Executive Summary and Background In August 1992, Colgate-Palmolive (CP) launched a new toothbrush in the United States, and named Colgate Precision. In order to maximize the profit and meet the consumer demand, CP could introduce the toothbrush as a niche, super-premium or a mainstream, professional product. In 1991, CP was a global leader in household and personal care products with sales of $6.06 billion and a gross profit of $2.76 billion. In 1992, there were three dominated player in toothbrush market which were: Colgate-Palmolive, Johnson &Johnson and Oral-B. Among three of them, Colgate-Palmolive and Johnson & Johnson were positioned in the professional segment and Oral-B were positioned in the super-premium segment. The toothbrush industry was divided into two models by price in the first time which were super-premium, professional, and value. Then second time was divided into niche and mainstream offerings. Depending on how it chooses to introduce the Precision toothbrush to the consumer, 1992 could count as an important year for CP to establish itself as the definitive oral health care company.
SWOT Analysis
Strengths
CP is the world’s leader in personal oral care sales. In 1991, it sales worldwide sales for CP’s oral care products increased 12% to $1.3 billion, accounting for 22% of CP’s total sales. The toothbrush sales in U.S. reached $77 million in 1991, and operating profits of $9.8 million. CP held the number one position in the U.S. retail toothbrush market with a 23.3% volume share. Based on the data in the case study, CP introduced 275 new products worldwide and setup manufacturing facilities in China and East Europe. The international sales accounted for 64% of total sales and 67% of profits in 1991. The Precision toothbrush was a technical innovation. In initial clinical tests, the brush achieved an average 35% increase in plague removal, compared with other leading toothbrushes, specifically Reach and Oral-B. At the gum line and between the teeth, the brush was even more effective, achieving double the plague removal scores of competitor brushes. A company with years of experience and a strong commitment to innovation through investment in R&D department is another major strength.
Weakness
The releasing of the Precision toothbrush may lead to a “cannibalization” of the Colgate-Plus and Colgate-classic’s market. Even though, Precision’s unique design could remove more plaque from teeth than the other leading brands on the market. However, it was difficult to translate into a message with broad consumer appeal, since few consumers acknowledged that they might have gum disease. In the other hand, the competitor, Oral-B had the ability to announce that their product was recommended by dental professionals and it was the brand most dentists use. Another weakness it has was that the media advertising expenditure layout was relatively small compares to other competitors. It only spent $7 million on Colgate-Plus and has only 19% of the share voice. Reach spent $15.5 million and has a 43% share voice. Since media exposure is extremely important for a new product, CP may need to increase its media advertising expense to the same level as its competitors.
Opportunities
CP estimated that 82% of toothbrush purchases were unplanned, and research showed that consumers were relatively unfamiliar with toothbrush prices. CP would take advantage from this circumstance to focus on presenting educational advertising to consumers, and passing the messages that Precision toothbrush is the technologically superior compare to its competitor at the same cost. It can also include the information of effective plague removal and gum disease prevention.
Threats
Similar as many industries, the super-premium toothbrush market is highly competitive. It contains many brands. CP has to deal with new competitors. In 1990s, many of new entrants include Procter & Gamble and Smithkline Beecham both positioned their new products in super-premium segment. If any of these competitors creates similar products with the similar function with a lower cost, CP would immediately lose market share. In the other hands, as the fast developing of technology, the electric toothbrush was introduced to consumers. As a substitute product or even better than traditional products, CP would face a losing of market share too.