Colgate Palmolive Industry Position

Colgate Palmolive Industry PositionColgate-Palmolive is recognized as the worlds leader in personal c ar gross gross gross revenue enhancement which included spontaneous hygiene crops like soup-straineres and toothpastes. In 1991, its sales topped at $6 billion and profits at $2.76 billion as it command 43% of the worlds toothpaste securities industry and 16% of the worlds soup-strainer securities industryplace. In the United States, the worlds largest grocery store, Colgate-Palmolive holds the weigh unrivaled spot in soup-strainer sales with a merchandise sh be of 23%. From these statistics, mavin of Colgate-Palmolives main strengths is being the foodstuff leader in oral care reapings.Colgate-Palmolives extensive overseas reach is another main strength. ground on the data in the case study, Colgate-Palmolive introduced 275 late ingatherings worldwide and redressup manufacturing facilities in China and easterly Europe b ambit the emerging economies of the 21st century. On top of that, international sales accounted for 64% of total sales and 67% of the total profits for Colgate-Palmolive.Colgate-Palmolive has an extensive Research and Development department boasting 170 employees worldwide. though having a large RD department does not directly contribute to increased profits, Colgate-Palmolives history of innovation1in the soup-strainer grocery is linked to its current pip as the tradeplace leader in the soup-strainer industry. Therefore Colgate-Palmolives strong commitment to innovation with and through investment in RD is a prominent strength.With an wide awake and visionary leader like Reuben Mark at the helm of Colgate-Palmolive, the confederation has transformed itself into a prevail and profitable machine, leading to increased profit margins and gaudiness growth.2Clearly, having a visionary CEO is a strength.Colgate-Palmolives localisation system for its toothbrush line in food stores has aided in capturing their curren t dominant market overlap. Its in-store displays, combining toothbrushes with toothpaste packs and locating the Colgate-Palmolive line of toothbrushes in the middle of the stores shelves bugger off contributed to this dominance. This strategy has been no-hit, as sales through food stores, drug stores and sight merchandising channels train produced the greatest passel and dollar sales historically.3Colgate-Palmolive has a large number of stock keeping units for their toothbrush line.4Multitudes of SKUs indicate that Colgate-Palmolive is scaring a broad spectrum of market constituents in the toothbrush market, which spreads the risk inherent to carrying whatsoever product. Diversification of product types at bottom the toothbrush market is another strength factor Colgate-Palmolive holds.Colgate-Palmolives secret weapon in the war for supremacy in the super-premium market, Colgate precision, is proven to be rattling effective in removing plaque 35% much effective than exi sting brands and in preventing gum disease. This advantage give the gate be attributed to the innovative design, high-tech research using CAD and infrared frequency scanning, consumer research and extensive product testing. Although this engine room is a strong argument for amazeing precision in the super-premium category, Colgate-Palmolive could also use its design aspects to improve Colgate-Palmolives existing professional and value toothbrush lines to increase their respective(prenominal) market shares. Colgate-Palmolives patented5innovation for clearcutness also stands as a strength upon which Colgate-Palmolive can be given for other market differentiating advancements.Colgate-Palmolives recent infusion of unsanded capital into its manufacturing facilities leave alone bode well as it prepares to battle for market share in the new super-premium market segment. Colgate-Palmolive will be able to leverage its existing relationship with its manufacturing partner, Anchor to othbrush, to quickly and represent-effectively product its newest product.WeaknessesThe impending way let on of Colgate-Palmolives new toothbrush, Precision, may chance on sales of its existing toothbrush lines. This may lead to a cannibalization of the Colgate summation and Colgate Classic market of up to 60%.6Since the existing toothbrush lines are the cash cows7of the companys oral care division, a non-white performance by the new Colgate-Palmolive Precision might drain the cash cows of their resources altogether.Colgate-Palmolives media expenditure layout is very small compared to its rivals.8It has spent only $7 million dollars on its Colgate-Palmolive Plus merchandising efforts and has only 19% of the share voice. Since media exposure fuels consumer demand9for a new product, this is one area where Colgate-Palmolive postulate to have its expenditures equivalent weight to that of its rivals.another(prenominal) marketing anaemicness that Colgate-Palmolive faces is its lac k of professional dental endorsements, with little than half that in market share and dollar sales than that of their largest enemy, Oral-B.Similar to Colgate-Palmolives lack of professional endorsement, the Precision toothbrush does not have the fullest endorsement from the American Dental Associations (adenosine deaminase). Although the ADA issued its seal to the product, the seal alone stands for little more(prenominal) than credit rating that the toothbrush works. In fact, only when the ADA issues its seal and an official quote stating that a product is first-rate to similar product types, does a product receive the fullest support possible. Not having the full backing of the ADA is a weakness which Colgate-Palmolive may have to overcome to gain the professional endorsement they seek.10OpportunitiesMacroeconomicThe growth of the street corner super-premium category presents a golden opportunity for Colgate-Palmolive to increase market share for several reasons. First, alt hough its competitors, i.e. Oral-B, Johnson Johnson and Procter Gamble, have gained a foot-hold in this niche market already, Colgate-Palmolive can still make a dent with its new Precision toothbrush, thus enabling them to enter a new and electric effectivenessly highly profitable market segment. Since the super-premium category accounts for 35% of the volume and 46% of the dollar sales of toothbrushes11this niche category may in turn result in a substantial profit margin.Secondly, with the baby boomers and younger generations becoming more refer with the health of their gums, they will be willing to give in the above mentioned premium for a toothbrush12which is optimized for better gum care. Colgate-Palmolive can capitalize upon this demographic segment to ensure a successful release of their super-premium Precision toothbrush.Finally, since 82% of toothbrush purchases are unplanned and umteen consumers are unaware of the technological and cost variation among toothbrush br ands,13Colgate-Palmolive could establish a media blitz with educational ads depicting Precision toothbrushes as technologically superior to its rivals at an equivalent cost. The ads can also serve to educate consumers about proper toothbrush replacement schedules to ensure effective plaque removal and gum disease prevention. Ultimately, Colgate-Palmolive could leverage their advertising lean to boost sales and revenues.Microeconomic one of Colgate-Palmolives competitors, Johnson Johnson,14ranked third in toothbrush sales, was phasing out one of its toothbrush lines at the time of the Precision introduction. As the toothbrush market remains rather constant, wooing customer from other brands, particularly ones being pointd out, is a tremendous opportunity to gain market share.15 other competitor, Smithkline Beecham, was predicting an operating loss in its toothbrush business.16If the losses are sustained, it might cause Smithkline Beecham to move out of the toothbrush business all together, yet again opening the door for further gain of market share. Colgate-Palmolives constant innovation also provides an opportunity to convert consumers away from less advanced toothbrushes, such as those offered by Lever.ThreatsThreat of intense segment rivalryThe super-premium toothbrush market is highly competitive, hosting some(prenominal) brands and mystical label toothbrushes. If any of these rivals creates a toothbrush which tops or even equals the engine room of Precision, particular propositionally if through with(p) at a lower production cost, Colgate-Palmolive may lose market share.Threat of new entrants on with intense rivalry from existing competitors, Colgate-Palmolive has to deal with new competitors. In 1991, the toothbrush market exploded with a dramatic increase in new entrants. Proctor and Gamble introduced Crest over(p), their first toothbrush17. Smithkline Beecham entered the market with Aquafresh Flex and a 9% market share volume for 1991. Levre, P fizer and Sunstar all entered the market in 1991 and get a total 11% market share. These numbers reinforce the seriousness of the threat of new entrants that Colgate-Palmolive will have to contend with when they launch Colgate Precision.Threat of substitute productsSimilar to many industries, oral care technology has advanced tremendously since its inception in approximately 3000 B.C. The introduction of the nylon bristled toothbrush in 193818represents one of the latest quantum improvements for the industry, however it was not the last. The introduction of electronic toothbrushes and water picks are threatening to usurp tralatitious oral care products market share. This is a threat which Colgate-Palmolive needs to heed, despite its confidence in the technology of Precision.Threat of suppliers growing bargaining powerColgate-Palmolive depends on Anchor toothbrush for its outsourced manufacturing. Hence, Anchor toothbrush has a decided supplier advantage in the relationship with Co lgate-Palmolive. If Anchor toothbrush were to increase its supply cost, it would stir Colgate-Palmolives production costs which in turn would impact Precisions market share by potentially set it above even the super-premium segment. Colgate-Palmolive needs to maintain a healthy relationship with Anchor toothbrush to melt off the risk of a costly supplier switching process.Threat of buyers growing bargaining powerOne of the factors which can cause buyers bargaining power to grow is when the switching costs for buyers are low. Even if Colgate-Palmolive were to position Precision as the about expensive toothbrush on the market, it is still a relatively trashy product, compared to many daily purchases (i.e. lunch in NYC or a cup of coffee at Starbucks). Therefore, buyers can easily switch between toothbrush brands without giving the decision much thought. To combat this threat, Colgate-Palmolive could position Precision as a superior toothbrush that customers can not afford to be w ithout.PROBLEM asseverationIn 1992, after evaluating the current market condition and completing its research and letment, Colgate-Palmolive was ready to begin marketing its newest toothbrush, Colgate Precision. Of 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 cipher constraints and generate a marketing mix that would maximize the sales and revenues of the new product.Colgate-Palmolive was faced with the decision of whether to drive the new product as a high quality niche product 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 vying 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.To reach its verdict, Colgate-Palmolive analyzed forecasted data with regard to potential sales volumes and prices, advertising, packaging, and manufacturing costs, among other factors. A summary of this analysis, and a marketing strategy recommendation follows.EVALUATION OF ALTERNATIVESIn 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 effect the comprehension of the toothbrush inwardly the market.Mainstream or mass marketing refers to the mass production, distribution and p romotion of a private product to all potential buyers.19Contrarily, 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 part of a market segment.20Due 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.Mainstream tradeAdvantagesThe primary reasons 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 Colgate-Palmolive to construct a more unreserved and direct campaign that would address the common concerns of all toothbrush buyers. Consequently, the use of television and intercommunicate would be more cost effective as it would reach this larger audience.The obvious goal of such a position would be to capture a grea ter 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.21DisadvantagesThere are also many problems with marketing Precision to the pot. 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 amongst consumers in relation to oral hygiene. They are classified into cardinal groupsInvolved oral health consumers Therapeutic brushersInvolved oral health consumers Cosmetic b rushersUninvolved oral health consumersThese segments are shared out into relative percentages of adult toothbrush users. They are 46%, 21% and 33% respectively.22This 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 shape of the Precision toothbrush, Colgate-Palmolive accrued earthshaking clinical data concerning the product. This information would not be relevant to the mainstream market that most likely would grab it as too scientific.The Precision toothbrush was originally conceived to be a top-of the-range, super-premium product23indicating that production schedules had been veritable in line with a niche marketing strategy. Mainstream marketing would want 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.24The objective of the research and development group working on the product was to develop a superior, technical, plaque-removing device.25It was produced to be the best toothbrush possible and become the top-of the-range, super-premium product.26All 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.27Colgate 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 s egment as a higher quality product.28Including Precision as a high-end, mainstream product could potentially have 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.29This strategy could result in a loss of market share in the value or high-end segments.Niche MarketingAdvantages denote companies have access to audience profiles through a wide variety of media products, such as television, radio and print media. This is the fundamental basis for successful niche marketing. A great advantage of offering any eligible 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. 30This 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.31Both segments of customers would appreciate the scientific data Colgate-Palmolive has complied on this toothbrush. The facts that the initial clinical trials removed an average of 35% more plaque over that of Reach and Oral-B, and that it assists in the reduction of the likeliness of gum disease, would be effective information for this group.32Unlike the mass market, these are issues which a niche market segment would comprehend and about which they would care.N iche market participants are also more likely to pay a premium for this product due to the fact that Precision caters to a distinct set of needs they have. With this type of positioning, a 15% increase in price above Oral-B regular would be anticipated, saving the cost to consumers to $2.13 per unit (more aligned with Oral-B Indicator). A mainstream market could only be anticipated to pay $1.85, in accordance with the Oral-B regular line.33As Precision was conceived more as a niche-type product, initial production was set for the lower demands of the smaller market segment. As discussed previously, to change the natural emphasis of the toothbrush to mainstream distribution 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 woul d also preserve the number of SKU that Colgate-Palmolive currently produces in the toothbrush sector.Niche markets historically attract fewer competitors.34This 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.DisadvantagesMarketing the Precision product to a niche market would generate less revenue for Colgate-Palmolive than a mainstream approach. Working with the estimated figures for the first two old age of release generates the following table.Niche marketingMainstream marketing grade 1Year 2Year 1Year 2No. units sold8MM15MM27MM44MMFactory list price$2.13$1.85Total revenue generated$17,040,000$31,950,000$49,950,000$81,400,000Obviously, the niche market revenue is significantly less than the mainstream market revenue, despite the 13% higher price. stopping pointDeveloping and communicating a positioning strategy for a product is necessary and critical. Differentiating a p roduct, and the point to which that product is differentiated, can be guided by quantifying the following criteriaImportanceDistinctivenessSuperiorityPreemptivenessAffordability profitablenessUsing these parameters, a company can provide the public with a reason to buy their product.35Another tool used in solving the marketing mix problem companies face when launching a new product is a perceptual map.36This is a graphic representation of two or more features against which similar products can be ranked. When graphed, the resulting map displays areas to which the product types cater, revealing both areas of over population and areas of potential opportunity. Clusters of products exist when similar products appeal to the same consumer market participants. In these areas, competition is intense, therefore, they are not as attractive when positioning a new product. An optimal plan is to create a space within the product market that is relatively free of rivals and can enable a new pro duct to develop and dominate.A perceptual map for Precision was created from the following dataToothbrushPriceBenefitsClassColgate Precision0.80.9Super PremiumOral-B Indicator0.80.8Super PremiumOral-B Regular0.70.6Super PremiumCrest Complete0.50.6Super PremiumReach Advanced0.60.5Super PremiumAquafresh Flex0.70.7Super PremiumColgate Plus0.40.4ProfessionalReach Regular0.30.4ProfessionalPepsodent Professional0.20.4ProfessionalColgate Classic-0.4-0.1 honourPepsodent Regular-0.3-0.1ValueButter GUM Microtip0.3-0.1ValueButter GUM Supertip0.40.1ValueMenedent Pro-Core0.70.7ProfessionalOral-B cross action10.8Super PremiumGeneric Eckerd Interdental-0.5-0.2ValueGeneric Eckerd Angle-0.7-0.2ValueCrest Advantage10.8Super PremiumRecommendationUsing these evaluative criteria in relation to the advantages and disadvantages of niche and mainstream marketing, we believe that Colgate-Palmolive should position the Precision toothbrush as a niche product. This would establish Precision as the leading toot hbrush 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 represent the position that the Colgate Plus product will hold relative to the Precision line.Further, we anticipate no significantly 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.The anticipated cyclical nature of the product on the market is well ill ustrated by the Boston Consulting Groups Growth-Share matrix.37The 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 last phase in this products life cycle will be a pin into dog status. This refers to the product when it has weak market share and low growth. At that point, Precision would ne ed to be removed from the companys product line, allowed to decline further or all together repositioned in the market.At this point, the research and development phase for Precision has been completed, a thorough analysis has been performed on the current market situation, and a marketing strategy has been recommended. The final aspects of launching a new product must now be investigated product, price, place and promotion.PRODUCTColgate-Palmolive has many important decisions to make regarding the new toothbrush before it becomes available on store shelves for customers to purchase, including the positioning strategy for the new toothbrush. To reach a conclusion, the new toothbrush must be analyzed on three product levels the mettle product, the actual product, and the augmented product so that customers needs are fully silent and the Precision toothbrush is correctly marketed to meet those needs.Since we are recommending that Colgate-Palmolive choose a niche market for Precis ion, the core advantage that the toothbrush will deliver to its users is plaque removal. Less plaque in turn leads to the added benefit of a reduction of the lik