Harvard Business School Case study on Colgate Palmolive Precision Toothbrush

1. Colgate Palmolive
Harvard Business Review
: Precision Toothbrush
A Case Study

2. Important takeaways:
• The US oral care market: Size, relative market shares
• Consumer Habits: Preferences, influences, spending allowances
• Competition: Both internal and external factors
• The Precision marketing strategy
• Conclusion

3. Major Decision-Makers:
• Susan Steinberg – Precision Product Manager
• Nigel Burton – Divisional General Manager
• Mark Ruben - Colgate Palmolive’s C.E.O
• John Phillips – Colgate Plus Product Manager

4. HISTORY AND SOME
IMPORTANT NUMBERS
The US Oral
Care Market

5. • In 1991, the US Oral Care market was $2.9 billion with an annual growth rate of
6.1% since 1986.
• Toothpaste accounted for 46% of this market, while mouth rinses and
toothbrushes accounted for 24% and 15.5% respectively; with dental floss and
other products accounting for the rest.
• Dollar sales grew at an average rate of 9.3% per annum since 1987, however, in
1992, they increased by 21% in value and 18% in volume.
• This can be attributed to 47 new products and line extensions, increased media
support and better consumer purchase frequency.

6. Chronology of Toothbrush Inventions

7. Knowing
Colgate
Palmolive

8. • Sales worth $6.06 billion and a gross profit of $2.76 billion in 1991
• In the same year:
CP spent $243 million to upgrade 25 manufacturing plants.
Introduced 275 new products worldwide.
Made strategic acquisitions.
Started manufacturing in Eastern Europe and China.
• Since 1985, gross margins shot up from 39% to 45%
• Grew annually at 5%
• CP’s international sales accounted for 67% in 1991

9. • In 1991, CP held 43% of the world toothpaste market and 16% of the
world toothbrush market.
• A team of 170 CP researches worked and the company launched two new
products in the market.
• In the same year, worldwide sales of CP’s oral care products increased to
$1.2 billion. This accounted to 22% of CP’s total sales.
• CP’s US toothbrush sales were $77 million, with an operating profit of
$9.8 million.
• CP held 23.3% of the US retail toothbrush market share.

11. HOW DID THE US
MARKET LOOK?
Product
Segments

12. In 1980s, the toothbrush category was divided into two
segments:
• Value
• Professional
In the late 1980s, a new segment by the name of “super-
premium” emerged. These brushes were priced at $2.29 to
$2.89 and by 1992, they accounted for 46% of the dollar sales.

14. CP’s research:
• 82% of the toothbrush purchases unplanned
• Consumers unfamiliar with toothbrush prices
• Consumers changed their brushes once every 7.5 months despite
willingness to experiment
• 45% consumers brushed before breakfast, 57% after breakfast, 28% after
lunch, 24% after dinner and 71% before going to bed
• Brand choice was majorly based on features, comfort, and professional
recommendations (see exhibit 3 on the next slide).

16. Competition

17. In order to have an understanding of how
the US oral care market looked like and who
were the major competitors, one must look
beyond plain text. The exhibits in the next
slides will give a clear (better) picture.

21. Advertising

22. • Hard to create demand, hence, focus on stealing the market share.
• Johnson & Johnson spent $8 million to introduce its new product Reach, Oral-B spent
$10 million to launch Indicator brush, while Proctor & Gamble was expected to support
Crest Complete with $15 million in media expenditures.
• The exhibit on slide 23 provides a complete picture on the major players’ advertising
strategies.
Total Expenditure in media and advertising: $55 million in 1992
$70 million in 1993

25. How much did CP spend?

26. Distribution

27. • In 1987, traditional stores sold 75% of all oral care products.
• By 1992, they accounted only for 43% of the toothbrush sales
and 47% of the toothpaste sales.
• Toothbrushes provided retailers with a 25-35% margin.
• In 1992, 22% of all toothbrushes were (expected to be)
distributed by dentists, with Oral-B the dominant brand
because of its dedicated sales force.

28. The Colgate
Precision
Marketing Mix

29. Product Design and Testing
In 1989, CP created a task force comprising of:
• R&D and Marketing executives
• Outside consultants
• Dental Professionals
Their mission was “to develop a superior, technical,
plaque removing device”

30. The task force had 5 goals:
Understanding
Understanding the varying
techniques consumers used
while brushing teeth.
Testing
Testing the between-teeth
access of various toothbrush
designs.
Establishing
Establishing an index to
score clinical plaque-removal
efficacy at the gum line
between teeth.

31. The task force had 5 goals: (cont.)
Creating
Creating a bristle configuration
and handle design offering
maximum plaque removal efficacy.
Determining
Determining through research the
efficacy and acceptance of the new
design

33. And what did
the study of
these
conclude?
 Brushing was ineffective in removing plaque from the
gums and in-between teeth.
 CP’s new design was superior to is competitors in
reaching the front and back teeth, irrespective of the
direction of brushing.
 Each tooth divided into nine areas, presence of plaque
found in each of these areas. Then the presence of plaque
was calculated pre- and post- usage of CP’s new product.
 The studies established that the new product removed on
an average 35% more plaque than its competitors.
 The overall acceptance of the product was determined
through 18-month tests amongst different groups.

34. Market
Positioning

35. Precision was developed as a
top-of-the-range super premium
toothbrush which was expected
to capture 3% of the US market
in the first year of its launch and
could comprehensively
command a 15% price premium
over Oral-B.

36. Colgate Palmolive had two options:
1.To position Precision as a niche product
2.Or, to position it as a mainstream product
Both the strategies had their own pros and cons.

37. Pros and Cons of the two strategies:

38.  With a niche product strategy, Precision would have a 3% share
in retail sales by the end of year 1 and 5% by the end of year 2.
 With a mainstream marketing strategy, the same would change
to 10% in year 1 and 14.7% in year 2.
 Total category unit volumes were expected to be 268 million in
1993 and 300 million in 1994.

39. Capacity and
Investment Costs

40. How much would Precision cost CP?

41. Communication and
Promotion

42. After establishing the product design, CP
conducted four concept tests. These tests were
conducted amongst 400 individuals in the age
group 18 to 54, and the sample size consisted
of the ones who were regular users of Colgate
Plus, Reach and Oral-B.

44. Simple
arithmetic
mean of the
exhibit given
suggests that:
 Test 1: 67.67% would probably buy the product
11.67% would definitely buy the product
 Test 2: 73.50% would probably buy the product
17.50% would definitely buy the product
 Test 3: 65.75% would probably buy the product
13.50% would definitely buy the product
 Test 4: 74.00% would probably buy the product
24.00% would definitely buy the product

45. Estimated cost of
communication in 1992:
$24.1 million($9.6 million+$14.4 million)

46. What do we
conclude?

47.  Steinberg viewed Precision was more than a simple line
extension.
 The case talked about how Precision should be positioned,
followed the path of its development, testing, and pricing.
 The case gave a background to the US oral care market and
backed it with concrete numbers taken directly from the
company records.

48. DISCLAIMER
Created by :
ABHIJIT SARKAR
BIT SINDRI during a
marketing internship
Guided by:
Prof. Sameer Mathur
IIM LUCKNOW