Colgate

Executive summary: As customers become increasingly concerned about their oral health, toothbrush manufacturers make great efforts in rolling out product innovations to make functional and aesthetic changes. Without a super-premium product on its product line, Colgate should develop one to address customers' needs which are missed by its competitors, such as gum care needs. As proved by present value calculation, Colgate should position its Precision brush as a mainstream product to achieve bigger market share with comparatively low price. Colgate should also adopt a marketing mix consistent with its positioning to cater to the segment of customers who focus on the toothbrushes' technical functions.

1. What are the changes that are occurring in the toothbrush category at the time of the case? Why are they happening? Why does Colgate need another Toothbrush?

At the time of the case toothbrush market has become very competitive. Meanwhile, the product innovations increased and performance benefits, rather than price, became increasingly important purchase criteria.

That customers became more concerned about their oral health and increasingly interested in high-end toothbrushes was the fundamental driver behind these changes. To address the customers' need, manufacturers launched new products with technical performance improvements, including both functional and aesthetic changes. These toothbrushes were higher-priced with higher margin, which stimulated marketing and promotion input from both the manufacturers and distributors. These promotion efforts further drove up demand of the professional, super-premium toothbrushes.

Colgate-Palmolive was encountered with strong competition from existing companies such as Johnson & Johnson and Oral-B and new companies such as Procter & Gamble and Smith Kline Beecham who positioned their new product launches in the super-premium toothbrush segment. With only two product lines, Colgate Classic as a value product and Colgate Plus as a professional product, Colgate didn't have a super-premium toothbrush to address the high-end customers' need. That resulted in lower profitability than some of its competitors. Due to the contribution brought by high-end products, Oral-B's operating margin in 1991 was 20%, whereas that of Colgate was only 13%.

2. Analyze consumer and competitor behavior for toothbrushes to determine if there is an opportunity in the marketplace for a new toothbrush for Colgate.

(1) Consumer behavior:

a. We have three types of consumers: therapeutic brushers who aimed to avoid oral care problems, cosmetic brushers who emphasized preventing bad breath and ensuring white teeth, and uninvolved consumers who only changed their behavior when confronted by oral problems.

b. People are becoming increasingly concerned about their oral health. Although plaque removal and gum stimulation were considered secondary role of toothbrushes, people generally paid more attention to the gum health.

c. Consumers look at the suitability of the product features to their individual needs to decide buying a brand. Among all the factors, the 3 main reasons are "fits most comfortably in my mouth, best for getting at hard-to-reach places and the bristles are the right softness".

(2) Competitor behavior:

a. Increasing product innovations in the super-premium toothbrush segment were launched to address people's functional and aesthetic needs. Oral-B Indicator helps enhance oral health by reminding the customers to replace toothbrushes. Johnson and Johnson's Reach Advanced Design caters to customers' need to clean the hard-to-reach places. Crest Complete by P&G has rippled end-rounded bristles to reach between teeth. Aquafresh Flex prevents gum irritation.

b. Increasing input in marketing and promotions to create a bigger base of consumers.

(3) A comparison of the consumer and competitor behavior can prove that customers' gum health need was not well addressed by competitors' products. There was an opportunity for Colgate to launch a product addressing this need or even providing a comprehensive solution to all the major needs, such as cleaning and gum care.

3. Evaluate the two proposed positioning options for precision. What are the benefits and risks associated with each? Which would you choose and why?

(1) Benefits and risks:

a. Niche: The main benefit of this positioning is the higher profit margin. By charging a higher price (15% higher than Oral-B), the marginal gross profit for each toothbrush is $1.36 ($2.02-0.66). However, by targeting at the group of people who are especially concerned about gum disease, Precision will only be able to achieve a small market share, 3% of the US toothbrush market by the end of the first year following its launch.

b. Mainstream: On the contrary of Niche Positioning, the positioning of mainstream will bring Colgate a much larger market share (10% of the market by the end of the first year) but with lower profit margin. The marginal gross profit for each toothbrush is $1.11 ($1.76-0.64).

(2) I would choose the positioning