Food Chain and Food Web (Ecosystem) EVS, B. Pharmacy 1st Year, Sem-II
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1. HARVARD BUSINESS SCHOOL CASE
COLGATE –PALMOLIVE
COMPANY
THE PRECISION TOOTHBRUSH
1
Colgate Palmolive Company: The Precision
Toothbrush
2. • Company background
• U.S. toothbrush market
• Product segments
• Consumer behaviour
• Competition
• The Precision Marketing mix
• Conclusion
Presentation Contents at a Glance:
2
Colgate Palmolive Company: The Precision
Toothbrush
3. Why study this
case?
• To understand the market competition
faced by the Colgate Precision Toothbrush.
• To analyse the Consumer Behaviour of
that time period.
• To summarise the profits gained by the
company.
3
Colgate Palmolive Company: The Precision
Toothbrush
5. A new product, toothbrush
launched by CP in August
1992
Developed over a period of
3 years
5
Colgate Palmolive Company: The Precision
Toothbrush
6. Precision Product Manager
The person who managed the entire
product development process
Responsible for recommending the
POSITIONING , BRANDING and
COMMUNICATION strategies
6
Colgate Palmolive Company: The Precision
Toothbrush
7. • Susan Steinberg – Product
Manager
• Nigel Burton – Division General
Manager
• Ruben Mark – CP’s C.E.O.
7
Colgate Palmolive Company: The Precision
Toothbrush
8. CP – A Global Leader in Household & Personal
Care Products
8
Colgate Palmolive Company: The Precision
Toothbrush
10. The U.S. Toothbrush Market
has seen many changes since
ancient times ranging from
Dr. West’s Miracle Tuft
Toothbrush to the newly
launched The Colgate
Precision Toothbrush.
10
Colgate Palmolive Company: The Precision
Toothbrush
13. 1. To launch new products
2. To enter into new geographic
markets
3. To improve efficiency in
manufacturing & distribution
4. To continue focus on CORE
CONSUMER PRODUCTS
13
Colgate Palmolive Company: The Precision
Toothbrush
14. The industry executives had divided the
toothbrush category into following
segments :
1. Value
2. Professional
3. Super - Premium
14
Colgate Palmolive Company: The Precision
Toothbrush
17. CP’s Consumer Research indicated that
the Baby Boom Generation Consumers
were NOW becoming more
CONCERNED about the HEALTH OF
THEIR GUMS AS OPPOSED TO CAVITY
PREVENTION and were WILLING TO
PAY A PREMIUM FOR NEW PRODUCTS
ADRESSING THIS ISSUE.
17
Colgate Palmolive Company: The Precision
Toothbrush
31. Colgate Palmolive Company: The Precision
Toothbrush
31
• In 1992, 22% of all toothbrushes were
expected to be distributed to consumers by
dentists.
• Manufacturer margins on toothbrush sales
through dentists were less than half those
achieved through normal retail distribution
• Exhibit 13 summarizes toothbrush retail
distribution trends by volume and value.
35. Colgate Palmolive Company: The Precision
Toothbrush
35
In 1989, CP had established a task force
comprising executives from
1. R&D and Marketing
2. Dental professionals
3. Outside consultants
MISSION
To “develop a superior, technical, plaque
removing device.
36. Colgate Palmolive Company: The Precision
Toothbrush
36
THE 5 – GOALS:
1. Understanding the varying techniques consumers used when brushing
their teeth.
CONCLUSION : Brushing was often ineffective at removing plaque from
the gum line and between the teeth.
2. Testing the between-teeth access of different toothbrush designs.
CONCLUSION: CP’s new design was superior to both Oral-B and Reach
in accessing front and back teeth, using either horizontal or vertical
brushing.
3. Establishing an index to score clinical plaque-removal efficacy at the gum
line and between teeth.
CONCLUSION: Measured presence of plaque on each of the nine tooth
areas.
Then Calculation of percentages of tooth areas affected by plaque pre-
and post-usage of different brushes.
37. Colgate Palmolive Company: The Precision
Toothbrush
37
THE 5 – GOALS:( contd.)
4. Creating a bristle configuration and handle design offering maximum
plaque- removing efficacy.
CONCLUSION: Clinical trials established that the 3 similar newly designed
products removed an average 35% more plaque than other leading
brushes and therefore helped to reduce the probability of gum disease.
5. Determining, through clinical and consumer research, the efficacy and
acceptance of the new toothbrush design.
CONCLUSION: Product design and characteristics, marketing concept,
and competitive strengths were tested.
The overall acceptance of Precision was determined via dental
professional focus groups and product usage tests .
39. Colgate Palmolive Company: The Precision
Toothbrush
39
Steinberg developed a
marketing mix and
financial projections
for both scenarios.
40. Colgate Palmolive Company: The Precision
Toothbrush
40
Volumes: Steinberg believed that :
1. With a niche positioning Precision retail
sales would represent 3% volume share of
the toothbrush market in year 1 and 5% in
year 2.
2. With a mainstream positioning, these
volume shares would be 10% in year 1
and 14.7% in year 2.
3. Total category unit volumes were
estimated at 268 million in 1993 and 300
million in 1994.
42. Colgate Palmolive Company: The Precision
Toothbrush
42
Capacity and Investment Costs: Three types of
equipment were required to manufacture the
Precision brush:
1. Tufters
2. handle molds
3. packaging machinery.
Table D gives the cost, depreciation period,
and annual capacity for each class of
equipment.
45. Colgate Palmolive Company: The Precision
Toothbrush
45
PRODUCTION COSTS
WAREHOUSING COSTS TRANSPORT COSTS
46. Colgate Palmolive Company: The Precision
Toothbrush
46
Steinberg consolidated - best
estimate of the cost and price
data as in Table E
47. Colgate Palmolive Company: The Precision
Toothbrush
47
$10 Million
$8.6 Million
$4.3 Million
$27 Million
$23 Million
$11.8 Million
Probable
Profit $0.87
Probable Profit
$0.73
48. Colgate Palmolive Company: The Precision
Toothbrush
48
Breakeven Analysis
Total Manufacturing Costs +
Total Advertising Costs = Input
Cost( Variable + Fixed costs)
Total Profit = Retail Price *
number of brushes – Input
Cost
For Breakeven , Input Cost =
Total revenue generated by
selling the Precision brushes
49. Colgate Palmolive Company: The Precision
Toothbrush
49
TABLE C + TABLE E =
A Pro-forma income statement
Profit Implications - Niche Vs Mainstream
Positioning Strategies
Uncertain Cannibalization
51. Colgate Palmolive Company: The Precision
Toothbrush
51
Two tests carried out:
1. CONSUMER CONCEPT TESTS
2. NAME TESTS
OUTCOME:
Under the mainstream and niche positioning scenarios –
1. Cannibalization figures for Colgate Plus would increase
by 20% if the Colgate brand name was stressed.
2. Remain unchanged if the Precision brand name was
stressed.
52. Colgate Palmolive Company: The Precision
Toothbrush
52
CP’s stated corporate
strategy was to build on
the Colgate brand equity.
54. Colgate Palmolive Company: The Precision
Toothbrush
54
4 concept tests - conducted -
among 400 adult professional
brush users (Colgate Plus, Reach,
and Oral-B users) -18 to 54 years
of age.
56. Colgate Palmolive Company: The Precision
Toothbrush
56
RESULT OF THE FOUR CONCEPT TESTS:
TEST 1:
(69+68+66)/3 = 67.67 % Probably Would Buy
(15+15+10)/3 = 11.67 % Definitely Would Buy
TEST 2:
(80+71+74+68)/4 = 73.5% Probably Would Buy
(19+19+18+14)/4 = 17.5% Definitely Would Buy
57. Colgate Palmolive Company: The Precision
Toothbrush
57
RESULT OF THE FOUR CONCEPT TESTS:(CONTD.)
TEST 3:
(63+72+62+66)/4 = 65.75 % Probably Would Buy
(13+16+11+14)/4 = 13.5 % Definitely Would Buy
TEST 4:
(87+61)/2 = 74% Probably Would Buy
(19+48)/2 = 24% Definitely Would Buy
58. Colgate Palmolive Company: The Precision
Toothbrush
58
Consumer Research - including in-home
usage tests revealed
• 55% of test consumers found Precision to
be very different from their current
toothbrushes.
• 77% claimed that Precision was much
more effective than their current
toothbrush.
59. Colgate Palmolive Company: The Precision
Toothbrush
59
sampling would be critical
to Precision’s success.
RESULT OF VARIOUS TESTS & RESEARCH:
60. Colgate Palmolive Company: The Precision
Toothbrush
60
Several consumer promotions to back the launch:
1. a free 5 oz. tube of Colgate toothpaste (retail
value of $1.89) with the purchase of a Precision
brush in strong competitive markets;
2. a 50%-off offer on any size of Colgate
toothpaste (up to a value of $1.00) in
conjunction with a 50¢ coupon on the Precision
brush in strong Colgate markets.
61. Colgate Palmolive Company: The Precision
Toothbrush
61
COST OF
COMMUNICATION
PROMOTIONS WAS
ESTIMATED TO BE $52.1
MILLION.
62. Colgate Palmolive Company: The Precision
Toothbrush
62
CONCLUSION
1. Precision- a technological breakthrough - more
than a niche product /simple line extension .
2. How Precision should be positioned, branded, and
communicated to consumers.
3. What the advertising and promotion budget should
be and how it should be broken down.
4. To develop a marketing mix and profit-and-loss pro
forma to enable Precision to reach its full potential.
5. It should be acceptable to Burton and other
colleagues, particularly the Colgate Plus product
manager.