Colgate palmolive

COLGATE PALMOLIVE: THE PRECISION TOOTHBRUSH

1. Colgate Palmolive Company:
The Precision Toothbrush

2. KEY PLAYERS
Susan Steinberg
Product Manager of Colgate Precision
Nigel Burton
General Manager
Reuben Mark
CEO of Colgate Palmolive
John Phillips
Colgate Plus Product Manager

4. Colgate Palmolive about to launch a new toothbrush in the
US
Tentative name Colgate Precision
The Oral Care division has been developing this product for
three years
At present there exists a highly competitive market with
substantial product activity
A suitable marketing strategy has to be developed that would
enable precision to achieve its full potential

5. PERSONAL CARE INDUSTRY:

6. PRODUCT DESIGN
Unique brush with bristles of three different lengths
and orientations
Longer outer bristles cleaned around the gum line
Long inner bristles cleaned between the teeth
Shorter bristles cleaned the teeth surface.

8. RESULT
Triple action brushing effect 35% increase in plaque removal

9. THE FOLLOWING THREE ISSUES HAVE TO BE
ADDRESSED
i) Develop the right Marketing mix and Profit-and-Loss pro forma
ii) Recommend positioning, branding and communication
strategies
iii) Allocation of advertisement and promotion budget

11. MARKETING MIX

12. It was decided that Precision would be priced within
the super-premium segment and distributed through
the same channels as Colgate Plus

15. PROFIT
FROM
NICHE POSITIONING

16. YEAR 1 :
Revenue from retail sales: =$2.89*8M=$23.12 M
Revenue from professionals =$0.79*2.4M+ $0.95*0.6M
= $2.466 M
NET REVENUE =$25.59 M
Manufacturing Cost =$0.66*13M=$8.58
Investment in capacity =$3.25 M
Depreciation =$316667
Advertisement = $5 M
Consumer Promotion =$4.6 M
Trade Promotion =$1.6 M
TOTAL COST =$23.35 M
NET PROFIT =$2.24 M

17. YEAR 2 :
Revenue from retail sales =$2.89*15m=$43.35M
Revenue from professionals =$2.466 M
NET REVENUE =45.816M
Manufacturing Cost:$0.66*20m =$13.2 M
Advertisements =$5 M
Consumer Promotions = $4 M
Trade Promotions: =$2.7 M
Investment Capacity =$4.55 M
Depreciation =$450000
TOTAL COST =$29.9 M
NET PROFIT =$15.916 M

18. PROFIT
FROM
MAINSTREAM POSITIONING

19. YEAR 1
Revenue from retail sales =$2.49*26.8m=$66.732M
Revenue from professionals =$0.79*6.4+$1.95*1.6=$6.576M
NET REVENUE =$73.31M
Manufacturing Cost =$0.64*42=$26.88M
Investment in capacity =$9.1M
Depreciation =$0.89M
Advertisements =$15M
Consumer Promotions =$13M
Trade Promotions =$4.8M
TOTAL COST =$69.67M
Cannibalization cost =0.35*26.8M*($2.49-$1.61)=$8.25M
TOTAL PROFIT=$(73.31-69.67-8.25)M= -$4.61M

20. YEAR 2
Revenue from retail sales=$109.81M
Revenue from professionals=$6.576M
TOTAL REVENUE =$116.39M
Manufacturing cost =$0.64*59M=$37.76M
Investment in capacity=$12.1M
Depreciation =$1.27M
Advertisements =$12M
Consumer Promotions=$10M
Trade Promotions =$7M
TOTAL COST=$80.13M
Cannibalization(Min 35%)=0.35*44.1M*$2.49-1.61=$13.58M
NET PROFIT=$(116.39-80.13-13.58)=$22.68M

21. From the profit-and-loss pro forma we can state that it
would be better to launch Precision as a niche
product in the first year.
Following this, in the second year it can also be
introduced in the mainstreamcategory

24. Precision was developed with the objective
of creating the best brush possible and
become a top of the range super premium
product

25. POSSIBLE POSITIONING
NICHE MAINSTREAM
>Targeted at consumersBroader appeal of being the
Concerned about gum most effective toothbrush
diseases in the market
>Factory List Price Factory List Price
$2.18 $1.85

26. Expected sales under the two
positioning

27. ADVANTAGES
NICHE
Would help to break into
the super premium
segment
Would help to build
Colgate brand equity.
MAINSTREAM
Help to capture the market
and increase net volume
shares in toothbrush
category
Unsatisfied demand would
create the perception of a
’hot product’

28. DISADVANTAGES
NICHE
Lesser Volume sales
compared to mainstream
Higher price premium
MAINSTREAM
Possible cannibalization of
Colgate Plus
Pressure on production
schedule that have been
developed for niche positioning
Could result in inadequate
supply of product
Would require dropping one or
more Stock Keeping Units

29. BRANDING

30. The COLGATE PRECISION name was consistently
viewed more favourably
Deemed appropriateby 49%and appealingby 31%
Stressing Precision rather than Colgate would limit the
extent on cannibalization which be otherwise be
increased by 20%for Colgate Plus( both for niche and
mainstream positioning)

31. COMMUNICATION

32. CONSUMER BEHAVIOUR
3 types of users
Therapeutic :aim to avoid oral care problems
Cosmetic brushers : emphasize on preventing bad
breath and ensuringwhite teeth
Uninvolved consumers: not motivated by oral care
benefits

33. PRECISION’S UNIQUE DESIGN COULD REMOVE
MORE PLAQUE FROM THE TEETH THAN OTHER
LEADING TOOTHBRUSHES ON THE MARKET
FOUR CONCEPT TESTS WERE CONDUCTED
AMONG 400 ADULT PROFESSIONALBRUSH USERS

34. CONCEPT TEST 1
Plaque Remover Healthier GumsTrouble Spots
Probably would buy 69% 68% 66%
Definitely would buy 15% 15% 10%
CONCEPT TEST 2
35% More Plaque 35% More Plaque Prevent Gum Feel the Difference
Removal Prevent Removal Disease
Gum Disease
Probably Would Buy 80% 71%74% 68%
Definitely Would Buy 19% 19% 18% 14%
CONCEPT TEST 3
Gum Disease/ Gum Disease Only Replacement Trouble Spots
Replacement Message
Probably Would Buy 63% 72% 62% 66%
Definitely Would Buy 13% 16% 11% 14%
CONCEPT TEST 4
No Price Given Prevent Gum Disease 20% Price Premium to Oral-B
Prevent Gum Disease
Probably Would Buy 97% 61%
Definitely Would Buy 29% 19%

35. THEREFORE
The most effective communication strategy
COLGATE PRECISION
Plaque Remover
35% More Plaque Removal
Prevent Gum Disease

37. Increased advertising of toothbrushes enhances
visibility, which in turn fuel consumer demand
Growing competition increased the frequency and
value of consumer promotion events

38. Typical
Colgate Palmolive
Point-of-Purchase Displays
increased sales by 90 %
over normal shelves

39. In 1992 Total Budget : $24.1M
Advertisement Budget: $9.6 M
Promotion Budget : $14.4 M
For 1993
Following 4 options are available:
i)Budget allocation according to percentage of sales
ii)Keep budget for Classic & Plus same-increase that of
precision substantially
iii)Allocate $11.2 M for precision and keep the previous
budget for Plus and Classic intact.
iv) Increase total budget by $19.28 M, 75% of advertising
budget for Precision,25% for Plus

40. BEST OPTION
Increase Total budget by $19.28 M
75% Precision
Allocation of Advertisement
25% Plus Budget
This is in addition to the existing advertisement budget of
Colgate Plus

41. WHY SO ?
With niche positioning of Precision, Plus wouldn’t require
much push because there wouldn’t be cannibalization.
But then,
A substantial amount should be spent on
advertisement of Plus so that it can grow its market share in
terms of volume sales in the mainstream/value segment.
RESULT
Colgate Palmolive will be able to increase its market share in
the overall toothbrush market.

42. SUMMARY
Key Players
Situation Analysis
Product Design
Marketing Mix and Profit-and-Loss Pro forma
Positioning, Branding and Communication Strategies
Advertisements and Promotions

43. DISCLAIMER
Prof. Sameer Mathur,
IIM LUCKNOW
Marketing Professor: 2013-Present
McGill University
Marketing Professor: 2009-2013
Carnegie Mellon: PhD and M.S.
Marketing
-----------------------------------------------
Swarnayu Ghosh
N.I.T Durgapur