TERM PAPER

ON

MARKETING PLAN OF A PRODUCT LINE

EXTENSION FOR COLGATE

PREPARED BY: OLAKUNLE OLADIPUPO

[STUDENT NUMBER: M1002157]

&

SUBMITTED TO

IN PARTIAL FULFILMENT OF THE REQUIREMENTS

FOR THE DEGREE OF MASTER IN BUSINESS
ADMINISTRATION (MBA)

TO BE AWARDED BY

SUBMITTED ON

MONDAY 11TH JANUARY, 2010.

 [WORD COUNT: 3,049]

Table of Contents

1.0 Abstract - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4
2.0 Executive Summary - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4
3.0 Situational Analysis - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 5

3.1 Product line extension – The Colgate Palmolive Mouth Freshening Mint - - - - 6

3.2 Product situation - - - - - - - - - - - -- - - - - -- - - - - - - - - - - - - - - - - - - - -- - - - - - - 7

3.3 Competitive situation - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - 7

3.3.1 The competitive landscape for the product line extension - - - - - - - - - 7

3.3.2 Factors to which competition is sensitive - - - - - - - - - - - - - - - - - - - - - 8

3.4 Distribution situation - - - - - - - - - - - -- - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - 8

3.5 Environmental factors - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9

3.5.1 Economic factor - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9

3.3.2 Sociological factor - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9

3.6 SWOT analysis - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9

3.6.1 Strengths - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9

3.6.2 Weaknesses - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 10

3.6.3 Opportunities - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 10

3.6.2 Threats - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - -- 10

4.0 Marketing strategy - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 10

4.1 Strategies used by Colgate - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- 11

4.1.1 Market Dominance - - - - - - -- - - - - -- - - - - - - - - - - - - - - - - - - - -- - - - 11

4.1.2 Porter’s generic strategy - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - 11

4.1.3 Product differentiation - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 12

4.2 Market Segmentation - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 12

4.2.1 Geographic segmentation - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - 12

4.1.2 Demographic segmentation - -- - - - - - - - - - - - - - - - - - - - - - - -- - - - - - 13

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 4.1.3 Behavioural segmentation - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 13

4.3 Marketing the product line extension - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 13

5.0 Financial Matters - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 14

6.0 Controls - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 15
7.0 Assumptions made in the product line extension report - - - - - - - - - - - 16

8.0 Conclusion - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 16

References - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 17

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1.0 Abstract

The purpose of this paper is to carry out an analysis of the product line extension for

Colgate Palmolive. The paper shall consider the product closely and will elaborate

on the fundamental principles behind the product line extension as well as

performing a detailed situational analysis for the product. The paper will analyze the

competitive landscape that exists for the product as well as the distribution platform

on which the product shall be brought to the consumers. Factors such as

environmental factors shall also be considered for the product as well as a

comprehensive analysis of the strengths, weaknesses and threats for the company

along with the opportunities that are open for the product. Furthermore, the paper will

shed light on the marketing strategy that is fundamentally adopted by Colgate

Palmolive as well as the marketing strategy that would be most appropriate for the

product line extension. Financial matters and controls for Colgate Palmolive shall

also be discussed before the paper comes to a conclusion with the presentation of

any and all assumptions that were made during the formulation of the paper.

2.0 Executive Summary

The origins of Colgate date back to 1806 to New York City (Colgate Palmolive

Company, 2010). Initially, Colgate began by selling soap and starch along with

candles and the first factory was not set up until almost two decades from its origin

had passed. Currently, Colgate revenues are reported to be over $15 billion and

Colgate is known as Colgate Palmolive. Along with its numerous subsidiaries,

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Colgate Palmolive functions in the personal, oral and home care industry and the pet

nutrition industry (Hoover's, Inc. 2010). Colgate has followed a strategy through

which it distributes its products to retailers and wholesalers in the case of the

personal, oral and home care segment. Colgate Palmolive currently has a human

resource capital exceeding thirty six thousand with its head quarter still based in New

York (Hoover's, Inc. 2010).

Colgate Palmolive faces off competition from Church and Dwight Co. Inc., Clorox

Corporation and Procter and Gamble Co (Yahoo! Finance 2010). The publicly held

company is positioned in a competitive landscape where the demand is driven by

population growth and the growth in the demand for household products in the

consumer sector. The revenues in this capital intensive industry are more dependent

on operational effectiveness and the sales and marketing strategies involved.

Competition is influenced heavily by innovations in the industry (Hoover's, Inc. 2010).

3.0 Situation Analysis

This paper explores a product line extension for Colgate Palmolive. The product is

the Colgate Palmolive Mouth Freshening Mint and has been designed to be in line

with Colgate Palmolive’s standard methodology of operation which is to ensure

dental care. However, as it shall become evident in the later paragraphs, it shall also

serve as Colgate Palmolive’s entry to the confectionary market while playing the role

of a breakthrough in affordable and convenient dental care. The product will make

use of the Colgate Palmolive distribution system as well as the brand name. The

product may have to face off aggressive attack strategies from the confectionary

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industry if it captures a significant market share and may therefore have to sustain its

position through a well defined defence strategy (Kotler and Keller 1998 p.365).

3.1 Product Line Extension – The Colgate Palmolive Mouth Freshening Mint

Toothpaste is often minty and is designed in a manner so that it does not come as

unpleasant to the person using it. Modern day toothpastes are generally sweet in

nature and maintain an appearance that is meant to appeal to the user’s sense of

sight as well. It is not uncommon for a person to think about the random thought of

consuming toothpaste while brushing with it. The smaller the child is, the stronger

the thought of consuming the toothpaste. While Colgate Palmolive has produced

numerous dental care products that have done quite well with consumers to date; for

the purpose of this paper, the product line extension that shall be considered will be

the introduction of the Colgate Palmolive Mouth Freshening Mint. The purpose of the

launching of this mint shall be to cash in on the desire that people feel to eat

toothpaste.

The mint will be designed to resemble the smell and taste of the Colgate Palmolive

toothpaste but will be customised to make the two attributes more edible. An

alternative would be to launch the product in the form of paste, which would perhaps

be more direct in addressing the subconscious tendency that users have to consume

the toothpaste. However, there is a possibility that confusions between the

toothpaste and the mint-paste may cause the occurrence of unwanted incidents;

which could in turn have a negative impact on brand image.

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3.2 Product Situation

The core product in the case of the Colgate Palmolive Mouth Freshening Mint shall

be the minted candy. The core product shall attempt to cater for the desire to

consume the toothpaste that becomes extensively tasteful when it is being used.

Instead of letting the consumer consume the inedible toothpaste, the consumer will

be allowed to enjoy the very same taste and freshness in the form of edible mints

that shall taste like the product’s flagship toothpaste.

The secondary product shall be the service that the core product shall provide the

consumer in the form of the protection of the teeth from decay and harm while

providing a minty fresh feeling at the same time. The idea will be to allow consumers

to chew on the Colgate Palmolive Mouth Freshening Mint every time they wish to

acquire the same fresh feeling that they would if they brushed their teeth but are not

present in any location from where they could acquire access to toothpaste and a

toothbrush.

3.3 Competitive Situation

The main competitors of the product shall be the few chewing gums in the market

which claim that their chewing gums are sugar free and are therefore not harmful to

health. The chewing mint may also face competition from the dental care industry in

the future if consumers adopt it as a substitute to toothpaste.

3.3.1 The competitive landscape for the product line extension

The product shall be sold as an over the counter product. It is essential to note that

the product will not be sold as a medicine and will not be marketed as a drug either.

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This way, the product will be able to avoid getting caught up in a position where it

can possibly face the immense competition from the confectionary industry or the

intense competition from the dental care industry.

3.3.2 Factors to which competition is sensitive

The competitive landscape for this product shall be more sensitive to innovation in

the field of dental care than it will be to developments in the confectionary industry.

This is because of the fact that the product shall continue to depict a brand image

that is meant to assist children in eating more candy. For instance, it can be

marketed to be one mint that nobody can say no to thereby making the consumer to

take more candy on account of the benefits of consuming the mint.

3.4 Distribution Situation

The mint shall be available at confectionary stores as well as in the position of an

over the counter consumable at drug stores and pharmacies on account of its

multiple roles. The product shall make use of Colgate’s current distribution network

which is to sell to retailers and wholesalers who in turn serve as distributing agents

for the products. This will allow costs of setting up a distribution network from scratch

to be saved. The current distribution of Colgate works on the very same lines and

has proved to be effective through time.

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3.5 Environmental factors

3.5.1 Economical factor

The product shall be priced to be affordable and available in smaller denominations

and packaging. This will allow consumers to purchase the various quantities of the

product that they may require.

3.5.2 Sociological factor

The product may experience obstructions in market penetration on account of the

sociological factors according to which consumers are hesitant in trying new

products that pertain to healthcare unless they are provided with assurances. For

this purpose, the product can be subjected to assessment and subsequent approval

by a credible medical committee of the board.

3.6 SWOT analysis

3.6.1 Strengths

The product is one that will serve to make dental care more affordable than it ever

was before on account of its availability in smaller packages. The product makes

dental care more convenient and can also be marketed to consumers who seldom

have time in the mornings to make sure that their teeth are good to go for the day. It

is imperative to note in this regard that the product can not only be marketed to

children but also to the working class and to students as well.

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3.6.2 Weaknesses

The product holds a weakness in the fact that unless consistent and continuous

marketing operations are performed to reinforce the brand image, consumers may

be able to take account of competition from the dental care industry and the

confectionary industry. Also, the product is one that may cause a decrease in the

sales for other products by Colgate as well.

3.6.3 Opportunities

The product will be able to replace toothpastes and toothbrushes in industries such

as the travel industry and the medical industry if expansion in the product range is

designed to meet the requirements that the two industries have for dental care. For

instance, airlines will have the option of providing passengers with this product rather

than supplying them with a complete set of toothpaste, toothbrush and mouth wash

for which the passengers will then have to go to the restroom in turns.

3.6.4 Threats

The product may fall into a position where it will run into competition from the dental

care industry as well as the confectionary industry. A situation such as this will serve

to contribute towards a bad brand image.

4.0 Marketing strategy

The general marketing strategy that is used by Colgate is the niche / mainstream

positioning strategy. The target market for the organization is the consumers who are

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worried about the gum disease. Colgate is using the differentiated marketing strategy

which means that they have different flavours for different customers of different age

groups, like for example Colgate junior is a product by Colgate which is entirely

targeting the children who are aged between 4-9 years.

The marketing strategies are the plans that take the organization towards the way

where they can achieve their goals. Strategies would lead the organization towards

their desired objective or the preferred future.

4.1 Strategies used by Colgate

Following are the strategies used by Colgate

• Market dominance

• Porter generic strategies

• Product differentiation

4.1.1 Market dominance

Without a doubt it can be said that Colgate is the market leader and the king in the

oral care industry. The reason for this is because they are catering for the needs of

all the segments of the market through their long and extended product lines. Also,

Colgate makes use of massive advertising campaign which helps to continuously

develop the awareness in the target market and especially in the children segment.

4.1.2 Porter’s generic strategy

Colgate achieves its competitive advantage through its product differentiation and

market segmentation strategies. As mentioned above Colgate has an extended

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product line which helps them to take care of all the target markets that they have

segmented as their potential customers.

4.1.3 Product differentiation

Colgate has adapted the product differentiation strategy to good effect and evidence

of this could be observed from the fact that if anyone asks about red colour

toothpaste the first thing that would come into the mind of a layman is Colgate. This

is the impact of product differentiation this results in differentiating your product from

competitors’ product and also by offering something extra to the customer. For

instance Colgate has launched Colgate herbal which is dedicated for a certain class

of people. The basic reason for developing a product differentiation strategy is to

provide a unique attribute about the product to the potential customer which he can

remember and use to easily differentiate it from other similar products.

4.2 Market segmentation

The market segmentation strategy adopted by Colgate primarily focuses on the

following variables geographic, demographics, and behavioural.

4.2.1 Geographic segmentation

As the name suggests, this is segmentation based on the geographical area in which

the product is being launched. This may include important geographical locations as

different continents, regions or major cities of the country etc.

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4.2.2 Demographic segmentation

In demographics the major variable which is considered is the age factor. This is a

very crucial factor because lots of marketing strategy depends on the age of a

particular target markets.

4.2.3 Behavioural segmentation

Behavioural segmentation is the segmentation of the market based on the overall

attitude of the people for that product like for example now in this age people are

quite aware of the oral health and they seems to be cautious about their oral health

so this shows a positive sign towards brushing teeth and keeping it clean and free

from germs. This is an important variable of the overall marketing strategy because it

would present the overall approach of that region towards toothpaste.

The reason why all these issues are taken into account is because based on the

results of these finding the strategy of the product is designed. All these play their

role in the developing the overall marketing strategy of the product.

4.3 Marketing the product line extension

It would be less risky to begin the marketing of the product in a selected region

rather than to take the product on a full scale distribution spree without judging the

response from a sample of the target population. Once the product has been

deemed as potentially popular and sufficiently acceptable, it can be put forward for

large scale manufacturing and can be part of Colgate Palmolive's current network of

distribution to retailers and wholesalers.

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Considering the fact that the choice in the purchase of consumer goods is influenced

considerably by women, it would be practical to spearhead the promotional

campaign by designing a brand image that appeals to women with children.

Colgate Palmolive is a well established and recognized name in the dental care

industry amongst consumers. This recognition and credibility will play an undeniable

role in the development of the brand image for the Colgate Palmolive Mouth

Freshening Mint. The credibility of the Colgate Palmolive brand name will allow the

Colgate Palmolive Mouth Freshening Mint to acquire a channel through which

consumers can be educated about the product and shall also serve to assist in the

selling of the product to the distributing agents in the distribution system used by

Colgate Palmolive.

5.0 Financial Matters

The net sales in 2008 for Colgate Palmolive have continued to follow a trend of

profits that can be observed through the decade. However, the gross profit margin

for Colgate Palmolive has still not reached the peak it had in 2007; after which it

experienced a decline in 2008 and is expected to rise beyond 56.7% of sales from

2008 but not beyond 57.3% of sales as was recorded in 2007 (Colgate Palmolive

Company 2010). However, earnings per share have continued to show a steady

increase.

In a more recent perspective, Colgate Palmolive experienced a growth in organic

sales and an increase in the margin of gross profit. In 2009, Colgate reported an

increase in worldwide sales as well as an increase in the gross profit margin,

operating profit, net income and diluted earnings per share.

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6.0 Controls

The company's controls are managed through adherence to the Securities Exchange

Act and are directed by the Company's chairman, the president of the company, the

chief executive officer and the chief financial officer. Policies for disclosure controls

are established through them in the form of a committee (Colgate Palmolive

Company 2008). The financial reporting although is headed by the chairman, the

president and the chief financial officer. The company follows generally accepted

accounting principles in the preparation of the disclosure reports and assistance is

taken in the evaluation of the company's accounting standards by comparing the

standards followed to the thresholds set by the Committee of Sponsoring

Organizations of the Tread way Commission.

It is imperative to note that the company makes use of an independent and external

accounting firm, PricewaterhouseCoopers LLP (Colgate Palmolive Company 2008),

which performs the audits for the company which provides the company with a report

on its evaluation of the company's accounts for every year. The statements given by

the external auditing firm is included in the company's annual reports.

In this regard, the product shall be made part of the company's annual report

evaluations and information regarding the accounts exercised in the development,

promotion and distribution of the product shall also have to be made available to the

external auditing firm employed by Colgate Palmolive for the respective term.

7.0 Assumptions made in the product line extension report

The report on the product line extension would not be justified unless the

assumptions and considerations of the report were presented. The report made use
15
of the annual report for Colgate Palmolive for the year 2008 because the company

does not publish its annual reports for the previous year until the end of the first

quarter of the next year. Also, the data provided was taken from the Colgate

Palmolive website. The paper also assumed that Colgate Palmolive is currently

stable and is in a position where it can consider and exercise a product line

extension. It was also considered that the current distribution network for Colgate

Palmolive is adequate and functioning appropriately.

8.0 Conclusion

The product line extension of the Colgate Palmolive Mouth Freshening Mint appears

to be one that shows favourable signs and indications of success. The paper found

that Colgate Palmolive is currently in a position where it can make use of its current

set up to launch the product line extension. It was also found that as much as the

product line extension of the Colgate Palmolive Mouth Freshening Mint appears to

be favourable, it is also one that may face extensive competition in its later days and

will therefore require a dedicated and consistent approach.

References

Colgate Palmolive Company. (2008) 2008 Annual Report. New York: Colgate

Palmolive Company

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Colgate Palmolive Company. (2010) Colgate Palmolive Company History [online]

available at: <www.colgate.com/app/Colgate/US/Corp/History/1806.cvsp> [accessed

3 January 2010]

Colgate Palmolive Company. (2010) Colgate's World Fact Sheet - Financial

Highlights [online] available at:

<http://investor.colgate.com/ColgateWorld/colgate_world-fin3.cfm?header=fin>

[accessed 3 January 2010]

Hoover's, Inc. (2010) Colgate Palmolive Company [online] available at

<http://www.hoovers.com/company/Colgate Palmolive_Company/rfyjyi-1-

1njdap.html> [accessed 3 January 2010]

Hoover's, Inc. (2010) Colgate Palmolive Company Competitors [online] available at

<http://www.hoovers.com/company/Colgate Palmolive_Company/rfyjyi-1-

1njea3.html> [accessed 3 January 2010]

Kotler, P. and Keller, K. (1998) Marketing Management: Analysis, Planning, and

Control. New York: Prentice-Hall

Yahoo! Finance. (2010) Colgate Palmolive Co [online] available at

<http://finance.yahoo.com/q/co?s=CL> [accessed 3 January 2010]

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