Colgate - Saqib Shakil v1.0

Saqib Shakil (156004799) Colgate Precision Case Analysis
Page 1 of 13
MEMORANDUM
DATE: 02/23/2015
TO: Nigel Burton
Division General Manager – Oral Care
FROM: Saqib Shakil
RE: Positioning, branding and communication strategies of Colgate Precision Toothbrush
Based on the detailed STP analysis of CP’s Precision Toothbrush and the existing production capabilities
of CP’s Oral Care Division, I recommend that the company should initially position Precision toothbrush
towards a niche market comprising of Therapeutic Brushers that not only constitute the biggest customer
segment of the market (46% of adults) but is also psychographically aligned with the value proposition of
this product that has proven to be 35% more effective in cleaning plaque and subsequently prevent gum
diseases. Niche positioning strategy will not only fit well with the product line logic of the company but
will also result in better gross and net profit margins of the product as compared to those of mainstream
strategy. Lastly, the current operational capacity of CP can fulfill the projected demand for niche strategy
only; as it is insufficient for mainstream strategy, which needs further capacity building that can delay the
product launch by 10 months and may put the product at competitive disadvantage due to potential
product launches by other competitors.
Firstly, analysis of the product line logic of Colgate Precision, positioned as a niche product (Exhibit 1)
as opposed to mainstream product (Exhibit 2), suggests that selective positioning under niche strategy is
a more logical choice to avoid product-market overlap and cannibalization of existing well-performing
brands, especially Colgate Plus. On contrary, under mainstream strategy the Precision brand will not only
compete with Colgate Plus for share of market and revenue but may also suffer from lower consumer
preference towards the brand as has happened to Colgate Plus (see Exhibit 2). Furthermore, considering
the competitive positioning of Precision brand under both strategies it can be easily observed that under
niche strategy (Exhibit 3) the brand will compete in super-premium price-performance segment, where
CP lacks presence, and will contribute to the corporate strategy of building CP’s brand equity by
enhancing its image as a producer of premium brands. Also, this strategy is appropriate for the existing
consumer trend of up-trading as consumers are increasingly consuming premium brands rather than value

Page 2 of 13
brands and it is resulting in better dollar sales for lesser unit volume than that of professional segment.
The mainstream strategy (Exhibit 4) will saturate the ‘professional’ market segment with CP’s brands
and any downward fluctuation in unit sales or revenue of this segment will have drastically adverse
effects on overall profitability of CP’s oral care division. So, based on the aforementioned information
and the comprehensive SWOT analyses of both strategies (Exhibits 5 and 6), I recommend niche
strategy for Colgate Precision along with appropriate marketing mix suggestions (see Exhibit 7).
Secondly, the communication strategy (see Exhibit 8) should highlight the ‘gum disease prevention’
benefit of the Precision toothbrush as it stimulated highest purchase intent and the advertising agency
should promote the usage timings of ‘after breakfast’ and ‘before bed’ to align the product consumption
timing with consumer usage behavior (see Exhibit 9). Additionally, $11.2 million is the appropriate
advertising and promotion amount for launching Precision brand as it is slightly better than the ad spend
of Oral-B ($15.7 million to be divided between Oral-B Regular, Angle and Indicator) and J&J ($21.7
million to be divided between Reach and Reach Advance). Furthermore, marketing the Precision brand as
a niche product results in at least 3% more gross and net profit margins as compared to those of
mainstream product (see Exhibit 10) and it can help CP to further improve its overall operating margin
even after considering 35%-60% cannibalization (see Exhibit 11) that may be minimized through careful
retail shelf placement. Lastly, the branding of Precision should follow the Colgate’s corporate strategy of
increasing the Colgate brand equity and it should use the ‘umbrella brand name’ strategy by using Colgate
to increase marketing and advertising efficiencies and to enhance the quality perception of CP among
consumers. Although such branding may further cannibalize existing CP toothbrush sales, the new
product will become profitable in second year after initial losses during the first year of product launch
(see Exhibit 12).
So, keeping in view all the relevant information and analyses presented above, I recommend following
niche strategy for Colgate Precision to minimize cannibalization, increase profitability and enhance the
brand equity of Colgate Palmolive; without higher initial investment into production capacity.

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Exhibit 1: Product Line Logic of Precision Toothbrush as a Niche Product
Market (Price segments)
Value Professional
Super-
Premium
Product
(Toothbrush)
Colgate Classic
Colgate Plus
Colgate Precision
Market (Customer segments)
Therapeutic
(46% 1)
Cosmetic
(21% )
Uninvolved
(33% )
Product
(Toothbrush)
Colgate Classic
Colgate Plus2
Colgate Precision3
1 Percentage of adult brushers
2 Light color shows weaker preference for a Colgate Plus brand by a customer segment i.e. this brand holds 3rd
or 4th
position
in terms of customer preference and usage in a specific segment (information from Table B of the case).
3 Colgate Precision is scientifically breakthrough product with high functional effectiveness in cleaning plaque and prevent
gum disease – the functional benefits sought after by therapeutic brushers.

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Exhibit 2: Product Line Logic of Precision Toothbrush as a Mainstream Product
Market (Price segments)
Value Professional
Super-
Premium
Product
(Toothbrush)
Colgate Classic
Colgate Plus
Colgate Precision
Therapeutic
(46% 1)
Cosmetic
(21% )
Uninvolved
(33% )
Product
(Toothbrush)
Colgate Classic
Colgate Plus2
Colgate Precision3
1 Percentage of adult brushers
2 Light color shows weaker preference for a Colgate Plus brand by a customer segment i.e. this brand holds 3rd
or 4th
position
in terms of customer preference and usage in a specific segment (information from Table B of the case).
3 Darker color represents strong estimated preference of customer segment towards Precision brand as it is positioned against
Oral B Regular that holds a major position in all customer segments.

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Exhibit 3: Competitive Positioning ofColgate Precision as Niche Product
$0 $1 $2 $3
Value Professional Super- Premium
Colgate Classic
Pepsodent Regular
Price
Quality/Performance
Low
High
Colgate Plus
Reach Regular
Pepsodent Prof.
Oral-B Indicator
Oral-B Regular
Crest Complete
Reach Advanced
Aquafresh Flex
Colgate Precision
Unit Volume: 35%
$ Sales: 46%
Unit Volume: 41%
$ Sales: 42%
Unit Volume: 24%
$ Sales: 12%

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Exhibit 4: Competitive Positioning of Colgate Precision as Mainstream Product
$0 $1 $2 $3
Value Professional Super- Premium
Colgate Classic
Pepsodent Regular
Price
Quality/Performance
Low
High
Colgate Plus
Reach Regular
Pepsodent Prof
Colgate
Precision
.
Oral-B Indicator
Oral-B Regular
Crest Complete
Reach Advanced
Aquafresh Flex
Unit Volume: 35%
$ Sales: 46%
Unit Volume: 41%
$ Sales: 42%
Unit Volume: 24%
$ Sales: 12%

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Exhibit 5: SWOT Analysis for Colgate Precision Niche StrategyInternalSituation
Strengths
 Precision Toothbrush targeted towards niche
market as a super-premium product fits
appropriately into product-line logic of Colgate,
which doesn’t have any product in this price-
category.
 This strategy benefits from trading-up trend of
consumers that placed more customers in
professional category since 1980 and gave way to
creation of super-premium category.
 Aging population of rich baby boomers are
increasingly becoming oral-health oriented and
may look for premium and effective oral care
products. Precision toothbrushes satisfy these
needs.
 The current operational capacity of CP supports
the desired market share goals of the company.
So, additional capacity needs not to be deployed
immediately before the product starts generating
cash inflows that can be used to fund the
operational expansion.
 Cannibalization of Colgate Plus, the bread and
butter of the company, can be avoided under this
strategy.
 4 SKUs will not disrupt the other existing SKUs.
Weaknesses
 The first feeling of using Colgate
Precision toothbrush is mixed or strange
for brushers and it may ward off further
trial and usage by customers with
‘indifferent’ or ‘disliked’ stance towards
the product.
 The product doesn’t explicitly addresses
a specific ‘reason for using a brand’,
such as Reach brand focuses on ‘hard to
reach places’ functional benefit of its
toothbrushes.
 Increased advertising and promotion
expenses to launch a product in a new
category.
 The existing brand image of CP
toothbrushes as mainstream products
may hamper the niche super-premium
positioning of Precision brand.
 Only 3%-5% volume share of the market
may be gained under this strategy, which
may not be an ideal volume for an
FMCG company.
ExternalSituation
Opportunities
 Positioning the product in super-premium and
therapeutic brushers category will help the
company to maintain its market leader position by
taking share away from its closest competitor
Oral-B.
 Presence in super-premium category may elevate
the brand equity of Colgate and the perception of
high quality toothbrushes may boost the sales of
other CP toothbrushes in their respective
categories.
Threats
 Focus on super-premium category for
new product launches by existing and
upcoming competitors may dilute the
perception of this category, resulting in
higher promotion and advertising costs
than usual and reducing product margins.
 Consumers generally assume that
premium products are more durable than
non-premium ones and tend to use them
longer, so, frequent two-for-one or one-
for-one promotions may increase the
replacement time for super-premium
toothbrushes.

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Exhibit 6: SWOT Analysis for Colgate Precision Mainstream StrategyInternalSituation
Strengths
 Reduction in replacement time for toothbrushes
will in generalincrease the market size for CP
Toothbrush products.
 An outstanding product like Precision doesn’t
exist in a Professional and Value category, so, it
may be able to gain large market share quickly to
provide appropriate return on investment within
first two years of its launch.
 Large volume sales will result in steep learning
curve and economies of scale to bring down the
cost of the product, thereby increasing its
contribution margin.
 Value proposition of Precision based on
‘increased gum disease prevention due to plaque
removal’ motivates the greatest purchase intent
among test consumers and it may appeal to larger
consumer market that seeks the functional benefit
of cleaner teeth.
 This strategy can take benefit of increasing sales
through mass merchandisers – a distribution
channel increasing in volume sales as compared to
other channels.
Weaknesses
 35%-60% cannibalization of Colgate
Classic and Plus sales due to this strategy
may adversely affect the overall
profitability of OralCare division.
 Like Colgate Plus, Precision brand may
fail to become the top choice among the
three segments of consumers under this
strategy.
 This strategy may fix the CP’s brand
image as a mainstream product and may
thwart future attempts of CP to launch a
premium brand.
 The current operational capacity and
production schedules don’t support the
desired market penetration and high
initial investment is needed to avoid
product shortages and lost revenue.
 7 SKUs under this strategy may force the
dropping of children’s brush line, which
might be a strategic SKU as today’s
children are tomorrow’s adults and may
remain loyal to Colgate brand.
ExternalSituation
Opportunities
 10%-15% volume share within first two years of
launch may establish Precision brand as a
successfulmainstream toothbrush.
 Precision toothbrush can be positioned next to
Oral-B Regular on retail shelf space and in terms
of pricing to not only gain increased customer
awareness in all customer segments as a premium
product but also to gain snatch market share away
from a close competitor of CP (i.e. Oral-B), which
plans to increase its presence in other oral-care
products such as floss and mouth rinses. This
strategy can threaten the core market of Oral-B,
preventing it from targeting CP’s other oral-care
product lines.
Threats
 Distributors may reject to carry two CP
toothbrush brands under same product
category – Professional.
 Retailers may hinder to allocate more
shelf space to multiple CP brands
positioned closely to each other.
 Increased reliance on mass
merchandisers under this strategy will
transfer the bargaining power to few
large buyers, which may be detrimental
to the long term profitability of CPs oral
care division.

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Exhibit 7: Consumer-Product-Market-Distribution Mapping
Therapeutic
(46% 1)
Cosmetic
(21% )
Uninvolved
(33% )
Market(PriceSegments)
Value
1. Colgate classic1 1. Colgate classic Mass
Merchandisers
RelevantDistributionChannel
Professional
3. Colgate Plus
4. Reach Regular
3. Colgate Plus 3. Colgate Plus
4. Reach Regular
Mass
Merchandisers
& Food Stores
Super Premium
1. Oral-B Angle
2. Oral-B Regular
2. Oral-B Regular
4. Oral-B Angle
2. Oral-B
Regular
Food and Drug
Stores
1. Numbers before brand names show the consumer preference with 1 and 2 being most preferred and 3 and 4 being least
preferred (Data from Table B and Exhibit 4 of the case).
2. Distribution mapping has been done using data from Exhibit 4 & 7 of the case.
3. Blue highlighted box is the recommended niche positioning of Colgate Precision.

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Exhibit 8: Proposed TVand Advertising Copy Strategy and Execution
Exhibit 9: Consumer Toothbrush Usage Behavior
•Colgate Precision
Product
•Unconventional, triple action design with superior cleaning capability that
removes 35% more plaque than Oral-B and Reach.
Message
•Prevents gum disease
Tagline
•Computer graphic display of product design followed by more clean looking
teeth if brushed with Colgate Precision as compared to Oral-B and Reach.
Execution
Breakfast
Lunch
Dinner
Bedtime
45% 57%
28%
24%
71%
Recommended
usage time
Recommended
usage time

Page 11 of 13
Exhibit 10: Pro Forma Income Statement under Niche and Mainstream Strategies
Year 1
1993
Year 2
1994
Year 1
1993
Year 2
1994
Revenue - Retail Sales ($MM) 16.19 30.35 47.10 77.51
Revenue - Professionals ($MM) 2.47 2.47 6.58 6.58
Total Revenue ($MM) 18.65 32.82 53.68 84.08
Less: COGS ($MM) (7.26) (11.88) (22.27) (33.34)
Gross Profit ($MM) 11.39 20.94 31.41 50.74
Expenses
Advertising ($MM) 5.00 5.00 15.00 12.00
Consumer Promotions ($MM) 4.60 4.00 13.00 10.00
Trade Promotions ($MM) 1.60 2.70 4.80 7.00
Total Marketing Expenses (11.20) (11.70) (32.80) (29.00)
Net Profit 0.19 9.24 (1.39) 21.74
Gross Profit Margin 70.39% 68.98% 66.68% 65.46%
Net Profit Margin 1.04% 28.15% -2.60% 25.85%
Niche Strategy Mainstream Strategy
Pro Forma Income Statement

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Exhibit 11: Impact of Cannibalization under Niche and Mainstream Strategies
*The unit sales and the operating profits for 1993 and 1994 are estimated using linear regression with R2
values of 99% and 96%
respectively. The per unit operating profit is calculated by dividing total operating profit by total unit sales.
*35% to 60% of the Precision total volume sales are taken away from Colgate Plus and Colgate Classic. So, the operating profit
per unit is used as a proxy for the combined revenue loss by other product lines, because the cannibalization of individual product
lines can’t be calculated from the case information. Op. profit cannibalization = Op. profit per unit x volume cannibalization.
1989 1990 1991 1992 1993 1994
Unit Sales (000's) 55296 63576 70560 78336 85968 93578.4
CP Toothbrushes Operating
Profit ($000's) 3,744.00 5,739.00 9,833.00 11,284.00 14,328.50 16,999.90
Operating Profit per unit ($) 0.07 0.09 0.14 0.14 0.17 0.18
From Table C
Year 1 Year 2 Year 1 Year 2
Unit Sales - Retail (MM) 8 15 26.8 44.1
Unit Sales - Professionals (MM) 3 3 8 8
Consumer Promotion Volume (MM) 2 2 7 7
Total Unit Sales (MM) 13 20 41.8 59.1
Volume Cannibalization - 35% 4.55 7.00 14.63 20.69
Op.Profit Cannibalization - 35% ($MM) 0.77 1.26 2.49 3.72
Year 1
1993
Year 2
1994
Year 1
1993
Year 2
1994
Total Revenue ($MM) 18.65 32.82 53.68 84.08
Less: COGS ($MM) (7.26) (11.88) (22.27) (33.34)
Gross Profit ($MM) 11.39 20.94 31.41 50.74
Expenses
Advertising ($MM) 5.00 5.00 15.00 12.00
Cannibalization - 35% (0.77) (1.26) (2.49) (3.72)
Net profit (0.58) 7.98 (3.88) 18.01
Net Profit Margin -3.11% 24.31% -7.23% 21.42%
Net profit (1.13) 7.08 (5.66) 15.35
With Cannibalization

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Exhibit 12: Impact of Additional 20% Cannibalization due to Colgate Precision Branding
1989 1990 1991 1992 1993 1994
Unit Sales (000's) 55296 63576 70560 78336 85968 93578.4
CP Toothbrushes Operating
Profit ($000's) 3,744.00 5,739.00 9,833.00 11,284.00 14,328.50 16,999.90
Operating Profit per unit ($) 0.07 0.09 0.14 0.14 0.17 0.18
From Table C
Year 1 Year 2 Year 1 Year 2
Unit Sales - Retail (MM) 8 15 26.8 44.1
Unit Sales - Professionals (MM) 3 3 8 8
Consumer Promotion Volume (MM) 2 2 7 7
Total Unit Sales (MM) 13 20 41.8 59.1
Year 1
1993
Year 2
1994
Year 1
1993
Year 2
1994
Total Revenue ($MM) 18.65 32.82 53.68 84.08
Less: COGS ($MM) (7.26) (11.88) (22.27) (33.34)
Gross Profit ($MM) 11.39 20.94 31.41 50.74
Expenses
Advertising ($MM) 5.00 5.00 15.00 12.00
Net profit (1.02) 7.26 (5.30) 15.89
Net profit (1.57) 6.36 (7.08) 13.23
With 20% Additional Cannibalization

Colgate - Saqib Shakil v1.0

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