HBR Colgate Palmolive Case study submitted by Varun Kapila under the internship of Prof. Sameer Mathur (IIM L)

1. Colgate Palmolive :
The Precision Toothbrush
Harvard Business Case Study
Analysis

2. Contents
• Case Problems
• Company Background
• US Tooth Brush Market Overview
• Profit/Loss Pro forma
• Marketing Mix
• Advertising & Promotion Budget

3. What is the case about ?
• CP is launching a new product in the SUPER
PREMIUM CATEGORY of toothbrush.
• Product will be named PRECISION.
• The analysis has to be done regarding this
product by keeping the problem statements in
mind.

4. PROBLEMS – PRECISION TOOTHBRUSH
• Develop positioning , branding and
communication strategies .
• Estimating advertising and promotion budget .
• Developing marketing mix and profit & loss
pro forma.

5. Company Background
• With 1991 sales of $6.06 billion and a gross
profit of $2.76 billion, CP was a global leader
in household and personal care products.
• Total worldwide research and development
expenditures for1991 were $114 million, and
media advertising expenditures totaled $428
million

6. CP Five Year Plan (1991-1995)
• New product launches.
• Entry into new geographic markets.
• Improved efficiencies in manufacturing and
distribution.
• Continuous focus on core consumer products.

7. CP Toothbrush Market
• In 1991 CP held 16% of world toothbrush
market.
• CP’s U.S. toothbrush sales in 1991 reached
$77 million, with operating profits of $9.8
million.
• CP held the number one position in the U.S.
retail toothbrush market with a 23.3% volume
share

8. Company Leaders
• Nigel Burton – General Manager
• Ruben Mark – CEO
• Susan Steinberg – Precision Product Manager

9. Products currently offered
• Colgate Classic (Value segment)
• Colgate Plus (professional segment)

10. Operating Statement

11. US Toothbrush Market

12. • Until the late 1970s , toothbrush was
considered a commodity .
• Recently , new product launches has increased
and performance benefits had become
increasingly important purchase criteria.
• Emergence of a “Super Premium Category”

13. Tooth Brush Market Evolution

14. Product Segmentation

15. • Until 1980s , only two segments were
considered , VALUE and PROFFESIONAL .
• Late 1980s a new segment emerged named as
SUPER PREMIUM SEGMENT .

16. Major Products in Super Premium
Segment

17. Consumer Behaviour

18. • People more concerned about health of the
gums rather than cavity prevention .
• Primary Role of toothbrush was considered to
remove food particles and plaque removal and
gum stimulation were considered secondary .
• Brand choice was based on COMFORT and
PROFESSIONAL RECOMMENDATION .

19. Consumer Segmentation

20. Brand Decision Factors

21. COMPETITION

22. Major Competitors
• ORAL B
• Johnson & Johnson
• Procter & Gamble (Crest Complete)
• SmithKline Beecham

23. Competition Prices

24. Product Lines of Competitors

25. Brand Unit and Dollar Market Shares

26. Brand Unit and Dollar Market Shares
by Class of Trade

27. ADVERTISING AND
PROMOTION

32. CP Racks

33. • CP line held 25% to 40% shelf space in most
stores.
• A display system of racks was used for sales of
CP Toothbrush .

34. DISTRIBUTION

35. • In 1987, traditional food stores sold 75% of oral
care products, but by 1992 they accounted for
only 43% of toothbrush sales and 47% of
toothpaste sales
• Though purchased too infrequently to be used
as a traffic builder, toothbrushes provided
retailers with an average margin between 25%
and 35%, twice that for toothpaste.
• In 1992, 22% of all toothbrushes were
expected to be distributed to consumers by
dentists.

37. THE PRECISION
MARKETING MIX
Precision Toothbrush

38. Product Design and Testing
• R&D Team of Colgate came up with a brand
new toothbrush with 3 different bristle sizes
for better plaque removal from all the parts of
the mouth and boasted a 35% increase in
plaque removal from its competitors.
• This was made by using infrared motion
analysis to track consumers’ brushing
movements and consequent plaque removal.

39. Precision
Toothbrush

40. In July 1992, CP senior management decided
to launch Precision early in 1993. It was
decided that Precision would be priced within
the super-premium segment and distributed
through the same channels as Colgate Plus

41. POSITIONING
(Problem)
Niche Position vs Mainstream Position

42. Current Scenario
Niche Position vs Mainstream Position

44. RECOMMENDATION
• The Colgate Precision should be marketed as a
MAINSTREAM Product .
• This is because it will help the company
capture greater portion of the available
market and thus helpful for the company in
the long run.

45. RECOMMENDATION(Contd.)
• The product should be marketed as a
competitor of Super Premium products of
other brands and hence minimizing the
cannibalization of its own Colgate Plus.
• This would give a feel to the consumers that a
similar product is being offered to the super
premium products but at a lower price .

46. Profit/Loss Pro Forma
(Mainstream Product)
• Input Costs = Fixed Costs + Variable Costs
• Input Costs= Investment Costs + Depreciation
cost + Advertising cost
= 76.9MM
This input cost is for 101MM Planned Units .
Revenue Generated from selling 85.9MM Units (
From Table C) = Revenue generated from
Retail sales + Professional Sale

47. • Retail Sale Revenue= No. Of units x Profit per
unit
= 79.409MM x $1.12 = 79.408MM
Revenue from sales through professionals =
0.96MM+0.496MM = 1.456MM (Keeping in
Mind 80% sales were made at $0.79/Unit and
rest at $0.95/Unit)
Total Revenue = 80.864MM

48. Profit/Loss Analysis
Revenue – Input Costs = Profit
Profit = 80.864 – 76.9
= 3.964MM
Therefore breakeven will be achieved before 2
years and will make a net profit when offered
as a mainstream product.

49. BRANDING

50. • Name Tests and Consumer Concept Test were
conducted .
• COLGATE PRECISION was the most favourable
name .
• Only dilemma left was whether to name it as
PRECISION BY COLGATE or COLGATE
PRECISION.

51. RECOMMENDATION
• Product should be named as COLGATE
PRECISION .
This judgement can be backed by the
following facts –
• This would give product an added advantage
as it will be more associated with COLGATE
thus benefiting from its brand equity.

52. RECOMMENDATION(Contd)
• The corporate strategy of COLGATE is in line with
this name as the product was going to be a super
premium product but placed as a mainstream
product thus giving a boost to its brand equity as
well.
• Cannibalization was anyways going to take place
even if it is placed as a niche product but using
this name can increase some cannibalization of
Colgate Plus but at the end Company Equity will
benefit from this.

53. COMMUNICATION AND
PROMOTION

54. Once the basic product design was
established, four concept tests, conducted
among 400 adult professional brush users
(Colgate Plus, Reach, and Oral-B users) 18 to
54 years of age, were run during 1990-1991.

55. Consumer Concept Test

56. Budget Allocation
• The current budget of CP should be increased to
support the CP launch with no effect to budget
for Colgate Classic and Colgate Plus .
• CP needs to make Precision its own face with
time as it will help in building the brand equity.
• The product was identified as a Very Different
product through consumer research and
therefore has high chances of being successful .

57. Budget Allocation(Contd.)
• In this way cannibalization of CP Plus will be
reduced and still favouring the Precision
brand.
• Consumer promotion should be used to
induce trials as stated and $4 Million budget
should be allocated to that which is necessary
for its mainstream position strategy.

58. Marketing Mix

59. Product

60. Price
• The mainstream strategy price was decided to
be $1.85 .
• Eighty percent of sales through dental
professionals would be priced at $0.79 per
unit; the remainder would be sold at $0.95.
• Practically all retail sales were done at a 5%
Discount.

61. Promotion
• Advertising
Year 1 - $15Million
Year 2 - $12Million
• Consumer Promotions
Year 1 - $13 Million
Year 2 - $10 Million
• Trade Promotions
Year 1 - $4.8 Million
Year 2 - $7 Million

62. Place(Distribution)
• Food Stores
• Drug Stores
• Mass Marketers
• Military
• Club Stores
• Others

63. Conclusion
• Precision is a technological breakthrough
capable of changing CPs future .
• We have discussed how it should be
positioned , branded and communicated
among consumers.
• We have also developed the Profit/Loss Pro-
forma and developed the marketing Mix
• This can be accepted by the other colleagues
including CP plus product manager.

64. Disclaimer
• Submitted by VARUN KAPILA during the
internship under Prof. Sameer Mathur .