Introduction:Colgate-Palmolive has developed the a new toothbrush Precision with triple action brushing effect. It is a unique toothbrush with bristle of three different lengths and orientation which gives three-action brushing effect. In initial clinical tests, the brush has achieved an average 35% increase in plaque removal compared to other toothbrushes in the market making it a viable product to decrease the gum diseases. There are two ways to position Precision:

As a niche product to be targeted at consumers concerned about gum disease As a mainstream brush, with the broader appeal of being the most effective brush in

the market

Positioning StrategyPrecision was developed with objective of creating best brush possible and become super-premium product. If it is positioned as niche product to be targeted to consumers with gum disease, it could capture 3% of US market and if it is positioned as mainstream brush with broader appeal of being most effective brush then it can capture 105 of the market. Advantages of niche product:- Can charge high price - Can differentiate itself from other toothbrushes- It won’t cannibalize its own product Colgate Plus Disadvantages of niche product:- Can cater to people with gum problems only and hence sales will be less as compares to mainstream Advantage of mainstream product:- Can capture more market Disadvantages of mainstream product:- Can cannibalization of its own product.- Can lead to production capacity problems. Capacity will have to be increased.

Competitor analysisThe major competitors of Colgate are Oral-B, Johnson & Johnson, Procter & Gamble and Smithkline Beecham.Oral-B has been the market leader since 1960s and it relied heavily on its endorse ment as the dentists toothbrush.Johnson & Johnson ranked 3rd in US retail toothbrush market and Reach line was positioned as toothbrush which enabled the customers to brush in even the hardest to reach places. It has also came out with a couple of new products like Glow Reach and Advanced Design Reach which had minor variations in the shape of the toothbrush. It has been relying on offers such as refunds by mails and “buy two get one free” to promote its toothbrushes.P&G is the most recent entrant and it has claimed its toothbrush as having the “ability to reach between the teeth up to 37% farther than leading flat brushes.”

Smith Kline Beecham has entered the market with a toothbrush named Aqua fresh Plus which is an extension of its toothpaste brand and has flexible handle that allows gentle brushing.Thus we see that the players in the toothbrush market have been innovating in whatever ways possible in order to attract customers who are not satisfied with the existing features. The different brands are positioning themselves by showing real differences in their features.

Pricing Depending on the positioning strategy price will be determined. If it is positioned as a niche product then the company can afford to charge a higher price. However if it is positioned as a mainstream product then the pricing would have to be in sync with the existing price levels.

PromotionSteinberg believed that Precision was the best brush for people who cared about what they put in their mouth. It would be better not to associate Colgate with Precision so that cannibalization does not take place. If Colgate brand name is stressed then cannibalization would increase by 20%.

Budgetary Analysis

Alternative 1 (Niche Product):

Total unit sales Year 1

Total dollar sales Year 1

Costs Year 1 Profit/loss

11 million (8 retail + 3 professional Table C)

Retail nos. * Price-retail + Professional * Price Professional (weighted)=8*2.13 + 80% @0.79 + 20%@0.95== $19.51 million

= Manufacturing + Promotions= 13*0.66 + 5 + 4.6 + 1.6

= $19.78 million

Loss=$0.27

million

In the case of a niche product being launched, Precision is expected to corner 3% of the US toothbrush market by end of Year 1.

Total unit sales Year 2 Total dollar sales Costs Year 2 Profit/Loss

Year 2

=18million(15retail+3

professionalTableC)

Retail nos. * Price-

retail + Professional

* Price

= 15*2.13 + 80%

@0.79 + 20%@0.95

= $34.42 million

= Manufacturing +

Promotions

= 20*0.66 + 5 + 4 +

2.7

= $24.9 million

Profit =$9.52

million

Alternative 2 (Mainstream Product)Expected returns

Total unit sales Year 1 Total dollar sales

Year 1

Costs Year 1 Profit/Loss

=35 million (27 retail

+ 8 professional

Table C)

Retail nos. * Price-

retail + Professional

* Price

= 27*1.76 + 80%

@0.79 + 20%@0.95

= $54.09 million

= Manufacturing +

Promotions

= 27*0.64 + 15 +

13 + 4.8

= $59.68 million

Loss = $5.59

million

In the case of a mainstream product being launched, Precision can capture 10% of the market by end of Year 1.

Total unit sales Year 2 Total dollar sales

Year 2

Costs Year 2 Profit/Loss

=52 million (44 retail

+ 8 professional

Table C)

Retail nos. * Price-

retail + Professional

* Price

= 52*1.85 + 80%

@0.79+ 20%@0.95

= $ 98.09 million

= Manufacturing +

Promotions

= 52*0.64 + 12 +

10 + 7

= $66.76 million

Profit = $ 31.33

million

The above calculation for mainstream market doesn’t take into account the cannibalization effect “Precision” would have on the existing mainstream “Colgate Plus”. If we consider the (worst case) cannibalization to the extent of 60%, Using exhibit 1, we get the net sales in 1992 as $91.611 million. The cost of sales for the same is $44.846 million. Given, the total sales units of 78.336 million, the contribution per unit can be calculated as $ .5969. Therefore the cost of cannibalization in year 1 and year 2 is $ 12.53 million and $ 18.62 million respectively. So the effective loss in first year after launch is $ 18.12 million. However, we see that in the second year we will have a estimated net profit of $12.71 million dollars.

Decision & ConclusionBudgetary analysis tells that even though positioning Precision as a mainstream product leads to cannibalization, still it leads to higher profits as compared with positioning it as a niche product. However, there is a possible threat from the competitors due to their constant innovation. Competitors may lower their price to gain advantage which would not be possible in niche market. This is because in a niche market buyers are willing to pay a higher price provided they get the satisfactory product.

Thus, considering these factors, although Precision would yield lower profits in the short run if it’s introduced as a niche product, it makes sense to continue with this strategy because of far higher competition, cannibalization and risks involved in positioning it as a mainstream product, not to mention the increased production capacity required. Thus, Precision must be launched as a niche product and accordingly the marketing mix must be designed.