Colgate-Palmolive - The Precision Toothbrush

Harvard Business Review - Case Study Analysis

1. Case Study on
Colgate Palmolive
The Precision Toothbrush

2. .Situation

3. Let’s see what the situation is:
◎August 1992, Colgate-Palmolive poised to
launch a new toothbrush, Colgate Precision
◎In development for 3 years
◎Susan Steinberg, Precision product manager
has to make key decisions regarding the new
product
.

4. .The Decision

5. Here’s our problem statement:
Colgate’s new product –The Precision Toothbrush
Decisionsto be made on:
◎Positioning
◎Branding
◎Communication to Consumers
◎Advertising and Promotion Budget

6. LET USBACKTRACK
Analyze the current situation of
the company and the market

7. CompanyBackground
◎Focused on the production, distribution and provision of
household, health care and personal products, such as soaps,
detergents, and oral hygiene products (including toothpaste
and toothbrushes)
◎$6.06 billion in sales and $2.76 billion gross profit in 1991
◎New 5 year plan (1991-1995) -New product launches and
improved manufacturing and distribution

8. ToothbrushMarket
Threesegments:
Professional
$1.84
Value
$1.29
High
Premium
$2.59
46%42%12%

9. Three types of consumers
Therapeutic brushers
(aim to avoid oral care problems)
Cosmetic brushers
(emphasize preventing bad breath or
ensuring white teeth)
Uninvolved consumer
(adjust behavior only when
confronted by oral hygiene problems)
Baby boomers more health conscious

10. Brands that provide
COMPETITION

11. CurrentMarket Position
◎43% of world toothpaste market and 16% of toothbrush market
◎US toothbrush sales in 1991: $77 million with operating profit
$9.8 million
◎Two lines of toothbrushes:
Colgate classic (value segment)
Colgate plus (professional segment)

12. “
Let’s revisit Susan’s decisions
?

13. Launch ofPrecision Toothbrush
and how to handle its:
Positioning Branding
Communication
to Consumers
Advertising and
Promotion Budget

14. let us analyze them
ONE
BY
ONE

15. 1.Positioning
Two possibilities :
Niche or Mainstream

16. Niche
◎Target towards consumers
concerned about gum disease
◎Expected to capture 3% of US
toothbrush market
◎Trade price $2.13 with 5%
discount
◎No threat of cannibalization
Positioning:
Mainstream
◎Appeal of being the most
effective toothbrush in the market
◎Can capture 10% of the US
market
◎Trade price $1.85 with 5%
discount
◎Could lead to cannibalization of
Colgate Plus

17. Niche
◎Placement on the retail shelves
between Colgate plus and Oral-B
◎SKU’s won’t be dropped
◎Distributed by food and drug
stores
Positioning:
Mainstream
◎Place away from Colgate lines
and closer to competition products
◎Would require dropping one or
more SKUs
◎Distributed by mass
merchandisers and club stores

18. Let’s crunch some
numbers
Results will help decide the best
positioning

19. Profits/Losses: Niche vs Mainstream
Year 1 Year 2 Year 1 Year 2
# units retail 8,000,000.00 15,000,000.00 26,800,000.00 44,100,000.00
# units promotion and sampling 2,000,000.00 2,000,000.00 7,000,000.00 7,000,000.00
#units throughprofessionals 3,000,000.00 3,000,000.00 8,000,000.00 8,000,000.00
trade price (after 5% discount) $2.02 $2.02 $1.76 $1.76
professional price $0.82 $0.82 $0.82 $0.82
deprecation cost $316,667.00 $450,000.00 $886,667.00 $1,270,000.00
per unit cost $0.66 $0.66 $0.64 $0.64
advertising $5,000,000.00$5,000,000.00 $15,000,000.00$12,000,000.00
consumer promotions $4,600,000.00$4,000,000.00 $13,000,000.00$10,000,000.00
trade promotions $1,600,000.00$2,700,000.00 $4,800,000.00 $7,000,000.00
Total (before cannibalization) -$1,470,667.00$7,416,000.00 -$6,694,667.00$16,098,000.00
Niche Mainstream

20. After Cannibalization
Year 1 Year 2 Year 1 Year 2
Cannibalization % 35.00% 35.00% 60.00% 60.00%
# units cannibalized 9,380,000.00 15,435,000.00 16,080,000.00 26,460,000.00
amount lost due to cannibalization $1,350,720.00$2,222,640.00 $2,315,520.000$3,810,240.000
Total (after cannibalization) -$8,045,387.00$13,875,360.00 -$9,010,187.000$12,287,760.000
Mainstream
Conclusion:
Year 1 –Niche has lesser loss ($1.47 million vs $8-9 million)
Year 2 –Mainstream has higher profits ($7.4 million vs $12-13 million)

21. Hypothesis
◎Initially –Niche, Later–Mainstream
◎Losses minimized for the first year
◎Profits higher in the second year
◎Since number of units sold high for
mainstream in the later years, profit
overcomes the cannibalization
◎Pressure on production schedules that
had been developed for niche positioning
is relieved
◎Enough lead time (more than 10 months)
to switch to mainstream positioning

22. 2.Branding

23. ◎Name –Precision
◎Viewed more favorably in consumer concept tests
◎Suggested brand name –“Precision by Colgate”
◎Emphasis on Precision to reduce cannibalization of
Colgate Plus
◎Keep the word Colgate in brand name –builds on
Colgate brand equity
Branding:

24. 3.Communication
and Promotion

25. ◎Toothbrush prevented gum disease: motivated greatest
purchase intent
◎Existing budget $24 million -$9.6 million in advertising and
$14.4 million in promotion
◎Proposition –Increase spending by $11.2 million and
allocate to Precisionlaunch
Communication and Promotion :

26. Product andAdvertisements:

27. Promotion
◎Free 5 oz. tube of Colgate toothpaste along with precision toothbrush in
competitive markets
◎50% off on toothpaste along with 0.5$ coupon on Precision brush in
strong Colgate markets
Advertising
◎Emphasis on functional superiority over competitors
◎Precision provides 35% more plaque removal than Oral-b
Sampling
◎Once tried consumer intent to purchase rose, so sampling critical to the
success
Communication and Promotion :

28. Let’s summarize
situation
Colgate-Palmolive launching a
new product –
The Precision Toothbrush.
problem
Decisions to be made on
positioning, branding and
communication of the new
product.
backtrack
Company’s current situation,
market analysis, competition
overview
positioning
Niche for short term and
Mainstream later on
branding
Precision by Colgate –to reduce
cannibalization and increase
brand equity
communication
and promotion
Advertisements, sampling,
promotion and their budgets

29. thank you!
Created by Shashwat Dixit, Manipal Institute of
Technology, Manipal, during the marketing internship
by Professor Sameer Mathur, IIM Lucknow