2. Background of the company
• Founded by William
Colgate in 1806.
• A global leader in the
household and personal
care products.
• The company's corporate
offices are on Park
Avenue in Midtown
Manhattan, New York City.
3. Issue
• In 1992, Colgate-Palmolive (CP) was poised to
launch a new toothbrush in the United States,
tentatively named Colgate Precision.
• Susan Steinberg, Precision product manager, was
weighing the option of introducing the new
toothbrush to a niche market or to a mainstream
market. Both the options had their potential
benefits and challenges.
4.
5. • Until 1980, the toothbrush category consisted of two
segments:
1. Value
2. professional.
• The late 1980s saw the introduction of another category
of toothbrushes called super premium brushes.
• By 1992, super-premium brushes accounted for 35% of
unit volume and 46% of dollar sales. Professional brushes
accounted for a corresponding 41% and 42%, and value
brushes accounted for 24% and 12%.
• This shows that that super-premium brushes had an
amazing impact on the market.
6. Analyzing consumer behavior
• CP’s consumer research indicated
that consumers were becoming
more concerned about the health
of their gums and were willing to
pay a premium for new products
addressing this issue.
• Most consumers agreed that
toothbrushes were as important as
toothpaste to effective oral
hygiene.
• They believed that the primary role
of a toothbrush was to remove food
particles and gum stimulation were
considered secondary.
9. • Major competitor brands in the super-premium segment included Oral-B,
Reach Advanced Design, Crest Complete, and Aquafresh Flex.
• The Table shows the number and type of stock keeping units (SKUs) for
each major brand.
BRAND Adult Child/Teen
Colgate 28 8
Oral-B 16 5
Reach 14 4
Crest Complete 10 0
Aquafresh Flex 6 1
Lever 7 2
Plax 2 1
10.
11. As the pace of new product introductions quickened in the late 1980s,
the advertising media expenditures needed to launch a new
toothbrush rose
Growing competition increased the frequency and value of consumer
promotion events.
The CP toothbrush line held 25% to 40% of the category shelf space in
most stores.
12. Retail advertising features and in-store
displays increased toothbrush sales.
CP had four display systems Counter Tops,
containing 24 to 36 brushes; Floor Stands, 72
brushes; Sidekicks , 144 to 288 brushes; and
Waterfall displays, 288 to 576 brushes.
The picture illustrates these display racks.
To maximize retail sales, CP salespeople tried
to locate the Colgate line in the middle of the
category shelf space,
between the Reach and the Oral-B product
lines.
13. Distribution
In 1987, traditional food stores sold 75% of oral care
products, but by 1992 they accounted for only 43% of
toothbrush sales and 47% of toothpaste sales.
Toothbrushes provided retailers with an average margin
between 25% and 35%, twice that for toothpaste.
In 1992, 22% of all toothbrushes were expected to be
distributed to consumers by dentists. With a dedicated
sales force, Oral-B dominated this market segment.
16. Niche positioning strategy
1.Targeted at consumers concerned 1. Less contribution to profits as
about gum disease. Compared to Mainstream
2. CP could command a 15% price positioning.
premium over Oral-B. 2. Net income increase much lesser
3. Expected to capture 3% of the than mainstream positioning.
U.S. toothbrush market by the end
of the first year following its launch.
17. Mainstream Positioning strategy
1. Had a broader appeal of 1. Raised concerns about the
being the most effective brush possible cannibalization of Colgate
available on the market. Plus.
2. CP could capture 10% of the 2. Production capacity increases
market by the end of the first year required 10 months’ lead time, and
which is higher than niche switching to a mainstream
positioning. Positioning could result in
inadequate supply of product.
18.
19. At the time consumer concept tests were carried out by the
task force, name tests were also conducted among those
consumers positively disposed towards the concept.
Alternative names tested included Colgate Precision, Colgate
System III, Colgate Advantage, Colgate 1.2.3, Colgate
Contour, Colgate Sensation, and Colgate Probe
20. • The Colgate Precision name was consistently viewed
more favorably—it was deemed appropriate by 49% of
concept acceptors and appealing by 31%.
• It was estimated, that cannibalization figures for
Colgate Plus would increase by 20% if the Colgate
brand name was stressed but remain unchanged if the
Precision brand name was stressed.
• But CP’s stated corporate strategy was to build on the
Colgate brand equity.
21.
22. CP should pursue the mainstream positioning
strategy for the Precision.
Also, pursuing a mainstream strategy takes
advantage of the rapid growth in the retail outlets
(mass merchandisers & club stores) that would
purchase this new product.
24. Analysis of the Pro forma income statements shows
the mainstream positioning strategy will lose almost
$6.7MM in year one, but earn $16MM in year two
whereas a niche strategy loses less money in year
one ($1.4MM) and makes $7.4MM in year two.
Hence mainstream positioning strategy will help CP
in long term profits.
25. Mass merchandisers and club stores have had
impressive growth from 1989-1991 and they will
generate a tremendous market for the Precision in a
mainstream strategy.
Hence, broadening into the mainstream positioning
would enhance greater proportion of sales which
would now also occur through mass merchandisers
and club stores apart from the food and drug stores.
26.
27. Steinberg should adopt a mainstream positioning
strategy for the Precision because it would lead to
increased performance as well as helps the
company in the long run.
Also it enables Colgate Palmolive to expand its
markets through mass merchandisers and club
stores apart from the food and drug stores.
28. Created by Harshit Kataria, IIIT Bhubaneshwar during a marketing
internship under the guidance of Prof. Sameer Mathur, IIM
Lucknow.
