Colgate-Palmolive Case Study

Colgate-Palmolive Company: The Precision Toothbrush, HBR case Study during a marketing internship under Prof. Sameer Mathur.

1. Presented By Subho Mistri J.U.(B.E.) ( A HBR case study)

2. Company Background US toothbrush market Product segments Consumer behavior Competition The precision marketing mix Conclusion Contents

3. WHY STUDY THIS CASE To understand the market competition faced by C olgate precision Toothbrush To analyze the consumer behavior of that time period To summarise the profits gain by the company

4. COLGATE PRECISION A new product toothbrush launched by CP in August 1992 Developed over a period of 3 years Who is Susan Steinberg? Precision product manager, managed the entire new development process. Responsible for recommending positioning, branding and communication strategies.

5. Company’s Background CP– A Global Leader in Household & Personal Care Product:

6. THE U.S. MARKET

7. The U.S. Toothbrush market has seen many changes from Dr. West’s miracle Tuft toothbrush to the newly launched the Colgate Precision

8. The Five year Plan(1991-1995)

9. To launch new products To enter into new geographic markets To improve efficiency in manufacturing and distribution To continue focus on CORE CONSUMER PRODUCTS

10. Product

11. Value Professional Super-Premium The industry executives had divided the toothbrush category into following segments:

12. CONSUMER BEHAVIOUR

13. CP’s Consumer Research indicated that Baby Boom generation Consumers were now becoming more concern about the health of their Gums as opposed to cavity prevention and were willing to pay a Premium for new Products addressing this issue

14. COMPETITION

15. PROMOTION

16. MEDIA EXPENDITURES

17. TELEVISION & ADVERTISING COPY STATEGIES & EXECUTIONS

18. CP TELEVISION ADVERTISING

19. ADVERTISING EXPENDITURE FOR CP TOOTHBRUSHES

20. In 1992, 22% of all toothbrushes were expected to be distributed to the consumers by dentists. Manufacturer margins on toothbrush sales through dentists were less than half those achieved through normal retail distribution. Exhibit 13 summarizes toothbrush retail distribution by volume & value

21. PRODUCT DESIGN AND TESTING

22. In 1989, CP had established a task force comprising executives from: R & D and marketing Dental professionals Outside consultants MISSION To “develop a superior, technical, plaque removing device”

23. Capacity and Investment Cost: Three types of equipment were required to manufacture the precision toothbrush : Tufters Handle molds Packaging machinery Table D gives the cost, depreciation period, and annual capacity for each class of equipment

24. Product cost & Pricing

25. Production Cost Warehousing cost Transport cost

26. Steinberg estimated the cost & Price data as below

27. Breakeven Analysis

28. Total manufacturing cost+ total Advertising cost=Input cost (Variable + Fixed cost) Total Profit= (Retail Price*No. of brushes) - input cost For Breakeven, Input Cost= Total revenue generated by selling the precision brush.

29. Two tests were carried out: Consumer concept test Name Test OUTCOME: Under the niche and mainstream positioning scenarios- Cannibalization figures for Colgate Plus would be increased by 20% if the C olgate brand name was stressed. Remain unchanged if the precision brand name was stressed.

30. CP’s stated corporate strategy was to build on the C olgate brand equity

31. 4 concept tests conducted among 400 adult professional brush users (Colgate Plus , Reach & Oral-B users)-18 to 54 years of age.

32. Result of Four concept tests : TEST 1: (69+68+66)/3=67.67% Probably would buy (15+15+10)/3=11.67% Definitely would buy TEST 2: (80+71+74+68)/4=73.5% Probably would buy (19+19+18+14)/4=17.5% Definitely would buy TEST 3: (63+72+62+66)/4=65.75% Probably would buy (13+16+11+14)/4=13.5% Definitely would buy TEST 4: (87+61)/2=74% Probably would buy (19+48)/2= 24% Definitely would buy

33. Precision-A technological breakthrough-more than a niche product/simple line extension How precision should be position, branded and communicated to customers. What the advertising & promotion should be and how it should be broken down. To develop a marketing mix and profit-and-loss pro forma to enable precision to reach its full potential.

34. This presentation made By Subho Mistri (J.U.), during a marketing internship under Prof. Sameer Mathur (IIM-L)