HBS Case Analysis by Naman Sharma during a Marketing Internship with Prof. Sameer Mathur, IIM Lucknow.

1. Colgate-Palmolive Company: The
Precision Toothbrush
Harvard Business School Case Analysis by Naman Sharma

2. WHO ARE THEY?

3. American worldwide consumer products
company focused on the production,
distribution and provision of household,
health care and personal products.
(Est. 1806, Revenue $16.03 Billion)

4. Situation

5. • Company releasing
new toothbrush,
tentatively named
Colgate Precision
New Toothbrush
• The product has been
under development for
3 years
3 years in
development
• Positioning, branding
and communication
strategies have to be
decided
The marketing mix

6. Key Players

7. •Susan Steinberg
Precision product manager
•Nigel Burton
General Manager
•Sales Manager of Colgate Plus
Susan Steinberg
Precision product manager
Nigel Burton
General Manager
Sales Manager of Colgate Plus

8. Objectives of
the case

9. 1.
To analyze the viability of
each option in case of
positioning, branding and
communication channel

10. 2.
To come up with criterion to
make those decisions as
objective as possible

11. 3.
To search reliable evidence
presented in the case to
backup those criterion

12. Decisions to
take

13. 1.
Which is the perfect position in the market for
the toothbrush – niche or mainstream?

14. 2.

15. 3.
Best promotion
strategy?

16. SWOT Analysis

17. Strengths
• CP is among the global leader in oral care space; 43% toothpaste
market share, 16% world’s toothbrush market share
• Technically superior product with 35% more plaque removal as
compared to other products
• Concept test showed 77% people found precision to be more
effective than their current toothbrush
• Because of its good standing relationship with retail stores, it is able
to position its products on the middle shelf, right between its
competitors, Reach and Oral-B

18. Weakness
• 33% consumers not educated enough about oral health
• CP is not positioned in the super-premium segment
• Its competitor, Oral-B, has endorsement from doctors and American
Dental Association while it does not

19. Opportunity
• Consumer research reveled that 46% of adults are concerned about
health of their gums
• These customers are willing to pay a premium
• Consumers are open to trying new, technologically evolved products

20. Threats
• Competitors offering several incentives like buy-one-get-one-free,
coupon deals etc.
• Competitors are also coming up with technologically advanced
iteration of their products which can threaten its Precision brand

21. Competition

22. Oral-B
23.1% by volume and 30.7% by
value share
Johnson & Johnson
19.4% by volume and 21.8% by
value share
Procter & Gamble
2% (e) by volume and 2.6% (e)
by value share
Others
Smithkline Beecham, Lever,
Pfizer and Sunstar
Competition

23. Segmentation

24. Price
Value: $1.29
Professional:
$1.59 - $2.09
Super-Premium:
2.29-2.89

25. Psychographic

26. Now let us look at all the
decision one by one

27. Product Positioning :
Niche

28. Advantages
• Entry into a otherwise unexplored territory for CP; super-premium
products
• Targeted at concentrated customers concerned with oral hygiene at
super-premium price
• Expected to earn toughly 35% volume share and 46% value share
• No cannibalization of Colgate Plus; no SKUs need to be dropped;
satisfied sales manager
Disadvantage
• Lower volume and value share captured

29. Product positioning:
Mainstream

30. Advantages
• Higher share in the U.S. market
• Due to short term unavailability, the product can be perceived as ‘hot’.
Disadvantage
• Cannibalization of Colgate Plus expected; angry sales manager.
• Deletion of SKUs
• Retailers reluctant to market two products in the same category
• Product is expensive when compared to other mainstream products; demand in
consumer concept results fell significantly when people were told about the
prices
• Colgate still won’t enter in the super-premium segment

31. Financial
Analysis

32. Niche Mainstream
Planned Capacity Year 1: 13 million
Year 2: 20 million
Year 1: 42 million
Year 2: 59 million
Cost Cost per unit: $0.66 Cost per unit: $0.64
Manufacturing Cost Year 1: 0.66*13 = $8.58 million
Year 2: 0.66*20 = $13.2 million
Year 1: 0.64*.42 = $26.88 million
Year 2: 0.64*59 = $37.76 million
Depreciation Year 1: $316,667
Year 2: $450,000
Year 1: $866,667
Year 2: $1,270,000
Advertising and Promotion Year 1: $11.2 million
Year 2: $11.7 million
Year 1: $32.8 million
Year 2: $29 million
Capital Year 1: $3.25 million
Year 2: $1.3 million
Year 1: $9.1 million
Year 2: $3.9 million
Total cost Year 1: 8.58+.31+11.2+3.25 = $23.24 million
Year 2: 13.2+.45+11.7+1.3 = $26.65 million
Year 1 : 26.88+.86+32.8+9.1 = $69.64 million
Year 2: 37.76+2.37+39+3.9 = $71.93 million
Retail Revenue Year 1: 2.02*95*8 = $15.352 million
Year 2: 2.02*.95*15 = $28.78 million
Year 1: 1.76*.95*26.8 = $44.8 million
Year 2: 1.76*.95*44.1 = $73.75 million
Revenue from professionals Year 1: 1.5*0.8*.79 + 1.5*.2*.89 = 1.215 million
Year 2: 1.5*0.8*.79 + 1.5*.2*.89 = 1.215 million
Year 1: 4*0.8*.79 + 4*.2*.89 = $3.24 million
Year 2: 4*0.8*.79 + 4*.2*.89 = $3.24 million
Total revenue Year 1: $16.5 million
Year 2: $30 million
Year 1: $48.04 million
Year 2: $76.99 million

33. Niche
• Loss in 1st year: $6.74 million
• Profit in 2nd Year: $3.24 million
• Considering no capital expenditure from 3rd year and stagnant
demand and same promotional expenditure as in second year:
Profit from 3rd year onwards: $4.65 million
• Company will break even in 3rd year (33rd month), followed by $4.65
million yearly profit (uniform sales throughout the year assumed)
• At the end of five years the profit will stand approximately at
$10.46 million

34. Mainstream
• Loss in 1st year: $21.6 million
• Profit in 2nd Year: $5.06 million
• Considering no capital expenditure from 3rd year and stagnant
demand and same promotional expenditure as in second year:
Profit from 3rd year onwards: $8.96 million/year
• Company will break even in 4th year (46th month), followed by $8.96
million yearly profit (uniform sales throughout the year assumed)
• At the end of five years the profit will stand approximately at
$10.45 million

35. Conclusion on Positioning
• It can be seen that both positioning strategies give almost same profit
at the end of 5 years, assuming constant demand.
• Positioning the toothbrush in mainstream category would yield higher
returns from 6th year onwards.
• But, it must be kept in mind that the life of toothbrush is prone to
technological innovation and expecting a product life of more than 5
years in this category would not be logical.
• Since, positioning the product in niche category helps in achieving
breakeven earlier ( 33 months as compared to 46 months), the
product must be positioned in niche category.

36. Branding

37. Options
1. Colgate Precision
2. Colgate System III
3. Colgate Advantage
4. Colgate 1.2.3
5. Colgate Contour
6. Colgate Sensation
7. Colgate Probe

38. Colgate Precision was deemed appropriate by
49% concept acceptor and appealing by 31%

39. Colgate Precision or Precision by
Colgate?

40. Points to consider
• Executives believe that product represented “big news” in the
category and can stand alone. Favorable towards name it “Precision
by Colgate”.
• Naming it “Precision by Colgate” would also limit the cannibalization
form Colgate plus by 16.66%.
• CP’s corporate strategy would be built more by naming it “Colgate
Precision”.

41. Conclusion on Branding
• It would be beneficial to name the product as “Precision by
Colgate”. It would limit the cannibalization of Colgate Plus
significantly.
• Also, we have already decided to place the product in niche category.
The product is advanced enough to stand alone with this name with
this product positioning.
• It also gives the feeling of superiority and effectively conveys the
functional advantage effectively.

42. Communication
and Promotion

43. How?
• Consumers want superior product and 77% of the test group found
Precision to be more effective than their current toothbrush.
• Consumer who use the product once are much more likely to buy the
product. Sampling could be used effectively.
• Consumer promotions like free toothbrush with Colgate toothpaste and
coupons for Precision can be used.
• Promotional and advertising budget should be shared equally by Colgate
Plus and Precision teams as Colgate Plus has been one of the best sellers in
this category. It is the bread and butter of CP right now.
• Dental professionals should also be targeted to compete effectively with
Oral-B

44. Overall
Conclusion

45. Positioning
Niche

46. Branding
Precision by Colgate

47. Communication and Promotions
Induce trials | Approach
Professionals

49. Created by Naman Sharma, BITS Pilani during a Marketing
Internship with Prof. Sameer Mathur, IIM Lucknow