branding.It should be noticed that the key strength that give the edge to the Colgate-Palmoliveamong its rivals under the domain of niche market, is its product that are promoted in the marketas Colgate 360 that is proven as a effective and efficient plaque remover that is comparatively35% more smarter than its rival products. These advantages are key characteristics that areattributed to the dedicated research by using CAD and infrared scanning and innovative design.Because Colgate treat toothbrushes regarding policy as technical innovation, researchers usedinfrared motion analysis to track consumers brushing movements and consequent levels ofplaque removal (Harvard). 4. Colgate-Palmolive http://www.Virtual-Dissertation.comThe top of the Colgate 360 toothbrush are comprised with the diverse angles of bristlesand every angle having its own characteristics. This characteristic leads the 360 to product lifecycle from launching as the toothbrush to the oral health care tool. (Harvard). This uniquedesigning of bristles give the edge to the Colgate 360 to remove the plaque efficiently andcomparatively 35% more than to its rival products.The classification of the product is totally dependent upon the consumer needs andperceptions; they may consider it as homogeneous or heterogeneous both. The

homogeneous inthat perspective, all toothbrush perform same action, therefore, the lowest price is their choiceand as a heterogeneous because of the efficiency and quality.The key purpose to select the brand name is to avoiding the perplexity to consider it newproduct as homogeneous one. Colgate did consider different name in that regard such asColgate System III, Colgate Advantage, Colgate 1.2.3, Colgate Contour, Colgate Sensation, andColgate Probe (Harvard).As far as the positioning concern, it could either be niche or mainstream. following arethe advantages and disadvantages of both markets.Advantages of Niche marketThe Colgate has the option an opportunity to set the price, according to its desire withoutfear about the rivalry. the issue of cannibalization can be reduced such as Colgate Extra clean,etc. and develop the equity of brand ("Colgate 360," ). The Colgate has the vast room to producethe product adequately as well as to translate from one market to another one according to theavailable capacity. this niche market is the catalyst to reach and fulfill the demand of those

5. Colgate-Palmolive http://www.Virtual-Dissertation.comclientele who are sensitive about the oral hygiene such as therapeutic and cosmetic brushers aswell as different type of gum disease.However, there are also flip sides that are following:The organization will have the fewer market shares comparatively than the mainstreammarket. it will has to face the high entry barriers into the niche market domain. Furthermore,Colgate can take a position as a mainstream brushes to promoting the highest effective brushesthat are available for users.Advantages of Mainstream marketIn the Mainstream market, Colgate has the comparatively big share. The new products aseffective and efficient tool to clean the teeth and gum will have the bigger realization from thewhole clientele. As far as the disadvantages are concerned, the organization may face the supplybarrier because of not producing the enough products. The new product may create the hype ofhot in the market but there could be a possibility not to get the predefined revenue targetbecause of low price and volume. The Colgate has to acquire further uncertainly investment tofull the product demand. The new product could be the catalyst to lead the Colgate to off theirexisting any stock keeping units. (Laird, Boivin, Shelton, Srivannusorn, & Chanprasert)The price of the product is the type of barometer at some extent that set customer mind inthe perspective of product quality. it is obvious that pricing of the new product will be differentfrom the existing one because of the research and production cost but Colgate should set theprices after analyzing the market and consumer trend properly. 6. Colgate-Palmolive http://www.Virtual-Dissertation.comRecommendation about the Promotion Strategy(s)As far as the pricing, strategies and recommendation is concerned, in the domain of nichemarket, Colgate can set the price after analyzing the consumer behavior and market trend, itcould be lower, equal and greater than the existing product range but the core focus should be onthe uniqueness so that customer attention could not only be developed but also retained. forbranding the new product will be called as Colgate 360. For attracting the customer and enjoythe lion share of niche market, Colgate can promote its new product as an efficient, effective anunique gum remover with the flexibility to clean those part of the teeth that are generallyunreachable by the standard tooth brushes. In that connection, Colgate can setup the workshopand free sample testing to have the customer confidence ("Identify the leading," 2006). For themainstream market, in the perspective of pricing, Colgate also needs to be more cautious asshould use its goodwill to gain the customer confidence. For promoting, Colgate should displaytheir product in all types of stores, including grocery stores, etc. for branding; Colgate should thesame niche market technique as described above. for having the attention of mainstreammarkets costumers, Colgate should use the general ideas such as it is the product that isdeveloped after the highly dedicated research that enabled it to portray as a totally unique breedof tooth brush that was not available in the market before. Sample testing facility will also workhere as in the niche market (Kotler, 2000). Besides, to promote the new brand, Colgate shouldalso focus the colleges and university students by giving them a special discount on the basis ofconfirmation of their college or university identity cards, etc. The reason behind is that fast food 7. Colgate-Palmolive http://www.Virtual-Dissertation.comand choloclates are the common among the students, and these type of foods are the key sourceof plaque and gum in the teeth, in case of careless behavior regarding teeth. Therefore,promotimg this product among the juvenile

students will open the new door of cash inflows.http://www.Virtual-Dissertation.comWe provide writing help to develop quality Essays, Term Papers, Coursework, Thesis and Dissertation, etc. for those who are quality oriented.We cover lots of different subjects including (but not to bound only these),Cyber Laws,Cyber Security,English Literature,Anthropology, Social Science,Case Studies,Law,Philosophy,Psychology,IT,Economics,Business,Marketing,Management,Politics,Glo bal Issues and lots of others.

Issue: 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.

Until 1991, the toothbrush category consisted of two segments: value and professional. Prior to 1990, industry growth rates for the toothbrush category were in the single digits. That changed in 1992 when 47 new products/line extensions were released. Their introduction led to 21% growth in value and 18% growth in volume for the industry. Several factors influenced that growth, but the primary driver was the introduction of the super-premium sub-category of toothbrushes. Exhibit 1 shows the amazing impact of the superpremium toothbrush on the market where unit volume is second to the professional segment and unit sales exceed both professional and value segments.

Prior to 1992, CP offered the Colgate Classic to the value segment and the Colgate Plus to the professional segment. Market share and volume for the Classic was decreasing and market share and volume for the Plus had marginal growth (Exhibit 2). In 1991 CP controlled 16% of the toothbrush market and toothbrushes

represented 19% of CPs overall Oral Care Division sales. In 1991, CP was the market leader with 23% of all retail toothbrush sales.

Toothbrush selection for consumers was as important as toothpaste selection when it came to oral care. Exhibit 3 details consumer reasons for toothbrush use. The Precision toothbrush was a technological innovation with a design that increased plaque removal by 35% compared with other brands. In consumer concept testing plaque removal & preventing gum disease, together, ranked as the most important attribute in the purchase decision by prospective consumers (Exhibit 4).

Recommendation: CP should pursue the mainstream positioning strategy for the Precision. Pro forma income statement analysis supports the decision as does the cannibalization analysis. Further supporting this recommendation, pursuing a mainstream strategy takes advantage of the rapid growth in the retail outlets (mass merchandisers & club stores) that would purchase this new product.

Analysis of the Pro forma income statements shows the mainstream positioning strategy will lose almost $6.7MM in year one, but earn $16MM in year two (Exhibit 5). A niche strategy loses less money in year one ($1.4MM) and makes $7.4MM in year two. Further, the mainstream strategy net income increases 142% year one to year two. With a niche strategy the net income increases 119%. Pro forma analysis indicates supporting a mainstream strategy.

The risk of cannibalization was analyzed in Exhibit 6. Two estimates were given for lost sales of the Plus: best case 35% loss and worst case 60% loss. In the worst case scenario, neither strategy leads to a profit. In the best case scenario, a niche strategy generates a profit in year one while a mainstream strategy generates a loss. In year two, however, the mainstream strategy generates significantly more net profit than the niche strategy generates. Cannibalization analysis indicates supporting a mainstream strategy.

Lastly, Exhibit 7 shows the impressive growth of the non-food and non-drug outlets. Mass merchandisers and club stores have had impressive growth from 1989-1991 and they will generate a tremendous market for the Precision in a mainstream strategy. Exhibit 8 shows the stark differences in growth for the various markets. Analysis of the market for Precision indicates supporting a mainstream strategy.

Two other factors should be addressed by CP. First, reduce the overall number of SKUs carried. Exhibit 5 from the case shows Colgate has significantly more SKUs than their competition. Colgate should evaluate their lowest performers and eliminate them. Second, its unacceptable that CP took 3 years to develop this toothbrush. CP should evaluate its R&D process and implement efficiencies designed to speed their rate of innovation.