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COLGATE-PALMOLIVE CASE:

Precision toothbrush launch

Submitted by-:
Group-4, Section C.

PGP-I

Introduction:
Colgate-Palmolive has developed the Precision toothbrush. It is a unique toothbrush
with bristle of three different lengths and orientation which gives three-action brushing
effect. In initial clinical tests, the brush has achieved an average 35% increase in plaque
removal compared to other toothbrushes in the market making it a viable product to
decrease the gum diseases. The company wants to price it in the high value superpremium segment against the established player Oral-B. There are two ways it could
position Precision
-

As a niche product to be targeted at consumers concerned about gum disease


As a mainstream brush, with the broader appeal of being the most effective
brush in the market

This case report discusses these alternatives with respect to the kind of profits that each is
expected to generate and the recommended branding and communication strategies that
Susan Steinberg must suggest to Nigel Burton.

The evolving market of toothbrushes


The US toothbrush market has evolved over the years. Initially toothbrushes were
conceived of as a low involvement product. But with technological enhancements and
rapid launches of newer products, the performance benefits have become increasingly
important purchase criteria. The number of new products in the markets has increased
from 1 in a decade to around 7 in the last five years. (Exhibit 2)
The total oral care market in US has grown at a rate of 6.1% since 1986. In the same
period, the toothbrush market which accounts for 15.5 % of the total market has grown at
a rate of 9.9 %.
The reasons for the above have been a growing concern in consumers about the health of
their gums. Consumers were willing to pay a premium for new products. As of today,
around 46% of the consumers are highly involved in health care products and they are the
ones who buy and use products for themselves. This high involvement of consumers has
led to formation of a new segment in the toothbrush market which is known as the superpremium segment. The toothbrush category was initially divided in two segmentsprofessional and value brushes. In the recent past, the growth in the toothbrush market
has been fueled by the super premium segment. Super-premium brushes account for
around 35% of unit volume and 46% of dollar sales.
Colgates precision is designed to address the needs of this particular segment.

Positioning Strategy
The company can choose from one of the two strategies of either going for niche
marketing or for mainstream marketing. Niche marketing is characterized by customers

who have a distinct set of needs and who will pay a premium to get the need satisfied.
The niche strategy is recommended when it is not likely to attract other competitor and
the nicher can gain certain advantages through specialization.
In this case Colgate can become the niche product by focusing on consumers who are
concerned about the prevention of gum diseases. Going for niche products has its own
advantages and disadvantages. The first benefit can be seen from the definition of the
niche product itself that it can charge a high price for the toothbrush as the person who
have gum diseases will go extra mile to buy it. In this way Colgate will be able to
differentiate itself from other toothbrushes. The way the brush is designed it has the
technical superiority over other brands as it has triple-action brushing effect which other
brands do not have till now. One more benefit is that if we position this as the niche
product it would not cannibalize its own product. So it can have its other product sales
intact along with the sales of precision toothbrush.
The disadvantages can be that if it is used as a niche product it will cater to only those
consumers who will have gum problems so the sales of the products will be less in
compared to the strategy in which it is use as a mainstream product.
In mainstream marketing we will launch the product without the price differentiation
against the product already existing. If that will be the case it will eat the market share of
other products as it has technical advantage over the other products in the market. Even
the sales in this case will be high. But the disadvantage is that it can cannibalize its own
product Colgate Plus because the consumers who are brand loyal will purchase the
Colgate precision toothbrush in this case as price difference is not much. Plus, theres the
problem of production capacities. Precision was always intended to be sold as a niche
product and hence production capacities were designed only for the low demand that
would be seen in the niche market. If it is to be positioned in the mainstream market,
capacities would have to be increased dramatically (over 3 times) which would be an
added strain on the resources of the company.

Pricing
The pricing policy followed by the company would depend upon the positioning strategy
followed by the company. If the Precision is positioned as a niche product then the
company can afford to charge a higher price. However if it is positioned as a mainstream
product then the pricing would have to be in sync with the existing price levels

Promotion
For promoting the product the help of dentists should be sought. The advertisements also
need to stress upon the distinguishing features of Precision in order to differentiate it
from other toothbrushes. If the toothbrush is positioned as niche then it should be sold
through the medicine shops as well as through food stores. In case of a mainstream
launch scenario the product should be sold mainly through retail outlets and the

marketing campaign must be a big one so that the brand gets maximum number of
eyeballs.

Competitor analysis
The major competitors of Colgate are Oral-B, Johnson & Johnson, Procter & Gamble and
Smithkline Beecham.
Oral-B is the market leader and it has relied upon promotion through dentists as well as
some innovations like Indicator brush.
Johnson & Johnson came out with a toothbrush which enabled the customers to brush in
even the hardest to reach places and aptly named it Reach. It has also come out with a
couple of new products in recent times like Glow Reach and Advanced Design Reach
which had minor variations in the shape of the toothbrush. It has been relying on offers
such as refunds by mails and buy two get one free to promote its toothbrushes.
P&G is the most recent entrant and it has claimed its toothbrush as having the ability to
reach between the teeth up to 37% farther than leading flat brushes.
Smithkline Beecham has entered the market with a toothbrush named Aquafresh Plus
which is an extension of its toothpaste brand and has flexible handle that allows gentle
brushing.
Thus we see that the players in the toothbrush market have been innovating in whatever
ways possible in order to attract customers who are not satisfied with the existing
features. The different brands are positioning themselves by showing real differences in
their features.

Budgetary Analysis
In this section we do a cost-benefit analysis of the two options available to us.

Alternative 1 (Niche Product):


Expected returns
In the case of a niche product being launched, Precision is expected to corner 3% of the
US toothbrush market by end of Year 1.
Total unit sales Year 1

= 11 million (8 retail + 3 professional Table C)

Total dollar sales Year 1

= Retail nos. * Price-retail + Professional * Price


Professional (weighted)
= 8*2.13 + 80% @0.79 + 20%@0.95
= $19.51 million

Costs Year 1

= Manufacturing + Promotions
= 13*0.66 + 5 + 4.6 + 1.6

= $19.78 million
Loss

= $0.27 million

Total unit sales Year 2

= 18 million (15 retail + 3 professional Table C)

Total dollar sales Year 2

= Retail nos. * Price-retail + Professional * Price


Professional (weighted)
= 15*2.13 + 80% @0.79 + 20%@0.95
= $34.42 million

Costs Year 2

= Manufacturing + Promotions
= 20*0.66 + 5 + 4 + 2.7
= $24.9 million

Profit

= $9.52 million

Alternative 2 (Mainstream Product)


Expected returns
In the case of a mainstream product being launched, Precision can capture 10% of the
market by end of Year 1.
Total unit sales Year 1

= 35 million (27 retail + 8 professional Table C)

Total dollar sales Year 1

= Retail nos. * Price-retail + Professional * Price


Professional (weighted)
= 27*1.76 + 80% @0.79 + 20%@0.95
= $54.09 million

Costs Year 1

= Manufacturing + Promotions
= 27*0.64 + 15 + 13 + 4.8
= $59.68 million

Loss

= $5.59 million

Total unit sales Year 2

= 52 million (44 retail + 8 professional Table C)

Total dollar sales Year 2

= Retail nos. * Price-retail + Professional * Price


Professional (weighted)
= 52*1.85 + 80% @0.79 + 20%@0.95

= $ 98.09 million
Costs Year 2

= Manufacturing + Promotions
= 52*0.64 + 12 + 10 + 7
= $66.76 million

Profit

= $ 31.33 million

The above calculation for mainstream market doesnt take into account the
cannibalization effect Precision would have on the existing mainstream Colgate
Plus.
If we consider the (worst case) cannibalization to the extent of 60%,
Using exhibit 1, we get the net sales in 1992 as $91.611 million. The cost of sales for the
same is $44.846 million. Given, the total sales units of 78.336 million, the contribution
per unit can be calculated as $ .5969.
Therefore the cost of cannibalization in year 1 and year 2 is $ 12.53 million and $ 18.62
million respectively. So the effective loss in first year after launch is $ 18.12 million.
However, we see that in the second year we will have a estimated net profit of $12.71
million dollars.

Decision & Conclusion


As we have seen through our budgetary that even though positioning Precision as a
mainstream product leads to cannibalization, still it leads to higher profits as compared
with positioning it as a niche product. However, there is a caveat to this conclusion of
positioning Precision as a mainstream product, the mainstream market is characterized
by price competition and hence there is a possibility that Precision may be countered by
the competitors by a lowering of prices which might not be possible in a niche market.
This is because in a niche market buyers are willing to pay a higher price provided they
get the satisfactory product.
Thus, considering these factors, although Precision would yield lower profits in the short
run if its introduced as a niche product, it makes sense to continue with this strategy
because of far higher competition, cannibalization and risks involved in positioning it as a
mainstream product, not to mention the increased production capacity required. Thus,
Precision must be launched as a niche product and accordingly the marketing mix must
be designed.