Colgate Palmolive Industry Position
|✅ Paper Type: Free Essay||✅ Subject: Marketing|
|✅ Wordcount: 5382 words||✅ Published: 26th May 2017|
Colgate-Palmolive is recognized as the worlds leader in personal care sales which included oral hygiene products like toothbrushes and toothpastes. In 1991, its sales topped at $6 billion and profits at $2.76 billion as it cornered 43% of the world’s toothpaste market and 16% of the world’s toothbrush market. In the United States, the world’s largest market, Colgate-Palmolive holds the number one spot in toothbrush sales with a market share of 23%. From these statistics, one of Colgate-Palmolive’s main strengths is being the market leader in oral care products.
If you need assistance with writing your essay, our professional essay writing service is here to help!Essay Writing Service
Colgate-Palmolive’s extensive overseas reach is another main strength. Based on the data in the case study, Colgate-Palmolive introduced 275 new products worldwide and setup manufacturing facilities in China and Eastern Europe breaching the emerging economies of the 21st century. On top of that, international sales accounted for 64% of total sales and 67% of the total profits for Colgate-Palmolive.
Colgate-Palmolive has an extensive Research and Development department boasting 170 employees worldwide. Though having a large R&D department does not directly contribute to increased profits, Colgate-Palmolive’s history of innovation  in the toothbrush market is linked to its current position as the market leader in the toothbrush industry. Therefore Colgate-Palmolive’s strong commitment to innovation through investment in R&D is a prominent strength.
With an energetic and visionary leader like Reuben Mark at the helm of Colgate-Palmolive, the company has transformed itself into a lean and profitable machine, leading to increased profit margins and volume growth.  Clearly, having a visionary CEO is a strength.
Colgate-Palmolive’s positioning strategy for its toothbrush line in food stores has aided in capturing their current dominant market share. Its in-store displays, combining toothbrushes with toothpaste packs and locating the Colgate-Palmolive line of toothbrushes in the middle of the stores’ shelves have contributed to this dominance. This strategy has been successful, as sales through food stores, drug stores and mass merchandising channels have produced the greatest volume and dollar sales historically. 
Colgate-Palmolive has a large number of stock keeping units for their toothbrush line.  Multitudes of SKUs indicate that Colgate-Palmolive is targeting a broad spectrum of market segments in the toothbrush market, which spreads the risk inherent to carrying any product. Diversification of product types within the toothbrush market is another strength factor Colgate-Palmolive holds.
Colgate-Palmolive’s secret weapon in the war for supremacy in the super-premium market, Colgate Precision, is proven to be very effective in removing plaque – 35% more effective than existing brands – and in preventing gum disease. This advantage can be attributed to the innovative design, high-tech research using CAD and infrared scanning, consumer research and extensive product testing. Although this technology is a strong argument for positioning Precision in the “super-premium” category, Colgate-Palmolive could also use its design aspects to improve Colgate-Palmolive’s existing “professional” and “value” toothbrush lines to increase their respective market shares. Colgate-Palmolive’s patented  innovation for Precision also stands as a strength upon which Colgate-Palmolive can lean for other market differentiating advancements.
Colgate-Palmolive’s recent infusion of new capital into its manufacturing facilities will bode well as it prepares to battle for market share in the new “super-premium” market segment. Colgate-Palmolive will be able to leverage its existing relationship with its manufacturing partner, Anchor toothbrush, to quickly and cost-effectively product its newest product.
The impending release of Colgate-Palmolive’s new toothbrush, Precision, may affect sales of its existing toothbrush lines. This may lead to a “cannibalization” of the Colgate Plus and Colgate Classic market of up to 60%.  Since the existing toothbrush lines are the “cash cows”  of the company’s oral care division, a dismal performance by the new Colgate-Palmolive Precision might drain the “cash cows” of their resources altogether.
Colgate-Palmolive’s media expenditure layout is very small compared to its rivals.  It has spent only $7 million dollars on its Colgate-Palmolive Plus marketing efforts and has only 19% of the share voice. Since media exposure fuels consumer demand  for a new product, this is one area where Colgate-Palmolive needs to have its expenditures equivalent to that of its rivals.
Another marketing weakness that Colgate-Palmolive faces is its lack of professional dental endorsements, with less than half that in market share and dollar sales than that of their largest competitor, Oral-B.
Similar to Colgate-Palmolive’s lack of professional endorsement, the Precision toothbrush does not have the fullest endorsement from the American Dental Associations (ADA). Although the ADA issued its seal to the product, the seal alone stands for little more than recognition that the toothbrush works. In fact, only when the ADA issues its seal and an official quote stating that a product is superior to similar product types, does a product receive the fullest support possible. Not having the full backing of the ADA is a weakness which Colgate-Palmolive may have to overcome to gain the professional endorsement they seek. 
The emergence of the niche “super-premium” category presents a golden opportunity for Colgate-Palmolive to increase market share for several reasons. First, although its competitors, i.e. Oral-B, Johnson & Johnson and Procter & Gamble, have gained a foot-hold in this niche market already, Colgate-Palmolive can still make a dent with its new Precision toothbrush, thus enabling them to enter a new and potentially highly profitable market segment. Since the “super-premium” category accounts for 35% of the volume and 46% of the dollar sales of toothbrushes  this niche category may in turn result in a substantial profit margin.
Secondly, with the baby boomers and younger generations becoming more concerned with the health of their gums, they will be willing to pay the above mentioned premium for a toothbrush  which is optimized for better gum care. Colgate-Palmolive can capitalize upon this demographic segment to ensure a successful release of their “super-premium” Precision toothbrush.
Finally, since 82% of toothbrush purchases are unplanned and many consumers are unaware of the technological and cost variation among toothbrush brands,  Colgate-Palmolive could establish a media blitz with educational ads depicting Precision toothbrushes as technologically superior to its rivals at an equivalent cost. The ads can also serve to educate consumers about proper toothbrush replacement schedules to ensure effective plaque removal and gum disease prevention. Ultimately, Colgate-Palmolive could leverage their advertising campaign to boost sales and revenues.
One of Colgate-Palmolive’s competitors, Johnson & Johnson,  ranked third in toothbrush sales, was phasing out one of its toothbrush lines at the time of the Precision introduction. As the toothbrush market remains rather constant, courting customer from other brands, particularly ones being phased out, is a tremendous opportunity to gain market share.  Another competitor, Smithkline Beecham, was predicting an operating loss in its toothbrush business.  If the losses are sustained, it might cause Smithkline Beecham to move out of the toothbrush business all together, yet again opening the door for further gain of market share. Colgate-Palmolive’s constant innovation also provides an opportunity to convert consumers away from less advanced toothbrushes, such as those offered by Lever.
Threat of intense segment rivalry
The super-premium toothbrush market is highly competitive, hosting many brands and private label toothbrushes. If any of these rivals creates a toothbrush which tops or even equals the technology of Precision, specifically if done at a lower production cost, Colgate-Palmolive may lose market share.
Threat of new entrants
Along with intense rivalry from existing competitors, Colgate-Palmolive has to deal with new competitors. In 1991, the toothbrush market exploded with a dramatic increase in new entrants. Proctor and Gamble introduced Crest Complete, their first toothbrush  . Smithkline Beecham entered the market with Aquafresh Flex and a 9% market share volume for 1991. Levre, Pfizer and Sunstar all entered the market in 1991 and earned a total 11% market share. These numbers reinforce the seriousness of the threat of new entrants that Colgate-Palmolive will have to contend with when they launch Colgate Precision.
Threat of substitute products
Similar to many industries, oral care technology has advanced tremendously since its inception in approximately 3000 B.C. The introduction of the nylon bristled toothbrush in 1938  represents one of the latest quantum improvements for the industry, however it was not the last. The introduction of electronic toothbrushes and water picks are threatening to usurp traditional oral care product’s market share. This is a threat which Colgate-Palmolive needs to heed, despite its confidence in the technology of Precision.
Threat of suppliers’ growing bargaining power
Colgate-Palmolive depends on Anchor toothbrush for its outsourced manufacturing. Hence, Anchor toothbrush has a decided supplier advantage in the relationship with Colgate-Palmolive. If Anchor toothbrush were to increase its supply cost, it would affect Colgate-Palmolive’s production costs which in turn would impact Precision’s market share by potentially pricing it above even the super-premium segment. Colgate-Palmolive needs to maintain a healthy relationship with Anchor toothbrush to reduce the risk of a costly supplier switching process.
Threat of buyers’ growing bargaining power
One of the factors which can cause buyers’ bargaining power to grow is when the switching costs for buyers are low. Even if Colgate-Palmolive were to position Precision as the most expensive toothbrush on the market, it is still a relatively inexpensive product, compared to many daily purchases (i.e. lunch in NYC or a cup of coffee at Starbucks). Therefore, buyers can easily switch between toothbrush brands without giving the decision much thought. To combat this threat, Colgate-Palmolive could position Precision as a superior toothbrush that customers can not afford to be without.
In 1992, after evaluating the current market condition and completing its research and development, Colgate-Palmolive was ready to begin marketing its newest toothbrush, Colgate Precision. Of major concern to Colgate-Palmolive was how to position, brand and communicate this new product to the general population. Colgate-Palmolive also had to develop budget constraints and generate a marketing mix that would maximize the sales and revenues of the new product.
Colgate-Palmolive was faced with the decision of whether to promote the new product as a high quality niche product marketed mainly towards individuals concerned about gum disease, or as a mainstream toothbrush that would be marketed as the best toothbrush available. If marketed as a niche product, Colgate-Palmolive would target a smaller market segment without as many competitors vying for market share. A niche market segment would also be willing to pay a premium for the new toothbrush. If, however, the toothbrush were marketed as a high quality mainstream toothbrush, Colgate-Palmolive would realize revenues from larger volumes of sales despite a lower price and more competition.
To reach its verdict, Colgate-Palmolive analyzed forecasted data with regard to potential sales volumes and prices, advertising, packaging, and manufacturing costs, among other factors. A summary of this analysis, and a marketing strategy recommendation follows.
EVALUATION OF ALTERNATIVES
In August 1992, Colgate-Palmolive had two options regarding the positioning strategy for their new toothbrush titled Colgate Precision. Their choice was to position the product as a mainstream offering or target the Precision toothbrush to a niche market. The positioning of the product would have little to do with any modifications to the actual design of this toothbrush, but would effect the perception of the toothbrush within the market.
Mainstream or mass marketing refers to the mass production, distribution and promotion of a single product to all potential buyers.  Contrarily, niche marketing is a form of micro-marketing. It refers to a specifically defined group of consumers with a need that is not currently well served. A niche is created from a subdivision of a market segment.  Due to the diversity of these two market types, the decision to market the Precision toothbrush as a mass-market product or as a niche product involves analysis of the advantages and disadvantages for each.
The primary reasons to use a mainstream marketing approach is that the product is made accessible to a larger market. Marketing to a more diverse audience would enable Colgate-Palmolive to construct a more simple and direct campaign that would address the common concerns of all toothbrush buyers. Consequently, the use of television and radio would be more cost effective as it would reach this larger audience.
The obvious goal of such a position would be to capture a greater return on the investment Colgate-Palmolive made on this product’s research and development effort. It is estimated that within twelve months this product could secure 10% of the market and a volume share of 14.7% by its second year. This would equate to 27 million retail unit sales in year one and 44 million in the second year, if positioned as a mainstream product. 
There are also many problems with marketing Precision to the masses. In the mainstream market a higher price makes a product less attractive to the average consumer. This means that Colgate will have to price their product within reasonable alignment of other similar products in order to be a serious competitor inside this market, ultimately diminishing their potential profit margin and return on investment.
There is a variance amongst consumers in relation to oral hygiene. They are classified into three groups:
Involved oral health consumers – Therapeutic brushers
Involved oral health consumers – Cosmetic brushers
Uninvolved oral health consumers
These segments are divided into relative percentages of adult toothbrush users. They are 46%, 21% and 33% respectively.  This illustrates that one third of the toothbrush using adult population has only little interest in oral hygiene and are probably not a worthwhile audience to which to pitch the Precision toothbrush. The expense of including these consumers in the target market would not be advisable.
In the design and testing phase of the Precision toothbrush, Colgate-Palmolive accrued significant clinical data concerning the product. This information would not be relevant to the mainstream market that most likely would view it as too scientific.
The Precision toothbrush was originally conceived to be a “top-of the-range, super-premium product”  indicating that production schedules had been developed in line with a niche marketing strategy. Mainstream marketing would require a greater volume production of the toothbrush with an estimated ten month lead time to achieve sufficient quantities of the product. This could result in an inadequate supply of the product at the outset. 
The objective of the research and development group working on the product was to “develop a superior, technical, plaque-removing device.”  It was produced to be “the best toothbrush possible” and become the “top-of the-range, super-premium product.”  All of these phrases are heavily skewed towards niche merchandising. A mainstream product should aim to serve all of the people, all the time. This product clearly was created with niche-oriented goals.
The greatest issue facing Colgate-Palmolive if they were to promote this product in the mainstream market is that it would be distributed through the same channels as an existing Colgate-Palmolive toothbrush called Colgate Plus.  Colgate Classic was the company’s original entry in the toothbrush sector and was positioned as a value segment. The Colgate Plus came later and was placed in the professional segment as a higher quality product.  Including Precision as a high-end, mainstream product could potentially “cannibalize” Colgate Plus sales.
Finally, Susan Steinberg, the product manager of Precision, felt that incorporating the new product into the mass market would require the company to delete one or more of the seven existing SKUs (stock keeping units) that Colgate-Palmolive produced.  This strategy could result in a loss of market share in the value or high-end segments.
Advertising companies have access to audience profiles through a wide variety of media products, such as television, radio and print media. This is the fundamental basis for successful niche marketing. A great advantage of offering any eligible product to a niche market is that it allows for a concentrated, specific advertising campaign, targeted to a specific demographic, psychographic, behavioral or geographic segment through whichever medium is most effective at reaching the specific population.  This allows efficient use of advertising budgets. Precision falls within the class of goods that could tender itself as a niche product. Developed to be the best toothbrush possible and placed in the super-premium category, this toothbrush is inherently a niche product.
Members of the public most interested in this toothbrush would be those in the “Involved oral health consumers” groups; therapeutic and cosmetic brushers. Therapeutic brushers are interested in functionally effective products and differentiate between brands.  Both segments of customers would appreciate the scientific data Colgate-Palmolive has complied on this toothbrush. The facts that the initial clinical trials removed an average of 35% more plaque over that of Reach and Oral-B, and that it assists in the reduction of the likelihood of gum disease, would be effective information for this group.  Unlike the mass market, these are issues which a niche market segment would comprehend and about which they would care.
Niche market participants are also more likely to pay a premium for this product due to the fact that Precision caters to a distinct set of needs they have. With this type of positioning, a 15% increase in price above Oral-B regular would be anticipated, bringing the cost to consumers to $2.13 per unit (more aligned with Oral-B Indicator). A mainstream market could only be anticipated to pay $1.85, in accordance with the Oral-B regular line. 
As Precision was conceived more as a niche-type product, initial production was set for the lower demands of the smaller market segment. As discussed previously, to change the natural emphasis of the toothbrush to mainstream distribution would require a major overhaul of projected production schedule and costs due to the increase number of units required.
Additionally, to keep Precision as a specialized product means that the new product is less likely to invade the market share of other Colgate-Palmolive products, like the Colgate Plus. This would also preserve the number of SKU that Colgate-Palmolive currently produces in the toothbrush sector.
Niche markets historically attract fewer competitors.  This gives time and room for a new product such as Precision to establish itself and build up a market share before it may have to fight against a new contender.
Marketing the Precision product to a niche market would generate less revenue for Colgate-Palmolive than a mainstream approach. Working with the estimated figures for the first two years of release generates the following table.
No. units sold
Factory list price
Total revenue generated
Obviously, the niche market revenue is significantly less than the mainstream market revenue, despite the 13% higher price.
Developing and communicating a positioning strategy for a product is necessary and critical. Differentiating a product, and the degree to which that product is differentiated, can be guided by quantifying the following criteria:
Using these parameters, a company can provide the public with a reason to buy their product. 
Another tool used in solving the marketing mix problem companies face when launching a new product is a perceptual map.  This is a graphic representation of two or more features against which similar products can be ranked. When graphed, the resulting map displays areas to which the product types cater, revealing both areas of over population and areas of potential opportunity. Clusters of products exist when similar products appeal to the same consumer market participants. In these areas, competition is intense, therefore, they are not as attractive when positioning a new product. An optimal plan is to create a space within the product market that is relatively free of rivals and can enable a new product to develop and dominate.
A perceptual map for Precision was created from the following data:
Butter GUM Microtip
Butter GUM Supertip
Oral-B cross action
Generic Eckerd Interdental
Generic Eckerd Angle
Using these evaluative criteria in relation to the advantages and disadvantages of niche and mainstream marketing, we believe that Colgate-Palmolive should position the Precision toothbrush as a niche product. This would establish Precision as the leading toothbrush on the market at a competitive price. It would be a superior and distinctive oral care product.
However, we believe this product would also work in the mainstream market and we envision it moving towards the mass market in the future. Once the toothbrush has established itself as a high quality product with specialty features, we believe that Colgate-Palmolive could transition the product to a wider audience. This will also allow time for Colgate to reconcile the position that the Colgate Plus product will hold relative to the Precision line.
Our academic experts are ready and waiting to assist with any writing project you may have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs.View our services
Further, we anticipate no significantly negative issues will be encountered by initially marketing Precision as a niche product and then moving it into the mainstream market. We do not believe the opposite would be true, as a niche market will most likely not accept a product that has been offered to the masses as the best value, and then marketed as a specialty item.
The anticipated cyclical nature of the product on the market is well illustrated by the Boston Consulting Group’s Growth-Share matrix.  The Precision toothbrush will begin as a “question mark.” This means the company will spend money developing and establishing the product in anticipation of increasing its market share. Subsequently, the hope would be for Precision to become a “star,” meaning it has been successful by obtaining a high market share and growth rate. If the product evolves into a mainstream offering by this time, the company will reap higher rewards.
Going even further into the future, the toothbrush will most likely decrease its market growth rate while maintaining its high market share. At this phase the product will be a “cash cow.” Revenues produced from Precision at this phase can be used to establish other “question marks” and/or subsidize other “stars” if required. The final phase in this product’s life cycle will be a decline into “dog” status. This refers to the product when it has weak market share and low growth. At that point, Precision would need to be removed from the company’s product line, allowed to decline further or all together repositioned in the market.
At this point, the research and development phase for Precision has been completed, a thorough analysis has been performed on the current market situation, and a marketing strategy has been recommended. The final aspects of launching a new product must now be investigated – product, price, place and promotion.
Colgate-Palmolive has many important decisions to make regarding the new toothbrush before it becomes available on store shelves for customers to purchase, including the positioning strategy for the new toothbrush. To reach a conclusion, the new toothbrush must be analyzed on three product levels – the core product, the actual product, and the augmented product – so that customer’s needs are fully understood and the Precision toothbrush is correctly marketed to meet those needs.
Since we are recommending that Colgate-Palmolive choose a niche market for Precision, the core benefit that the toothbrush will deliver to its users is plaque removal. Less plaque in turn leads to the added benefit of a reduction of the lik
Cite This Work
To export a reference to this article please select a referencing stye below:
Related ServicesView all
DMCA / Removal Request
If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: