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Colgate Palmolive

Essay by 24  •  July 13, 2011  •  2,101 Words (9 Pages)  •  852 Views

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Introduction:

The Colgate-Palmolive Company (CP.Co) is poised to launch a new toothbrush in the United States, tentatively called, “Colgate Precision Toothbrush”. The Cp’s Oral Care Division has developed Colgate Precision after three years of intensive research but now face a significant market competition with substantial new product activity. Ms.Susan Steinberg, CP’s Precision Product Manager is responsible to determine the appropriate marketing mix and recommend positioning, branding and communication strategies to division manager Nigel Burton.

Synopsis:

Colgate-Palmolive is the global leader in household and personal care products with 1991 sales of $6.06 billion and a gross profit of $2.76 billion. The company had an expenditure of $114 million in R & D and total of $428 million on media advertising. During this period, it held 43% of the world toothpaste market and 16% of the world toothbrush market. Since 1985, the company’s gross margin climbed from 39% to 45% while annual volume growth since 1986 had averaged 5%. In 1991, although international sales remained CP’s strong suit, the company faced tough competition from P&G, Kao, Unilever, NestlÐ"©Ð²Ð‚™s L’Oreal Division and Henkel of Germany.

In the United States, toothbrushes accounted for 15.5% of $2.9 billion in retail sales of oral care products. CP held the number one position in the U.S retail sales with a 23% volume share (Toothbrushes represented 19% of CP’s oral care and profits). In order to boost its sales, CP had instituted a five year plan for 1991 to 1995 that emphasized new product launches and entry into new geographic markets accompanied by improved efficiencies in manufacturing and distribution arenas.

Increased advertising and Promotion of toothbrushes enhanced the category’s visibility which in turn fuel consumer demand. With a growing competition, there was an increase in dollar expenditures on promotions (buy-one-get-one-free, free toothbrush with toothpaste, or mail-in premiums) and regular advertisements.

For distribution of oral care products, the three main retailers were,

• mass merchandisers

• drug stores

• Food outlets.

The average margin for the retailers was between 25% and 35%. As a result many retailers were more receptive to adding new toothbrush products than new varieties of toothpaste, thereby increasing the shelf space and the number of SKUs for toothbrushes. When it comes to marketing, Dentists played a vital role in selling the toothbrushes which was dominated by Oral-B.

In 1980s, the industry executives divided the toothbrush category into two segments: Value and Professional. The late 1980s saw the development of the new segment-Super Premium Brushes. By 1992, three market segments were identified,

1) Super-Premium Brushes

• Price: $2.29 and $2.89

• Unit Volume: 35%

• Dollar Sales: 46%

• Major Players (1990s): P&G, J&J, Oral-B & Smithkline Beecham

2) Professional Brushes

• Price: $1,59 and $2.09

• Unit Volume: 41%

• Dollar Sales: 42%

• Major Players: CP & J&J

3) Value Brushes

• Average Price: $1.29

• Unit Volume: 24%

• Dollar Sales: 12%

Further, in later 1980s, many new toothbrushes were introduced on the basis of aesthetic rather than functional features, in particular the children’s segment. But by 1991, however, new product introductions were again focused on technical performance improvements, such as greater plaque removal and ease of use. The initial clinical tests showed that CP Precision Toothbrush achieved an average 35% increase in plaque removal capabilities due to triple-action brushing effect. This made the product to be superior to other leading toothbrushes, specifically Reach and Oral-B. In addition, the brush was more effective in achieving double the plaque removal scores at the gum line and between the teeth. CP’s consumer research indicated that consumers of the baby boom generation were becoming more concerned about the health of their gums as opposed to cavity prevention and were willing to pay a premium for new products addressing this issue. Although the consumers were willing to experiment with new toothbrushes, they replaced their brushes once every 7.5 months versus the three months replacement recommended by dentists. CP’s marketing team realized that most consumers agreed that toothbrushes were as important as toothpaste to effective oral hygiene and that the primary role of a toothbrush was to remove food particles, plaque removal and gum stimulation were considered secondary. As per to CP’s research 45% of consumers brushed before breakfast,57% after breakfast, 28% after lunch, 24% after dinner and 71% before bed. CP’s marketing team realized that 48% of consumers claimed to change their brushes at least every three months, 70% changed when their toothbrush-bristles worn out and 11% decided to switch to a new brush after seeing their dentists.

CP recognized three major consumer groups relating to the use and purchase of toothbrushes.

The brand choice was based on the consumer’s individual needs like size and shape of the mouth, sensitivity of gums and personal brushing style. The handle, bristles and head shaper were perceived to be the most important physical features of a toothbrush.

Based on the above research, there could be two options to position the product and become top-of-the range.

1) Niche Positioning Strategy

Niche marketing can be accomplished by releasing the Colgate Precision Toothbrush in the super-premium market where CP has no product under this segment. This would ensure that CP competes directly with Oral-B’s

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