PROBLEM Colgate-Palmolive is in a tight spot on how to finalize the position of Precision toothbrush and its corresponding branding and

communications strategies. OBJECTIVE To come up with a final decision as to which is the best positioning of Precision and its branding and communication strategies that will somehow contribute in maximizing its profits. AREAS OF CONSIDERATION 1. The Colgate-Palmolive Company was founded in 1806 by William Colgate. They began introducing oral health care products to the market in 1873, by producing its first toothpaste, an aromatic dental cream sold in jars. By 1991, Colgate-Palmolive had become the leader in not only household products but also in oral health. 2. By 1991, Colgate-Palmolive held the number one position in the world for the sale of oral care products. The companys sales and profits were increasing each year, and by 1991 sales totaled 1.03 billion dollars, while profits totaled 9.8 million dollars,. At this point in time Colgate had introduced two different types of toothbrushes to the market, the Colgate Classic and the Colgate Plus. 3. Production began for the Precision toothbrush in 1989 when the company put together a research team whose purpose was aimed at testing the design of the toothbrush, how the company would market the product, and how the company would gain a competitive advantage over others. This led to the introduction stage of the product life cycle, with the launching of the Precision toothbrush to the oral health care market in 1993. 4. The main design of the product concentrated on the bristles of the toothbrush. Because of the newly innovated bristles, the removal of plaque increased by 35% when compared to other leading producers of toothbrushes. 5. The Precision toothbrush can be classified as either a homogeneous or heterogeneous shopping product. Some consumers may see it as a homogenous product because they see all toothbrushes as the same, and place their attention on the lowest prices. Others may see the toothbrush as a heterogeneous product because they see the need to inspect for quality and suitability. 6. Under a niche-positioning strategy Colgate-Palmolive would price the toothbrush at $2.13 a unit. Under a mainstream-positioning strategy, the company would price the toothbrush at $1.85 a unit. If the toothbrush was sold to dental professionals eighty percent of sales would be priced at $.79 per unit; the remainder would be sold at $.95. 7. Colgate-Palmolive considered many different names, which included, Colgate System III, Colgate Advantage, Colgate 1.2.3, Colgate Contour, Colgate Sensation, and Colgate Probe (Harvard). Colgate-Palmolive decided upon the name Precision, because they did not want a name that could lead customers to associate the new toothbrush with their already existing toothbrush, Colgate Plus.

8. The price budget for promotion was set at 14.4 million dollars. The companys promotion plan was to induce trial (Harvard). Colgate- Palmolive planned to promote the Precision toothbrush one, by offering a free five-ounce tube of toothpaste or a fifty percent off coupon that could be put towards any other size of toothpaste to every consumer who purchased a Precision toothbrush, and two by offering $.50 off coupons. 9. The position of the Precision toothbrush could be niche or mainstream. If the position were to be niche, concentration would be placed on the prevention of gum disease, and retail sales would represent 3% volume share of the toothbrush market in year 1 and 5% in year 2. If the position were to be mainstream, concentration would be placed on being the most effective brush on the market, [and] volume shares would be 10% in year 1 and 14.7 in year 2,. The decision on where to place the new toothbrush on retail shelves is another important aspect of positioning. Colgate-Palmolive chose to place the toothbrush in between one of their existing products and a competitors product. 10. The oral health care market is spread worldwide mainly targeting grocery, drug, convenience, and large retail stores. The toothbrush market in the past had few types of toothbrushes, while todays market carries many various types of toothbrushes. This may have been due to lack of consumer concerns with what type of toothbrush they desired. 11. Many toothbrush purchases are unanticipated, with consumers purchasing toothbrushes once every 11.6 month. Forty-eight percent of consumers claimed to change their brushes at least every three months; the trigger to purchase a new brush for 70% of them when their toothbrush bristles became visibly worn. Eleven percent decided to switch to a new brush after seeing their dentists, and only 3% admitted to purchasing on impulse,. 12. Many consumers base a lot of their purchase decisions on how comfortable a toothbrush feels in their mouths, whether the bristles are soft enough, whether the head shape suits their mouth size, or whether the toothbrush is flexible enough. They also base their purchases around the ability of the toothbrush to remove food particles; plaque removal and gum stimulation,. 13. When it comes time to purchase a toothbrush, there are three different consumer groups. These groups include therapeutic, cosmetic, and uninvolved brushers. Therapeutic brushers are concerned with oral care problems. They brush to prevent disease or other oral health risks, and search out functionally effective products. Cosmetic brushers are concerned with bad breath and their appearance, and search for products that effectively deliver cosmetic benefits. Uninvolved brushers view all products the same and lack interest in this product category,. 14. Competitors: Oral-b: Indicator, Johnson & Johnson: Reach, Proctor & Gamble: Crest Complete, Smithkline Beecham: Aquafresh Flex 15. In 1991, it was estimated that Oral-B held 23.1% of the market share and Johnson & Johnson held 19.4% of the market share. With companies holding such large shares of the market, Colgate-Palmolive had to worry about the innovation of new products that could compete with the Precision toothbrush. Companies that hold large market shares can afford to pay for more advertising for a newly developed product. It was to Colgate-Palmolives advantage that they had their share of 16% of the toothbrush market. 16. Aside from convenience stores and large retail stores, many food stores played a key role in the distribution of oral health care products. Mass merchandisers gained share due to increased in-

store promotional support. Because of the increase in the demand for oral care products, stores began shelving more oral care products. This was a big advantage for Colgate-Palmolive because there would be more room in the stores for them to market the new Precision toothbrush. Dentists also played a big role in the distribution of oral care products. 17. Since many of the food stores began to open more shelf space for oral care products, this would allow for Colgate-Palmolive to situate the Precision where they thought it would gain attention from consumers. The only drawback about distribution for Colgate-Palmolive was dentists. Colgate-Palmolive did not hold the market share for the distribution of toothbrushes in dentists offices. With a dedicated sales force, Oral-B dominated this market. Without dominating the dentist market for toothbrushes, Colgate-Palmolive would have to focus more strongly on other retail locations, considering in 1992, 22% of all toothbrushes were expected to be distributed to consumers by dentists. 18. It has been proven that increasing promotion has lead to an increase in consumer demand. Both Colgate-Palmolive and their competitors spent a lot of money on the promotion of their new products. Johnson & Johnson spent $8 million in medias support to introduce its new Reach brush; Oral-B spent $10 million to launch its new Indicator brush; and Proctor & Gamble was expected to support its Crest Complete brush with $15 million in media expenditures,. 19. The Total media spending for the category, primarily on television advertising, was estimated to total $55 million in 1992 and $70 million in 1993,.Between the years 1985 and 1992, ColgatePalmolive ran four different commercials. Each commercial had its own marketing situation, platform, execution plan, and tag line. The marketing situation that the last commercial dealt with before the introduction of the Precision toothbrush was Increased competitive activity and consequent need for harder-hitting copy. ALTERNATIVE COURES OF ACTION 1. Niche-Positioning (targets therapeutic consumers) a. Advantages i. Differentiation from other toothbrushes ii. SKUs will not decrease if Colgate-Palmolive will position the Precision toothbrush as a niche iii. If costs for producing the Precision decreases, losses will be reduced b. Disadvantages i. Sales in mass merchandising decrease ii. Retail sales will be less 2. Mainstream Positioning(being the most appealing & effective toothbrush available in the market) a. Advantages i. Most retail stores are under mainstream than niche. ii. Super Premium position is the most superior. iii. This will increase name recognition for Precision.

b. Disadvantages i. Prices are same with other brushes ii. The rise of cannibalization. iii. Reduction and removal of one or more SKUs. 3. Position the Colgate Precision in Niche market for 10 Months and afterwards position the brand in the mainstream products a. Advantages i. Positioning the Colgate Precision under the Niche market can give time for the company to increase their capacity ii. Niche market cannot stand long because competition will make the other manufacturers create a better product iii. Transition from an expensive item to something cheaper is better. iv. If sales volume will increase further it will outpace the cannibalization loss b. Disadvantages i. Sales in mass merchandising decrease ii. Retail sales will be less iii. Customers in the niche market will go away because of the lesser price.

RECOMMENDATION Alternative Course of Action 3 CONCLUSION The best alternative course of action that the company can come to is to position the Precision brand in the Niche market until such time that the company can increase its manufacturing capacity. As the demand for precision grows, the company when it has the manufacturing capacity, can switch to a mainstream position. Because of the effectiveness of the product based on research, customers will want to have this toothbrush at the lowest possible price. Distribution Channels Colgate-Palmolive in marketing their product should make use of various distribution channels to bring the product to households. A summary of the channels is shown below: Short term Long-term

Drug Store Mass Merchandiser Attract customers with gum diseases Sales in Mass merchandisers now about 21% Build-up hign-end image for future expend into market share mainstream market Expanding in fast pace in the future Need more in-store promotion support

Food Store Club Stores Estimated 43% of the whole market in 1992. Current only small portion of the market but For home user to gradually accept the new increasing across time product Dentist and Professionals Foods Stores Colgate-Palmolive need to directly compete with Still the biggest market share Oral-B Focus on home users Product Differentiation Strategy As stated in the case, consumers are not really price sensitive in the toothbrush market and they prefer a product that has to offer more features. The Precision should be branded in such a way that would make it entirely different from existing toothbrush in the market. They can for example emphasize in their product advertisement and also in their packaging that the product is 35% more effective in removing plaque. They could also emphasize the design of the product itself and highlight that it has three bristle which has different purposes to achieve over-all gum protection. Price/Quality Differentiation Strategy Pricing for the item should be at par with the price of existing competition. Most customers really want to have the best value for their money and by creating a product that is far more superior than competition at probably the same price there is no doubt that customers will be buying Colgate Precision. Target Market The product should be positioned to target those customers who have gum problems and those who are oral-health conscious people. Basically those people who have gum disease wont care about the price as long as they will see a clear benefit from buying the product. As the Pro-forma Statement

As Niche Product Y1 Y2 12MM 20MM (3%) (5%)

As Mainstream Product Y1 Y2 42MM(10%) 59MM(14.7%)

Market Demand (Units) (volume shares) Tufters Capacity and Initial Investment Cost Handle Molds .5M*2 .3M*2 .5*7 .3*3 .5M*14 .3*6 .5*20 .3*9

Packaging Annual Depreciation Manufacturer Cost Per Unit Manu. Listed Price Advertisement

.15*1 .317M 0.66 2.02 11.2

.15*1 0.45

.15*2 .887M 0.64 1.76

.15*2 1.267M

11.7

32.8

29

Net Sales Cost of Sales Advertisement Operating Profit Plus Rice Classic Price Gross Margin Quantity (MM) Cannibalization Loss Net Profit (M) 1.35 0.69 50%

as Niche Product Y1 Y2 26.26 40.4 8.58 13.2 11.2 11.7 6.48 15.5

as Mainstream Product Y1 Y2 73.92 103.84 26.88 37.76 32.8 29 14.24 37.08 50%Plus & 50%Classic 35% 60% Y2 Y1 Y2 10.325 12.6 17.7 10.325 12.6 17.7 10.53 26.55 12.85 1.39 18.05 19.03

100% from Plus 35% Y1 14.7 9.92 4.32 Y2 20.65 13.94 23.14 Y1 25.2 17.01 -2.77 60% Y2 35.4 23.9 13.9 Y1 7.35 7.35 7.5 6.74