ColgateColgate-Palmolive is recognized as the world’s leader in personal care sales which included oral hygiene products like toothbrushes and toothpastes. In 1991, its sales topped at $6 billion and profits at $2. 76 billionand as it cornered 43% of the world’s toothpaste market and 16% of the world’s toothbrush market. In the United States, the world’s largest market, ColgateColgate-Palmolive holds the number one spot in toothbrush sales with a market share of 23%. From these statistics, one of Colgate-Palmolive’s main strengths is being the market leader inpersonal oral care products.
is one of Colgate ColgateColgate-Palmolive’s extensive overseas reach is another main strength. Based on the data in the case study, ColgateColgate-Palmolivehas introduced 275 new products worldwide and setup manufacturing facilities in China and Eastern Europe, breaching the new emerging economies inof the 21st century. On top of that, international sales accounted for 64% of total sales andand profits from international operations account for 67% of the total profits for ColgateColgate-Palmolive.
-Palmolive ColgateColgate-Palmolive hasa very large an extensive Research and Development department with a strength of boasting 170 employees worldwide. Though having a large R&D department does n’t not directly contribute to increased necessarily constitute improvements in profits, ColgateColgate-Palmolive’s history of innovation1 in the toothbrush market is linked to its current position as the market leader in the toothbrush industry. Therefore ColgateColgate-Palmolive’s-Palmolive’s strong commitment to innovation through investment in R&D is amajor prominent strength.
factor. With an energetic and visionary leader like Reuben Mark at the helm of ColgateColgate-Palmolive, the company has transformed itself into a lean and profitable machine, from its inefficient past, leading to increased ing profit margins and volume growth. 2. Clearly, having a visionary CEO is a strength. ColgateColgate-Palmolive’s-Palmolive’s positioning strategyof for its toothbrush line in food stores has aided in capturing a largetheir current dominant market share.
Its in-store displays, combining toothbrushes with toothpaste packs and locating the ColgateColgate-Palmolive line of toothbrushes in the middle of the stores’ shelves have contributed to this dominance. its increasing market share. This strategy has been successful, asis good because toothbrush sales through food stores, drug Sstores and mass merchandising channels have produced the greatest volume and dollar are some of the top channels in terms of dollar and unitsales historically. 3. ColgateColgate-Palmolive -Palmolive has a large number of stock keeping units for their toothbrush line. 4.
Multitudes of SKUs indicate that ColgateColgate-Palmolive-Palmolive is targeting a broad spectrum of market segments in the toothbrush market, which spreads ing tthe risk inherent to carrying any product. Diversification of product types within the toothbrush market is another strength factor Colgate-Palmolive holds. , which is a strength factor. ColgateColgate-Palmolive’s-Palmolive’s secret weapon in the war for supremacy in the super-premium market, ColgateColgate Precision, is proven has been foundto be very effective in removing plaque – 35% momore effective than existing brands – and in preventing gum disease.
This advantage can be has beenattributed to the innovative design, high-tech research using CAD and infrared scanning, consumer research and extensive product testing. of the product. Though we plan to suggest positioning ColgateAlthough this technology is a strong argument for positioning Precision in the “super-premium” category, Colgate-Palmolive could also use its the design aspects can be copied to Colgateto improve Colgate-Palmolive’s existing “professional” and “value” toothbrush linesin the “professional” and “value” category in order to increaseimprove their respective market shares.
Colgate-Palmolive’s patented5 innovation for Precision also stands as a strength upon which Colgate-Palmolive can lean for other market differentiating advancements. ColgateColgate-Palmolive’s -Palmolive’s recent plans to infuseion of new capital into its manufacturing facilities will bode well as it prepares to battle for market share in the new “super-premium” market segment. It Colgate-Palmolive will be able to canleverage its existing relationship with its manufacturing partner, Anchor toothbrush, to quickly and increase production of any new product release.
cost-effectively product its newest product. Weaknesses The impending release of ColgateColgate-Palmolive’s -Palmolive’s new toothbrush, Precision, may affect sales of its existing toothbrush lines. This may lead to a “cannibalization” of the ColgateColgate Plus and ColgateColgate Classic’s market of up by 35% to 60%. 6 of the expected Colgate Precision sales. Since the existing toothbrush lines isare the “cash cows”7 of the company’s oral care division, a dismal performance by the new ColgateColgate-Palmolive Precision might drain the “cash cows” of its their resources market sharealtogether.
ColgateColgate-Palmolive’s media expenditure layout is very small compared to its rivals. 8 It has spent only $7 million dollars on its ColgateColgate-Palmolive Plus marketing efforts and has only a 19% of the share voice. Since media exposure fuels consumer demand9 for a new product, this is one area where ColgateColgate-Palmolive needs to have its expenditures equivalent to that of its rivals. Another marketing weakness that ColgateColgate-Palmolive faces is thatits lack of professional dental endorsements, with less than half that in market share and dollar sales than that of their largest competitor, Oral-B.
toothbrushes are not endorsed by dentists. This technique has been effectively used by Oral-B, Colgate-Palmolive’s competitor in increasing toothbrush sales. Similar to Colgate-Palmolive’s lack of professional endorsement, the Precision toothbrush does not have the fullest endorsement from the American Dental Associations (ADA). Although the ADA issued its seal to the product, the seal alone stands for little more than recognition that the toothbrush works.
In fact, only when the ADA issues its seal and an official quotestating that a product is superior to similar product types, does a product receive the fullest support possible. Not having the full backing of the ADA is a weakness which Colgate-Palmolive may have to overcome to gain the professional endorsement they seek. 10 Opportunities Macroeconomic The emergence of the niche “super-premium” category presents a golden opportunity for ColgateColgate-PalmolivePalmolive to increase market share for several reasons. First, alTthough its competitors, i. e.
Oral-B, Johnson & Johnson and Procter & Gamble, have gained a foot-hold in this niche market already, ColgateColgate-Palmolive -Palmolivecan still make a dent with its new Precision toothbrush, thus enabling them to enter a new and potentially highly profitable market segment. This niche category commands a premium price, which in turn results in a higher profit margin. Since Tthe “super-premium” category accounts for 35% of the volume salesand 46% of the dollar sales of toothbrushes sales11.
this niche category may in turn result in a substantial profit margin. Secondly, Wwith the baby boomers and younger generations becomingbeing more concerned with the health of their gums, they arewill be willing to pay athe above mentioned premium for a toothbrush12 which is optimized for better gum care. This is a demographic segment ColgateColgate-Palmolive-Palmolive can capitalize upon this demographic segment to ensure a successful with therelease of their “super-premium” Precision toothbrush.
Finally, Ssince 82% ofthe toothbrush purchases are unplanned and many consumers are unaware of the technological and cost variation among prices of varioustoothbrush brands,13, ColgateColgate-Palmolive-Palmolive could establish a media blitz with educational ads depicting that are educational and shows ColgatePrecision toothbrushesto be as technologically superior to its rivals at an equivalent cost. and accent the fact that its prices are cheaper than most rivals.
The ads can also serve to educate the consumersto about proper toothbrush replacement schedules to ensure replace the toothbrushes more often so that brushing can be moreeffectiveagainst plaque removal and gum disease prevention. Ultimately, Colgate-Palmolive could leverage their advertising campaign to boost sales and revenues. Microeconomic One of ColgateColgate-Palmolive’s -Palmolive’scompetitors, Johnson & Johnson,14, ranked third in toothbrush sales, was phasing out one of its toothbrush lines at the time of the Precision introduction.
As the toothbrush market remains rather constant, courting customer from other brands, particularly ones being phased out, is a tremendous opportunity to gain market share. 15 This opens the way for Colgate-Palmolive to muscle in J&J’s market share with its own toothbrush line. Another competitor, Smithkline Beecham,16 was to make predicting an operating loss in its toothbrush business. 17 If the losses are sustained, it Sustained losses might cause Smithkline Beecham to move out of the toothbrush business all together, yet again opening the door for further gain of market share.
Another competitor, Lever did not have a track record of innovation and has a small market share. Colgate-Palmolive can “eat” up the competition. Colgate-Palmolive’s constant innovation also provides an opportunity to convert consumers away from less advanced toothbrushes, such as those offered by Lever. Threats Threat of intense segment rivalry The super-premium toothbrush market is highly competitive, hosting many brands and private label toothbrushes.
If any of these rivals creates a toothbrush which tops or even equals the technology of Precision, specifically if done at a lower production cost, ColgateColgate-Palmolive Colgatemay lose market share. Threat of new entrants Along with intense rivalry from existing competitors, Colgate-Palmolive has to deal with new competitors. In 1991, the toothbrush market exploded with a dramatic increase in new entrants. Proctor and Gamble introduced Crest Complete, their first toothbrush18.
Smithkline Beecham entered the market with Aquafresh Flex and a 9% market share volume for 1991. Levre, Pfizer and Sunstar all entered the market in 1991 and earned a total 11% market share. These numbers reinforce the seriousness of the threat of new entrants that Colgate-Palmolive will have to contend with when they launch Colgate Precision. Threat of substitute products Electric toothbrushes can usurp market share from the “super-premium” category.
Similar to many industries, oral care technology has advanced tremendously since its inception in approximately 3000 B. C. The introduction of the nylon bristled toothbrush in 193819 represents one of the latest quantum improvements for the industry, however it was not the last. The introduction of electronic toothbrushes and water picks are threatening to usurp traditional oral care product’s market share. This is a threat which Colgate-Palmolive needs to heed, despite its confidence in the technology of Precision.
Threat of suppliers’ growing bargaining power ColgateColgate-Palmolive -Palmolive depends on Anchor toothbrush for its outsourced manufacturing. Hence,If Anchor toothbrush has a decided supplier advantage in the relationship with Colgate-Palmolive. If Anchor toothbrush were to increase its supply cost, it wouldraises its rates, this will affect ColgateColgate-Palmolive’sPalmolive production costs whichin in turnwill affect would impact Precision’s market share by potentially pricing it above even the super-premium segment.
Colgate-Palmolive needs to maintain a healthy relationship with Anchor toothbrush to reduce the risk of a costly supplier switching process. Threat of buyers’ growing bargaining power One of the factors which can cause buyers’ bargaining power to grow is when the switching costs for buyers are low. Even if Colgate-Palmolive were to position Precision as the most expensive toothbrush on the market, it is still a relatively inexpensive product, compared to many daily purchases (i. e. lunch in NYC or a cup of coffee at Starbucks).
Therefore, buyers can easily switch between toothbrush brands without giving the decision much thought. To combat this threat, Colgate-Palmolive could position Precision as a superior toothbrush that customers can not afford to be without. PROBLEM STATEMENT In 1992, after evaluating the current market condition and completing its research and development, Colgate-Palmolive was ready to begin marketing its newest toothbrush, Colgate Precision. Of major concern to Colgate-Palmolive was how to position, brand and communicate this new product to the general population.
Colgate-Palmolive also had to develop budget constraints and generate a marketing mix that would maximize the sales and revenues of the new product. Colgate-Palmolive was faced with the decision of whether to promote the new product as a high quality niche product marketed mainly towards individuals concerned about gum disease, or as a mainstream toothbrush that would be marketed as the best toothbrush available. If marketed as a niche product, Colgate-Palmolive would target a smaller market segment without as many competitors vying for market share.
A niche market segment would also be willing to pay a premium for the new toothbrush. If, however, the toothbrush were marketed as a high quality mainstream toothbrush, Colgate-Palmolive would realize revenues from larger volumes of sales despite a lower price and more competition. To reach its verdict, Colgate-Palmolive analyzed forecasted data with regard to potential sales volumes and prices, advertising, packaging, and manufacturing costs, among other factors. A summary of this analysis, and a marketing strategy recommendation follows. EVALUATION OF ALTERNATIVES
In August 1992, Colgate-Palmolive had two options regarding the positioning strategy for their new toothbrush titled Colgate Precision. Their choice was to position the product as a mainstream offering or target the Precision toothbrush to a niche market. The positioning of the product would have little to do with any modifications to the actual design of this toothbrush, but would effect the perception of the toothbrush within the market. Mainstream or mass marketing refers to the mass production, distribution and promotion of a single product to all potential buyers.
2021 Contrarily, niche marketing is a form of micro-marketing. It refers to a specifically defined group of consumers with a need that is not currently well served. A niche is created from a subdivision of a market segment. 22 Due to the diversity of these two market types, the decision to market the Precision toothbrush as a mass-market product or as a niche product involves analysis of the advantages and disadvantages for each. Mainstream Marketing Advantages The primary reasons to use a mainstream marketing approach is that the product is made accessible to a larger market.
Marketing to a more diverse audience would enable Colgate-Palmolive to construct a more simple and direct campaign that would address the common concerns of all toothbrush buyers. Consequently, the use of television and radio would be more cost effective as it would reach this larger audience. The obvious goal of such a position would be to capture a greater return on the investment Colgate-Palmolive made on this product’s research and development effort. It is estimated that within twelve months this product could secure 10% of the market and a volume share of 14.
7% by its second year. This would equate to 27 million retail unit sales in year one and 44 million in the second year, if positioned as a mainstream product. 23 Disadvantages There are also many problems with marketing Precision to the masses. In the mainstream market a higher price makes a product less attractive to the average consumer. This means that Colgate will have to price their product within reasonable alignment of other similar products in order to be a serious competitor inside this market, ultimately diminishing their potential profit margin and return on investment.
There is a variance amongst consumers in relation to oral hygiene. They are classified into three groups: Involved oral health consumers – Therapeutic brushers Involved oral health consumers – Cosmetic brushers Uninvolved oral health consumers These segments are divided into relative percentages of adult toothbrush users. They are 46%, 21% and 33% respectively. 24 This illustrates that one third of the toothbrush using adult population has only little interest in oral hygiene and are probably not a worthwhile audience to which to pitch the Precision toothbrush.
The expense of including these consumers in the target market would not be advisable. In the design and testing phase of the Precision toothbrush, Colgate-Palmolive accrued significant clinical data concerning the product. This information would not be relevant to the mainstream market that most likely would view it as too scientific. The Precision toothbrush was originally conceived to be a “top-of the-range, super-premium product”25 indicating that production schedules had been developed in line with a niche marketing strategy.
Mainstream marketing would require a greater volume production of the toothbrush with an estimated ten month lead time to achieve sufficient quantities of the product. This could result in an inadequate supply of the product at the outset. 26 The objective of the research and development group working on the product was to “develop a superior, technical, plaque-removing device. ”27 It was produced to be “the best toothbrush possible” and become the “top-of the-range, super-premium product. ”28 All of these phrases are heavily skewed towards niche merchandising.
A mainstream product should aim to serve all of the people, all the time. This product clearly was created with niche-oriented goals. The greatest issue facing Colgate-Palmolive if they were to promote this product in the mainstream market is that it would be distributed through the same channels as an existing Colgate-Palmolive toothbrush called Colgate Plus. 29 Colgate Classic was the company’s original entry in the toothbrush sector and was positioned as a value segment. The Colgate Plus came later and was placed in the professional segment as a higher quality product.
30 Including Precision as a high-end, mainstream product could potentially “cannibalize” Colgate Plus sales. Finally, Susan Steinberg, the product manager of Precision, felt that incorporating the new product into the mass market would require the company to delete one or more of the seven existing SKUs (stock keeping units) that Colgate-Palmolive produced. 31 This strategy could result in a loss of market share in the value or high-end segments. Niche Marketing Advantages Advertising companies have access to audience profiles through a wide variety of media products, such as television, radio and print media.
This is the fundamental basis for successful niche marketing. A great advantage of offering any eligible product to a niche market is that it allows for a concentrated, specific advertising campaign, targeted to a specific demographic, psychographic, behavioral or geographic segment through whichever medium is most effective at reaching the specific population. 32 This allows efficient use of advertising budgets. Precision falls within the class of goods that could tender itself as a niche product. Developed to be the best toothbrush possible and placed in the super-premium category, this toothbrush is inherently a niche product.
Members of the public most interested in this toothbrush would be those in the “Involved oral health consumers” groups; therapeutic and cosmetic brushers. Therapeutic brushers are interested in functionally effective products and differentiate between brands. 33 Both segments of customers would appreciate the scientific data Colgate-Palmolive has complied on this toothbrush. The facts that the initial clinical trials removed an average of 35% more plaque over that of Reach and Oral-B, and that it assists in the reduction of the likelihood of gum disease, would be effective information for this group.
34 Unlike the mass market, these are issues which a niche market segment would comprehend and about which they would care. Niche market participants are also more likely to pay a premium for this product due to the fact that Precision caters to a distinct set of needs they have. With this type of positioning, a 15% increase in price above Oral-B regular would be anticipated, bringing the cost to consumers to $2. 13 per unit (more aligned with Oral-B Indicator). A mainstream market could only be anticipated to pay $1. 85, in accordance with the Oral-B regular line.
35 As Precision was conceived more as a niche-type product, initial production was set for the lower demands of the smaller market segment. As discussed previously, to change the natural emphasis of the toothbrush to mainstream distribution would require a major overhaul of projected production schedule and costs due to the increase number of units required. Additionally, to keep Precision as a specialized product means that the new product is less likely to invade the market share of other Colgate-Palmolive products, like the Colgate Plus.
This would also preserve the number of SKU that Colgate-Palmolive currently produces in the toothbrush sector. Niche markets historically attract fewer competitors. 36 This gives time and room for a new product such as Precision to establish itself and build up a market share before it may have to fight against a new contender. Disadvantages Marketing the Precision product to a niche market would generate less revenue for Colgate-Palmolive than a mainstream approach. Working with the estimated figures for the first two years of release generates the following table.
Niche marketing Mainstream marketing Year 1 Year 2 Year 1 Year 2 No. units sold 8MM 15MM 27MM 44MM Factory list price $2. 13 $1. 85 Total revenue generated $17,040,000 $31,950,000 $49,950,000 $81,400,000 Obviously, the niche market revenue is significantly less than the mainstream market revenue, despite the 13% higher price. Conclusion Developing and communicating a positioning strategy for a product is necessary and critical. Differentiating a product, and the degree to which that product is differentiated, can be guided by quantifying the following criteria: Importance
Distinctiveness Superiority Preemptiveness Affordability Profitability Using these parameters, a company can provide the public with a reason to buy their product. 37 Another tool used in solving the marketing mix problem companies face when launching a new product is a perceptual map. 38 This is a graphic representation of two or more features against which similar products can be ranked. When graphed, the resulting map displays areas to which the product types cater, revealing both areas of over population and areas of potential opportunity.
Clusters of products exist when similar products appeal to the same consumer market participants. In these areas, competition is intense, therefore, they are not as attractive when positioning a new product. An optimal plan is to create a space within the product market that is relatively free of rivals and can enable a new product to develop and dominate. A perceptual map for Precision was created from the following data: Toothbrush Price Benefits Class Colgate Precision 0. 8 0. 9 Super Premium Oral-B Indicator 0. 8 0. 8 Super Premium Oral-B Regular 0. 7 0. 6 Super Premium Crest Complete
0. 5 0. 6 Super Premium Reach Advanced 0. 6 0. 5 Super Premium Aquafresh Flex 0. 7 0. 7 Super Premium Colgate Plus 0. 4 0. 4 Professional Reach Regular 0. 3 0. 4 Professional Pepsodent Professional 0. 2 0. 4 Professional Colgate Classic -0. 4 -0. 1 Value Pepsodent Regular -0. 3 -0. 1 Value Butter GUM Microtip 0. 3 -0. 1 Value Butter GUM Supertip 0. 4 0. 1 Value Menedent Pro-Core 0. 7 0. 7 Professional Oral-B cross action 1 0. 8 Super Premium Generic Eckerd Interdental -0. 5 -0. 2 Value Generic Eckerd Angle -0. 7 -0. 2 Value Crest Advantage 1 0. 8 Super Premium Recommendation
Using these evaluative criteria in relation to the advantages and disadvantages of niche and mainstream marketing, we believe that Colgate-Palmolive should position the Precision toothbrush as a niche product. This would establish Precision as the leading toothbrush on the market at a competitive price. It would be a superior and distinctive oral care product. However, we believe this product would also work in the mainstream market and we envision it moving towards the mass market in the future. Once the toothbrush has established itself as a high quality product with specialty features, we believe that Colgate-Palmolive could transition the product to a wider audience.
This will also allow time for Colgate to reconcile the position that the Colgate Plus product will hold relative to the Precision line. Further, we anticipate no significantly negative issues will be encountered by initially marketing Precision as a niche product and then moving it into the mainstream market. We do not believe the opposite would be true, as a niche market will most likely not accept a product that has been offered to the masses as the best value, and then marketed as a specialty item.
The anticipated cyclical nature of the product on the market is well illustrated by the Boston Consulting Group’s Growth-Share matrix. 39 The Precision toothbrush will begin as a “question mark. ” This means the company will spend money developing and establishing the product in anticipation of increasing its market share. Subsequently, the hope would be for Precision to become a “star,” meaning it has been successful by obtaining a high market share and growth rate. If the product evolves into a mainstream offering by this time, the company will reap higher rewards.
Going even further into the future, the toothbrush will most likely decrease its market growth rate while maintaining its high market share. At this phase the product will be a “cash cow. ” Revenues produced from Precision at this phase can be used to establish other “question marks” and/or subsidize other “stars” if required. The final phase in this product’s life cycle will be a decline into “dog” status. This refers to the product when it has weak market share and low growth. At that point, Precision would need to be removed from the company’s product line, allowed to decline further or all together repositioned in the market.
At this point, the research and development phase for Precision has been completed, a thorough analysis has been performed on the current market situation, and a marketing strategy has been recommended. The final aspects of launching a new product must now be investigated – product, price, place and promotion. PRODUCT Colgate-Palmolive has many important decisions to make regarding the new toothbrush before it becomes available on store shelves for customers to purchase, including the positioning strategy for the new toothbrush.
To reach a conclusion, the new toothbrush must be analyzed on three product levels – the core product, the actual product, and the augmented product – so that customer’s needs are fully understood and the Precision toothbrush is correctly marketed to meet those needs. Since we are recommending that Colgate-Palmolive choose a niche market for Precision, the core benefit that the toothbrush will deliver to its users is plaque removal. Less plaque in turn leads to the added benefit of a reduction of the likelihood of gum disease.
This is the primary reason that the target niche customers will purchase the toothbrush. Colgate-Palmolive must therefore position itself as the premiere benefit provider to these consumers. To do so, the toothbrush must be positioned and marketed with regard to the physical or actual product. This incorporates the products brand name, the products features and style, the packaging, and the quality of the product. Colgate-Palmolive’s branding decision resulted from four concept tests used to evaluate the effectiveness of potential names.
Ultimately, the name “Precision” emerged from the others as it brought to mind connotations of an oral care product that cleans one’s teeth completely and consistently. Further, the word Precision exudes many of the qualities that are desirable in a brand name, such as positive attributes, high quality and a name which is easy to pronounce, recognize, and most importantly, remember. Regardless of which name was chosen, however, the individual product’s branding would also be able to take advantage of the brand recognition of Colgate-Palmolive – a household name that the majority of the population associates with good dental care.
Colgate-Palmolive could have also considered utilizing the line extension tactic of “introducing additional items in the same product category under the same brand name,”40 thereby marketing the toothbrush as “Colgate Precision. ” This brand name, as with other Colgate-Palmolive products, should come to signify Precision’s intentions to deliver features that are synonymous with the consumers need for good dental health as offered by a well recognize and trusted company. As mentioned above, a brand name should bring certain attributes, benefits and values to the minds of consumers.
Consumers should recognize the physical attributes of the Precision toothbrush as an advantageous design that will work better than the majority of the toothbrushes on the market. The benefits that the consumer should associate with the Precision toothbrush should include noticeably cleaner and healthier teeth and gums. The values inherent to Precision should be an effective tool for improved oral care. Combining the attributes, benefits and values of Precision into a readily recognizable product is a step towards Colgate-Palmolive’s ultimate goal – brand loyalty to Precision.
Precision has patented the design and features of the triple action bristles that work with one another so that the short, long, and angled bristles remove 35% more plaque then a standard toothbrush. 41 There are, however, some aspects of the toothbrush that still need to be defined, such as the cosmetics. Most people undoubtedly associate toothbrushes and general oral hygiene with a dentist. To capitalize on this association, Colgate-Palmolive could make the Precision t