Colgate Precision Case Analysis
Case Analysis: Colgate Precision Prepared for Instructor University Prepared by Student University October 19, 2011 INTRODUCTION Colgate-Palmolive has been researching and developing a superior toothbrush, the Colgate Precision, and as the Precision Product Manager I have overseen the development of the Precision from start to finish. We have been developing a technical innovation in the toothbrush industry, and with the product’s launch pending there have been several factors yet to be decided upon.
With a tremendous amount of resources pooled into the development of the Precision and the recent competitive market we are launching it in, it is essential the positioning and branding of this toothbrush are executed properly. The Precision, if done successfully, should stand out as a technological breakthrough to consumers and limit cannibalization of current Colgate brand toothbrushes. Another key issue that is at play for the business is whether the Colgate Plus brand will be cannibalized following the introduction of our new toothbrush.
Through analysis of the marketing mix for the Precision toothbrush, and weighing the financial benefits and costs relative to the two positioning strategies, I will address the correct course of action for the Precision toothbrush to sustain a competitive advantage in the market. RECOMMENDATIONS My recommendation is to introduce the Precision toothbrush into the niche market, as it is a significantly advanced toothbrush and should be tested on a smaller scale before being placed into the mainstream.
The toothbrush needs to be positioned as a technological breakthrough in oral care, to young adults and baby boomers, who are concerned about plaque removal and gum disease. If that initial strategy is successful I advise moving towards the mainstream market with additional inventory. Secondly, the correct branding of the product should be “Precision by Colgate”, rather than the “Colgate Precision”, as extensive research should support our design as an elite toothbrush that stands on its own. ANALYSIS
This analysis considers the core competencies of our new product, the external factors affecting the market, the financial estimates of our sales, a SWOT analysis of Precision, and other significant factors reflecting my final decision. Precision’s Mission Part of my decisions branched from our initial mission, developing a “superior, technical, plaque removing device”. A super-premium toothbrush, especially one like ours with extensive research, should not be placed on a mainstream agenda right away, as it may confuse consumers what the toothbrush is trying to achieve.
In our launch we need to keep in mind the adoption process most consumers go through when purchasing products that relate to their personal health. Though we have tested it and confirmed it’s effectiveness in labs and within focus groups it’s important those truly invested in their teeth and gum care, and consumers familiar with Colgate brands, agree it is an elite product and one they will continue to purchase. Pursuing our initial mission should effectively target the therapeutic and cosmetic brushers who are looking for a professional toothbrush (Case, Table B, p. ). Our distribution strategy is also crucial to the core competence of Precision; we would weaken our position if the product ran short on availability following launch. Following the initial launch I feel that the mainstream distribution strategy to mass merchandisers and club stores can be achieved to maximize profit (Exhibit 1, attached). We currently have the majority of our market share in mass retail stores (Case, Exhibit 7) so once we have tapped into food and drug store market with the precision it should be relatively easy distributing them to these retailers.
Branding Tactics With its triple-action brushing effect, twice as effective plaque removing ability, and gum line reach bristles Precision should be branded to stand alone rather than a Colgate extension. Although an initial niche positioning would place it on shelves next to the Plus and Classic it will raise awareness to the brush and hopefully prepare it for a broader audience. The brush will still be communicated to consumers as a design by Colgate, it will not be excluded from the packaging; therefore brand equity should not be a concern.
The possible threat of a near saturated premium toothbrush market with Johnson & Johnson and Proctor & Gamble now entering the industry hopefully will be reduced with a brand focused on the specific product and not Colgate. Positioning the Precision Taking a multi-step approach to our positioning of the Precision is crucial to ensure that it exceeds initially and continues to thrive when introduced to a larger target market.
As one of our competencies, the gum disease prevention and plaque removal effects, needs to be stressed to a target market that is interested in it. While it is also convenient for distribution purposes going to a niche position first can also reach those segments that are interested most in our product. I believe that through our in-depth research of developing a brush for the super-premium segments we should be reaching those interested in paying the premium price as well, which might not do so well initially selling to a mainstream market.
Those going to a drug or food store would be more interested in finding a brush that is going to be of distinct value rather than a big retailer where one would find cheaper brushes attached to 2-for-1 deals and coupons. Once we have achieved successful sales in our initial efforts we can move into a more widely distributed placement of the Precision and its effects are proven. Working with dentists to promote the new offerings of our toothbrush, as a premium brush will also aid in competition with Oral-B, who excels in this area, and having affirmation behind our claims.
CONCLUSION After a thorough analysis I would like to see us follow through with our planned launch of the Precision, into niche markets, as we have assumed that a mainstream launch would delay distribution and harm sales during a lag of inadequate inventory. Moving into mass retailers afterwards will improve sales in the long run will be the next step once it is well stocked. Touching upon the design of the product and its extreme ability to remove plaque twice as effectively than leading brands, as well as clean between the gum lines.
The Precision should remain exactly that, because the quality of the product should stand above even the brand of Colgate to exemplify to consumers the revolution of our product for the oral care industry. Exhibit 1| | | | | | | Pro Forma Profit & Loss Statement| | | | | | | Niche| Mainstream| | (Units in Millions)| | 1| 2| 1| 2| | Unit Volume| | 13 M| 20 M| 42 M| 59 M| | Retail | | 8. 00| 15. 00| 26. 00| 44. 10| | Unit Sales$| | $16. 10 | $30. 30 | $47. 50 | $77. 40 | | | | | | | | |
Professional| | 3. 00| 3. 00| 8. 00| 8. 00| | Unit Sales$| | $2. 40 | $2. 40 | $65. 00 | $65. 00 | | Total Revenue| | 18. 626 M| 32. 766 M| 54. 096 M| 84. 016 M| | | | | | | | | Operating Expenses| | | | | | | Mfg. Costs| | $7,260 | $11,880 | $22,400 | $33,200 | Millions| Advertising/Promos| | $11,200 | $11,700 | $32,800 | $29,000 | Millions| Sample Costs| | $1,320 | $1,320 | $4,480 | $4,480 | Millions| Capacity Costs| | $316,667 | $450,000 | $886,000 | $1,270,000 | | Total Expenses| | $18. 0| $24. 00| $56. 00| $63. 50| | Net Profit| | (150 K)| 8,736 M| (1,990 M)| 20,466 M| | Exhibit 2 SWOT Analysis Strengths * Superior design and physical features that increased effectiveness * Secondary uses of plaque removal and gum disease prevention * Pre-tested and largely approved by researchers & focus groups * Differentiation from current tooth brushes Weaknesses * Chance of cannibalizing other Colgate brands Distributed through same channel as Colgate Plus Threats (external) * Saturation of premium toothbrush market with J&J and P&G * Poor repurchase rate of toothbrushes: > 3 months recommended Opportunities (external) * Trend towards gum disease awareness among baby boomers * With an initial niche position Colgate can capture more sales in drug and food stores than in past years * Shelf space made for toothbrushes has increased