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
