Colgate-Palmolive Company:The Precision Toothbrush

Problem:

1- Positioning, Branding and communicating to consumers2- Advertising and promotion Colgate Precision.

Company’s Background

In 1991

Total Sales = $6.06 billionGross profit = $2.76 billion

R&D Expenditure = $114 millionMedia Advertising expenditure = $428 million

Global Leader In Household And personal Care products

$243 million was spent in upgrading CP’s 25 manufacturing plant.275 new products were introduced worldwide.

Strategic acquisition were made.

Gross margin climbed from 39% - 45%Average Annual volume growth - 5%

Since 1985

Like:-Colgate Baking Soda toothpaste Colgate Angle andWild Ones toothbrushes

Procter & GambleUnilever

Nestle’s L’Oreal DivisionHenkel of Germany

Kao of Japan

Competitors

CP held 43% of world’s toothpaste marketAnd 16% of world’s toothbrush market

In 1991

PRODUCT % Of market acquisition

Toothpaste 46

Mouth resins 24

Toothbrush 15.5

Dental flaws and others 14.5

In 1991 US oral market was $ 2.9 billion with growth of 6.1% annually.

US toothbrush market

Due to introduction of 47 new brushes and line extension there was 21% increase in value and 18 % in volume

Cause of decline of sales in 1993

• Buildup of household inventories due to free samples given by dentists• “Two-for-one” offers of companies doing promotion

Toothbrush Category

Value Professional Super-premium

• $2.29 - $2.89• 35% unit volume• 46% dollar sale

• $1.59- $2.09 • 41% unit volume • 42% dollar sale

• Nearly $1.29• 24% unit volume• 12% dollar sale

Type Market share Market response

Firm-bristles brushes 8% Declining by 13%

Medium bristles brushes 39% Declining by 4%

Soft bristles brushes 48% Growing by 7%

Extra-Soft bristles brushes 5% Growing more than 7%

Market response

On basis of Toothbrush headadult, full-sized heads 69%

compact heads 17%

child/youth-sized heads 13%

We can see that people are moving towards more sophisticated and softer toothbrush.They are moving towards more costly toothbrushes.So, we can say that people are becoming more quality conscious.

Consumer behavior analysis• Baby boom generation (adults born in the 1940s, 1950s and early 1960s) were becoming more concerned about the health of their gums.Willing to pay for

Premium

Main Reasons for Using a Brand Percent of Consumers

Fits most comfortably in my mouth 63%

Best for getting at hard-to-reach places 52%

The bristles are the right softness 46%

The bristles are the right firmness 36%

Toothbrush my dentist recommends 35%

Important part of my oral care regimen 30%

Here we can see that most of the consumer prefer comfort, soft bristles and efficient plague removal.

Competition

Competitors Volume share (%) Value share (%)

Oral B 23.1 30.7

Johnson & Johnson 19.4 21.8

Procter & Gamble 2 2.6

Aqua fresh Flex 0.9 1.1

Lever 7.2 6.6

Most tougher competitor is Oral B. It has highest value share and volume share.

Promotional ActivitiesGrowing competition also increased the frequency and value of consumer promotion events.

1- The number of coupon events for toothbrushes increased from 10 in 1990 to 33 in 19922- The average toothbrush coupon value increased from $0.25 to $0.753- Total media spending for the category, primarily on television advertising, was estimated to total $55 million in 1992 and $70 million in 1993

CP had four display systems:• Counter Tops- 24 to 36brushes• Floor Stands- 72 brushes• Sidekicks -144 to 288 brushes• Waterfall displays- 288 to 576 brushes.

Precision Toothbrush

CP developed a unique brush with bristles of three different lengths and orientations• longer outer bristles cleaned around the gum line• long inner bristles cleaned between teeth• shorter bristles cleaned the teeth surface

• CP precision toothbrush had achieved a 35% increase in plague removal than other competitors

• Innovative product design• Can capture oversea market• Can reduce gum disease

Strengths

Weakness

• Introduction of precision can cannibalize the market of Colgate plus and Colgate classic

• Can cause harm to Colgate plus

Retail price Trade Price Manufacturing Price

Mainstream Strategy $2.49 $1.85 $1.76

Niche marketing strategy $2.89 $2.13 $2.02

Pricing

Mainstream Strategy Niche marketing strategy

Through incentives (coupons, buy 1 get 1 free)

Aggressive advertising

Through Doctor’s recommendation Through Doctor’s recommendation

Consumer promotion Consumer promotion

Promotion

Profit generation

Total profit obtained in niche market = $16.66 millionTotal profit obtained in mainstream market = $36.16 million

Calculated by

Profit= (Selling price* no. of units sold) – (investment + depreciation + manufacturing cost + advertising and promotional costs)

NOTE: The above data include combined profit of both years

Benefits Losses• Unsatisfied demand could increase

the sell.• More profit can be generated.

• Can harm market of Colgate plus• Can cannibalize children’s toothbrush

from production line.• Inadequate supply can occur due

extreme pressure on production line.• May face tough competition from the

rivals.

Benefits and losses of positioningMainstream Strategy

Benefits Losses

• Unsatisfied demand could increase the sell.

• More profit can be generated.

• Can harm market of Colgate plus• Can cannibalize children’s toothbrush

from production line.• Inadequate supply can occur due

extreme pressure on production line.• May face tough competition from the

rivals.

Mainstream Strategy

Benefits Losses• Less harm to Colgate plus• Niche can be expanded to mainstream

with additional capacity on line.• Very less competition

• Less profit.• Can reach less consumers.

Niche Strategy

Suggestions

• Position the brush in super-premium category and specifically tailored to therapeutic consumers• Niche market is more consistent than mainstream market. CP should position premium in niche market and then expand it to mainstream market when it achieve more capacity support.• It should take professional endorsement from dentists.• Should do a rigorous advertising campaign.• Should match price with other premium brands.• Can replace Oral-B as leading brand of super premium range.• Can expand in other oral care products for therapeutic consumers.

Thank You!

Created by Nirmal Padgelwar,VIT University, during a marketing

Internship by Prof. Sameer Mathur, IIM Lucknow

DISCLAIMER