Colgate is facing increased competition in the toothbrush market and a decline in market share for its Classic and Plus lines. The introduction of the super premium segment has been successful, accounting for 35% of the market. Colgate is considering launching a new toothbrush, Precision, targeted at the super premium segment to focus on gum health. Precision has the potential to increase Colgate's market share to 7.4% in the first year and generate a profit of $14 million in the second year with $15 million spent on advertising. Positioning Precision as a mainstream product could gain an even higher market share and contribution margin for Colgate compared to a niche strategy.

1. Colgate Precision Case Analysis
Usha Vijayakumar
123800153
Professor Duncan Reith
20-Nov-2016

2. Executive Summary
• In 1991, Colgate launched new products in the market and held 43% of the world toothpaste market with 16% of the world
toothbrush market. The worldwide sales of Colgate oral care products increased by 12%. Colgate ‘Classic’ was positioned in value
segment and Colgate ’Plus’ was positioned for the professionalsegment. But the Super premium segment was having a huge
impact in the overall toothbrush sales capturing 14% unit volume in two years
• Also it is observed that the customers are becoming more apprehensive about the gum health . Hence the toothbrush market
has shifted the focus from the traditional aesthetic brushes to a new, more technically advanced toothbrushes. And Colgate
was facing heavy competition from companies like Johnson & Johnson, Proctor & Gamble
• Given the current strategy, Colgate Plus and Classic are expected to see a significant decline in their market share and Crest is
expected to the gain large portion of market share with its entry into Super Premium segment
• In August 1992, Colgate Palmolive Senior Management deciding to launch a new toothbrush, namely Precision. In order to meet
the customer demands and enable the product to reach its full potential, it should be launched with a perfect marketing mix. A
well targeted customers and reachable promotion strategy and identifying the correct segment for launch can establish a
successful product.
• Colgate can launch the product as a Mainstream product with focus of media advertising on its first year. With $8M investment
for production and $15M media spending, Colgate will gain an IRR of 108% and NPV of $10,699 and also achieve the Share Of
Voice to 15%

3. There Is An Increase Of Demand In The US Toothbrush Market And Competition Is
On the Rise
• The total sales of toothbrushes accounts for $453 in million
in retailsales
• U.S population growth is expected to increase onan
average of1.28%
• Average toothbrush buyer per year 1.6approximately
Factors influencing marketdemand
U.S Oral care market - $2.9Billion retail sales
(1992)
Annual growth rate - 6.1% (since1986)
 Increase in US population
 Media and coupon promotions are increasingrapidly
 Increase in frequency of replacing drives the marketdemand
 Increase in the number of players in themarket
Retail
Market
Size
Forecast
Growth by1.19%
Growth by1.17%
Growth by7%

4. The impact of Super-Premium Segment introduction in the Toothbrush market
Toothbrush Market
ValueSegment ProfessionalSegment
Erosion ofvalue
segment
Increase in Professional
Segment
ValueSegment ProfessionalSegment Super PremiumSegment
• $1.29 average price
• 24% unit volume
• 12% dollarsales
• $1.59 & $2.09 averageprice
• 41% unitvolume
• 42% dollarsales
• $2.29 and $2.89 avg.price
• 35% unitvolume
• 46% dollarsales
3 major market players in1992
1980
1990
1992 Colgate
Palmolive
Johnson and
Johnson
Oral-B P&G
Smith line
Beckman
With the launch of Super-Premium segment and introduction of the new
players in the professional segment, there was a decline in the value
segment.
By 1991, Crest entered the market as Super Premium with 2%, J&J,S&B
and Oral-B gained major market share of thesegment
A significant 13% increase in the market share is expected in
the Super Premium segment by 1992

5. The shift of consumer buying behavior focusing more towards oral hygiene is
correlated with the increase of super premium segment
• In accordance to the CP research, the adults who were born between 1940 to 1960 were concerned about their gum health and
hence called ‘Baby boom generations. 82% toothbrush purchases are unplanned
• In spite of the dental recommendation to replace brushes every 3months, frequency pattern displays that the customers only
replaced their brushes on an average of once in 7.5 months. In effect of the “two-for-one’ offers, the replacement frequency
dropped by to 11.6 in 1991 and expected to reduce further to 9.7 in 1992
• Major customers, appx 63%, purchased a brand which fits most comfortably in the mouth.
• From the various concepts test, 29% of potential customers state “Definitely buy” implies that the customers are increasingly
becoming aware of the Oral hygiene.
TherapeuticBrushers
•Has the knowledge of
products
•Personalbuyers
•Brushes twice a day
•Uses professional
toothbrush
•Oral B Angle, Regular, Reach
and ColgatePlus
Cosmetic Brushers
•Buys for cosmetic benefits
•PersonalBuyers
•Brushes twice a day
•Uses mouthwash, freshener,
flosset.,
•Colgate Classic, Oral-B
Regular and Colgate Plus and
Oral-B Angle
Oral HealthConsumers
•Lack of knowledge about
category
•Familybuyers
•Brush once daily or less
•Less use of mouthwash, floss
•Colgate Classic and Oral – B
regular
Plaque removal & preventing gum
disease, together is the most important
factor in the purchase decision by
potential consumers

6. With current strategy, given the competitive landscape and changing consumer behavior,
Colgate is expected to foresee a decline of 8.6% in the market share by 1994
• From the market shares, it is observed that the unit market share
and dollar sales was decreasing for Classic and Plus.
• In spite of increase in the total share, the growth rate has been
declined by 3% in1992
• Private Label grabbed nearly half the market share from others
segment in 1991 and is expected to become a challenge for
ColgateClassic
• Colgate Plus was leading “Professional” segment but there was
less increase in 1992. All other professional products was
declining since 1990
• With the current strategy and products, Colgate is expected lose
approximately 9% of its share to its competitors’ emergence in
the Super-Premiumsegment
With Classic and Plus being challenged by the competition,
Colgate needs to launch new products and enter new
markets to retain the major player position

7. Introducing Precision toothbrush in the Super Premium segment, Colgate Palmolive will
gain 7.4% market share in first year and 12.5% market share in second year
● Precision was developed focusing the customers who concerned about gum disease and successful at 35% increase in plaque removal
● Precision will ensure Colgate Palmolive remains the market leader in the US toothbrushmarket
● With Precision, Super Premium segment of the tooth brush market will increase by 4.6% and 7.5% successive years
● Increased promotional activities by Crest, Oral-B and Reach Advanced will gain higher market share without precision.
● Precision will impact the existing market leaders of Super PremiumSegment

8. Without Precision, Colgate would lose 3% market share and 7M in dollars as Crest would
acquire the market shares from other Super Premium brands
● Crest would acquire 7% of market share
from Colgate and other Super Premium
brands
● With no increase in market demand for
Professional and the rise of Private Label in
Value segment, Colgate would lose $7M by
1994
● With the same advertising costs and trade
promotions, Colgate is not expected to gain
the market share either in Units or Dollars
To gain the highest market share in Units/Dollars, Colgate should target the effective segment of customers

9. Contribution Margin of $14.2 Million suggests that Colgate Palmolive Precision should be
launched as a mainstream product
● Given the large number of customers shifting the focus towards oral hygiene, Precision must be appropriate choice for mass
market
● Positioning Colgate Precision as a mainstream product gives an estimated Contribution Margin of $14.2 million and $37.08
million in the first and second year respectively.
● In spite of the higher investment cost and variable costs, the total sales is expected to be $73 million and $103 million for the
successive years is approximately $50 million higher than the Nichestrategy
Colgate Palmolive should
position Precision in the mass
mainstreammarket

10. Colgate Precision will gain profit of $14M in its second year with price at $1.76 by itself
• Priced at $2.5 lower than the other competitors, market share will increase by 5% in 1994 as the total super premium market demand
will increase
• Net Income would highly increase in the second year with respect to more number of units sold that contributed higher sales and
lower fixed cost with respect to sales

11. With Cannibalization of Plus and Classic, Colgate traditional market would significantly
decline
Classic with Precision Plus with Precision
• Considering the cannibalization is 35% of Colgate Traditional Market, Net Income would be negative for Classic and highly reduced for
Colgate Plus as the units sold decline and fixed costs also increases
• Major market of Classic and Plus would decrease in effect of Precision and Private Label

12. Colgate would gain market share and generate higher contribution margin and net income
with Precision
Total Base Total Innovation

13. Advertisement expenditure should be spent $15M for first year on Precision to read 7.4%
market share and retain the same for Classic and Plus
• Media spending should be higher to increase the Share Of Voice for Colgate and reach the market share required forPrecision
• Higher Consumer promotions are needed more for Precision than the traditionalmarket
• To retain the traditional market, Colgate Classic and Plus should have the same media spend and expenditures
• Investment costs will be required for 13 Tufters, 6 Handlings molds and 1 packaging for the units sold in precision

14. Precision can break even in its first year with IRR of 108% and NPV of $10,699 at a hurdle
rate of 10%
Change

15. APPENDIX 1 Market Size Projections

16. APPENDIX 2 Positioning

17. APPENDIX 3 Investments Costs

18. APPENDIX 4 Share of Voice

19. APPENDIX 5 Selling Price