Downloaded 13 times
More Related Content
Similar to Colgate-Palmolive Company: The Precision Toothbrush Case Study
Colgate-Palmolive Company: The Precision Toothbrush Case Study
- 1. Colgate Palmolive Company:ThePrecision Toothbrush A Harvard Business School Case
- 2. What is Colgate-Palmolive? Colgate-Palmoliveis aMultiNational Company which focuses on the production and distribution of household and personal care products
- 3. The following case revolvesaround it’s oral care unit Thefollowing case focuses onthe Oral Product division of Colgate-Palmolive
- 4. Sowho arethe mainplayers involvedin this case?
- 5. Susan Steinberg –Colgate Precision Product Manager John Philips – Colgate Plus Product Manager
- 6.
- 7. Year: 1989 Up untilnow, CP has offered just twolinesof Toothbrushes..
- 8.
- 9. Colgate Classic • GP’sfirst entry into the toothbrush market • Positioned in the “value segment” Colgate Plus • Positioned as a higher quality product in the professional segment
- 10. Then, in thesame year 1989, the company comes up with a team to develop a superior, technical, plaque removing device.. ..and in just 3 years, the company had it’s ground-breaking product ‘Precision’
- 11. Precision–Features: • Moreplaqueremoval– 35%more plaque removal than other competing brand products • Tripleaction brushing effect – enabled the bristles to reach out and clean all the parts of the teeth • Better precision– The product was much more efficient than Oral B in accessing the front and back teeth
- 12. The product wasscheduled to release and hit themarkets as a super-premium product in the year 1993
- 13. Objectives of thiscase?
- 14. To understandthe constraintsthattheproduct launchis facingand come up with the most suitable positioning,brandingand communicationstrategies
- 15.
- 16. Steinberg was facedthe dilemmaof whetherto position ‘Precision’ as a main stream product or as a niche product.. ..To predict the solution for thisdilemma, we have to analyze the totalcost-profit figures of both the cases
- 17. Cost Analysis:Niche Product(Y-1) TotalCost =3.25 M+ 0.316667 M+ 0.66*13 M= 12.146,670 M Advertising = 11,200,000 Revenue – 2.02*13,000,000 = 26,260,000 Net Profit = 2,913,330 $
- 18. Cost Analysis: NicheProduct (Y-2) Total Cost =4,550,000 + 13,200,000 + 450,000 = 18.2 M Advertising = 11,700,000 Revenue – 2.02*13,000,000 = 40,400,000 Net Profit = 10,500,000 $
- 19. Cost Analysis: MainStreamProduct (Y-1) Total Cost =9,100,000 + 886,667 + 26.88 = 36.866667 M Advertising = 32.8 M Revenue – 73.92 M Net Profit = 4,253,333 $
- 20. Cost Analysis: MainStreamProduct (Y-2) Total Cost =37.76+ 13+1.27=52.03 M Advertising = 29 M Revenue – 103.84 M Net Profit = 22,810,000 $
- 21. Cannibalization Cost: • Dueto the production of a similar product in the same industry, there are bound to be cannibalizationcosts • This cost is higher for Mainstream positioning than for Niche positioning
- 22. CannibalizationCost: Max. Loss •Steinberg predicted that 35-60% of volumes for Precision could come from the other two product lines 60% of 13 Million = 7.8 Million 268*0.173 = 46.36 M 46.364 – 7.8=38.564 M Final Revenue – 52.0614 Previous Revenue – 62.586 Maximum Loss in Revenue – 10.5246M $ • Maximum loss due to Cannibalization would be suffered when the whole 60% is from the customers who purchased Colgate Plus products
- 23. CannibalizationCost: Min. Loss •Now, the minimum loss would ideally be the one where the 35% volume change occurs completely dude to the shift of consumers from Colgate classic to the new product • But it’s illogical, as the consumers of Colgate Classic, as can be seen below, are either from Involved Oral care consumers (21%) or uninvolved oral care consumers (33%), who wouldn’t be willing to spend much on their dental care
- 24. CannibalizationCost: Min. Loss •So, let’s assume 60% from Plus and 40 % from Classic: 4.55*0.6 =2.73 M Plus units 4.55*0.4 = 1.82 M Classic units Least Loss in revenue = 2.73*1.35 + 1.82*0.69 = 4.9413 M $ (Approximate, as we took the same volume share for the year 1993 as 1992E)
- 25. The better solutionisto have Niche positioningin thebeginning,and thenlater on, shiftto Main stream positioning. Why?
- 26. • Having Mainstream positioning in the beginning would lead to shortage of products, and give rise to much more losses due to insignificant production of goods, accounting to lesser sales than expected • Shifting from Niche to Main stream would also ensure that a lot of “Therapeutic Brushers” who usually stick to the higher end range of oral products, purchase the product even when we shift it to a mainstream positioning • When shifted to Main Stream, the profits that we obtain are also maximized, ensuring greater cash return. (after taking cannibalization into consideration)
- 27.
- 28.
- 29. • Upon trials,it was found that “Colgate Precision” was deemed to be more appropriate by 49% and more appealing to 39 % • The confusion came up as to name it Colgate Precision or whether Precision, and build it as such like a brand • The company needs to put more focus and try to publicize “Precision” more, as cannibalization costs need to be kept as low as possible Colgate Precision Precision by Colgate Cannibalization would increase by 20% from before Result in lesser Cannibalization of Colgate Plus Can build on the brand equity of Colgate Should run solely on the properties of the product and new marketing strategies, which will require a lot more expenses
- 30.
- 31. • The brushlook was unusual and test participants sometimes had mixed opinions about it • Consumer research revealed that the more info they were provided, the more excited they were for the product • Steinberg concluded ‘Sampling would be critical to Precision’s success’ • The company should create a substantial increase for Precision launch with no change in the other two, as it’s necessary to ensure that the two already set products shouldn’t be harmed due to the setback of a new product
- 32. • Consumer promotions– 4 million dollars for Colgate Precision • 35% more plaque and gem removal promotes more sales as the research survey proves • Steinberg believed that launching precision would enable increase in overall share of trade advertising features • Through dentist professionals, 3 million units were to be sent in the case of niche positioning and 8 in the case of main stream positioning
- 33.