COLGATE-PALMOLIVE COMPANY: THE PRECISION TOOTHBRUSH

WHAT IS COLGATE PALMOLIV

E ?

• Global leader in household and personal care products

SLEEPY AND INEFFICIENT

LEAN AND PROFITABLE

INCOME STATEMENTS: 1989-1992E

THE U.S TOOTH BRUSH

MARKET

BASIS OF PURCHASE

≤ 1970: Purchase was based purely

on the PRICE FACTOR

>1970: Purchase was based on the

PERFORMANCE BENEFIT

CHRONOLOGY OF TOOTHBRUSH INNOVATIONS IN THE U.S

PRODUCT SEGMENT AND

CONSUMER BEHAVIOUR

TOOTH BRUSH

VALUE SUPER PREMIUMPROFESSIONAL

COMPETITION• Colgate• Oral-B (owned by Gillette)• Johnson & Johnson• Procter & Gamble• Smithkline Beecham• Lever• Pfizer• Sunstar

BRAND DECISION FACTORS

CURRENT SITUATION

CP was planning to launch a new toothbrush in the U.S- COLGATE PRECISION

Susan Stainberg, Precision product manager, had developed the product.

She wants to decide on positioning, branding, and communication strategies.

TECHNICAL OBJECTIVES• Long outer

bristles: clean the gum line.

• Long inner bristles: Clean b/w the teeth.

• Short bristles: clean the teeth surface

BRISTLES FEATURES

• 35% increase plaque removal

PLAQUE REMOVAL

• Double the plaque removal score of competitors

POINT OF DIFFERENCE

MISSION

DEVELOP A SUPERIOR, TECHNICAL, PLAQUE REMOVING DEVICE

OBJECTIVES OF THIS

CASE

1.• How to position the product• How to brand and communicate

it to the customers

2.• Advertising and promotion

budget

3.• Developing a market-mix• Profit and loss pro forma

ISSUES TO BE FOCUSED

POSITIONING

NICHE PRODUCT

Capture 3% of the U.S toothbrush

market at the end of 1st year

MAINSTREAM PRODUCT

Capture 10% of the U.S toothbrush

market at the end of the 1st

year

SUPER-PREMIUM PRODUCT

STENBERG’s ASSUMPTIONS

• Precision sales: 3% volume share of the toothbrush market in 1st year and 5% in the second year

• Mainstream sales: 10% volume share in the 1st year and 14.7% in the second year.

• Total category unit volume:1993- 268 million1994- 300 million

UNIT VOLUMES REACH TO CONSUMER

PRODUCTION COSTS AND PRICING

CAPITAL INVESTMENT FOR EACH CLASS OF EQUIPMENT

PRODUCTION COST AND PRICING

• Subcontracted to Anchor Brush.• NICHE: $2.13/brush• MAINSTREAM: $1.85/brush

WAREHOUSING COST

TRANSPORT COST

PRODUCTION COST

CONCERNS IN MAINSTREAM POSITIONING

• Might cannibalize Colgate plus.• Production schedules developed for niche

will not suit it.• Precision shelf:

COLGATE PLUS > COLGATE PRECISION >ORAL-B

CONCERNS IN MAINSTREAM POSITIONING CONTD.

• Precision in mainstream dropping of one or more SKUs from plus line.

precision

Niche: food and drug store

Mainstream: greater

proportion- mass

merchandise

STEINBERG’S ESTIMATE

UNCERTAINITIES OF THE ESTIMATE• 35-60% of volumes indicated in the table

unit volume reach to consumers could have come from Colgate classic and plus.

• ASSUMPTION: Let’s take it to be an average of 47.5% cannibalization.

• So, 52.5% of the total indicated would be possible.

• Revised estimate follows:

Precision as a Niche product

Precision as a Mainstream product

Planned capacity unit volume Year 1= 6.825 MM unitsYear 2= 10.5 MM units

Year 1=22.05 MM unitsYear 2=30.975 MM units

Investment in capacity, where Year 2 figures are additional capacity

Year 1= $1.7 MYear 2= $0.7 M

Year 1= $4.78 MYear 2= $2.05 M

Depreciation costs Year 1= $166,250Year 2= $236,250

Year 1=$465,500Year 2=$666,750

Manufacturer per cost unit: Year 1 and 2

$0.66 $0.64

-Manufacturer price-Suggested retail price

$2.02$2.89

$1.76$2.49

Advertising- Year 1-Year 2Consumer Promotions- Year 1-Year 2Trade Promotions- Year 1-Year 2

$2.625 million$2.625 million$2.415 million$2.1 million$0.84 million$1.42 million

$7.875 million$6.3 million$6.825 million$5.25 million$2.52 million$3.675 million

#SKUs-Brushes-Colors

4 adult6 colors

6 adults / 1 child6 colors

BRANDING

BRANDING

49% Acceptance & 31% appealing

Colgate Precision Precision by ColgateVS

COMMUNICATION AND PROMOTION

CONSUMER CONCEPT TEST

4 concept tests

400 adult professional brushers

ADVERTISEMENTS USED IN CONSUMER CONCEPT TESTS

CONSUMER CONCEPT TEST RESULTS

ADVERTISING AND PROMOTION BUDGET4 WAYS:

1.

$9.6 MILLION

IN ADVERTISEMENT

$14.4 MILLION

IN PROMOTI

ON

$24.1 MILLION

2.

Budget same as percentage

of sales in 1993

Classic Precisionplus

3. $24.1 millio

n

Additional $11.2Million

( totally for precision)

$35.3 million

$24.1 million

Additional 80%

($19.28 million)

$43.38 million

4.

$43.38 million

75% precision ($32.535 million)

25% plus

($10.845

million)

Placing precision in mainstream:• affects Colgate Plus• doesn’t suit production schedule• concept test – consumers preferred

brushes ton fight against gum diseases • Thus, Precision is placed as a NICHE

product.

Branding:• Based on the name test results we can conclude it to

be branded as COLGATE PRECISION

ADVERTISING :• $35.3 million in advertising and

promotion expenses will be optimal because among the 4 ways this method of allocation was especially for Niche product .