Analyzed Colgate strategies to become a market leader

1. HARVARD BUSINESS REVIEW
On
COLGATE PALMOLIVE

2.  Company background
 U.S. toothbrush market
 Product segments
 Consumer behaviour
 Competition
 The Precision Marketing mix
 Conclusion

3. Why study this case?
• Tounderstand the market competition
faced by the Colgate Precision
Toothbrush.
• Toanalyse the Consumer Behaviour of
that time period.
• Tosummarise the profits gained by the
company.

5. COLGATE PRECISION:
 A newproduct, toothbrush launched by CP in
August 1992
 Developed over a period of 3years
SUSAN STEINBERG
Precision Product Manager
 The person who managed the entire product
development process
Responsible for recommending the
POSITIONING , BRANDING and
COMMUNICATION strategies

6. PEOPLE WHO MADE NEW PRODUCT LAUNCH
SUCCESSFUL:
• Susan Steinberg – Product Manager
• Nigel Burton – Division General Manager
• Ruben Mark – CP’s C.E.O.

7. CP – A Global Leader in Household & Personal
Care Products:

9. • The U.S. Toothbrush Market
has seen many changes since
ancient times ranging from Dr.
West’s Miracle Tuft
Toothbrush to the newly
launched The Colgate
Precision Toothbrush.

12. 1. Tolaunch new products
2. Toenter into new geographic
markets
3. Toimprove efficiency in
manufacturing & distribution
4. Tocontinue focus on CORE
CONSUMER PRODUCTS

13. PRODUCT SEGMENTATION

14. • The industry executives had divided the toothbrush
category into following segments :
1. Value
2. Professional
3. Super - Premium

16. CONSUMER BEHAVIOUR

17. • CP’s Consumer Research indicated
that the Baby Boom Generation
Consumers were NOW becoming
more CONCERNED about the
HEALTH OF THEIR GUMS AS
OPPOSED TO CAVITY PREVENTION
and were WILLING TO PAY A
PREMIUM FOR NEW PRODUCTS
ADRESSING THIS ISSUE.

26. MEDIA EXPENDITURES

27. TELEVISION & ADVERTISING COPY
STRATEGIES & EXECUTIONS

28. CP TELEVISION ADVERTISING

29. ADVERTISING EXPENDITURE FOR CP
TOOTHBRUSHES:

31. • In 1992, 22% of all toothbrushes were
expected to be distributed to consumers by
dentists.
• Manufacturer margins on toothbrush sales
through dentists were less than half those
achieved through normal retail distribution
• Exhibit 13 summarizes toothbrush retail
distribution trends by volume and value.

33. of
COLGATE PRECISION

34. PRODUCT DESIGN
AND
TESTING

35. In 1989, CP had established
a task force comprising
executives from:
• R&D and Marketing
• Dental professionals
• Outside consultants
MISSION
• To“develop a
superior, technical,
plaque removing
device.

36. THE 5 – GOALS:
•
•
•
1. Understanding the varying techniques consumers used when
brushing their teeth.
CONCLUSION : Brushing was often ineffective at removing
plaque from the gum line and between the teeth.
2. Testing the between-teeth access of different toothbrush designs.
• CONCLUSION: CP’s new design was superior to both Oral-B and
Reach in accessing front and back teeth, using either horizontal
or vertical brushing.
3. Establishing an index to score clinical plaque-removal efficacy at
the gum line and between teeth.
CONCLUSION: Measured presence of plaque on each of the
nine tooth areas.
Then Calculation of percentages of tooth areas affected by
plaque pre- and post-usage of different brushes.

37. THE 5 – GOALS:( contd.)
•
4. Creating a bristle configuration and handle design offering
maximum plaque- removing efficacy.
CONCLUSION: Clinical trials established that the 3 similar
newly designed products removed an average 35% more plaque
than other leading brushes and therefore helped to reduce the
probability of gum disease.
5. Determining, through clinical and consumer research, the efficacy
and acceptance of the new toothbrush design.
• CONCLUSION: Product design and characteristics, marketing
concept, and competitive strengths were tested.
• The overall acceptance of Precision was determined via
dental professional focus groups and product usage tests .

38. ColgatePrecision’s

39. •Steinberg developed
a marketing mix and
financial projections
for both scenarios.

40. • Volumes: Steinberg believed that :
1. With a niche positioning Precision retail
sales would represent 3% volume share of
the toothbrush market in year 1 and 5% in
year 2.
2. With a mainstream positioning, these
volume shares would be 10% in year 1 and
14.7% in year 2.
3. Total category unit volumes were estimated
at 268 million in 1993 and 300 million in
1994.

42. • Capacity and Investment Costs: Three types
of equipment were required to manufacture
the Precision brush:
1. Tufters
2. handle molds
3. packaging machinery.
• Table D gives the cost, depreciation
period, and annual capacity for each class of
equipment.

44. Product Cost
and

45. PRODUCTION COSTS
WAREHOUSING COSTS TRANSPORT COSTS

46. •Steinberg consolidated -
best estimate of the cost
and price data as in Table E

48. Breakeven Analysis

49. • Total Manufacturing
Costs + Total
Advertising Costs =
Input Cost( Variable +
Fixed costs)
• Total Profit = Retail
Price * number of
brushes – Input Cost
• For Breakeven , Input
Cost = Total revenue
generated by selling
the Precision brushes

50. TABLE C + TABLE E =
A Pro-forma income statement
Profit Implications - Niche Vs Mainstream
Positioning Strategies
Uncertain Cannibalization

52. Two tests carried out:
• CONSUMER CONCEPT TESTS
• NAME TESTS
OUTCOME:
• Under the mainstream and niche positioning
scenarios –
• 1. Cannibalization figures for Colgate Plus would
increase by 20% if the Colgate brand name was
stressed.
• 2. Remain unchanged if the Precision brand name
was stressed.

53. CP’s stated corporate
strategy was to build on
the Colgate brand equity.

55. 4 concept tests - conducted -
among 400 adult professional
brush users (Colgate Plus, Reach,
and Oral-B users) -18 to 54 years
of age.

57. RESULT OF THE FOUR CONCEPT TESTS:
TEST 1:
(69+68+66)/3 = 67.67 % Probably Would Buy
(15+15+10)/3 = 11.67 % Definitely Would Buy
TEST 2:
(80+71+74+68)/4 = 73.5% Probably Would Buy
(19+19+18+14)/4 = 17.5% Definitely Would Buy

58. RESULT OF THE FOUR CONCEPT TESTS:(CONTD.)
TEST 3:
(63+72+62+66)/4 = 65.75 % Probably Would Buy
(13+16+11+14)/4 = 13.5 % Definitely Would Buy
TEST 4:
(87+61)/2 = 74% Probably Would Buy
(19+48)/2 = 24% Definitely Would Buy

59. Consumer Research - including in-home
usage tests revealed
•55% of test consumers found Precision to
be very different from their current
toothbrushes.
•77% claimed that Precision was much
more effective than their current
toothbrush.

60. SAMPLING OF THE PRODUCT

61. Several consumer promotions to back the launch:
1. a free 5 oz. tube of Colgate toothpaste (retail
value of $1.89) with the purchase of a Precision
brush in strong competitive markets;
2. a 50%-off offer on any size of Colgate toothpaste
(up to a value of $1.00) in conjunction with a 50¢
coupon on the Precision brush in strong Colgate
markets.

62. COST OF
COMMUNICATION
PROMOTIONS WAS
ESTIMATED TO BE $52.1
MILLION.

63. CONCLUSION
• Precision- a technological breakthrough -
more than a niche product /simple line
extension .
• How Precision should be positioned,
branded, and communicated to consumers.
• What the advertising and promotion budget
should be and how it should be broken
down.
• Todevelop a marketing mix and profit-and-loss
pro forma to enable Precision to reach its full
potential.
• It should be acceptable to Burton and other
colleagues, particularly the Colgate Plus
product manager.

64. These slides are Created by Ayushi nagar, IIT
Bombay, during a marketing internship (May’17-
june’17) under the guidance of Prof. Sameer
Mathur, IIM Lucknow
DISCLAIMER