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Section C Group 8 Company Background

Colgate-Palmolive is a global leader in oral care products with 43% of the world's toothpaste market. They offer two toothbrush lines - Colgate Classic, positioned for value, and Colgate Plus, positioned for professionals. Colgate is developing a new toothbrush called Precision that outperforms competitors in plaque removal. They must decide whether to launch it as a niche or mainstream product. While mainstream would generate more revenue, a niche launch is recommended initially to target specific customers and avoid cannibalizing sales of Colgate Plus, as the new product is untested in the market.

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38 views2 pages

Section C Group 8 Company Background

Colgate-Palmolive is a global leader in oral care products with 43% of the world's toothpaste market. They offer two toothbrush lines - Colgate Classic, positioned for value, and Colgate Plus, positioned for professionals. Colgate is developing a new toothbrush called Precision that outperforms competitors in plaque removal. They must decide whether to launch it as a niche or mainstream product. While mainstream would generate more revenue, a niche launch is recommended initially to target specific customers and avoid cannibalizing sales of Colgate Plus, as the new product is untested in the market.

Uploaded by

sagar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Section C Group 8

Company Background:
Colgate – Palmolive (CP) was a global leader in household and personal care products. It
held 43% of the world toothpaste market, 16% of the world toothpaste market along with
dental floss and mouth rinses. CP offered two lines of toothbrush – the Colgate Classic and
Colgate Plus. Colgate Class was positioned in value segment while Colgate Plus was
positioned in the professional segment.
Brand Positioning:
The positioning of a brand is called the brand’s value proposition which is the combination of
benefits on which a brand is differentiated and positioned. It is the answer to the customer’s
question “Why should I buy your brand?” The five winning value propositions are:
1. More for more: Precision is the product of CP which falls in this category of
positioning. In initial test, it achieved an average 35% of plaque removal as compared
to Reach and Oral-B. If we sell Precision under niche positioning strategy, it would be
factory list priced to the trade of $2.13, a premium over Oral-B regular and at parity
with Oral-B indicator.
2. More for the same: Precision costs almost same as Oral-B and Aquafresh Flex but
gives the premium features in comparison to them.
3. The same for less: In comparison with Oral-B Regular which costs around $2.51,
Colgate Plus gives the more or less same benefits at around $2.00.
4. Less for much less: With less price of around $1.22, Colgate Classics meets
consumer’s lower performance or quality requirements at a much lower price. It is the
cheapest available product in the market for customers.
5. More for less: The factory listed price in mainstream category of Precision would be
around $1.85, which is at parity with Oral-B Regular and much lesser than Oral-B
Indicator.

Branding:
The company has conducted the survey to choose the best name for their product. The tested
names included Colgate Precision, Colgate System III, Colgate Advantage, Colgate 1.2.3,
Colgate Contour, Colgate Sensation, and Colgate Probe. The result favoured Colgate
Precision by 49% of concept acceptors and appealing by 31%.
Out of ‘Colgate Precision’ and ‘Precision by Colgate’, we consider ‘Colgate Precision’ to be
more appealing.
 It emphasizes the company name prior to the brand name.
 As it is the new product in the market, the company name in the beginning will help
in gaining the customer’s trust.

Promotion and Advertisement:


In 1991, on the scale of thousand $, CP spent $8761 on media promotion (43% of total
advertising and promotion), it also spent $5286 on consumer promotions (26% of total
advertising and promotion) and $6287 on trade promotions (31% of total advertising and
promotion). The total cost of CP’s advertising and promotion was $20334, and they are
planning to increase by around 18% for next year along with introducing Colgate Precision.
When Colgate toothbrush were combined with toothpaste in a single display, the toothbrush
sale by increased by 170%. AS compared to Johnson & Johnson, who spent $8 million in
media to introduce its new Reach toothbrush, Oral-B spend $10 million to launch its
Indicator toothbrush and Procter and Gamble was expected to support its Crest Complete
toothbrush with $15 million in media expenditures. Apart from all this, they also offered ‘buy
one get one free’ offers and other discount coupons which increases the promotion
expenditure.

Revenue:

Precision as a niche product Precision as a mainstream


product
Unit value produced Year 1 – 13 MM units Year 1 – 42 MM units
Year 2 – 20 MM units Year 2 – 59 MM units
Investment in Capacity Year 1 – $3.25 M Year 1 – $9.1 M
Year 2 – $1.3 M Year 2 – $3.9 M
Depreciation Cost Year 1 – $316667 Year 1 – $886667
Year 2 – $450000 Year 2 – $1270000
Manufacturer per unit cost $0.66 $0.64
Manufacturer Price $2.02 $1.76
Total Advertisement and $22.9 $61.8
Promotion cost
Revenue Generated $66.667 M $177.76 M

Conclusion:
Although the revenue generated is higher in mainstream product, but we still suggest them to
go with niche product for initial stage. As this product is new in the market and there is high
chances of cannibalisation of Colgate Plus with this product, so target specified segment of
customers in the initial year is more beneficial.

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