Transcript
Colgate Precision
Concerned Authorities
Susan Stienberg ( Precision Product Manager )
Nigel Burton ( Division General Manager )
John Phillips ( Colgate Plus Product Manager )
Problems to be TackledPositioning, Branding and Communication Strategy for Precision (Colgate's new toothbrush line)
Avoiding Cannibalism of Colgate Plus
Allocation of Advertisement and Promotion Budget
Colgate’s Current Position (1991)Toothbrushes Contribute 19% of CP’s U.S. Oral Health Care sales and profits.CP holds No. 1 Position is U.S. retail toothbrush market with 23% volume share.Total Market Sale of CP’s toothbrushes = $77 million.Net Profit form this sale =$9.8 million.
Market Share of Different Category of ToothbrushesCATEGORY Avg. Price ($) Volume Sale Dollar Sale
Super-Premium Brushes
$2.6 35% 46%
Professional Brushes
$1.9 41% 42%
Value Brushes $1.29 24% 12%
Colgate Precision was going to be priced in Super-Premium category
It could be priced as a niche product or a main-stream product alongside its counter part Colgate Plus.
There were different Pros and Cons in both the category and Susan had to decide which category should she position Precision.
As a Main-Stream ProductChances of Cannibalizing Colgate Plus ( mainstream toothbrush of colgate)Retail Unit Volume Sale in first two years = 70.9 MMManufacturer Per Unit Cost = $ 0.64Manufacture Per Unit Price = $ 1.76No. of SKU’s Introduced = 7Chances of not fulfilling the product demand.Colgate will have to drop some slow moving SKU’s to create space for precision.
As a Niche ProductMain competitor Oral B’s Indicator Brush (well established).Retail Unit Volume Sale in first two years = 23 MMManufacturer Per Unit Cost = $ 0.66Manufacture Per Unit Price = $ 2.02No. of SKU’s Introduced = 4Can be accommodated without dropping any SKU.Demand can be satisfied with current production capacity.
Profits Niche vs Main-streamNiche’s Unit Sold = 23 MMNiche’s Per Unit Margin = $ 1.36Niche’s Profit = $ 31.28 million
Mainstream’s Unit Sold = 70.9 MMMainstream’s Per Unit Margin = $ 0.72Mainstream’s Profit = $ 51.28 million
Profits Niche vs Mainstream ( cont.)Although Profit of Mainstream product appears higher than Niche but these profits are expected to arise from cannibalism of 35 – 55 % of Colgate Plus’s sale. 45 %(cannibalism) of $ 51.28 million (Profit Mainstream) is = $ 22.97 MM.Hence on considering the effective profit earned by mainstream product is = $ 28 MM.Therefore Profit by Niche Category is more ($ 31.28 million).
Pricing Strategy for Precision
Considering Profits and to avoid Cannibalism of Colgate plus introduction of Precision as a Niche product is better.
Branding StrategyStressing Precision in comparision to Colgate would limit cannibalization of colgate plus.Even Precision as Niche product would cause as much as 20% cannibalization of Colgate Plus while stressing on Colgate rather than Precision.Therefore the name Colgate Precision must not be adopted.
Promotional Strategy of PrecisionA survey indicated that a product promising to reduce gum-diseases motivated greatest purchase intent.Therefore focusing on Precision’s gum related qualities is most important.Consumer tests revealed that more people were interested in buying the product once they tried it.Therefore sampling will be important for Precision’s success.
Susan was considering following promotional activities :
• A 5 oz. tube of Colgate toothpaste free with a precision toothpaste.• 50% off on toothpaste up to value $1.• 50 Cent discount coupons.• $1.99 mail discount coupons.• Channelling 3million brushes via. Dentists ( To increase
the credibility)
Advertising Strategy for PrecisionIn the case of toothbrushes increased advertisement and promotion enhances category’s visibility which in turn fuels consumer demand.This is clearly depicted in data below (Year 1992’s data)
Product Media Expense $ MM Share Voice (%)
Colgate Plus 8 15
Reach 17.1 31
Oral-B 11.2 20
Others 18.6 34
Advertising Strategy for Precision(Cont...)
The data clearly shows that expenditure on media advertisement is directly proportional to product’s voice share in market.Therefore it is important to have a substantially high budget for media advertisement of Precision as a Niche product.Susan proposed 80% increase in CP’s advertisement budget and out of which 75% must be used for Precision.
Summary• Precision must be priced as Niche product.• Branding must give stress on Precision as compared to
Colgate.• Precision must be promoted as gum caring product.• Higher budget should be allocated for media
advertisements.
Thanks for reading.These slides were create by Samarth Gupta (BITS Goa) under guidance of Prof. Sameer Mathur (IIM Lucknow).
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