Colgate-Palmolive Company: The Precision Toothbrush.

A Harvard Business School Case Analysis.

1. Colgate-Palmolive Company: The Precision Toothbrush A Harvard Business School Case Analysis Arnab Das

2. Colgate-Palmolive’s Oral Care Industry Position

3. Situation Analysis

4. Advertising and Promotion budget also need to be decided. Positioning, branding, and communication strategies need to be devised for Colgate Precision. The market is highly competitive with substantial new product activity. Colgate-Palmolive (CP) has decided to launch a new toothbrush in the United States, tentatively named Colgate Precision.

5. The Precision Toothbrush A technical innovation. Mission is to “develop a superior, technical, plaque removing device.” Triple-action brushing effect. 35% more effective in plaque removal than its competitors.

6. Major Players in Marketing Strategy of Colgate Precision Toothbrush Susan Steinberg Product Manager Nigel Burton Division General Manager

7. Understanding US Toothbrush Industry

8. Consumer Behaviour (1/2) 46% therapeutic brushers. 21% cosmetic brushers. 33% uninvolved brushers.

9. Consumer Behaviour (2/2) Fits most comfortably in mouth- 63% Best for getting at hard-to-reach places- 52% Bristles are of right softness- 46% Bristles are of right firmness- 36% Dentist recommendation- 35% Important part of oral care regimen- 30% Brand Decision Factors

10. Competitors of Colgate-Palmolive (1/5) Oral-B has been the market leader since the 1960s. Held a 23.1% volume market share and 30.7% value share in US. Known as “The dentist’s toothbrush”. Launched Indicator Brush in 1991, priced at 15% premium to its other brushes.

11. Competitors of Colgate-Palmolive (2/5) Johnson & Johnson ranked third in the U.S. retail toothbrush market with a 19.4% volume share and a 21.8% value share. The Reach line was positioned as the toothbrush that enabled consumers to brush in even the hardest-to-reach places, thereby increasing the efficiency of brushing . J&J’s expected 1992 operating margin on toothbrushes, after advertising and promotion costs, was 8.4% of factory sales.

12. Competitors of Colgate-Palmolive (3/5) P&G was expected to launch Crest Complete nationally in September 1992 . C laimed to have “the ability to reach between the teeth up to 37% farther than leading flat brushes.” Expected to capture a 2.0% volume share and a 2.6% value share by the end of 1992 .

13. Competitors of Colgate-Palmolive (4/5) Smithkline Beecham entered the market with Aquafresh Flex in August,1991. H eld a 0.9% share by volume and 1.1 % by value of the U.S. retail market . Point of differentiation was “flexibility and gentleness”. E xpected to make an operating loss on toothbrushes in 1992.

14. Competitors of Colgate-Palmolive (5/5) Pepsodent of Lever Butler of Sunstar

15. Advertisement & Promotions

16. It is estimated that almost all toothbrush companies will increase media advertising expenditure with newer entrants in super-premium segment (Crest Complete, Aquafresh Plax) leading the pack by some distance.

17. Colgate has always evenly distributed its expenditures across different forms of advertising and promotion.

18. SWOT Analysis of Colgate-Palmolive

19. Strengths Number one company in US retail toothbrush market. Extensive international reach. Exclusive R&D team working on new technologies. Innovative product design.

20. Weaknesses Lack of professional dental endorsements. Small media expenditure layout compared to its rivals. Introduction of Precision toothbrush may cannibalize Colgate Plus and Colgate Classic.

21. Opportunities Increasing market share in the highly profitable but emerging “super premium” segment. Capturing baby boomers and younger generation as they are more concerned about gum care. . Converting unplanned toothbrush purchases into sales through well directed advertisements .

22. Threats Intense segment rivalry. Threat of new entrants. Threat of substitute products (electronic brush ).

23. Positioning Branding Communication and Promotion

24. Niche Positioning – Advantages for Precision Allows for a concentrated marketing campaign targeted to therapeutic brushers. Niche market consumers are more likely to pay a premium price for Precision. The super-premium segment accounts for 46% of dollar sales, CP will do well if they place Precision as a niche product to capture market share. Positioning (1/4) Niche Positioning | Benefits of Precision Toothbrush Allows for a concentrated marketing campaign targeted towards therapeutic brushers who care about gum care. Niche marketing accounts for 46% of dollar sales and premium consumers are willing to pay high price. Precision won’t have a chance to cannibalize Colgate Plus or Colgate Classic. Precision has a ready to go production schedule.

25. Positioning (2/4) Niche Positioning | Harms of Precision Toothbrush Lesser revenue than mainstream positioning. Product reach is limited to a specific section.

26. Positioning (3/4) Mainstream Positioning | Benefits of Precision Toothbrush Simple and direct campaigning. Greater return on investment. Large market share.

27. Positioning (4/4) Mainstream Positioning | Harms of Precision Toothbrush Almost one-third population have little interest in oral hygiene. Precision won’t appeal to them. Cannibalization of Colgate Plus and Colgate Classic. Mainstream market is steadily declining.

28. Precision should be placed in the niche market as a superior and distinctive product in the fast growing super-premium segment. Later Precision can be moved into the mainstream market and thus gain higher market share.

29. Branding “Colgate Precision” or “Precision by Colgate” ? “Colgate Precision” appeared to be more popular from a survey but also increased cannibalization risk of Colgate Plus by 20%. “Precision by Colgate” had no cannibalization risk but it was unable to harness Colgate brand equity.

30. “Precision by Colgate” would be more suitable as it won’t cannibalize Colgate Plus, which is the bread and butter of CP. “Precision by Colgate” stresses on Precision, which indicates the specific value it is going it deliver to its customers. In later stages, when Precision will enter mainstream market, focus can be shifted to Colgate as the company would look to build on the brand equity. Recommendation

31. Communication and Promotion (1/2) Key findings of a survey carried out by CP: 55% found Precision different than their current toothbrush. 77% found Precision more effective. Once tried, consumer intent to purchase Precision rose dramatically.

32. Communication and Promotion (2/2) Advertising and promotion budget was $24.1 million in 1992. A decision needs to be taken for allocation of 1993 budget to different CP products. Susan Steinberg, Precision Product Manager considered several promotions to back the launch. Sampling formed an important part as surveyed customers gave positive feedback after using Precision. Another important tactic was professional endorsement through dentists.

33. Recommendation Budget of 1993 should be increased by 80% and that amount should be solely invested in Precision toothbrush. In that way, a sufficient amount will be invested towards promotion to build Precision as a brand in the increasingly competitive super-premium segment without hurting advertising budgets of its existing products.