Colgate- Palmolive Company: The Precision Toothbrush

Case Study

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Assistant Professor

Problem/Issues
In 1992, after evaluating the current market condition and completing its research and development, Colgate-Palmolive was ready to begin marketing its newest toothbrush, Colgate Precision. One major concern to Colgate-Palmolive was how to position, brand and

communicate this new product to the general population. Colgate-Palmolive also had to develop budget constraints and generate a marketing mix that would maximize the sales and revenues of the new product. Colgate-Palmolive faced with the decision of whether to promote the new product as a high quality niche product which was marketed mainly towards individuals concerned about gum disease, or as a mainstream toothbrush that would be marketed as the best toothbrush available. If marketed as a niche product, Colgate-Palmolive would target a smaller market segment without as many competitors compete for market share. A niche market segment would also be willing to pay a premium for the new toothbrush. If, however, the toothbrush were marketed as a high quality mainstream toothbrush, Colgate-Palmolive would realize revenues from larger volumes of sales despite a lower price and more competition.

Evaluation of Alternatives
In August 1992, Colgate-Palmolive had two options regarding the positioning strategy for their new toothbrush titled Colgate Precision. Their choice was to position the product as a

mainstream offering or target the Precision toothbrush to a niche market. The positioning of the product would have little to do with any modifications to the actual design of this toothbrush, but would affect the perception of the toothbrush within the market.

Mainstream or mass marketing refers to the mass production, distribution and promotion of a single product to all potential buyers. Contrarily, niche marketing is a form of micro-marketing. It refers to a specifically defined group of consumers with a need that is not currently well served. A niche is created from a subdivision of a market segment. Due to the diversity of these two market types, the decision to market the Precision toothbrush as a mass-market product or as a niche product involves analysis of the advantages and disadvantages for each.

1. Mainstream Marketing
Advantages The primary reason to use a mainstream marketing approach is that the product is made accessible to a larger market. Marketing to a more diverse audience would enable ColgatePalmolive to construct a more simple and direct campaign that would address the common concerns of all toothbrush buyers. The obvious goal of such a position would be to capture a greater return on the investment, Colgate-Palmolive made on this products research and development effort. It is estimated that within twelve months this product could secure 10% of the market and a volume share of 14.7% by its second year. This would equate to 27 million retail unit sales in year one and 44 million in the second year, if positioned as a mainstream product. Disadvantages There are also many problems with marketing Precision to the masses. In the mainstream market a higher price makes a product less attractive to the average consumer. This means that Colgate will have to price their product within reasonable alignment of other similar products in order to

be a serious competitor inside this market, ultimately diminishing their potential profit margin and return on investment. There is a variance among consumers in relation to oral hygiene. They are classified into three groups: Involved oral health consumers Therapeutic brushers Involved oral health consumers Cosmetic brushers Uninvolved oral health consumers

These segments are divided into relative percentages of adult toothbrush users. They are 46%, 21% and 33% respectively. This illustrates that one third of the toothbrush using adult population has only little interest in oral hygiene and are probably not a worthwhile audience to which to pitch the Precision toothbrush. The expense of including these consumers in the target market would not be advisable. In the design and testing phase of the Precision toothbrush, Colgate-Palmolive accrued significant clinical data concerning the product. This information would not be relevant to the mainstream market that most likely would view it as too scientific. The Precision toothbrush was originally conceived to be a top-of the-range, super-premium product indicating that production schedules had been developed in line with a niche marketing strategy. Mainstream marketing would require a greater volume production of the toothbrush with an estimated ten month lead time to achieve sufficient quantities of the product. This could result in an inadequate supply of the product at the outset.

The objective of the research and development group working on the product was to develop a superior, technical, plaque-removing device. It was produced to be the best toothbrush

possible and become the top-of the-range, super-premium product. All of these phrases are heavily skewed towards niche merchandising. A mainstream product should aim to serve all of the people, all the time. This product clearly was created with niche-oriented goals. The greatest issue facing Colgate-Palmolive if they were to promote this product in the mainstream market is that it would be distributed through the same channels as an existing Colgate-Palmolive toothbrush called Colgate Plus. Colgate Classic was the companys original entry in the toothbrush sector and was positioned as a value segment. The Colgate Plus came later and was placed in the professional segment as a higher quality product. Including Precision as a high-end, mainstream product could potentially cannibalize Colgate Plus sales. Finally, Susan Steinberg, the product manager of Precision, felt that incorporating the new product into the mass market would require the company to delete one or more of the seven existing SKUs (stock keeping units) that Colgate-Palmolive produced. This strategy could result in a loss of market share in the value or high-end segments.

2. Niche Marketing
Advantages A great advantage of offering product to a niche market is that it allows for a concentrated, specific advertising campaign, targeted to a specific demographic, psychographic, behavioral or geographic segment through whichever medium is most effective at reaching the specific population. This allows efficient use of advertising budgets. Precision falls within the class of

goods that could tender itself as a niche product. Developed to be the best toothbrush possible and placed in the super-premium category, this toothbrush is inherently a niche product. Members of the public most interested in this toothbrush would be those in the Involved oral health consumers groups; therapeutic and cosmetic brushers. Therapeutic brushers are

interested in functionally effective products and differentiate between brands. Both segments of customers would appreciate the scientific data Colgate-Palmolive has on this toothbrush. The facts that it removed an average of 35% more plaque over that of Reach and Oral-B, and that it assists in the reduction of the likelihood of gum disease, would be effective information for this group. Niche market participants are also more likely to pay a premium for this product due to the fact that Precision satisfies the distinct set of needs they have. With this type of positioning, a 15% increase in price above Oral-B regular would be anticipated, bringing the cost to consumers to $2.13 per unit (parity with Oral-B Indicator). A mainstream market could only be anticipated to pay $1.85, in accordance with the Oral-B regular line. As Precision was conceived more as a niche-type product, initial production was set for the lower demands of the smaller market segment. To change the natural emphasis of the toothbrush to mainstream distribution we would require a major overhaul of projected production schedule and costs due to the increase number of units required. Additionally, to keep Precision as a specialized product means that the new product is less likely to invade the market share of other Colgate-Palmolive products, like the Colgate Plus. This would also preserve the number of SKU that Colgate-Palmolive currently produces in the toothbrush sector.

Niche markets attract fewer competitors. This gives time and room for a new product such as Precision to establish itself and build up a market share before it may have to fight against a new contender. Disadvantages Marketing the Precision product to a niche market would generate less revenue for ColgatePalmolive than a mainstream approach. Working with the estimated figures for the first two years of release generates the following table. Niche Marketing Year 1 Number of units sold Price Revenue 8MM $2.13 $17,040,000 Year 2 15MM $2.13 $31,950,000 Mainstream Marketing Year 1 27MM $1.85 $49,950,000 Year 2 44MM $1.85 $81,400,000

In spite of the 13% higher price, the niche market revenue is significantly less than the mainstream market revenue.

Branding
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. This is called cannibalization. Ultimately, the name Precision

emerged from the others as it brought to mind connotations of an oral care product that cleans ones teeth completely and consistently. Further, the word Precision provides many of the qualities that are desirable in a brand name, such as positive attributes, high quality and a name which is easy to pronounce, recognize, and most importantly, remember. Regardless of which name was chosen, however, the individual products branding would also be able to take advantage of the brand recognition of Colgate-Palmolive a household name that the majority of the population associates with good dental care.

BCG Analysis
The cyclical nature of the product on the market is well illustrated by the Boston Consulting Groups Growth-Share matrix. The Precision toothbrush will begin as a question mark. This means the company will spend money developing and establishing the product in anticipation of increasing its market share. Subsequently, the hope would be for Precision to become a star, meaning it has been successful by obtaining a high market share and growth rate. If the product evolves into a mainstream offering by this time, the company will reap higher rewards. Going even further into the future, the toothbrush will most likely decrease its market growth rate while maintaining its high market share. At this phase the product will be a cash cow. Revenues produced from Precision at this phase can be used to establish other question marks and/or subsidize other stars if required. The final phase in this products life cycle will be a decline into dog status. This refers to the product when it has weak mark et share and low growth. At that point, Precision would need to be removed from the companys product line, allowed to decline further or all together repositioned in the market.

Recommendation
In summation, we recommend that Colgate-Palmolive position the Precision toothbrush as a niche market product during its introductory and growth life cycle stages. Thereafter, during the products maturity, Precision should be repositioned to the mainstream market. We believe that Colgate-Palmolive positioning the Precision toothbrush as a niche product would establish Precision as the leading toothbrush on the market at a competitive price. It would be a superior and distinctive oral care product. However, we believe this product would also work in the mainstream market and we envision it moving towards the mass market in the future. Once the toothbrush has established itself as a high quality product with specialty features, we believe that Colgate-Palmolive could transition the product to a wider audience. This will also allow time for Colgate to reconcile the position that the Colgate Plus product will hold relative to the Precision line. Further, we anticipate that no negative issues will be encountered by initially marketing Precision as a niche product and then moving it into the mainstream market. We do not believe the opposite would be true, as a niche market will most likely not accept a product that has been offered to the masses as the best value, and then marketed as a specialty item. To ensure the success of Precision, Colgate-Palmolive should continue to address the specific needs of the stated consumer segments. We should also price Precision at competitive levels within the super-premium segment so as to offer more value than competitors, for an equivalent cost. We also can leverage their existing intensive distribution channel relationships to ensure that Precision receives the most effective placement, and, invest industry-standard amounts of capital into the promotion of the new toothbrush.