Strategic marketing: Assignment #2 Case Proctor & Gamble

Table of contents
1 Problem definition........................................................................................................................... 3 1.1 1.2 1.3 1.4 2 Introduction............................................................................................................................. 3 Market problem ...................................................................................................................... 3 Management question ............................................................................................................ 3 Smart goal................................................................................................................................ 3

Internal analysis............................................................................................................................... 4 2.1 2.2 2.3 Company background.............................................................................................................. 4 Brand Loyalty/Consumer satisfaction ..................................................................................... 4 Relative Cost of New product.................................................................................................. 4

External analysis .............................................................................................................................. 5 3.1 3.2 3.3 3.4 3.5 3.6 Macro analysis ......................................................................................................................... 5 Market analysis ....................................................................................................................... 5 New product developments .................................................................................................... 6 Customer analysis.................................................................................................................... 6 Segmentation variables ........................................................................................................... 6 Competitor analysis ................................................................................................................. 7

SWOT analysis ................................................................................................................................. 9 4.1 4.2 SWOT table ............................................................................................................................. 9 SWOT Confrontation matrix .................................................................................................. 10

Strategic options............................................................................................................................ 11 5.1 5.2 Strategic options.................................................................................................................... 11 Strategic evaluation............................................................................................................... 11

6 7

Implementation ............................................................................................................................. 13 Summary ....................................................................................................................................... 16

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1.1

Problem definition
Introduction

Scope is a mouthwash product produced and marketed by Proctor & Gamble. P&G is one of the worlds most successful consumer product companies. A total of 75% of Canadian households use mouthwash and have at least one brand of mouthwash at home. The total market can be categorized as user and non-user. Users are three types: heavy users (once per day or more), medium users (two to six times a week) and light users (less than once a week). The customer needs are various, these needs can be divided into two categories: people that use mouthwash because they just want a better breath and people who use mouthwash because of the health benefits it provides. Scope offers only great-tasting and mouth refreshing on the mouthwash market. If Scope also wants to meet the needs of the other customers, Scope should take the same familiar taste in combination with ingredients to obtain health benefits in their new product. 1.2 Market problem

In 1988 Plax was introduced in the mouthwash market. Plax was positioned around a new benefit: a plaque fighter. Plax and other brands who are plaque fighters were going to promote this benefit. This competitive threat makes the continued profitably of Scope insecure. For Scope, this is the reason to develop a new strategy that ensures the profitability and prevents the competitive threats. 1.3 Management question

For the management of Scope the question is how to compete with the benefits great-tasting, mouth-refreshing (provided against bad-breath protection) against the other brands with the new benefit: plaque fighter. The challenge is to develop a new strategy for Scope to compete against the new benefits in the Canadian mouthwash market that would ensure the profitability. 1.4 Smart goal

The management question leads to a SMART goal: Ensure P&Gs continued profitability in the Canadian mouthwash market with a market share of 33% in the next three years.

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2.1

Internal analysis
Company background

Between 1987 and 1990 Procter & Gamble (P&G) increased its sales to $8 billion and net earnings to $1.3 billion, and was positioned in more than 140 countries and with net earnings in 1990 of $1.6 billion, with the Canadian subsidiary contributed with $1.4 billion of sales and $100 million net earnings. One of P&Gs successful and profitable brands is Scope. Scope is positioned as a mouth refreshing brand and was the first brand in the market to offer effective protection against bad-breath and a good taste at the same time. In 1976 Scope became market leader in Canada, and in 1990 Scope had a 32 percent market share in the Canadian mouthwash market.

Turnover Market share

1988 16,767 33.0%

1989 17,847 33.0%

1990 18,15 32.3%

Table 1: Turnover and market share

The market can be divided in Food Stores and Drug Stores. Food stores represent 35 percent of sales and the Drug Stores 65 percent of the total market. The share held by Scope in Food Stores was 42 percent and in Drug Stores of 27 percent. In terms of Advertising expenditures, the total market is represented by $5 million dollars spent on media, and Scope had the highest advertising expenditures with $1,7 million spent, corresponding to a percentage of 34%, followed by Listerine with a percentage of 32%. Scope also had the highest number of weeks on air (35), however the GRP, which is the measure of advertising impact resultant of the number of persons exposed to the advertisement, is lower than Listerine which only was on air for 25 weeks, meaning that the impact of Scopes advertising campaigns were not as good as Listerines. 2.2 Brand Loyalty/Consumer satisfaction

Brand users only perceive Scope as above average in reducing bad breath, and yet they are loyal to the brand. However other mouthwash brands in the mouthwash market contain significantly more attributes than Scope, customers stay loyal to the brand. It can be said that customers of Scope just dont need all the other attributes other brands offer. This means that customers of Scope are satisfied with the benefits Scope already provides. In the meanwhile the market is maturing and so customer loyalty allowed Scope to have a competitive share at around 33% of the market, positioning them as market leaders. 2.3 Relative Cost of New product

Creating a new line or products for Scope means that Scope needs to understand the market and decide whether this new line or product will be under Scopes name or whether it will be a newly named mouthwash that is positioned in direct competition with Plax and Listerine. If Scope decides for the line extension it will cost $20,000 just for product testing, as well as advertising costs. The ingredients itself would increase by $2.55 per unit because new ingredients would be added and also packaging costs in the order of $0.30 per unit. If successful, this opportunity can create a new perception of Scope as a competitive, innovative company who is ahead of the competition and retain its position as market leader.

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3.1

External analysis
Macro analysis

Social-cultural factors Consumers indicate that they buy the product to solve the socially related problem of 'bad breath' and that mouthwash products are part of their basic oral hygiene. Political factors In Canada it is possible to apply for a 'seal of recommendation' of the Canadian Dental Association. The CDA will decide whether or not they approve the application by investigating the medical effects of the substance. In Canada saccharin is prohibited to as a sweetener. For that reason cyclamate is used as a sweetener. In the USA it is the other way around: cyclamate is prohibited and saccharin is used as a sweetener. 3.2 Market analysis

Market development Until 1987, on a unit base the mouthwash market had grown an average of 3 percent per year for the previous 12 years. In 1987, it experienced a 26 percent increase with the introduction of new flavors such as peppermint. Since then, the growth rate had declined to a level of 5 percent in 1990. The mouthwash market was initially developed by Warner-Lambert with its pioneer brand Listerine. It dominated the market until the entry of Scope in 1967. In 1976 Scope became market leader in Canada by focusing on a better tasting mouthwash. The Canadian mouthwash market had experienced an increase of 58% on the total unit sales from 1986 until 1990. The total retail sales had experienced a same increase from 43.3 million to 68.6 million dollars. Submarkets The Canadian mouthwash market can be divided in several submarkets where multiple competitors compete in. 1. Normal mouthwash, the bad breath strategy. (Listerine) 2. Better tasting mouthwash, the good taste strategy. (Scope, Listermint) 3. Plague removal mouthwash, the fights plaque strategy. (Listerine1, Plax) 4. Recommended mouthwash by dentists, the CDA2 seal strategy(Listerine, Colgate, Plax) Furthermore the mouthwash market can be split up by selling point: drugstores and food stores. Market trends Various trends can be identified on the mouthwash market. One of them is the increase of competitors that focus on health benefits. Second is the combination of health benefits and a good taste. Third is the fact that multiple competitors try to obtain the Canadian Dentist Association seal for their mouthwash product, which is closely related to trend number one and two.

Improved version in 1988. Canadian Dentist Association. 5

Market attractiveness The Canadian mouthwash market is a relatively stable and growing market. With all the trends in the market, the market is expected to grow in the next 3 years. There are many competitors on the market who all try to be distinctive, this can be realized by making good use of all the trends and developments in the market. Like in every other market there is always the threat of potential entrants, but when we look at the positions of all the big firms in the market. We can say that small potential entrants are not much of a threat. The mouthwash market is not really subject to the bargaining power of customers, because of the relatively low prices of the goods and the small quantity that consumers buy. This leads to the conclusion that the Canadian mouthwash market still is a profitable market where multiple competitors can be distinctive on their own way. The upcoming of competitors that produce mouthwash that has health benefits means that Scope also have to join this trend to obtain their market share and to address a wider range of customers. 3.3 New product developments

In 1987 the mouthwash increased by 26 percent with the introduction of a new flavor such as peppermint. But during the 1980s there were several developments in the Canadian mouthwash market. The main changes/ developments were: - Listermint added the CDA seal for preventing cavities (1983) - Introduction of new flavors (1987) - Fights plaque and prevent inflamed gums caused by plaque introduced (1988) - Cepacol promoted their product on the basis of price (1988) - Plax launched on a new and different platform (1988) For Scope these competitive changes mean that the Canadian mouthwash market is continuously developing. Because Scopes main focus is on the bad breath protection they have to consider to develop their own product as well.

3.4

Customer analysis

The Canadian mouthwash market is growing each year. A total of 75% of the Canadian households have at least one brand of mouthwash in home. The only benefit scope buyers recognize above average is the reduction of bad breath. When taking a look at the consumer perceptions of brand images by all users it can be concluded that Plax and Listerine have scored on several points above average. This means that although not everybody is using mouthwash from these brands there is a good consumer perception. When looking at the brand users there is a difference in perception observable between brand users and all users. Listerine only has two scores above average when looking at all users, the brand users can be defined as very satisfied customers because they have given an above average score on each attribute. This could mean that the customers from Listerine will stick to the brand no matter which other brand has the same benefits. Also the users of Cepacol are very satisfied with their product, the only things they didnt recognize as benefits are plaque removal and healthier teeth and gums. There cant be said anything for what the customers of other brands would like to see changed at their own brand. Nevertheless, when consumers are not experiencing the benefits they expect from the product. They could easily switch to another brand that can meet their needs. 3.5 Segmentation variables

Frequency of use: According to the company market research, the market could be segmented on frequency of use: heavy users (once per day or more) comprised 40 percent of all user, medium users (two to six times a week) comprised 45 percent, and light users (less than once a week) comprised 15 percent. Reasons to use mouthwash:
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There are several reasons that people have to use mouthwash. This is also a way to segment the market. For this segmentation there has been a selection of reasons: 1. It is part of my basic oral hygiene. 2. It gets rid of bad breath. 3. It kills germs. (health reason) 40% 40% 30%

Choices have been made in the implementation part of this paper. This will include the Targeting and Positioning. 3.6 Competitor analysis

For the competitor analysis there has been made a comparison between Scope and the four main competitors in the Canadian mouthwash market: Listerine, Listermint, Cepacol and Plax. These four competitors and Scope are the brands of mouthwash with the highest market shares. Brand analysis To analyze the five brands of the Canadian mouthwash market five variables have been selected to create a comparison.

* Rate by respondents of all users The table indicates that Scope is the market leader of the Canadian mouthwash market followed by Listerine, Listermint, Cepacol and Plax. Besides that, Scope has also the highest advertising expenditures with $1.700, followed by Listerine: $1.600. Cepacol spend less money on advertising their brand: $170. The table also indicates that Scope and Listermint have no strengths, rated by respondents of all users. Viewed on the weaknesses of the brands the schedule shows that Listerine, Listermint and Cepacol has no weaknesses at all. Scope shows that they have three weaknesses they cant realize: kill germs, removes plaque and healthier teeth and gums. In the last three years the market share of Plax increase most, about 10%. Listermint market share decreased most in the last three year, about 43%. Scopes market share decreased with 2,2%. Scope Brand with no obvious strengths and with a lot of weaknesses. Scope spend the most money on advertising. The market share of Scope decreased with 2,2% in the last three years.

Listerine Listerine is familiar with killing germs and preventing for colds. Beside it has no strong weaknesses. The market share of Listerine increased with 9,2% in the last three years. Plax Plax is the brand with the most strengths compare to the competitors. Beside it dont resist bad breath. In the last three years the market share of Plax increased with 10%. Listermint Listermint has no obvious strengths or weaknesses. Also the market share decreased enormous, about 43% in the last three years. Cepacol The main strength of Cepacol is killing germs. The market share of Cepacol decreased with 32%. Comparing with the other brands Cepacol has the lowest advertising expenditures. Change of competition on the mouthwash market Until 1987, the mouthwash market of Canada had increased with an average of 3% per year for the previous 12 years. The brands were segmented around two major benefits: fresh breath and killing germs. In 1987 the mouthwash market of Canada experienced a 26% increase with the introduction of new flavors by Scope, Listerine and other small brands. Since then, the growth rate had declined to a level of 5% in 1990. During the last 5 years, since 1987, the mouthwash market of Canada changed also with the creation of additional benefits for the consumers as prevent your tooth against plaque. Forecasting competitors future Plax and Listerine are the main competitors for Scope in the next few years. The last three years Plax and Listerine both increased their market shares with about 10%. The market share of Scope decreased with 2,2%. Also Plax and Listerine develop new strengths as: prevent for colds, plaque fighter, healthier for teeth and gums and recommendations of the doctor and dentist. The next years Plax and Listerine could grow more and more in the mouthwash market. It is also possible that either one or both of the brands apply for a seal of the CDA. As the market shares of Listermint and Cepacol decreased enormous, with respectively 43% and 32% these two competitors has a lot of work to do. In view of that fact these brands are no serious threats of Scope. Conclusion The main competitors Plax and Listerine have to be taken into account by Scope. They develop its brands with some new developments and both increasing their market shares the last three years. If Scope will do nothing there is a possibility to lose market share in the next few years. Also Scope has to consider the development of some new product features or do some research for development.

SWOT analysis

4.1

SWOT table

4.2

SWOT Confrontation matrix

External
Opportunities Threats
4. Achive higher 1. Increased market share in competition drug stores (overall) (more volume) 2. Competing 3. Competitors brands have are introducing copied Scopes more benefits benefits

Internal

1. Growing 2. There is a market (overall) demand for mouth water with health benefits

3. Obtain seal from the Canadian Dental Association

1. P&G is one of the most successful consumer goods companies in the world. 2. Scope is the market leader on the Canadian mouth wash market 3. Brand users recognize Scopes benefit (reduces bad breath) 4. The sales of P&G have increased in recent years 1. Scope does only offer one benefit (reduces bad breath with a good taste) 2. Scope is not endorsed by the Canadian Dental Association 3. Non-users do not perceive the benefit Scope offers

Strategic option 3: Scope could try to obtain a higher market share in drug stores Most volume on the mouth wash market is sold in drug stores. Scope could try to improve its market share in this sales chanel by applying a specially developed market ing strategy for this market. (S1,2; O1,4)

Strategic option 1 + 2 : Scope could introduce a new product that offers 'medical' benefits. Either under the 'Scope' brand name (1), or under a new brand name (2). Competitors have copied Scope's benefits and are offering even more benefits then Scope (as plague or Cavities fighter). Scope could introduce a product that also offers a medical benefit. (T1,2,3; W1,3; O2; S1)

Strenghts

Strategic option 4: Scope could try to obtain an approval seal from the Canadian Dental Organization . Some competitors of Scope already have this seal of approval. Scope has anti-bacterial ingredients, and could after adding some germ-killing additives, try to obtain the approval seal from the CDA (T3; W2; O2,3; S1,3)

Weaknesses

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5.1

Strategic options
Strategic options

The four main strategic options are based on the combination of strengths, weaknesses, opportunities and threats, in any order and combination, as displayed in the SWOT confrontation matrix. Strategic option 1 : The introduction of a new product (new brand name) Competitors have copied Scope's benefits and are offering even more benefits then Scope (as plaque or cavities fighter). Scope could introduce a new product that offers 'medical' benefits, as well as a fresh breath and a good taste. The new product could be launched with a new brand name. This creates the possibility of a completely new approach and strategy. And prevents confusion among the Scope users. Strategic option 2: The introduction of a new product (same brand name) Competitors have copied Scope's benefits and are offering even more benefits then Scope (as plague or cavities fighter). Scope could introduce a new product that offers 'medical' benefits, as well as a fresh breath and a good taste. The new product could be launched by using the Scope brand name. Scope is a well-known brand on the mouthwash market. This should help attract consumers that, for example, bought mouthwash from an other brand which didnt provide the benefits that they would have liked to have. Strategic option 3: Expand market share in drug store Most volume on the mouthwash market is sold in drug stores. Scope has the largest overall market share, but sells a relatively low percentage of their product via drug stores. Scope could try to obtain a higher market share in drug stores by applying a specially developed marketing strategy for this market. Strategic option 4: Seal of approval by the Canadian Dental Association Some of Scopes competitors have a seal of approval by the Canadian Dental Association. This seal confirms the positive medical effect of the mouthwash. Scope contains anti-bacterial ingredients, and could after adding some germ-killing additives, try to obtain the approval seal from the CDA. This will possible attract consumer that are interested in a mouthwash with medical benefits. 5.2 Strategic evaluation

The external analysis reveals that competing brands, such as Plax, have introduced mouthwash products offering medical benefits in recent years and that that these products are rather successful. There is a serious risk that Scope will lose ground to competitors that offer more benefits. For that reason, the managements goal of maintaining profitability as well as a 33% market share will, most probably, be rather hard to achieve. Improving market share in the drug store sales channel is likely to have a positive effect on the sales of Scope as most volume is sold via this channel. Without offering more benefits to the consumer, the strategy will however most probably not lead to a sustainable improvement of profitability. Some of Scopes competitors are making use of a seal of approval by the Canadian Dentist Association. The seal confirms the positives effects of the mouthwash, as a germ killer or plaque fighter, to the consumer. Scope is a mouthwash that already contains anti-bacterial ingredients. By adding germ killing additives P&G could apply for such a seal. Historical applications by Scopes competitors indicate that there is a considerable risk for an application to get rejected. In addition to that, the fact that competing brands already have the seal means that adding it to Scope will not lead to a unique advantage or benefit, and is for that reason unlikely to result in an sustainable improvement of Scopes profitability.
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By introducing a mouthwash product that offers the same - plus even more & unique benefits, Scope could attract more costumers then they attract now by offering only a fresh breath and a nice taste. There are two ways Scope, or P&G can pursuit this goal. Either by introducing a new product under the Scope brand name, or by introducing a product under a completely new brand name. The advantage of using the Scope brand name is that it is an established name in the mouthwash market, that most consumers will be familiar with. On the other hand, current consumers might get confused as the new product is different from what they thought was the only Scope on the market. An advantage of introducing the new product under a different name is that it creates the possibility of a very different brand positioning. The new product would not be related to the current Scope, which enables the possibility for a completely different marketing strategy and approach. The downside of this option is that the new introduced brand will have to build everything up from zero again. This will mean more advertising costs and it will take time before consumers accept you in the market. Introducing a new product under the current Scope brand name is the best strategic option. This will enable P& G to reap the benefits of their established brand and profit from the new consumer needs, without losing their traditional Scope brand and market share. The new product should offer more benefits then the competing mouthwashes, and should clearly be positioned different from the classic scope.

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Implementation

The implementation of the marketing strategy will be formulated using the 4P method (Product, Place, Price, Promotion). Each component will be discussed below. Product The new product will be a mouthwash that offers several health benefits, to meet the consumer needs. The new product will be called; Scope: Dental 5 in 1. The addition of the word Dental clarifies that it is a product that offers dental benefits, while the 5 in 1 confirms that it is a product with multiple benefits. Namely: Plaque removal Germ killing ingredients Reduces bad breath Prevents gingivitis Prevents cavities

The Scope brand name ensures the quality of the new product, by referring to the successful original product. The users and potential new users will presumably buy the product based on the quality and experience of the original product. When the product is developed and tested thoroughly Scope has to attach a warranty to the new product that every health benefit will be obtained when the product is being used every day.
Illustration 1: Scope Dental: 5 in 1

Price Scope Dental: 5 in 1 will be more expensive because of the costs related to the research & development and the realization of the line extension which has to be done when introducing a new product. Cost price. The price per unit3 for the original Scope in 1990 was $41,25. The prices for the new product would be higher because of the following factors: - Increase in ingredient costs: $2.55 per unit. - Increase in packaging costs: $0.30 per unit. (When producing in a plant in America then the price per unit will increase with $1,-) This means that the price per unit will be: $44.1, when the product is produced in Canada. And $45.1 when it is produced in America. Retail price. The retail price of the original Scope is in both food stores as drugstores in percentage terms lower than most of the competitors. If Scope wants to make a good chance against the competitors they have to try to preserve this advantage also with the new product. In food stores they could easily increase their retail price with 25%, with this retail price theyre still cheaper than their biggest competitors. In drugstores they could increase the retail price with 20%. The reason they can increase the price this much is the fact that the new product will have all the benefits you can ask of a mouthwash product.

One unit equals 10 liters or 352 fluid ounces of mouthwash. 13

Place The external analysis has shown that drug stores are an attractive sales channel, as most mouthwash products are sold via this channel. The fact that Scope Dental: 5 in 1 is a product that offers several medical benefits should enable P&G to acquire a substantial market share in this channel, which will be a priority. Store sales also remain an important channel as well. The promotional campaign aims to generate pull by consumers who are interested in the product and will ask for it in drug stores as it is recommended by a dentist in the commercial. This will help to increase market share in both channels. Promotion Scopes promotional plan can be divided in both above the line and below the line promotion. Above the line Above the line communication will have a strong focus on Television advertising and Outdoor advertisement. Television advertising will consist of a TV Commercial with the duration of 15 seconds. It will focus on the main product benefits of Scope Dental: 5 in 1, such as Plaque removal, germ killing ingredients, reducing bad breath, preventing gingivitis and cavities. To convince the consumer, the commercial will have the presence of a specialist (dentist) recommending Scope Dental 5 in 1, emphasizing its unique qualities and the fact that it is a completely new and revolutionary product in the mouthwash market. To visualize this concept, a storyboard of the commercial is displayed below.

Illustration 2: Commercial storyboard

Pitch: With this revolutionary mouthwash, all your problems will stop! Buy Scope Dental 5 in 1, its my recommendation! The outdoor campaign will also follow this perspective, and it will be placed in strategic points in the city, so that it can be seen by more people.

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Below the line Our below the line campaign will be done through store promotion: - Free samples of the new product attached with the current Scope mouthwash. Our objective is to make consumers try the new product and increase sales of the current users as well as attract new consumers to buy this new product. 10.000 free samples will be distributed and that according to promotion prices will cost $0.45 a piece (including distribution). This totals a cost of $4.500 for Scope. Another important promotion tool for Scope Dental 5 in 1 will be in-store Stoppers. The point of using stoppers is that the new product needs to be seen by consumers . This can be achieved by using in-store stoppers that directly attract consumers attention. Again attracting new consumers is one of the main objectives with this communication.

Illustration 3: the in-store stopper

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Summary

Scope is a mouthwash produced by Proctor & Gamble. It is available in more than 140 countries and is considered the mouthwash market leader in Canada since 1976. In 1990 the brand held a market share of 33%. In three years Scope managed to increase its sales up to $8 billion and its net earnings to $1.3 billion. Scope only offers a great-taste and mouth refreshment. Then a new competitor called Plax entered the market. Plax was a new mouthwash brand positioned around a new benefit: a plaque fighter. This competitive threat made the continued profitably of Scope insecure. The following goal was defined: Ensure P&Gs continued profitability in the Canadian mouthwash market with a market share of 33% in the next three years. Brand users only perceive Scope as above average in reducing bad breath, and yet they are loyal to the brand. However other mouthwash brands in the mouthwash market contain significantly more attributes than Scope, customers stay loyal to the brand. Scope had to come up with a new strategy . A SWOT analysis and SWOT confrontation revealed several strategic options. The introduction of a new product (new brand name): P&G could introduce a new product that offers more benefits under a new brand name The introduction of a new product (same brand name): P&G could introduce a new product that offers more benefits under the same brand name Apply for a seal of approval by the Canadian Dental Association: Scope could add germ killing additives that reduces plaque and/or fights germs and apply for a CDA approval seal. Expand market share in drug store sales channel: P&G could try to increase market share on the drug store market. After a evaluation introducing a new product under the current Scope brand name was chosen as the best strategy. The implementation can be defined in 4 Ps: Product, Price, Place and Promotion. Product: The new mouthwash will be called Scope Dental 5 in 1, offering a range of benefits namely: Plaque removal, Germ killing ingredients, Reducing bad breath, Preventing gingivitis and cavities. Price: This product will be more expensive due to the costs of adding new ingredients as well as distribution prices. The final price will be 20-25% higher than the original Scope in Canada. Place: the Scope Dental 5 in 1 will be sold in drug stores as well as in food stores, but giving a special emphases to drug stores as this channel represents 65% of all mouthwash sales. Promotion: To promote Scope Dental 5 in 1, the focus will be on TV advertising, outdoors and instore promotion with stoppers and free samples. The main objective is to make consumers try this new product and increase sales of the current users as well as attract new consumers to buy this new product.

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