Colgate-Palmolive: The Precision

Toothbrush
Case Analysis
Ahir Mahmood
1009429129
Professor Tarun Dewan

Executive Summary

Oral care products such as toothbrushes have been a part of our daily lives since 3000
B.C. A company that specializes in oral care products is Colgate-Palmolive (CP) and as
of 1992, the company has found itself in a difficult yet favorable position. This position
consists of CP launching its advanced and recently developed toothbrush in the United
States known as Colgate Precision. However, CP is currently facing an extremely
competitive market in the oral care industry because of a significant amount of innovative
product development. So, this is a problem case because we must determine how the
company should approach positioning, branding, and communication for Colgate
Precision. Also, we are required to devise a strategy for advertising and promotion
budgeting.

SWOT Analysis

Strengths Weaknesses

 Precision is an innovative product  Since 33% of adults are uninvolved

because it increases plaque removal oral health customers, it will be
by 35%. challenging to enlighten them about
 77% of people who tested Precision the significance of Precision.
declared that it was more effective  The likelihood of cannibalization of
than other toothbrushes. Colgate Plus if Precision is
 CP acquired 43% of the world’s positioned as a mainstream
toothpaste market and 16% of the product.
world’s toothbrush market in 1991.  CP has not established itself in the
 In 1991 CP’s international sales super-premium toothbrush market
increased by 12% which while Oral-B has professional
represented 22% of CP’s total endorsements as the dentist’s
sales. toothbrush.
 Marketing the main benefit of
Precision which is reduced gum
disease will be problematic since
few customers will accept the
probability of them having gum
disease.
Opportunities Threats

 Acquiring market share in the  CP’s main competitors are offering

super-premium toothbrush market deals to consumers such as Oral-
will not be difficult since Precision B’s buy-one-get-one-free offers
surpasses all other products in the and $2.00 mail-in refunds.
market.
  Retailers are more willing to stock  CP’s main competitors are also
Precision in beneficial shelve planning to launch new products
positions because of a higher with extra features such as Crest
markup on toothpastes and Complete with rippled bristles of
toothbrushes. great length.
 Professional endorsements by
dentists will prove to be useful as
they can increase brand recognition
and credibility just like Oral-B.

Background - The 3 C’s: Company, Competition, Customer

Company

CP was regarded as a “sleepy and inefficient” organization until 1984 when Reuben
Mark became CP’s CEO. Which allowed Reuben to apply his leadership skills to remodel
CP into a “lean and profitable” company. Ever since 1985, the gross margins for CP had
risen from 39% to 45% while annual volume growth has averaged 5% since 1986. Then
CP devised a five-year-long strategy for 1991 to 1995 which consisted of three main
segments. First, CP was meant to focus on launching new products in the oral care
market and penetrate new international markets. Second, CP was meant to dedicate itself
to the betterment of efficiency in the distribution and manufacturing of products. Finally,
developing a persistent attitude towards the commitment to its most important consumer
products. So, in 1991, CP became a worldwide market leader for personal care products
and household products. CP’s main product lines were composed of toothbrushes,
toothpaste, mouthwashes, and dental flosses which enabled the company to generate sales
of $6.06 billion and a gross profit of $2.76 billion. Furthermore, CP became the top
company in the U.S. retail toothbrush market by having 23.3% of volume share.

Competition
1) Oral-B is an organization owned by Gillette and it was the market leader for the
toothbrush industry. In 1991 Oral-B achieved a 30.7% value share and 23.1%
volume market share of U.S. retails using 27 SKUs. Oral-B’s major advantage is
its professional dental endorsements which increased its brand recognition
amongst consumers and gained the reputation of “the dentist’s toothbrush.” These
endorsements are Oral-B’s biggest liability since the company heavily relies on it
for credibility. Furthermore, Oral-B’s most innovative product is the Indicator
brush which was launched in 1991 and included blue bristles that needed changing
once the bristles turned white. There would be television commercials starring
“Rob the dentist” using the Indicator brush.

2) By 1991 Johnson and Johnson (J&J) had a 21.8% value share and 19.4% volume
share which made it number three in the U.S. retail toothbrush market. J&J’s main
product line is the Reach brand which consists of a toothbrush that increases the
efficiency of brushing by allowing consumers to brush in the most difficult places
to reach. J&J’s new products such as Glow Reach or Advanced Design Reach
included unique non-slip handles, tapered heads, and angled necks. However, the
company decided to launch Reach Between in September 1992 which included
rippled bristles and an angled neck to reach places between the teeth.

3) Proctor and Gamble (P&G) is the newest competitor in the toothbrush market with
Crest Complete. Crest Complete was supposed to launch in the U.S. by September
1992 because of promising test markets in San Antonio and Houston from August
1991 to August 1992. Crest Complete attained a 13% value share from test
markets and was supposed to accomplish an identical total market share amount
by its first year in the market. Crest Complete’s product design included lengthy
rippled bristles of different heights to reach more than 37% of areas between the
teeth when compared to the best flat brushes in the market.

4) In August 1991 Smithkline Beecham entered the U.S. toothbrush market with its
new product Aquafresh Flex. Aquafresh Flex toothbrushes have the main
advantage of soft brushing due to their flexible handles. Aquafresh Flex had
achieved a value share of 1.1% and a volume share of 0.9% by the end of 1991 in
the U.S. retail toothbrush market from six SKUs. Smithkline Beecham’s strategy
is to expand its product line by offering one child brush and two adult compact
heads. However, Smithkline Beecham was meant to incur an operating loss on
toothbrushes in 1992.
 Insignificant Competitors were comprised of Sunstar, Pfizer, and Lever.

Customer – Segmentation, Targeting, and Positioning (STP)

Segmentation – Attributes of Distinct Customer Segments

Therapeutic Brushers – Cosmetic Brushers – 21% Uninvolved Oral Health

46% Consumers – 33%
 Core brands consist  Core brands consist  Core brands consist
of Oral-B Regular, of Oral-B Regular, of Oral-B Regular,
Oral-B Angle, Oral-B Angle, Colgate Classic,
Colgate Plus, and Colgate Plus, and Colgate Plus, and
Reach. Colgate Classic. Reach.
 85% are willing to  54% are willing to  28% are willing to
brush twice a day. use a professional only use regular
 62% are willing to brush. toothbrushes.
use a professional  85% are willing to  20% are willing to
brush. brush twice a day. brush once a day or
 Pursued successful less.
products that
highlighted oral
health care.

Consumer research has determined that CP has three main segments for their adult
consumers because of their all-inclusive participation in their oral health. Also, customers
have a higher possibility of choosing a brush that satisfies their needs and wants through
specific brushing styles, mouth shape, gum sensitivity, and mouth size which all rely on
head shape and the types of bristles. Furthermore, a big portion of customers declared
that a toothbrush is utilized for discarding food particles and oral hygiene followed by
plaque removal and the prevention of gum diseases.

Targeting – Differentiation Capabilities of Main Competitors

Company and Gillette and Smithkline Colgate- Johnson &

Product Oral-B Beecham and Palmolive and Johnson and
Indicator Aquafresh Colgate Advanced
 Flex Precision Reach
Advantages The color of Soft brushing. Exceptional Ability to reach
the bristle plaque removal difficult places
changes from among teeth while brushing.
blue to white to and gums.
determine its
expiration.
Messages Informs Is gentle on the Increase your Includes a new
consumer when gums due to a chances of not handle and
to change the flexible neck. acquiring gum head design.
brush head. disease.
Distinct The bristle Malleable The angle of Non-slip
Properties changes color handle work the bristle, handles, angled
depending on design of the necks, and
the amount of handle, and tapered heads.
usage. arrangement.
Value Shares 27% 1% N/A 42%
in 1991 and “20%” “18%” “31%”
“1992”
Volume 1.0% 0.9% N/A 0.7%
Shares in 1991 “3.7%” “4.6%” “4.0%”
and “1992”
Net Price of $1.92 $1.61 N/A $1.66
Manufacturer “$2.13” “$1.75” “$1.75”
in 1991 and
“1992”

The table above portrays Colgate Precision’s ability to remove 35% more plaque will
prove to be highly marketable and profitable if CP targets Therapeutic Brushers. So,
Colgate Precision can differentiate itself in the market for consumers who want to avoid
oral health problems.

Positioning – Niche Positioning versus Mainstream Positioning of Precision

Positioning Niche Mainstream

Retail Price $2.89 $2.49
Manufacturer Price $2.02 $1.76
 Pricing A 15% premium over Oral- N/A but less expensive
B. than Niche to target a
broader customer segment.
Planned Capacity Unit Year 1 = 13 MM units Year 1 = 42 MM units
Volume Year 2 = 20 MM units Year 2 = 59 MM units
Manufacturer Per Unit $0.66 $0.64
Cost
Distribution Mainly in drug and food Club stores and huge
stores. merchandisers
Number of SKUs 4 adult brushes 6 adult brushes and 1 child
6 colors brush
6 colors
Predicted Market Share 3% 10%
Promotional Year 1 = $11.2 million Year 1 = $32.8 million
Expenditures Year 2 = $11.7 million Year 2 = $29 million

The table shows us that Colgate Precision has two options for positioning which are niche
and mainstream. Mainstream Positioning will enable CP to acquire 10% of the market
share through the mass promotion and production of Precision by showcasing it as the
most impactful product in the market. Niche Positioning will require CP to assign
Precision a 15% price premium over Oral-B which will allow CP to attain a 3% market
share.

Recommendations

Retail Price
Niche positioning presents us with a more expensive choice of $2.89 compared to
Mainstream positioning which offers us a cheaper option of $2.49. This makes
Mainstream positioning the superior choice but $2.49 will be cheaper than Oral-B’s
Indicator which is an average price of $2.65. This could make customers choose the
Indicator since a higher price usually means higher quality. However, through the process
of sampling CP can gain a wider customer base through word of mouth.

Manufacturer Per Unit Cost

Niche Positioning is more expensive to produce at $0.66 per unit, unlike mainstream
positioning which incurs less expense because of $0.64 per unit.

Distribution
Most customers view oral care products as a commodity and anticipate these products to
be available at convenient locations such as drug and food stores. Also, exhibit 13
provides us with exemplary information about the prediction of toothbrush sales locations
which is 31% for drug stores, 43% for food stores, 21% for huge merchandisers, and 3%
for club stores. This is why niche positioning is superior in terms of distribution when
compared to mainstream positioning.

Number of SKUs
Niche positioning provides us with six colors and four adult brushes which is less than
mainstream positioning which offers CP six adult brushes and one child brush with six
colors as well. This informs us that with mainstream positioning CP can penetrate the
U.S. child toothbrush market while acquiring a larger percentage of market share.

Predicted Market Share

CP can achieve the goal of overtaking Oral-B as an industry leader if CP implements
mainstream positioning. This is because niche positioning can only attain 3% of the
market share, unlike mainstream positioning which can acquire a greater market share of
10%.

Promotional Expenditures
Mainstream positioning has a drastic reduction of $3.8 million from year one to year two
but niche positioning increases expenditures by $500,000 from year one to year two. This
is because niche positioning has a smaller target market so it will generate a lower
number of sales triggering an increase in promotional expenses due to more sampling.
However, mainstream positioning has a broader target market which will generate a
higher number of sales so CP will face a decrease in promotional expenses due to less
sampling.
Conclusion

All the information provided to us informs us that CP should choose mainstream

positioning for launching Precision into the U.S. retail toothbrush market. CP should do
this because Precision has a high chance of being profitable if it is marketed towards
Therapeutic Brushers and baby boomers. Since all Therapeutic Brushers and most baby
boomers are concerned about their oral health, Precision will seem very appealing to
them. Also, mainstream positioning enables CP to tap into a larger target market which
will allow Precision to be purchased by more households. This will inevitably increase
our total sales, market share, and gross margins.