Colgate Case New

ANALYSIS OF COLGATE PALMOLIVE PRECISION TOOTHBRUSH BY GROUP 4

SYNOPSIS

Introduction

1. The paper discusses the state of oral health care market in US in early 90s and analysis of various market factors affecting positioning, branding and communication strategy of a new product to be launched by Colgate Palmolive.

2. The US oral health care market was worth $2.9 Billion in retail sales and had been growing at rate of 6.1% since 1986. The product mix consisted of toothpaste (46%), mouthwash (24%), toothbrush (15.5%) and dental floss and other products taking up the remainder. The other leading companies operating at that time were Gillette (Oral B), Johnson & Johnson and P & G. Other new entrants were Lever, Pfizer and Sunstar.

3. Colgate Palmolive held No-1 position in the US retail toothbrush market with 23.3% volume share. CP offered two lines of toothbrushes in 1991- Colgate Classic and Colgate Plus, which were positioned in the value segment and professional (higher quality) segment respectively.

Changing Market Trends and Consumer Behavior

4. In late 80s a new category of brushes evolved and was labeled super-premium (priced above $2.0). By 1992 these brushes accounted for 35% of unit volume and 46% of Dollar sales. Professional brushes accounted for 41-42% and value brushes ranged from 12-24%.

5. The psyche of the customer was undergoing a change wherein the characteristics of the product were becoming the overbearing factor in their decision for choice of product. There was a marked shift in the preference of consumers from value to professional segment and from firm to soft bristles with concern being health of the gums as opposed to cavity prevention. Consumers were willing to pay a premium for products addressing these issues. Brand choice of the consumer was based on features, comfort and dentist's recommendations. The handles, bristles and head-shapes were perceived to be the most important features of the toothbrush. Toothbrush users could be classified into therapeutic users, cosmetic brushers and un-involved consumers.

The Competition

6. There was stiff competition in the market from players like Oral-B (in super-premium category with 23.1% volume share), Johnson & Johnson (Reach Brand with 19.4 % volume share), Proctor & Gamble (with Crest Compete with 13% volume share), Smithkline Beecham, Lever, Pfizer and Sunstar. All the companies had individual USPs.

7. In-store display was considered to increase toothbrush sales. When Colgate toothbrushes were combined with Colgate Toothpaste in a single display, the toothbrush sales increased significantly. CP had four "point-of-purchase" display system viz. Counter top, Floor stand, Sidekicks and Waterfall Display. The CP toothbrush line held 25-40% of category shelf space in most stores and was generally positioned between Reach and Oral-B product line.

The Precision Toothbrush

8. Based on sound R&D, CP developed a unique brush with bristles in three different angles and length which provided triple action brushing effect and 35% more plaque removal compared to others. The launch was scheduled for early 1993 and priced within the super premium segment. However, the most important decision regarding positioning of the product and consequent branding and communication strategy was a matter of intense contemplation.

9. Positioning. The new toothbrush had the potential to be positioned as mainstream brush, where it had to compete with Oral-B Regular, or a top-of-the range, super premium product, where it had competition from Oral-B Indicator. The lead time of 10 months could create supply inadequacy in the market for the product if switched to mainstream positioning. The option however, was there to launch in the niche segment and later broaden to mainstream positioning.

10. Branding. The toothbrush was to be named as "Colgate Precision" or "Precision by Colgate" as per the feedback received during "naming test" conducted by the company. There were arguments in favor of emphasizing ‘Precision' over ‘Colgate' as the brand could stand alone in the market and it would minimize the extent of cannibalization of Colgate Plus. However, CP corporate strategy was to build on the Colgate brand equity.

11. Promotion. Four concept tests indicated preference of users for a toothbrush that prevents gum diseases. Although toothbrush had an unusual look, it gave a unique feel in the mouth that encouraged users to buy it. This put more emphasis on sampling. While allocating advertising and promotion budget for toothbrushes, there were arguments to keep it in the ratio of the sales in 1993, or keep it in favor of either Colgate Plus (the "Bread and Butter" of CP) or Precision.

ISSUES AND CHALLENGES

12. A well developed product after intense R&D and consumer feedback was available with CP, but the main issue confronting the marketing team was whether to position the product in niche segment or mainstream segment.

13. Other issues were whether to emphasize on the ‘Precision' name or capitalize on brand equity of Colgate and how to promote the new product for effective branding.

ANALYSIS

14. Precision was developed as a technologically superior toothbrush in keeping with the current consumer behavior which was shifting towards health of gums as opposed to cavity prevention. The consumers were willing to pay a premium for a new product addressing this issue. Further, the willingness of the consumers to experiment with new toothbrushes compared to toothpastes was being cashed in by various toothbrush manufacturers by launching a slew of new products every year.

15. Precision could therefore be positioned in the niche category of super-premium brushes, which accounted for 46% of dollar sales. The existing brands in this category included Oral-B Indicator, Oral-B Regular, Crest Complete, Reach Advanced and Aquafresh Flex with average retailing price ranging from

$ 2.3 to $ 2.65. Keeping in view the consumers' willingness to pay premium for toothbrushes addressing gum health issues, Precision was poised to make an impact in this category of therapeutic brushers, who make up 46% of adults. Product innovation is an effective means to differentiate a product in this highly competitive market of super premium category. This was the forte of Precision.

16. Also there was a vast market of mainstream (professional) category available with 42% dollar sales. However this could result in Precision competing with its own well established product Colgate Plus in this category. Further, since the product was to have the lead time of 10 months to launch in this category, it could create supply inadequacy in the market for the product. A mainstream consumer would appreciate focus on overall benefits of the toothbrush instead of prevention of gum disease. The capital investment for the first 2 years of production in a mainstream positioning strategy would be substantially higher compared to that in the niche positioning strategy.

17. Despite unusual look of the product, its unique feel in the mouth encouraged the consumers to opt for it during the tests conducted. It implied that more emphasis was required on Sampling to get the consumers to start using the product. Its exclusivity was gum disease prevention, but positioning it in mainstream segment required emphasis on Plaque removal properties, where Plax was the only competitor other than Colgate Plus.

18. Advertising costs had substantially increased due to restricted market and tough competition, more so in the mainstream segment, where it would be approximately 3 times more than that in the niche strategy. Hence either the advertising expenses for the mainstream would be required to be increased significantly or that for Colgate Plus would need to be reduced to maintain this expenditure to launch the product in the mainstream segment.

19. If Precision were to be positioned as a mainstream product with 7 SKUs, Colgate would have to drop 1 or more of its existing SKUs while as a niche product with 4 SKUs, no existing SKUs would possibly be required to be dropped.

RECOMMENDATIONS

20. In view of the SWOT analysis carried out above, it is recommended that the product be named as "Colgate Precision" to capitalize on the brand equity of CP. It is proposed that the product be positioned in the niche segment priced at $ 2.9, taking best advantage of consumer preferences and willingness to pay more. It would minimize competition with Colgate Plus and also its cannibalization. The product can foray into mainstream segment after stabilization of the product line.

21. It is recommended the advertisement budget be maintained in ratio of 60:40 in favor of Precision and may be reviewed subsequently.

CONCLUSION

22. The analysis brings about the intricacies and challenge of factoring market tends and consumer behavior along with pricing and branding for formulation of the product strategy. The factors are not to be considered in isolation as they are interdependent. Success of a product depends as much on these factors as on R&D and innovation.

ANALYSIS OF COLGATE PALMOLIVE PRECISION TOOTHBRUSH

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