Assessment of Colgate Palmolive's Competitive Position

Assessment of Colgate Palmolive's Competitive Position

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Assessment of Colgate Palmolive's Competitive Position

Toothbrush manufacturers have poured millions of dollars and hours, to marry form and function in oral health care products that enable their users to brush frequently, comfortably, and above all, properly. Along the way, they have built the U.S. oral care market into a $2.9 billion industry, changed the brushing habits of millions and turned the lowly toothbrush into a trendy lifestyle accessory.
As the consumers are becoming more concerned about the health of their teeth, the toothbrush companies are focusing on helping them have an optimal dental health, and offering various types of toothbrush; to do this they must be all the time focused on what the customer's needs are.
And for this reason, the toothbrush companies have made numerous functional and aesthetic changes to the heads and bodies their products. Some toothbrushes have an indicator who tells you when to change the toothbrush; handles were thickened for a more comfortable grip and lengthened to extend the reach of the bristles. Shaft materials changed, incorporating translucent and more flexible plastics in the handle and rubber components fashioned into thumb ridges to help prevent slippage. The toothbrush market has become very competitive, and Colgate-Palmolive is facing strong competition for its products from existing companies like Johnson & Johnson and Oral-B and new companies such as Procter & Gamble and Smith Kline Beecham who positioned their new product lunches in the super-premium toothbrush segment.
In 1991, CP launched new products in the U.S market CP and held 43% of the world toothpaste market and 16% of the world toothbrush market. Other oral care products included dental floss and mouth rinses. In 1991, worldwide sales of CP's oral care products increased 12% to $1.3 billion, accounting for 22% of CP's total sales.

2. How is the toothbrush market segmented….? Compare consumer behavior for toothbrushes and toothpaste…..?

The toothbrush category is divided into two segments: value and professional. Also, the toothbrushes are differed by bristle type ( firm, medium, soft and extra soft) and by head size (full/adult, compact and child/youth). In the beginning the toothbrushes were introduced on the basis of functional features but in the late 1980's this changed and many new toothbrushes were introduced on the basis of aesthetic and of course this changed because in 1991 new product introduction were again focused on technical performance improvements. Generally, different people have various needs for buying toothbrush.
Furthermore, we have three groups of consumers:

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• Involved oral health consumers- therapeutic brushers 46%
• Involved oral health consumers- cosmetic brushers 21%
• Uninvolved oral health consumers- 33%
So we have consumers who search out functionally effective products in order to avoid oral care products, consumers who search for products that deliver cosmetics benefit (such as preventing bad breath and/or ensuring white teeth) and the last group who views the products as the same. These kind of consumers are not motivated by oral care benefits and adjust their behavior only when they confront oral hygiene problems.
For most consumers toothbrushes were as important as toothpaste to effective oral hygiene and that the primary role of a toothbrush was to remove food particles; plaque removal and gum stimulation were considered secondary. CP estimated that 82% of toothbrushes purchases were unplanned. The average or replacements of the toothbrushes were only once every 8.6 months in 1990, 7.5 in 1991 and due to the prevalence of "two-for-one" the average was 12.4 months in 1990 and 9.7 months in 1991.
Consumer behavior for toothbrushes and toothpastes is different. The toothpaste is shared by members of the same hoysehold. Consumers are more careful in choosing the right toothbrush rather than toothpaste. People are choosing the toothbrush based on their individual needs about size, the handle, the bristles and head shape of the toothbrush and all that based on the shape of the mouth.

3. What are the arguments for launching Precision as a) a niche product and b) a mainstream brand?

• Launching Precision as a niche product:
Niche positioning focuses on customers who care about the prevention of gum diseases. As such, it could command a 15% price premium over Oral-B and would be expected to capture 3% of the U.S. toothbrush market by the end of the first year following its launch. Steinberg believed that with a niche positioning, Precision retail sales would represent 3% volume share of the toothbrush market in year 1 and 5% in year.
Under a niche positioning strategy, Steinberg decided that CP would establish a factory list price to the trade of $2.13, a premium over Oral-B regular and at parity with Oral-B Indicator.
If the company decided to position the Precision toothbrush as a niche product many positive benefits would appear:
1. Precision toothbrush is more advanced and is characterized for its technological superiority over its competitors. Because of that, Colgate-Palmolive can be able to differentiate and promote something new to the market.
2. Colgate-Palmolive would be able to charge premium prices if targeting to customers who are worried about gum diseases.
3. If the company decided to position the Precision toothbrush as a niche product SKU's would not decrease.
4. In case of failure of Precision, Colgate could reduce the losses if costs were to decrease.
Focusing on the same customers, niche positioning offers some negative benefits. As it is expected, sales in mass merchandisers would decrease, and also retail sales would be less if niche positioning was used.
• Launching Precision as a mainstream brand:
Mainstream positioning regards Precision toothbrush as the most appealing and effective on the market. It was estimated that, as a mainstream product, Precision could capture 15% of the U.S. toothbrush market by the end of the first year following its launch. Steinberg believed that with a mainstream positioning, Precision retail sales would represent 10% volume share of the toothbrush market in year 1 and 14.7% in year 2. Under a mainstream positioning strategy, Steinberg decided that CP would establish a factory list price to the trade of $1.85 at parity with Oral-B regular.
If the company decided to use mainstream positioning, there would be some advantages:
1. Name recognition and brand awareness for Colgate would be increased.
2. The Precision toothbrush would be characterized as the most superior product.
3. The company should take advantage of the fact that most retail stores are under this position rather than niche position.
Using mainstream positioning, some disadvantages may appear:
1. Although Precision toothbrush is superior compared to other brushes, the prices of all would be equal. This fact leads to more competition which will cause an increase in prices.
2. some SKU's would be reduced
3. A mainstream toothbrush raised concerns about the possible cannibalization of Colgate Plus and about pressure on production schedules that had been developed for a niche positioning. Production capacity increases required 10 months lead time and switching to a mainstream positioning could result in inadequate supply of products.

4. What marketing recommendations would you make to Steinberg?

As we can see in exhibit 5 Colgate-Palmolive has 28 SKUs, Oral-B 16, Crest Complete 10 and Aquafresh Flex 10. Positioning Colgate-Palmolive Precision Toothbrush in the super-premium Niche should be the defining line between Oral-B and Colgate-Palmolive's oral care products. As it is mentioned in the case in clinical test, the brush achieved an average 35% increase in plaque removal, compared with other leading toothbrushes, specifically Oral-B and this clinical test means that Precision could be positioned as a Niche product and as we know niche, was recommended to avoid the cannibalization of Colgate Plus who was in the mainstream market.
We recommend that is better if Precision is displayed separately from the other Colgate-Palmolive products and close to competitive super-premium toothbrushes, because first of all the consumers can compare price (which is $2.13, a premium over Oral-B regular and at parity with Oral-B Indicator), design (which is superior to both Oral-B and Reach) and ingredients (which are more efficient than Oral-B).
The most important advantage of Colgate-Palmolive is that no one of its competitors have not launched new improved products, so CP will the first, and so will have the benefit of positioning a new product in the super-premium niche market. And being new product Precision will reach maturity level maybe in less than 2 years and in this time CP can continue improving its products. After this CP can move Precision into the mainstream market and move Colgate-Palmolive Plus into the value market.
Precision toothbrush should be carried primarily by drug and food stores, and CP should focus on the baby boom generation because as we saw in the case, they were becoming more concerned about the health of their gums, and were willing to pay a premium for new products addressing this issue. CP should compete directly with Oral-B in the professional dental offices segment and use the offices for distribution points and reinforcement and recognition of the new product because the professional advise is important to establish the credibility of a new toothbrush.
One of the important points is what kind of toothbrush they will produce, and from the data we see that the medium-bristle accounted for 39% and were declining at 4% a year, soft-bristle brushes held at 48% market share and were growing at 7% per year, extra soft-bristle held only a 5% share but were growing even more rapidly; CP should focus on the soft and extra soft- bristle brush because are the 2 sub-segments with the higher percentage of increase.
Because competition was increasing and the competitors spend a lot of money on the promotion of their new products (Johnson& Johnson spend $17.1 million, Oral B $ 11.2 million, Smithkline Beecham $10 million) CP should spend at least at pair with Oral B which is the bigger Competitor. Advertising and promotion should be done through commercials in TV, magazines, radio and they should focus on the benefits of the Precision toothbrush.
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