Marketing Plan 313m1z

Kim Pauszek

Colgate-Palmolive Case-Marketing Plan I. Executive Summary A. Summary of situation analysis The Colgate-Palmolive case involves the Precision toothbrush, which was entered into the market in 1993 by Colgate-Palmolive. This marketing plan summarizes the company’s situation at the time the Precision toothbrush was introduced, and the different marketing strategies that we believe would be best for Colgate-Palmolive and their new toothbrush. B. Summary of marketing strategies The marketing strategies include proposed strategies involving product, price, place, and promotion. C. Budget summary Included in the marketing plan are pro-forma income statements for Colgate Palmolive if they were to launch the product, and also if they were to choose not the launch the product. Also included is an advertising budget. II. Situation Analysis A. The Industry 1. Definition of industry The purpose and main focus of the oral health care industry is to prevent teeth and gum diseases and to deliver cosmetic benefits. Examples of products in this industry include toothbrushes, toothpaste, dental floss, and mouth rinses.

2. History of Industry Toothbrushes first evolved in 3000 B.C., and advancements have continued ever since. Such advancements include the head shape, size, flexibility, bristle texture and type, color, and angled handles. Companies, other than Colgate-Palmolive, that have entered into the toothbrush market include Oral-B, owned by Gillete, Johnson and Johnson, Procter and Gamble, Smithkline Beecham, Lever, Pfizer, and Sunstar. 3. Growth Patterns Consumers first purchased toothbrushes without much knowledge or information concerning the product’s benefits. As new product development increased, and consumers became better informed about the benefits of toothbrushes, they began to focus their interest not only on cavity prevention, but also on the health of their gums, their oral hygiene, and their cosmetic appearance. Because consumer interest and toothbrush purchases began to increase, advertising and promotion also began to increase, which lead to the development and addition of the super- product class. The super product class was a “sub-category of toothbrushes partly offset by downward pressure on average retail prices in mass-merchandiser channels,” (Harvard). Consumers began to purchase toothbrushes based on the specific benefits each toothbrush and company had to offer. B. The Company 1. Brief History

The Colgate-Palmolive Company was founded in 1806 by William Colgate. The company first began by centering their production around soaps, perfumes, and candles. They began introducing oral health care products to the market in 1873, by producing “its first toothpaste, an aromatic dental cream sold in jars” (Colgate-Palmolive, 1 of 3). By 1991, Colgate-Palmolive had become the leader in not only household products but also in oral health. 2. Size, growth, profitability By the early 1990’s there were many different companies that focused on oral care products, with the leader being Colgate-Palmolive. By 1991, Colgate-Palmolive held the number one position in the world for the sale of oral care products, ing for 19% of the worlds toothbrush market. The company’s sales and profits were increasing each year, and by 1991 sales totaled “1.03 billion dollars, while profits totaled 9.8 million dollars,” (Harvard). At this point in time Colgate had introduced two different types of toothbrushes to the market, the Colgate Classic and the Colgate Plus. C. The Product 1. Development and history The product in which this marketing plan focuses around is the Precision toothbrush. Production began in 1989 when the company put together a research team whose purpose was aimed at testing the design of the toothbrush, how the company would market the product, and how the company would gain a competitive advantage over others. Colgate-

Palmolive’s mission was to “develop a superior, technical, plaque-removing device” (Harvard). Colgate-Palmolive referred to the toothbrush as a “technical innovation, [because] researchers used infrared motion analysis to track consumers’ brushing movements and consequent levels of plaque removal” (Harvard). By studying consumers brushing techniques, and focusing on areas of the mouth that had developed excessive amounts of plaque build-up, such as in between the teeth and on the gum line, researchers were able construct a newly designed toothbrush. The research team tested and experimented with the toothbrush for eighteen months by the usage of “dental professional focus groups and product usage tests.” This led to the introduction stage of the product life cycle, with the “launching” of the Precision toothbrush to the oral health care market in 1993 (Harvard). 2. Design/quality The main design of the product concentrated on the bristles of the toothbrush. The head of the Precision toothbrush included three different lengths of bristles, each length having its own responsibility. “The longer outer bristles cleaned around the gum line, the long inner bristles cleaned between the teeth, and the shorter bristles cleaned the teeth surface,” (Harvard). Because of the newly innovated bristles, the removal of plaque increased by 35% when compared to other leading producers of toothbrushes. 3. Goods classification

The Precision toothbrush can be classified as either a homogeneous or heterogeneous shopping product. Some consumers may see it as a homogenous product because they see all toothbrushes as the same, and place their attention on the lowest prices. Others may see the toothbrush as a heterogeneous product because they see the need to “inspect for quality and suitability” (McCarthy). 4. Price Under a niche-positioning strategy Colgate-Palmolive would price the toothbrush at $2.13 a unit. Under a mainstream-positioning strategy, the company would price the toothbrush at $1.85 a unit. If the toothbrush was sold to dental professionals “eighty percent of sales […] would be priced at $.79 per unit; the remainder would be sold at $.95” (Harvard). 5. Branding Colgate-Palmolive considered many different names, which included, “Colgate System III, Colgate Advantage, Colgate 1.2.3, Colgate Contour, Colgate Sensation, and Colgate Probe” (Harvard). Colgate-Palmolive decided upon the name Precision, because they did not want a name that could lead customers to associate the new toothbrush with their already existing toothbrush, Colgate Plus. This is called cannibalization. 6. Promotion The price budget for promotion was set at 14.4 million dollars. The company’s promotion plan was to “induce trial” (Harvard). ColgatePalmolive planned to promote the Precision toothbrush one, by offering a free

five-ounce tube of toothpaste or a fifty percent off coupon that could be put towards any other size of toothpaste to every consumer who purchased a Precision toothbrush, and two by offering $.50 off coupons. 7. Positioning The position of the Precision toothbrush could be niche or mainstream. If the position were to be niche, concentration would be placed on the prevention of gum disease, and “retail sales would represent 3% volume share of the toothbrush market in year 1 and 5% in year 2.” If the position were to be mainstream, concentration would be placed on “being the most effective brush on the market, [and] volume shares would be 10% in year 1 and 14.7 in year 2,” (Harvard). The decision on where to place the new toothbrush on retail shelves is another important aspect of positioning. Colgate-Palmolive chose to place the toothbrush in between one of their existing products and a competitor’s product. D. The Market 1. Location The oral health care market is spread worldwide mainly targeting grocery, drug, convenience, and large retail stores. The toothbrush market in the past had few types of toothbrushes, while today’s market carries many various types of toothbrushes. This may have been due to lack of consumer concerns with what type of toothbrush they desired. 2. Purchasing characteristics

Many toothbrush purchases are unanticipated, “with consumers purchasing toothbrushes once every 11.6 month. Forty-eight percent of consumers claimed to change their brushes at least every three months; the trigger to purchase a new brush for 70% of them when their toothbrush bristles became visibly worn. Eleven percent decided to switch to a new brush after seeing their dentists, and only 3% itted to purchasing on impulse,” (Harvard). 4. Market needs In most cases consumers only need two to three toothbrushes a year. “Sixty-five percent of consumers had more than one toothbrush, 24% kept a toothbrush at work, and 54% had a special toothbrush for traveling,” (Harvard). 5. Buying behavior patterns Many consumers base a lot of their purchase decisions on how comfortable a toothbrush feels in their mouths, whether the bristles are soft enough, whether the head shape suits their mouth size, or whether the toothbrush is flexible enough. They also base their purchases around the ability of the toothbrush to “remove food particles; plaque removal and gum stimulation,” (Harvard). When it comes time to purchase a toothbrush, there are three different consumer groups. These groups include therapeutic, cosmetic, and uninvolved brushers. Therapeutic brushers are concerned with oral care problems. They brush to prevent disease or other oral health risks, and

“search out functionally effective products.” Cosmetic brushers are concerned with bad breath and their appearance, and “search for products that effectively deliver cosmetic benefits.” Uninvolved brushers “view all products the same and lack interest in this product category,” (Harvard). E. The Competition 1. Identification of competitors • • • •

Oral-b: Indicator Johnson & Johnson: Reach Proctor & Gamble: Crest Complete Smithkline Beecham: Aquafresh Flex

2. Weaknesses of Competition Many competitors striving to succeed in the oral care market such as Oral-B and Johnson & Johnson know that in order “to be a leader in the oral care category, companies have to be able to compete in all areas of the oral care,” besides toothbrushes and toothpaste (Harvard). Because there are many primary competitors in the oral care market, product innovation is a key factor to a company’s success. Colgate-Palmolive not only had to worry about cannibalizing their own products, they also had to worry about the new line of products that were being introduced by such companies as Oral-B, Johnson & Johnson, and Procter and Gamble. In 1991, it was estimated that Oral-B held 23.1% of the market share and Johnson & Johnson held 19.4% of the market share. With companies holding such large shares of the market, Colgate-Palmolive had to worry about the innovation of new products that could compete with the Precision toothbrush.

Companies that hold large market shares can afford to pay for more advertising for a newly developed product. It was to Colgate-Palmolive’s advantage that they had their share of 16% of the toothbrush market (Harvard). F. Distribution 1. Types of Distribution Aside from convenience stores and large retail stores, many food stores played a key role in the distribution of oral health care products. “Mass merchandisers gained share due to increased in-store promotional ” (Harvard). Because of the increase in the demand for oral care products, stores began shelving more oral care products. This was a big advantage for Colgate-Palmolive because there would be more room in the stores for them to market the new Precision toothbrush. Dentists also played a big role in the distribution of oral care products. 1. Strengths/Weaknesses of Distribution Since many of the food stores began to open more shelf space for oral care products, this would allow for Colgate-Palmolive to situate the Precision where they thought it would gain attention from consumers. The only drawback about distribution for Colgate-Palmolive was dentists. ColgatePalmolive did not hold the market share for the distribution of toothbrushes in dentists’ offices. “With a dedicated sales force, Oral-B dominated this market” (Harvard). Without dominating the dentist market for toothbrushes, ColgatePalmolive would have to focus more strongly on other retail locations,

considering in 1992, “22% of all toothbrushes were expected to be distributed to consumers by dentists” (Harvard). G. Communication Strategies 1. Promotion pricing It has been proven that increasing promotion has lead to an increase in consumer demand. Both Colgate-Palmolive and their competitors spent a lot of money on the promotion of their new products. “Johnson & Johnson spent $8 million in medias to introduce its new Reach brush; Oral-B spent $10 million to launch its new Indicator brush; and Proctor & Gamble was expected to its Crest Complete brush with $15 million in media expenditures,” (Harvard). These figures are also summarized in Attachment 1-Advertising Budget. Because competition was increasing, these companies saw it necessary to increase their spending on promotion. Companies began to offer purchase deals, such as buy one get one free, special percent off coupons, and mail in rebates. 2. Advertising programs “Total media spending for the category, primarily on television advertising, was estimated to total $55 million in 1992 and $70 million in 1993,” (Harvard). Between the years 1985 and 1992, Colgate-Palmolive ran four different commercials. Each commercial had its own marketing situation, platform, execution plan, and tag line. The marketing situation that the last commercial dealt with before the introduction of the Precision

toothbrush was “Increased competitive activity and consequent need for harder-hitting copy.” Colgate’s copy platform for this commercial stated, “Plaque focus, Efficiency message.” Colgate’s execution plan was, “Armed to the Teeth, execution where the bristles were soldiers.” And Colgate’s tag line was, “In the fight against plaque, it’s a Plus,” (Harvard). III. Marketing Strategy A. General marketing strategy 1. Niche/mainstream positioning strategy The main focus of niche positioning would be placed on consumers who are concerned about the prevention of gum diseases. There would be many positive benefits to the company if Colgate-Palmolive were to position the Precision toothbrush as a niche product. These benefits would include one, by targeting the segment of consumers who are worried about gum disease; Colgate-Palmolive would be able to charge prices. Two, Colgate-Palmolive would be able to differentiate the Precision toothbrush from other toothbrushes, because of Precision’s technological superiority over the other toothbrushes already on the market. Three, it is safe to say that SKU’s would not decrease if Colgate-Palmolive were to position the Precision as a niche product. And four, if costs were to decrease then it enables Colgate to reduce the losses of Precision if it were not successful. Niche positioning not only offers positive benefits, but it also offers negative ones as well. The negative benefits if Colgate-Palmolive were to position the Precision toothbrush as a niche product would include one, sales in mass merchandisers

would decrease, and two, retail sales would be less if niche positioning were used. Mainstream positioning would place emphasis on the Precision toothbrush as being the most appealing and effective toothbrush available on the market. The advantages of using mainstream positioning for the Precision toothbrush would be one, most retail stores are under a mainstream position rather than a niche position. Two, in the super- category, the Precision toothbrush would be the most superior product. And three, by positioning the toothbrush as a mainstream product, it would in return increase name recognition for Colgate. Negative advantages of using mainstream positioning for the Precision toothbrush are one, although the toothbrush would be superior to the other super- toothbrushes, the prices for the Precision and other brushes would be equal. Equal prices would then lead to increased competition, which in return could cause prices to go up. A second disadvantage could also lead to the cannibalization of Colgate-Palmolive’s other super- toothbrush, the Colgate Plus. And three, a mainstream position would probably lead to the reduction and removal of one or more SKU’s. By looking at Attachment 2-Pro-forma Income Statement For Launch of Precision, which compares the profits if Colgate-Palmolive were to use niche or mainstream positioning, one would be able to see that if mainstream positioning were to be used for the Precision toothbrush, it would generate more profits to Colgate-Palmolive. We believe that maximizing your profits

is the most important thing, and that positioning the Precision toothbrush as a mainstream product, rather than a niche, it would create higher profits. 2. Product differentiation strategy By differentiating a product, it creates a difference that sets certain products apart from other products, and also targets certain market segments. Colgate-Palmolive will need a product differentiation strategy that will make the Precision toothbrush unique from all other toothbrushes already available on the market. The company will also need a strategy that will appease to certain consumer segments. By coming up with this strategy, it in return will cause Colgate-Palmolive to increase profits and market share. The main area of this strategy’s focus should be placed on the design and packaging of the toothbrush. For example, we suggest Colgate make sure the consumers know that the bristles are of different lengths for a reason, for the reduction of plaque build-up in places such as the gum line and in between the teeth, and that no other toothbrush on the market is designed this way. We suggest that a picture is placed on the toothbrush package showing the different lengths of bristles, and an explanation of what each length is responsible for doing. Also we suggest that the bristles be different colors representing the different lengths. This way the consumer will be able to differentiate the Precision from all other toothbrushes. We suggest that Colgate-Palmolive package the Precision toothbrush differently than the other toothbrush companies. We think that the toothbrushes’ packaging should be very colorful in order to draw customer

attention away from other brushes. The name Precision should also be placed on the packaging in a distinct font. 3. Price/quality differentiation strategy Our main focus here is on the customers. We want them to be able to get the most for their money. By producing a superior toothbrush, that offers more qualities than the other toothbrushes available on the market, at or around the same price as the competition, consumers will hopefully want to purchase the Precision toothbrush over the others. There will be more qualities offered at no extra charge. The price of the toothbrush if positioned as a mainstream product will have to be equal to the prices of the other toothbrushes already available on the market. If the Precision toothbrush is profitable and there is a high percentage of consumer demand, then Colgate-Palmolive might want to consider increasing the price of the toothbrush by a small margin. 4. Mission marketing strategy Colgate-Palmolive’s mission strategy is to be successful in the toothbrush market, and hope the Precision toothbrush is not a failure. They will strive to gain a competitive advantage over other companies, while producing a profit, and satisfying the wants and needs of buyers. A goal of Colgate-Palmolive is for the Precision toothbrush to add utility or value to its consumer’s lives.

B. Target markets

1. Target market A and proposed strategies The first segment market that the Precision toothbrush will target will be consumers who are concerned about oral health issues, such as fighting plaque and gum disease. These consumers are known as “therapeutic consumers,” because they purchase products, toothbrushes, that will be the most effective when it comes to oral health care. These consumers “buy and use products for themselves,” (Harvard). Consumers in this target market usually do not care about the price, as long as they are getting the highest quality products. Most consumers in this segment are adults, especially ones who have oral health problems. When distributing the Precision toothbrush to this market segment, we suggest they place emphasis of distribution on dentists, drug stores, grocery stores, and large retail stores. Dentists would be a good when distributing the new toothbrush because many dentists act as “opinion leaders”, meaning they have a big impact on what others think. Although Oral-B is the main distributor when it comes to dentists, this would be a good opportunity for Colgate to gain competitive advantage over Oral-B, by getting dentists to distribute the new toothbrush while selling the benefits to patients. Advertising and promotion should be done through commercials, magazines, radio, and ads put up in places such as dentists offices. These advertising and promotion mediums should target this segment’s consumers, and should focus on the benefits the Precision toothbrush has to offer in connection with oral healthcare. Commercials made for this market segment

should also show the benefits of the toothbrush, possibly through demonstration. Commercials should air at night during “prime-time”, the time in which most people watch television, and during the day, especially during soap operas. These are the time periods in which more adults watch television. Also when it comes to advertising, Colgate-Palmolive should institutional , meaning they should not only promote their new Precision toothbrush, but they should also promote the company’s image. This in return will remind consumers of Colgate’s other products that are available on the market. Colgate could direct market the toothbrush by sending special coupons in the mail to consumers, or by offering rebates to consumers who purchase other Colgate-Palmolive oral care products. These rebates and coupons would act as an incentive to consumers when it comes to purchasing or trying the new toothbrush. These coupons and rebates could also be dispersed through hard to eat food products, such as popcorn. Also in-store displays could be set up through out stores. These in-store displays could also include demonstrations. 2. Target market B and proposed strategies The second segment market that we would target the new Precision toothbrush would be consumers concerned with their oral hygiene, such as bad breath, and personal appearance. Many, but not all, consumers in this group are female adults who worry about what they look like. These

consumers purchase products that will “effectively deliver cosmetic benefits,” (Harvard). Target B consumers feel the same way as Target A consumers when it comes to pricing. Most are willing to pay more if the product offers more advantages than competing products, although because the toothbrush will be positioned as a mainstream product, price will vary in accordance to the prices of other toothbrushes. When it comes to the distribution of this product, the toothbrush should be distributed through the same locations as Target A, with the addition of plastic surgeon practices and make-up departments of large retail department stores, such as Von Maur, and Bloomingdales. The toothbrushes should be distributed through plastic surgeons because many people who visit a plastic surgeon are concerned about their appearance, and would likely consider the different options available to them that will enhance their appearance, such as their teeth. The toothbrush should be distributed through make-up departments because most people who shop for make up at large department stores are also concerned with looking their best. Advertising and promotion should be done in a similar manner as Target A, through commercials, magazine ads, the radio, with the addition of placing ments on billboards, and buses. The commercials and other ments should focus on the cosmetic benefits of the toothbrush. We suggest the adds show well made up men and women, who one can tell place great emphasis on their looks, demonstrating the strengths of the new toothbrush. The placement of ads on billboards and buses throughout the

larger cities will hopefully increase consumer demand because many people who live in large cities have important jobs that require them to look nice. Special promotions that Colgate can offer can be through other Colgate products that many consumers also associate with appearance and oral hygiene. Such products can include dental floss and mouth rinses. As with Target A, special rebates and coupons can be offered through these products. Also, the use of in-store displays could be useful when promoting the toothbrush. By placing the new toothbrush on the shelf between an existing Colgate product and a competitor’s profits, this may or may not be a good idea. By placing the product next to an existing company’s product, consumers may not see the benefits of switching, and could continue to prefer using the existing product rather than even considering trying the new one. But by placing the new product next to a competitor’s product, it may lead to the consumer questioning which product is better, hopefully causing the consumer to try the new product, over its competing product. C. Summary of tactics 1. Product The product, the Precision toothbrush, is a product that should add value to a buyer’s life. It should also add utility, and meet the wants and needs of targeted consumers. The product should be unique and different from all similar products that are already available on the market. The strategy is to differentiate the product’s design and packaging, which in return will cause

the toothbrush to stand out. 2. Price The price of a product says something about the quality. Even though the quality of the Precision toothbrush will be significantly higher than other leading toothbrushes, the price of the toothbrush will be determined by the prices of the other toothbrushes already in the market. This pricing strategy is a result of positioning the toothbrush as a mainstream product rather than a niche product. 3. Place The most important part of marketing is how a product will get from the seller to the buyer. Many products go through a channel of distribution, which involves, manufactures, wholesalers, retailers, and consumers. The distribution strategy proposed for the Precision toothbrush is through dentists, plastic surgeons, drug stores, grocery stores, large retail stores, and department stores. 4. Promotion Product promotion is communication spread through advertising, publicity, and sales promotion. We suggest that Colgate-Palmolive their products by using commercial, magazine ads, the radio, ads that are to be placed in dentist offices, billboards, and the sides of buses. Advertising is done to promote new products, remind consumers of existing products, and also promote the image of the company at hand. We also suggested that Colgate offer special coupons and rebates through their

other products, and also food products. Also, Colgate could benefit from the usage of in-store displays. C. Attachments 1. Attachment 3-Pro-forma Income Statements Without Precision Launch 1989-1993

Works Cited Laidler, Nathalie. “Colgate-Palmolive Company: The Precision Toothbrush.” Harvard Business School. 1993 McCarthy, Jerome E. and William D. Perreault. Basic Marketing: A Global-Managerial Approach. New York: McGraw-Hill Companies, 2002. 276-277. Younger, Vicki. “Colgate Palmolive.” Redgum Soaps. 8 Sept. 2002. http://www.redgumsoaps.com.au/soaphistory/colgate.htm.