Case Analysis: Colgate-Palmolive Precision Toothbrush

Monique Priestley

Winter 2011: MCDM COM588 Digital Media Marketing & Branding

Rick McPherson/Brian Marr

Monique Priestley

Winter 2011: MCDM COM588 Digital Media Marketing & Branding

Table of Contents
Analysis & Strategy
Executive Summary Situation Analysis Strategic Alternatives Proposed Strategy

1 1 1 2 3 4 4 5 5 6 6 6 7 7 7 8 8 9 9 9
i

Appendix A: Competitive Strategy

Porters Generic Strategies Applied

Appendix B: Environmental Assessment

SWOT Matrix

Appendix C: Alternatives Assessment

Alternatives: Introduction of the Precision Alternatives: Naming Convention Matrix

Appendix D: Segmentation & Targeting

Segmentation of Toothbrush Users Consumers Educated on Precisions Effectiveness

Appendix E: Positioning
Positioning of Precision in the Industry

Appendix F: Positioning Map

Positioning of Niche, Super-Premium Toothbrush Models Positioning of Mainstream, Professional Toothbrush Models

Case Study: Colgate-Palmolive Precision Toothbrush

Monique Priestley

Winter 2011: MCDM COM588 Digital Media Marketing & Branding

Analysis & Strategy

Executive Summary
In July 1992, CP senior management announced a new toothbrush model, the Precision, that was set to launch in early 1993. In order to meet consumer demand CP could introduce the toothbrush as a niche, super-premium or a mainstream, professional product. It could also introduce the product using standard naming conventions or introduce a new labeling system by calling it the Precision by Colgate. CP could leverage existing industry relationships and make an effort to form new ones in order to gain a competitive edge. At launch, CP could plan to offer competitive promotions, a popular offering that was slowly becoming standard practice in the oral care industry. The company could also increase its advertising budget to include educating the public on the dangers of gum disease. Depending on how it chooses to introduce the Precision toothbrush to the market, 1992 could serve as an important year for CP to establish itself as the denitive oral health care company.

Situation Analysis
Environmental Analysis In 1992, Colgate-Palmolive (CP) was the global leader in household and personal care products. It was also the leader in retail toothbrush sales in the United States. Prior to the 1990s, consumers were satised with toothbrushes that were aesthetically pleasing. As therapeutic toothbrush sales rose it became apparent that baby boomers were becoming increasingly concerned with their oral health, specically their gums. As a result, the toothbrush industry experienced a massive inux of worthy competitors and the formation of a niche, super-premium market. In order to gain an edge each competitor worked on developing new toothbrush technology, forming alliances with dental professionals, expanding advertising budgets and offering promotions that would grab consumer attention. Industry Analysis Not only can the industry be broken down by price models (super-premium, professional, and value), it can broken down a second time into niche and mainstream offerings. Consumers of this industry can be sorted into three categories: therapeutic, cosmetic, and uninvolved. Competitive Analysis One promising conclusion that can be drawn from the competitive analysis is that every company has been caught off guard by the change in consumer behavior, emergence of new technology, and introduction of new players entering the playing eld. For example, in 1988, Johnson & Johnson introduced new brush technology only to phase it out by 1992. In order to get an edge, competitors, Johnson & Johnson, Oral-B, Procter & Gamble, and Smithkline Beecham (latter two are new competitors), are offering promotions in the form of coupons, mail-in refunds, and bundles.

Environmental Analysis
Strengths With 43% of the global toothpaste market and 16% of the global toothbrush market, CP has dened itself a leader of household and personal are products worldwide, and positioned itself as the number one retailer of toothbrush products in the United States. CP utilizes a cutting-edge infrared motion analysis and technique to measure exact levels of plaque Case Study: Colgate-Palmolive Precision Toothbrush 1

Monique Priestley

Winter 2011: MCDM COM588 Digital Media Marketing & Branding

removed by its products in consumer tests. CPs Triple Action head removes 35% more surface plaque and 100% more gum line and in-between teeth plaque than its competitors products. As a company with years of experience, CP has formed a strong relationship with subcontracting manufacturer, Anchor Brush. It has also put together a task force of research & development, marketing experts, dental professionals, and outside consultants. Because of its good standing relationship with retail stores, it is able to position its products on the middle shelf, right between its competitors, Reach and Oral-B. Weaknesses Although industry players are manufacturing products to improve oral health, it has been difcult to educated consumers of the importance of preventing gum disease (which is a common motivator to improve dental care habits). One major advantage that the competitor, Oral-B, has over the other companies is the ability to say it is recommended by dental professionals. By seeking accreditation from the American Dental Association, partnering with dental providers, and offering support to elementary school dental education programs, CP could not only work on educating the public, it would also position itself to steal market share away from its main competitor, Oral-B. Opportunities In consumer tests, 55% of consumers found the CP Precision model was very different from other brushes and 77% claimed it was more effective. Seeing as a majority of consumers are willing to experiment with new brands/models, CP could make being new, different, and effective the major tenants of its marketing messaging; along with including messaging concerning their incredible ability to ght gum disease, it should have a rock solid campaign. Threats Because of the recent market saturation, the various producers of oral health care products have rushed to offer promotional incentives including two-for-one, buy-one-get-one-free and mail-in refund coupon deals. In order combat this threat, CP could plan to launch the Precision brush paired with similar promotional offers and introduce fresh promotional offers such as coupling the toothbrush with Colgate brand toothpaste. With the increase of in-store advertising, toothbrushes and toothpastes have been found to sell 170% better when located in close proximity. The most worrisome threats to CP are from the company itself. If CP were to release the Precision brush into the mainstream market as the Colgate Precision, not only would it knock the childrens Plus brush off of the shelves, it would also cannibalize its agship Plus model. In order to avoid this, CP should introduce the model into the niche, super-premium market as the Precision by Colgate.

Strategic Alternatives
The rst option that CP has would be to enter the Precision into the market as a niche, super-premium product. As a niche product, compared to the other CP models, the Precision would expect earn roughly 35% volume share and 46% value share. A positive factor of introducing the Precision as a niche product is not only would it give Colgate enough time to build up a stock of the product, CP would also be able to avoid taking the Childrens Plus model off store shelves. With the Precision toothbrush, CP could nally introduce a super-premium product into the mix and give the therapeutic consumer segment some much needed attention. One key feature of the Precision toothbrush is that it is incredibly successful at removing signicant amounts of plaque from teeth, especially when compared to competitor brushes. Another option that CP has is to enter the Precision into the market as a mainstream, professional product. As a mainstream product, the Precision would expect to earn roughly 41% volume share and 42% value share, when compared to other CP offerings. At a price of $0.79, and in order to boost referrals, CP would expect to earn 80% of its sales by distributing the toothbrush to dental professionals. One negative result of channeling the Precision toothbrush through the mainstream market is that the Childrens Plus model would need to be dropped in order to make room for

Case Study: Colgate-Palmolive Precision Toothbrush

Monique Priestley

Winter 2011: MCDM COM588 Digital Media Marketing & Branding

another product on shelf among the other professional models. As a result, CP would also go another year without any super-premium SKU on the market.

Proposed Strategy
Colgate-Palmolive should focus on launching its unique product to a narrow market and introduce the Precision brush rst as a niche, super-premium product for therapeutic consumers. By 1994 or 1995, when it has had time to build up its stock of the Precision toothbrushes, it should move it to the mainstream, professional market in order to add cosmetic and uninvolved consumers to its target markets. By using this two-level approach, CP will be able to reach its maximum potential across all possible market segments. In order to move as many units as possible, CP should start the Precision at a retail price slightly higher than the Oral-B Indicator ($2.65 - $2.89). After moving it to the mainstream market at a price no lower than $1.75, CP could focus on changing its strategy to offering a low cost product to the population as a whole (approximately 260,327 1 Americans). Although it does not do as much to help the companys brand equity, CP should launch the Precision with the name, Precision by Colgate, in order to avoid cannibalizing its agship, Plus, model. By the time Colgate moves the Precision to the mainstream tier a year or two later, it can take a spot next to the Plus model to make room for a new super-premium toothbrush. CP should plan to spend money educating the public on the dangers of gum disease. The American baby boomers, ages 32-46 2 (in 1992) with an estimated population of 62,1453 are particularly concerned with the health of their gums and willing to spend extra money to give their mouths the best protection possible. Many companies can be found focusing on rubber handles and angled heads, but only CP can claim the ability to dramatically decrease the likelihood of encountering future gum problems by having consumers use its brush. The major hinderance to pushing a product based on its effectiveness to prevent gum disease is that a majority of consumers do not understand what risks they face. In order to educate the public and to form a stronger bond with dental professionals, CP should seek accreditation from the American Dental Association (ADA). Not only would this be a powerful disclaimer to add to advertisements, but CP would move into a position to steal sales away from Oral-B. Using this approach, Colgate-Palmolive should be able to reach a signicant portion of the consumer population. Its main focus should be on seeking ADA accreditation (thereby stealing sales from Oral-B) and promoting its effectiveness to ght gum disease. It would be helpful to launch the Precision with coupons and new promotional ideas such as a a toothbrush/toothpaste bundle. In order to insure an edge on the competition, Precision might want to look into offering some sort of dentist sampling program with a satisfaction guaranteed refund offer if the state of their oral health does not improve after using the Precision for a solid 6 months. This plan, paired with Precisions efcacy, should prove to bring Colgate-Palmolive a successful year in the oral health care industry.

1 2 3

Wharton Universia. (2007). Dueling Age Groups in Todays Workforce. Retrieved from http://bit.ly/ei45LA US Census Bureau. (2001). Resident Population Estimates of the US by Age & Sex. Retrieved from http://bit.ly/etn5Gc 1994 Estimated population from: US Census Bureau. (2001). Resident Population Estimates of the US by Age & Sex. 3

Case Study: Colgate-Palmolive Precision Toothbrush

Monique Priestley

Winter 2011: MCDM COM588 Digital Media Marketing & Branding

Appendix A: Competitive Strategy

Porters Generic Strategies Applied
Advantage Target Scope Low Cost CP could either offer the Precision as a cream-of-the-crop mainstream brush or a competitive niche product. Broad (Industry) Could offer fresh promotion ideas and get ADA accreditation for deeper market penetration. If mainstream, CP would have the best product in that market at standard mainstream, professional price. If niche, $2.13 supplier price would be Narrow (Market Segment) equal to Oral-B Indicator, but premium over Oral-B Regular. Product Uniqueness CP needs to leverage cutting-edge infrared motion analysis technology that can measure levels of plaque removal. It also needs to educate a public that is rather ignorant to the dangers of gum disease. If mainstream, CP has a premium offering, unique from all other brushes and more effective. If niche, CP enters the market as unique (but other brushes offer unique features as well). Would need to focus on efcacy of brush (plaque removal of Precision is 35% more effective on surface of teeth and 100% more effective at gum line/between teeth).

Case Study: Colgate-Palmolive Precision Toothbrush

Monique Priestley

Winter 2011: MCDM COM588 Digital Media Marketing & Branding

Appendix B: Environmental Assessment

SWOT Matrix
Strengths Opportunities Triple Action removes 100% more plaque than any other competitor at gum line/ between teeth Baby boomers very concerned with gum health; willing to spend money Infrared technology/formulated solution could be used in advertising to educate public with visuals 55% of testers said Precision was much different than brushes they had tried before; needs positive spin 77% of testers claimed Precision was more effective; need to repeat that Consumers are willing to try new brands/ models Threats Positioned well in stores (middle shelf/ displays); needs to be careful not to cannibalize agship Plus model Variety of products offered; needs to be careful not to Childrens Plus model by going mainstream too early Consumers are difcult to educate (unaware of gum disease); need to educate consumers Oral-B has dental industry backing (major voice); CP could seek ADA accreditation Promotions are hitting the market hard; Needs to offer matching discounts, as well as fresh ideas 82% of consumer toothbrush purchases are unplanned; need to educate public on benets of brushing Weaknesses Needs to seek American Dental Association (ADA) accreditation to steal opportunities from Oral-B Needs to educate the public; could support educational causes such as nurses of elementary schools Informed customers are more willing to make a purchase; need to educate consumers or gain dentist approval

Case Study: Colgate-Palmolive Precision Toothbrush

Monique Priestley

Winter 2011: MCDM COM588 Digital Media Marketing & Branding

Appendix C: Alternatives Assessment

Alternatives: Introduction of the Precision
Niche, Super-Premium, Adult Market Share Retail Price (per unit) SKU Share (Internal) Factory Price (per unit) Dentists Affect on Other CP SKUs Main Distribution Channel Target Segment Where to Focus Message 3% for 1993, 5% for 1994 $2.29 - $2.89 35% Volume, 46% Value $2.13 -?No affect Drug Stores Therapeutic (46% of Market) Affect on gum disease probability Mainstream, Professional, Adult 10% for 1993, 14.7% for 1994 $1.59 - $2.09 41% Volume, 42% Value $1.85 $0.79 per unit, 80% of Sales Childrens Plus brush would drop Dentists, Drug & Food Stores, etc. Therapeutic, Cosmetic, Uninvolved Premium product on the market

Alternatives: Naming Convention Matrix

Colgate Precision Affect on Other CP SKUs Brand Equity Summary 20% Cannibalization of Colgate Plus Builds up brand equity Precision by Colgate

+ 0

No affect Will not help brand equity

0 0 0

Case Study: Colgate-Palmolive Precision Toothbrush

Monique Priestley

Winter 2011: MCDM COM588 Digital Media Marketing & Branding

Appendix D: Segmentation & Targeting

Segmentation of Toothbrush Users

Consumers Educated on Precisions Effectiveness

(Informed that the Precision is 35% more efcient at plaque removal than competitor models and prevents gum disease.)

Case Study: Colgate-Palmolive Precision Toothbrush

Monique Priestley

Winter 2011: MCDM COM588 Digital Media Marketing & Branding

Appendix E: Positioning
Positioning of Precision in the Industry
Niche, Super-Premium, Adult Product Competitive, effective, unique; no current CP offering in the super-premium range. 35% more effective on surface teeth and 100% more effective at gum line/between Promotion teeth at removing plaque when compared to product offerings from the competition. Equal to Oral-B Indicator; premium when compared to Oral-B Regular. Majority through retail outlets, specically drug stores where people will be searching Distribution for the best protection against gum disease. 80% distributed through ofces of dental professionals; rest through retail outlets (e.g. mass merchandisers, club stores, and food stores). Best value for level of efciency. Mainstream, Professional Premium offering compared to others in this market segment. Best of the mainstream offerings.

Price

Positioning of Precision Among Other CP SKUs

Launch Year (1993) 1994 - 1995 (Expected new model with the current Super-Premium Colgate Precision growth rate of consumer demand and development of oral care technology.) Professional Value Discontinue Colgate Plus, Colgate Reach Colgate Classic, Colgate Childrens Plus Colgate Precision, Colgate Plus Colgate Reach, Colgate Classic Colgate Childrens Plus

Case Study: Colgate-Palmolive Precision Toothbrush

Monique Priestley

Winter 2011: MCDM COM588 Digital Media Marketing & Branding

Appendix F: Positioning Map

Positioning of Niche, Super-Premium Toothbrush Models

Positioning of Mainstream, Professional Toothbrush Models

Case Study: Colgate-Palmolive Precision Toothbrush