Download - Colgate case study- Harvard Business Review
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The PRECISION toothbrush
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Define positioning, branding and communication strategies for the new Toothbrush-Colgate Precision.
OBJECTIVE:-
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Nature Of Demand
Shift in demanded benefits: • Cavity prevention • Healthier gums • Ready to pay for superior toothbrush
Market is emerging from value and premium to Super premium-Enhanced Oral Care
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US Oral care market: -$2.9 billion in retail sales -growing at a rate of 6.1% annually
Toothbrush Market growth: average 9.3% per annum since 1987
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CP’s toothbrush sales in 1991 - $77 million
Number one in US retail toothbrush market with 23.3% volume share
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Consumer perception map High effective bristles
Low effective bristles
Less comfort
High comfort
Crest complete
Colgate Precision
Oral-B Indicator
J & J Reach Advance
Aquafresh flex
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Consumer facts Purchase frequency
Year Duration
1990 Every 12.4 months
1991 Every 11.6 months
1992 Every 9.7 months
Brushing Habits
Customer % Habits
45 Before Breakfast
57 After Breakfast
28 After lunch
24 After Dinner
71 Before Bed
Change in toothbrush
Customer % Habits
48 Every 3 months
70 Bristles visibly worn
11 After seeing dentist
3 Purchase on impulse
Brand decision factors
Reasons for using brand Customer %
Fits comfortably in mouth 63
Best for getting hard to reach places 52
Bristles are of right softness 46
Bristles are of right firmness 36
Dentist recommends 35
Part of oral care regime 30
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Consumer choices based on:
• Features
• Comfort
• Professional Recommendation
• Concerns about health of gums more than cavity prevention
As a consequence:
• Relatively unfamiliar with toothbrush prices.
• Willing to pay premium for addressing these concerns
• 82% of purchases are unplanned.
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Consumer segmentation
Type of consumer % of adults
Habits Major brands
Therapeutic brushers 46 Brush twice a day-85% Use professional brush-85% Floss regularly-54%
Oral-B regular Oral-B Angle Colgate Plus
Cosmetic brushers 21 Brush twice a day-85% Use mouth wash-81% Use professional brush-54% Use breath fresheners-54% Floss regularly-69%
Colgate classic Oral-B regular Colgate Plus
Uninvolved Consumers
33 Brush once a day or less-20% Use mouthwash-66% Use regular brush-28% Floss regualrly-54%
Colgate classic Oral-B regular Colgate Plus
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Competitors
CP appears to have a considerate share of the market
Number of Stock keeping Units
Brand Adult Children
Colgate 28 8
Oral-B 16 5
Reach 14 4
Crest complete 10 0
Aquafresh flex 6 1
Lever 7 2
Plax 2 1
Total 83 21
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Channels Principal brand unit market shares-
FOOD
j&j
Oral-B
Colgate
others
aquafresh
P&G
Principal brand unit market shares-MASS
oral-B
J&J
colgate
Lever
Aquafresh
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colgate
J&J
Oral-B
Others
P&G
Aquafresh
Lever
CP must increase its focus in drug store channel
Principal toothbrush brand unit market share-DRUG
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Product
Precision is a technological innovation
CP developed brush with 3 different lengths and orientations
35% more plaque removing efficiency
More effective in reducing gum diseases than leading brushes
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Pricing:
Manufacturer cost per unit $0.66 $0.64
Manu. Listed price $2.02 $1.76
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Pre-forma Income statement-cannibalization analysis
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Promotion
• Under the niche market -Aggressive advertising campaign -Demonstrate technical superiority of the toothbrush • Under mainstream position -through financial incentives - Coupon, buy one get one free • Through professional channels- Dentists
• Consumer promotions in CP market -a free 5 oz. tube of Colgate toothpaste with a Precision brush -a 50% off offer on Colgate toothpaste -a 50 cent coupon
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Branding
Stressing “Precision” would limit the extent of Cannibalization of Colgate Plus.
Emphasizing “Colgate” would build Brand Equity
Colgate Precision
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Communication and promotion
Special Coupons-Strong Colgate market
60 cents discount on Precision provided when purchased Colgate toothpaste and Other oral products
Maximizes benefit from being dominant player in toothpaste market
Buy 1 Get 1 Bundling- Competitive market
A free 5 oz tube of Colgate toothpaste or travel size dental floss with a purchase of a precision toothbrush.
Have less undesired effect on repeat purchase frequency than “two-for-one” toothbrush offer
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Sampling
6 months campaign providing free samples for dental professional offices in order to establish and strengthen our position as a professional’s choice
Satisfaction Guarantee
If an unsatisfactory check up has occurred, the consumer can send in the certificate for a full refund of the cost of the toothbrush
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Pros and cons of positioning
Niche Market Strategy
Pros
1. Entry into new superior toothbrush market which CP currently holds no position. 2. CP would face less competition. 3. Niche could later be broadened to a mainstream position as additional capacity came on line. This would be an easy transition in product life cycle. 4. Less erosion of Colgate Plus. The products are more isolated.
Cons
1. Less contribution to net profit in future years.
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Mainstream Market Strategy
Pros
1. Unsatisfied demand could create the perception of a hot product, which may increase sale. 2. Possible increase in sales.
Cons
1. Greater erosion of Colgate Plus. 2. May require dropping one of the slow moving children’s brush from the Plus line. 3. Possible pressure on production schedules resulting in inadequate supply of product. 4. More competition
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Recommendations Launching Strategy:
• Target therapeutic and cosmetic brushers • Enter the Super-premium niche market • Move to Mainstream market • Distribute to Dentists and Drug stores
Advertising campaign:
• 1993 Budget: Increase overall toothbrush Ads & Promotion Budget by $19.2M • Devote $32.5 to Precision, $10.8 to Plus • Ads focused on Prevention of gum diseases, toothbrush effectiveness(need to develop superiority claim)
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Positioning
Short term—Niche , Long term—Mainstream
Why?
• 10 month lead time for mainstream Cost of shortage of inventory • Niche strategy cannot hold long Potential competitors with similar product/technology • Relatively easier to move from high end to low end Market of Precision will be broader • Profit numbers from cannibalization calculation When total sales are higher enough, profit from Precision will exceed cannibalization