Colgate-Palmolive Company: The Precision Toothbrush
...‘92) and consumer promotion events (samples, coupons, free extra toothpaste, etc.) • Continuous introduction of new products, supported by high promotion spending Alternatives: Option 1: Niche product to be targeted at consumers concerned about gum disease. This alternative focuses on the major strength of the Colgate Precision toothbrush: the most efficient plaque-removing toothbrush to be on the market. The product will be introduced as a niche product, targeted at consumers concerned about gum disease because of the Precision toothbrush’s strong appeal to the specific needs of the identified customer segment. Pros Cons Consumer research done shows the effectiveness of this claim to motivate purchases. Limited sales potential due to a narrow target market. Proven functionality on plaque-removal and gum disease prevention. Limited economies of scale due to a lower production volume. Focused marketing strategy development for specific target market with a new message (gum disease prevention). Possibility of losing current overall high market share because customers not targeted could prefer to purchase other brands. Customers in this segment are willing to pay a higher price. Lower advertising and promotion spending concentrated on the niche market. Probable less cannibalization of other Colgate toothbrushes, because of the different target group. Option 2: Introduction into mainstream consumer segment This option aims at getting high market share and high sales through introducing Colgate Precision as a mainstream brush into a broad market segment. The targeted customer segment would be the “involved oral health consumer”, mainly the therapeutic brushers. Pros Cons High market share and product sales to be expected. Limits of production capacity with high lead time to increase production volumes could cause product shortages. Economies of scale through high production volumes and decrease of fixed cost per unit. Broad market introduction has to be supported by high spending for advertising and consumer promotion. Fully capitalize on the unique product characteristics which appeal to a broad customer segment. High cost to be incurred by investments in production capacities. Utilization of existing strengths in the toothbrush market (brand, distribution position) to extend existing product lines into growing super-premium segment. Risk of considerable cannibalization effects on Colgate Plus. Option 3: Focus on dentist market segment This alternative targets dentists as an opinion leader, able to influence future consumer toothbrush purchases, and as a provider of toothbrushes. The superior effectiveness of the Precision toothbrush will appeal to the dentist target market. Pros Cons Significant market share (25%) in terms of volume. Lower gross margin due to lower manufacturer prices to dentists. Dentists are opinions leaders whom consumers trust, which could translate into increased future sales after trial. Increased costs caused by the need for trained sales force to promote the Precision toothbrush to dentists. Low spending on promotion and advertisements for specific target group (no mass media) and lower selling cost resulting from the bulk sales. Market segment dominated by Oral-B for a long time, which translate into a difficult market to break into due to Oral-B brand loyalty and high competition. Easy communication of technical benefits to a professional audience. Lower/limited market potential. Dentists are able to highlight and communicate the technical benefits relating to gum disease and plaque removal. Recommendation: Based on the situation analysis and the alternatives explored, we recommend that a two phase strategy be followed: Phase 1 will be launching Colgate Precision toothbrush focused on niche market of gum disease conscious consumers, Phase 2 is the expansion to a broader mainstream market segment after one year. Considering the product features and the consumer needs, Phase 1 offers Colgate the best alternative for the introduction of this new product with an innovative claim, while avoiding the risks of product shortages and high cannibalization. Relatively low cost for advertisement and consumer promotion will have a low impact on the budget for Colgate Plus within the first year of launch. The experiences during this period will provide more data to evaluate the budget split between the product lines and also the most effective positioning in order to minimize cannibalization. Capitalizing on the expected success of the Precision toothbrush in the niche market, the spill over of product awareness and the buzz created, Phase 2 will emphasize expansion into the mainstream customer segment. Marketing efforts will focus on the advantages of the product for a large number of customers as the most effective toothbrush on the market. Considering the expected pro-forma income statement for the mainstream option it becomes clear that this opportunity should not be foregone. The dentists will be part of the marketing strategy, however, they will not be the sole target market focus as the barriers to entry this market segment are rather high and the sales and profit potent...