Marketing Case Presentation, Group 8

Aneesh Shankar CV

Raghav Ghosh

Charani Hekha

Soumyak Basu

Kingsley Samuel K

Vivek Kumar

Launch of Precision Toothbrush

Wednesday, August 14, 2013

Situation Analysis Toothbrush Market

US toothbrush market grew at 21% in 1991 to reach $ 453 Mn; Oral-B is market leader

Overview

Valued at $ 453 Mn (92); 21% value growth due to 47 new products / extensions
Highly competitive market with substantial new product activity in last 1 year
Majority of new launches in $ 209 Mn Super Premium segment

Market Segments 91 Key Players

$ 453 Mn

$ 453 Mn

Superpremium

$ 209 Mn

Market Shares 91

Oral-B

Key Trends
1 4 major super

31%

Oral-B

23%

Colgate

premium
launches by
Oral-B, J&J, P&G
and Smithkline
Beecham

2
Professional

Value

$ 190 Mn

Colgate, J&J

22%

J&J

$ 54 Mn

Colgate, Lever

24%

Others

1992

1992

Food stores,
drug stores and
mass
merchandisers
key distribution
channels

Situation Analysis Colgate Palmolive

Colgate plans to launch Precision, its first brand in the super-premium segment, in 93

Company
Overview

Global leader in oral care market in 91 with sales of $6 Bn, profit of $2.76 Bn

US toothbrush sales of $77 Mn highest volume share of market (23%)

New
Product
Launch
Precision
Toothbrush

Emphasis on geographical expansion, new product launches, efficiency

improvement and core consumer products in 1991-95 plan

Plus and Value brands in professional and value segments respectively;

however, no brands in large and growing super-premium segment
Started development of Precision in 1989 with aim to develop
superior, technical plaque removing tooth brush.
Used advanced technology to track brushing movement and
level of plaque removal resulted in technical innovation,
increasing plague-removing capability by 35% over Oral-B
Decided to launch Precision in early 1993 priced in the
super-premium category and distributed through same
channel as Colgate Plus

Problem Definition

How to position the Precision toothbrush in the

minds of the consumer
We will use a weighted
evaluation method to
decide positioning

Corresponding to positioning, design of:

Branding and Communication strategy
Advertising and Promotion budget
Precision Marketing Mix
1

Statement of Objectives

1. Launch Precision as a top-of-the-range, super1

premium product
2
2. Maximize profits from the Precision brand in the

short and long-term

3
3. Minimize cannibalization effect on other CP brands
4
4. Build Colgate brand equity in the toothbrush market

Evaluation Criteria
The following criteria will be used for evaluating the
optimal positioning for Precision:

Super-premium , top-of-the-range brand identity

Operating Profit

Cannibalization effect

Production Feasibility

Target Market Size

Generation of Options
The following options exist for positioning Precision:
1. Niche positioning
1

2. Mainstream positioning
2
3. Initial niche positioning broadening into a
3

mainstream positioning later

Profitability Analysis Niche vs. Mainstream

Niche

Mainstream

Comparison
Year 1

Year 2

Year 1

Year 2

Planned capacity unit vol. (Mn)

13

20

42

59

Investment in capacity ($ Mn)

3.25

1.3

9.1

3.9

316,667

450,000

886,667

1,270,000

0.66

0.66

0.64

0.64

15

12

Consumer promotions ($ Mn)

4.6

13

10

Trade promotions ($ Mn)

1.6

2.7

4.8

Per unit cost ($) Marktg.

0.86

0.59

0.78

0.49

Total per unit cost ($)

1.52

1.25

1.42

1.13

Trade price ($)

2.02

2.02

1.76

1.76

Per unit Operating Profit ($)

0.50

0.78

0.34

0.63

Depreciation ($)
Per unit cost ($) Manuf.

Advertising ($ Mn)

Evaluation of Options
Criterion
Weight

Option #1:
Niche

Option #2:
Mainstream

Option #3:
Niche then
Mainstream

Super-premium brand
identity

25%

Operating Profit

25%

Cannibalization Effect

20%

Production Feasibility

15%

Target Market Size

15%

Total

100%

4.5

1.85

3.45

Evaluation Criteria

5-point Scale Used: 1 Least favorable ; 3 Moderately favourable ; 5 Most favourable

1

Decision Making

On the basis of evaluation against key criteria,

we recommend a Niche Positioning (Option #1)
for Colgate Precision
Now, corresponding to a Niche Positioning, we
design the:
Branding and Communication strategy

Advertising and Promotion budget

Precision Marketing Mix

Profit and Loss Pro forma

1

Elements of Niche Positioning

Target Segment Therapeutic Users

Differentiated Positioning
Points of Difference

Adult Users

Therapeutic
Users

Uninvolved
Users

46%

Cosmetic
Users

Differentiate among
products; search out
functionally effective
products
Self-purchase products
85% brush at least twice
a day

21%

Best brush possible

35% more effective than
competition in plague removal
Unconvenational, unique 3layered design with 3 kinds of
bristles
Price premium

Brands used are Oral-B

Regular and Oral-B Angle

33%

1992
3

Positioning Map
Most Effective In Gum Protection

Precision

Least effective
in removing
Plaque

Reach

Oral-B

Most effective
in removing
Plaque

Least Effective In Gum Protection

4

Branding

Concept
Tests

Brand names tested: Colgate Precision, Precision by Colgate, Colgate System

III, Colgate Advantage, Colgate 1.2.3. Colgate Contour, Colgate Sensation,
Colgate Probe
Colgate Precision was deemed appropriate by 49% of concept acceptors and
appealing by 31%

Use Colgate to
build on brand
equity

Recommended Brand Name

Colgate
Precision

Rationale
for
Selection
Precision: drive the
Inventor Pioneer
image

Scepticism over cannibalization of Colgate

Plus by Colgate Precision is mitigated to a
large extent since they are targeted to different
segments, professional and super premium
segments respectively.
5

Communication

Concept Test 1

Plaque Remover
Healthier Gums
Trouble Spots

Concept Test 2

35% More Plaque

removal Prevents
gums diseases
Offered separately

Concept Test 3

Gum disease/
Replacement
Offered separately

Concept
Test 4

Concept Test 4
Pricing with respect
to Oral B lower or
higher

Highest Scores across all 4 Tests

Recommended Communication:

81%
80%

Probably Buy

19%
Definitely Buy

Both

35% More Plague Removal

Prevents Gum Disease

The more consumers were told of Precision and

how it worked through tests, it built greater
enthusiasm. These tests made a direct appeal to
consumers who might have otherwise never
acknowledged they had a gum disease.
6

Advertising & Promotion Budget

Marketing Mix
PRICE

PRODUCT

Technical innovation 35% increase

in plague removal vs. competitors

Triple action brushing effect

100% more effective than
competitors in removing plague at
gum line and between teeth

4Ps

Priced in super premium segment

Retail price of $2.89 (highest priced
brand in the market); 9% premium
over Oral-B Indicator (2nd most
expensive) and 15% premium over
Oral B-Regular (key competitor);
Trade price of $2.02

PLACE

Food and drug stores, with 75% of

retail toothbrush sales, will be
primary distribution channels
The dentists channel, expected to
account for 22% of sales in 92, will
also be critical to establish niche
positioning

PROMOTION

X
X
X
X
X

Profit & Loss Pro forma

Niche

Proforma Income Statement

Sales ($ M)

COGS ($ M)

Operating Income ($ M)
Expenses (admin, marketing) ($ M)
EBIT ($ M)

Year 1

Year 2

26

40

8.58

13.20

17.7

27.2

11.2

11.7

6.48

15.50

Contingency Plan