Colgate-Palmolive Company: The Precision Toothbrush Case Study by Abhinav.U, IIT Madras

1. Colgate Palmolive Company: ThePrecision Toothbrush
A Harvard Business School Case

2. What is Colgate-Palmolive?
Colgate-Palmolive is aMultiNational Company which focuses on the production and
distribution of household and personal care products

3. The following case
revolves around it’s
oral care unit
Thefollowing case focuses onthe Oral Product division of
Colgate-Palmolive

4. Sowho arethe main players involvedin this case?

5. Susan Steinberg – Colgate Precision Product Manager
John Philips – Colgate Plus Product Manager

6. CurrentSituationof
Colgate-Palmolive:

7. Year: 1989
Up until now, CP has offered just twolinesof Toothbrushes..

8.  Colgate Classic
Colgate Plus

9. Colgate Classic
• GP’s first entry into the
toothbrush market
• Positioned in the “value
segment”
Colgate Plus
• Positioned as a higher quality
product in the professional
segment

10. Then, in the same year 1989, the company comes up with a team to develop a superior,
technical, plaque removing device..
..and in just 3 years, the company had it’s ground-breaking product
‘Precision’

11. Precision–Features:
• Moreplaqueremoval– 35% more plaque removal than other competing
brand products
• Tripleaction brushing effect – enabled the bristles to reach out and clean
all the parts of the teeth
• Better precision– The product was much more efficient than Oral B in
accessing the front and back teeth

12. The product was scheduled to release and hit themarkets as a super-premium
product in the year 1993

13. Objectives of this case?

14. To understandthe constraints thattheproduct launchis facingand come up with
the most suitable positioning,brandingand communicationstrategies

15. Positioning

16. Steinberg was faced the dilemmaof whetherto position ‘Precision’ as a main
stream product or as a niche product..
..To predict the solution for thisdilemma, we have to analyze the totalcost-profit
figures of both the cases

17. Cost Analysis:Niche Product(Y-1)
Total Cost =3.25 M+ 0.316667 M+
0.66*13 M= 12.146,670 M
Advertising = 11,200,000
Revenue – 2.02*13,000,000 =
26,260,000
Net Profit = 2,913,330 $

18. Cost Analysis: Niche Product (Y-2)
Total Cost =4,550,000 + 13,200,000 +
450,000 = 18.2 M
Advertising = 11,700,000
Revenue – 2.02*13,000,000 =
40,400,000
Net Profit = 10,500,000 $

19. Cost Analysis: Main StreamProduct (Y-1)
Total Cost =9,100,000 + 886,667 +
26.88 = 36.866667 M
Advertising = 32.8 M
Revenue – 73.92 M
Net Profit = 4,253,333 $

20. Cost Analysis: Main StreamProduct (Y-2)
Total Cost =37.76+ 13+1.27=52.03 M
Advertising = 29 M
Revenue – 103.84 M
Net Profit = 22,810,000 $

21. Cannibalization Cost:
• Due to the production of a similar product in the same industry, there are bound to be
cannibalizationcosts
• This cost is higher for Mainstream positioning than for Niche positioning

22. CannibalizationCost: Max. Loss
• Steinberg predicted that 35-60% of volumes for Precision could
come from the other two product lines
60% of 13 Million = 7.8 Million
268*0.173 = 46.36 M
46.364 – 7.8=38.564 M
Final Revenue – 52.0614
Previous Revenue – 62.586
Maximum Loss in Revenue – 10.5246M $
• Maximum loss due to Cannibalization would be suffered when
the whole 60% is from the customers who purchased Colgate
Plus products

23. CannibalizationCost: Min. Loss
• Now, the minimum loss would ideally be the one where the 35% volume
change occurs completely dude to the shift of consumers from Colgate
classic to the new product
• But it’s illogical, as the consumers of Colgate Classic, as can be seen
below, are either from Involved Oral care consumers (21%) or uninvolved
oral care consumers (33%), who wouldn’t be willing to spend much on
their dental care

24. CannibalizationCost: Min. Loss
• So, let’s assume 60% from Plus and 40 % from Classic:
4.55*0.6 =2.73 M Plus units
4.55*0.4 = 1.82 M Classic units
Least Loss in revenue = 2.73*1.35 + 1.82*0.69 = 4.9413
M $
(Approximate, as we took the same volume share for the year
1993 as 1992E)

25. The better solutionis to have Niche positioningin thebeginning,and thenlater on,
shiftto Main stream positioning.
Why?

26. • Having Main stream positioning in the beginning would lead to shortage
of products, and give rise to much more losses due to insignificant
production of goods, accounting to lesser sales than expected
• Shifting from Niche to Main stream would also ensure that a lot of
“Therapeutic Brushers” who usually stick to the higher end range of oral
products, purchase the product even when we shift it to a mainstream
positioning
• When shifted to Main Stream, the profits that we obtain are also
maximized, ensuring greater cash return. (after taking cannibalization
into consideration)

27. RequiredInformation for Calculations:

28. Branding

29. • Upon trials, it was found that “Colgate Precision” was deemed
to be more appropriate by 49% and more appealing to 39 %
• The confusion came up as to name it Colgate Precision or
whether Precision, and build it as such like a brand
• The company needs to put more focus and try to publicize
“Precision” more, as cannibalization costs need to be kept as
low as possible
Colgate Precision Precision by Colgate
Cannibalization would increase by 20% from before Result in lesser Cannibalization of Colgate Plus
Can build on the brand equity of Colgate Should run solely on the properties of the product and
new marketing strategies, which will require a lot more
expenses

30. Communicationand Promotion Strategies

31. • The brush look was unusual and test participants sometimes
had mixed opinions about it
• Consumer research revealed that the more info they were
provided, the more excited they were for the product
• Steinberg concluded ‘Sampling would be critical to Precision’s
success’
• The company should create a substantial increase for Precision
launch with no change in the other two, as it’s necessary to
ensure that the two already set products shouldn’t be harmed
due to the setback of a new product

32. • Consumer promotions – 4 million dollars for Colgate Precision
• 35% more plaque and gem removal promotes more sales as the
research survey proves
• Steinberg believed that launching precision would enable
increase in overall share of trade advertising features
• Through dentist professionals, 3 million units were to be sent
in the case of niche positioning and 8 in the case of main
stream positioning

33. Thank You!
- ByAbhinav.U