Colgate-Palmolive Company: Marketing Anti-Cavity Toothpaste ADV 388K Integrated Communication Management Group 6
Zachary Bodner (bodnerzd) Alex Hart (amh6375) Xing Liu (xl5525) Darya Procopovich (dp28353) Emma Szyller (es34345)
The University of Texas at Austin
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Situation Analysis In October 2013, Suzan Harrison, Colgate’s president of Oral Care, prepared to launch its new Colgate® Maximum Cavity Protection™ plus Sugar Acid Neutralizer™ toothpaste (CMCP+SAN) in Brazil, but first, her executive team needed to consider the product’s positioning and pricing. Demographic Environment The company has no specific target audience. Brazil is the world’s third-largest oral care market. Consumption of toothpaste in Brazil is high, with 99% usage and 90% of people brushing twice or more times per day. According to estimates from the WHO, 60% to 90% of school-aged children, and nearly all adults suffer from caries. Colgate estimates that 5.4 billion people suffer from active caries at some point in their lives. That means that almost every person has the potential to be a customer. Consumer demand is highly sensitive to price which might be the result of several factors. First, a high competition rate in the given category makes it easier to switch to another less expensive toothpaste. Second, roughly 21% of Brazil’s population lives in poverty, and the expected GDP per capita shows that the situation is unlikely to change in the near future. Economic Environment Colgate is a $17.4 billion consumer products company with an operating profit of over $3.5 billion. Their products are marketed in over 200 countries, and they employ more than 37,000 people. Forty-six percent of Colgate’s sales worldwide come from the oral care category, with 80% of Colgate’s revenue being generated from outside the U.S.; more than 50% of which comes from emerging markets. Overall, oral health is a significant concern in high income countries, accounting for 5-10% of total public health spending (pg.3). By launching a new product in Brazil, Colgate will face the challenges that come with their difficult economic situation. Brazil has the 7th largest economy in the world ranked by total gross domestic product, but is 95th in GDP per capita. Roundly 21% of Brazil’s population lived in poverty in 2012. To change the situation and reduce the population living in poverty, or at-risk of poverty, by half, the growth of Brazil’s GDP per capita should be higher than 4.2%, but annual growth was only 1.2%. Natural Environment Colgate puts immense effort into its sustainability programs. Particularly, they established an approach to improve outcomes in three pillars: “People,” “Performance,” and “Planet” (pg. 4). Their sustainability strategy sets targets to “improve the health of its employees around the world, improve the sustainability profile of its products, and reduce its manufacturing environmental footprint (including specific goals related to reduction of water usage, greenhouse
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gases, and waste production), as well as contribute to the communities in which it operated, including expanding the company’s flagship Bright Smiles™, Bright Futures oral health education program” (pg. 4). Technological Environment Crest toothpaste led the shift from marketing based on therapeutic benefits to preventing caries (pg.2). In 1955, Procter & Gamble (P&G) launched Crest toothpaste with its patented fluoride, which resulted in 20% fewer cavities (pg.2). In 1983, Colgate’s first toothpaste, Colgate Dental Cream served as both cosmetic and oral cleaning purposes (pg. 2). Colgate’s CMCP+SAN toothpaste relies on the anti-caries properties of arginine in combination with an insoluble calcium compound and fluoride. A product that incorporates arginine with an insoluble calcium compound is as effective as 1,000 parts per million (ppm) fluoride. ProArgin™ technology, which Colgate acquired the rights to in 2005, helps prevent the drop of pH levels caused by the acids derived from the carbohydrates found in many foods and beverages, which Colgate refers to as “sugar acids.” Clinical trials proved that the combination of 1.5% arginine, an insoluble calcium compound, and 1,450 ppm fluoride in CMCP+SAN prevents 20% more new cavities over a two-year period compared to toothpaste with 1,450 ppm fluoride alone. CMCP+SAN is proven to combat the effect of sugar acids on plaque pH levels and to strengthen the tooth enamel to prevent damage from demineralization and to remineralize four times more effectively versus toothpaste with the same level of fluoride alone. Competitive Environment Internal Within the Colgate family, the Big Red and Colgate Triple Action make up their base product offering. Colgate needs to consider the possibility that CMCP+SAN may replace its base products and determine if that is the intended effect or if it will erode the success of its current product offerings. Colgate Total is the brand’s premium product. If Colgate positions CMCP+SAN in the same premium tier but at a slightly discounted price compared to Colgate Total, customers might trade down from Colgate Total due to the lower price. External Crest® toothpaste led the shift to marketing toothpaste based upon therapeutic benefits by obtaining the endorsement of the American Dental Association in 1960. As a consequence of P&G’s patents on Crest® toothpaste, competitors, including Colgate, were unable to launch their own fluoride toothpaste products until seven years later. By the time Colgate added fluoride to its toothpaste, many consumers considered Crest® to be the leading therapeutic toothpaste. In 1997, Colgate offered Colgate Total which was designed to handle all aspects of oral care in one toothpaste; it has subsequently become the leading toothpaste in the U.S. In 2013, Colgate held 45% value share of the worldwide toothpaste category. Today, all major industry players,
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including Procter & Gamble, GlaxoSmithKline, and Colgate itself have launched products with the maximum amount of fluoride allowed by health authorities (pg.1). Presently, Colgate holds strong positions in both the world and Brazilian toothpaste markets. Colgate’s worldwide share is 44.6% with the closest competitor trailing at 14.4%. Colgate holds approximately 70% of the Brazilian market of toothpaste upon retail price and 62% of the market upon amount of selling toothpaste. Product Environment Many customers consider Crest to be the leading therapeutic toothpaste, because it was the first toothpaste company to introduce fluoride as an ingredient. However, by the 1990s, almost all U.S. toothpaste products contained fluoride. Thus, marketing toothpaste on the basis of caries prevention is no longer a basis for differentiation; consumers instead seek solutions for halitosis, tooth discoloration, and sensitive teeth. Most toothpaste category growth is driven by innovation in the premium tier, which aims to trade up consumers to higher-value products. Company Analysis Colgate-Palmolive Company is the world’s leading oral care company. It has four core businesses: oral care, personal care, home care, and pet nutrition. Colgate’s oral care category includes toothpaste, toothbrushes, mouthwash, and interdental devices. Table X. Distribution of Company Net Sales, by Business Segment 2013
2012
2011
Oral Care
46%
44%
43%
Personal Care
21%
22%
22%
Home Care
20%
21%
22%
Pet Nutrition
13%
13%
13%
In 2013, Colgate’s net sales was more than $17 billion and there was constant increase in net sales and gross profit during 2011-2013. There was a small decrease in net income in 2013 compared to 2012.
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Table X. Colgate-Palmolive Summary Financials (millions), 2011-2013 2013 Net Sales
2012
2011
17,420
17,085
16,734
Cost of Sales
7,219
7,153
7,144
Gross Profit
10,201
9,932
9,590
Selling, general and administrative expenses (SG&A)
6,223
5,930
5,758
Operating profit
3,556
3,889
3,841
Net Income
2,241
2,472
2,431
Colgate’s sub-brands include Colgate® Sensitive Pro-Relief™, Colgate® Maximum Cavity Protection™ (also known as “Big Red”), Colgate® Max Fresh™, Colgate® Optic White™, Colgate® Luminous White™, and Colgate Total®. Colgate Total® is Colgate’s leading toothpaste brand.
Key indicators for success include: market share, net sales, earnings per share, metrics on working capital, capital expenditures, cash flow and return on capital. Why Colgate needs to launch a new toothpaste (CMCP+SAN) in Brazil Before launching a new product, it is vital for Colgate to weigh the pros and cons of adding a new product to their existing offering. It is also crucial to consider the overall strategy of positioning and target markets. Before launching CMCP+SAN in Brazil, the world’s thirdlargest oral care market, Colgate needs to weigh their public health and sustainability goals alongside maximizing the economic value to Colgate’s shareholders (pg. 1). Overall, the company’s entire growth agenda is driven by its four strategic initiatives: “engaging to build our brands”; “innovation for growth”; “effectiveness and efficiency”; and “leading to win” (pg. 2). In the past, Colgate’s frequent product innovations and effective marketing helped achieve strong
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brand penetration and distribution worldwide (pg. 2). Despite the perception that the issue of caries has been solved by the previous technological advancements within the oral care industry, caries remain a significant threat to public health in many countries, both developing and developed. Moreover, people living in areas with poor access to oral health facilities, with aging populations, or with high consumption of sugary foods and beverages are most likely to suffer from caries (pg. 4). Approximately 25% of the worldwide toothpaste market by value is in ‘mainstream anti-caries products,’ such as Colgate® Big Red and Colgate® Triple Action toothpastes and the largest share of Colgate’s volume sales came from this segment, however, it is growing at a slow rate. By introducing CMCP+SAN, Colgate is addressing its need to stay relevant by continuously innovating and meeting a continuing need within the oral care industry. Moreover, by choosing to enter a market like Brazil, Colgate is recognizing two factors: first, that Brazil is one of their largest consumer segments - Latin America has the biggest net sales by region for Colgate and the second in organic sales growth (pg. 14). Secondly, that it is their largest consumer segment with a high proportion of its population below the poverty line - roughly 21% of Brazil’s population of over 200 million lived in poverty in 2012 (pg. 9). Due to this fact and the fact that people living in areas with poor access to oral health facilities, with aging populations, or with high consumption of sugary foods and beverages are most likely to suffer from caries (pg.4) this is a significant target market for Colgate. Thus by introducing a product like CMCP+SAN, Colgate is recognizing the need for preventative oral health care practices due to the lack access to oral health facilities within the Brazilian market.
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SWOT Analysis Strengths
Weaknesses
Colgate-Palmolive brand Colgate-Palmolive brand ● Colgate-Palmolive Company is the ● In 2013, Colgate’s toothpaste market world’s leading oral care company shares had decreased in North with 44.6% of the world’s market America and Latin America versus share. 2012 (pg. 3). ● Colgate is a $17.4 billion consumer CMCP+SAN technology products company with an operating ● The ingredients of CMCP+SAN are profit of over $3.5 billion. more expensive than those of Big Red, ● Colgate’s products are marketed in so a higher price would be needed to over 200 countries, and it employs maintain the same absolute and/or more than 37,000 people. percentage margin. ● Colgate’s frequent product innovations ● When Colgate performed a simulated and effective marketing helped test market to measure the potential achieve strong brand penetration and demand for an upgraded Big Red distribution worldwide. product, it estimated that 4% of ● Colgate tracks the purchasing power current Big Red consumers did not of low-income consumers in all care for the “new” taste of emerging markets to ensure its CMCP+SAN. products are priced affordably (pg. 3). ● Colgate can’t simply add SAN to the ● In 2013, Colgate’s toothpaste market existing Colgate Total® formulation, shares had increased in Europe/South due to technical hurdles. Pacific, Asia and Africa/Eurasia (pg. 3). Marketing ● Diverse product line ● In many markets, Big Red no longer receives advertising support, so the CMCP+SAN technology country managers need to divert funds ● The new CMCP+SAN toothpaste that were previously allocated to contains 1.5% arginine, an insoluble higher-priced products like Colgate calcium compound, and fluoride, Total® to promote CMCP+SAN. which is clinically proven to reduce ● Country managers would also have to and prevent cavities more effectively offer a trade deal on CMCP+SAN to than toothpaste with the same level of Colgate’s retail customers or risk them fluoride alone. delisting existing stock-keeping units ● Dr. Israel Kleinberg worked for (SKUs) to make space for decades to understand arginine’s CMCP+SAN. caries-prevention properties before ● CMCP+SAN’s formula similarity to achieving clinical results showing that Big Red could make it easier to move a product that incorporates arginine consumers to the new product, but with insoluble calcium compound is as they might have difficulty effective as 1,000 parts per million understanding the value proposition of fluoride. the higher-priced CMCP+SAN. ● Colgate acquired the rights to the
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technology which it referred to as ProArgin™ technology. ● Colgate has performed two clinical trials, in China and in Thailand. ● In a clinical trial, arginine proved to reduce 20% more cavities than fluoride over a two year period. CMCP+SAN Positioning Strategy ● Colgate tested the new CMCP+SAN product in 4 markets: India, Colombia, Mexico, and the U.K. ● The product is meant for emerging markets, but also tested well in developed markets. Marketing ● The package for CMCP+SAN is purple to help it stand out on a shelf whereas most packages are either red or blue. ● Colgate’s team of public health professionals are especially engaged in the CMCP+SAN launch planning. ● Colgate created partnerships with public health-focused organizations and government health agencies to promote the health care benefits of CMCP+SAN to dentists, hygienists, and dental schools. ● Regional managers are responsible for developing and funding the marketing efforts for their country’s product portfolio, which helps the company stay attuned to cultural differences. ● Thanks to the nine Consumer Innovation Centers (CICs), Colgate’s new products incorporate both global innovations and local market knowledge. ● In 2013, Colgate spent $267 million on research and development activities across all four of its businesses. Sustainability Programs ● By 2013, Colgate has received
● Caries prevention was no longer considered a “premium benefit,” so consumers might be unwilling to pay a higher price for additional caries prevention (pg. 8).
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numerous accolades from independent organizations for its various initiatives (pg. 4). ● Colgate developed a Product Sustainability Scorecard to measure its progress and has set ambitious goals for the future. Community Outreach Programs ● In 1998, the first clinical study measuring the effectiveness of Bright Smiles, Bright Futures’ (BSBF) found that children exposed to the curriculum showed statistically significant improvement compared to controls (pg. 6). Opportunities
Threats
Toothpaste technology ● All major industry players have long ago launched products with the maximum amount of fluoride allowed by health authorities. Yet caries remain a significant threat to public health in many countries, both developing and developed. Thus products that can solve this solution have the potential to be highly successful.
Oral Care and Public Health ● Caries protection is no longer considered a “premium benefit” in the category. ● Colgate faces the challenge of turning the oral health conversation back to caries. Although caries is still a key public health issue, caries protection is not a competitive differentiator within the toothpaste category.
Market ● Brazil is the world’s third-largest oral care market. ● 80% of Colgate’s revenue was generated outside the U.S., with more than 50% coming from emerging markets. ● Latin America has the biggest net sales by region for Colgate and is second in organic sales growth.(pg.14) Oral Care and Public Health ● Although oral health issues are more common in poorer countries, oral health is also a significant concern in
Pricing ● Consumer demand is highly sensitive to price which could affect the success of introducing a new, more premiumly priced product; especially if Colgate chooses the first solution: replace Big Red with CMCP+SAN.
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high-income countries, often accounting for 5% to 10% of total public health spending. â—? In the U.S. alone, children miss more than 51 million school hours each year for dental-related reasons, with poor children suffering nearly 12 times more restricted-activity days than children from higher-income families. â—? Dental caries, or cavities, are the most common chronic disease worldwide. â—? Dental caries can be prevented by regular and thorough oral hygiene practices, reduced sugar consumption, and effective exposure to fluoride.
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Problem Statement What positioning strategy should Colgate choose for launching their new Colgate Maximum Cavity Protection plus Sugar Acid Neutralizer (CMCP+SAN) in Brazil?
Critical Factors 1. Product positioning - In order for CMCP+SAN to be successful in Brazil, Colgate needs to convince consumers that caries prevention is still a point of differentiation within toothpaste products. 2. Price - The price of the product will be directly related to the product positioning. 3. Cost a. Ingredients - The ingredients of CMCP+SAN are more expensive than those of the base products. The costs of packaging and distribution may vary. b. Advertising - The process of launching CMCP+SAN requires the advance cooperation of the public relations, professional relations, and consumer marketing teams, and involves investments in public and professional relations versus traditional consumer market. 4. Competition - (both internal and external) - Internally, CMCP+SAN will compete with Colgate’s other products, particularly Big Red and Colgate® Total. Externally, CMCP+SAN will compete with all the other oral care brands, particularly Crest®. 5. Technology - The combination of 1.5% arginine, an insoluble calcium compound, and 1,450 ppm fluoride in CMCP+SAN prevents 20% more new cavities over a two-year period compared to toothpaste with 1,450 ppm fluoride alone. 6. Economic situation - Due to the economic situation in Brazil consumer demand is highly sensitive to price. 7. Market - CMCP+SAN will be launched in Brazil, the world’s third-largest oral care market, and will later expand to the global market.
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Solution 1: Replace the base product This solution involves the replacement of Big Red with CMCP+SAN. It this case, the new toothpaste will be positioned as an anti-caries base product. Because the ingredients of CMCP+SAN are more expensive than those of the existing base products, the price of this product would be higher than the price of Big Red.
Target audience CMCP+SAN will target those looking for premium cavity protection, but are more concerned with the cheapest price. It will also target existing Colgate brand enthusiasts. Pricing strategy The price will be higher than the base price of Big Red. This is necessary because of the higher cost of the ingredients for CMCP+SAN and the promotion and advertising budget (there was no advertising spending on Big Red during the past several years). The price for Big Red is R$2.05 and an even slight increase of price in terms of money will lead to a significant increase of price in percentage terms, which is risky because of Brazilian demand being highly sensitive to price due to the economic situation. Colgate holds approximately 70% of the Brazilian market of toothpaste with regard to retail price and 62% of the market in terms of amount of selling toothpaste. This indicates that the company sells more expensive toothpaste and competitors have stronger positions within the Base Tier. Despite the fact that the Base Tier segment is the biggest for Colgate (based upon volume sales in kilograms), the company risks losing customers. The price will be increased because of increased expenses, but the level of profit will be the same ($0.12 per kilogram). That means that the company will have the same amount of profit (if all Big Red’s buyers switch to the new CMCP+SAN) or will lose money (if some of customers decide that price is too high and switch to another brand).
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Advertising support Replacement of the base toothpaste requires a higher price due to the more expensive ingredients in CMCP+SAN. Therefore, this solution involves the least advertising and promotion expenses, compared to the other two positioning solutions. Colgate plans to spend $3 million for a valuepriced product over the first three months and $5 million over the first year. There are included costs for public relations activities, the professional relations budget, and consumer markets. Shelf placement/point-of-purchase materials Would replace the recognizable Big Red on the shelf. That should be a lower-medium shelf level, because CMCP+SAN is a Base segment and should be placed below Premium and MidTier. It could be placed higher in the beginning until the end of the initial promotion period. Product positioning The toothpaste that gives the most effective cavity protection at the most valuable price point. Packaging Package in 90g packages - similar to Big Red, the new CMCP+SAN will maintain customers’ familiarity to the brand. Competition Other base toothpastes within the Colgate family and toothpastes of other leading producers. Pros ● Replacing Big Red will cause less confusion between Big Red and CMCP+SAN, and will reduce consumer questioning why they should or shouldn’t pay more for the CMCP+SAN product. ● There is no media support of Big Red and CMCP+SAN can fill this hole. Cons ● Customers are familiar with Big Red. It is difficult for them to switch from one base product to another. ● The ingredients of CMCP+SAN are more expensive than those in Big Red and CMCP+SAN would need to carry a higher price than Big Red in order to return the same margin (pg. 8). ● Four percent of current Big Red consumers did not care for the “new” taste of CMCP+SAN (pg. 7). ● In 2013 in Brazil, the base products volume share accounted for 29% of total volume share. Introducing a new product may cause result in the loss of some customers loyal to Big Red (pg.19). ● There was no advertising support of Big Red during the last several years and the company will have to allocate advertising budget.
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Solution 2: Make CMCP+SAN a premium new product Position CMCP+SAN as a new premium product, priced just below Colgate’s premium brand, Colgate Total. The product would appeal to customers who seek a premium product with extra caries protection. Those in favor of the approach argue that a patent-protected, anti-caries toothpaste that is superior to fluoride provides a compelling value proposition to consumers and should command a higher price than Big Red. However, others are concerned that CMCP+SAN’s superior caries prevention would motivate some consumers to trade down from Colgate Total®. Due to technical hurdles, Colgate can’t simply add SAN to the existing Colgate Total® formulation.
Target audience Those who value cavity protection the most when it comes to oral care and those willing to pay a premium for superior caries protection. Pricing strategy This solution involves premium positioning. Colgate produces three toothpastes that are included in the Premium Tier: Colgate Total, Colgate Sensitive Pro-Relief, and Colgate Luminous White. By positioning CMCP+SAN as a premium toothpaste, it will compete with Colgate Total and the differences in cost structure will be the following: ● Expenses for packaging and distribution should be at the same level as Colgate Total has now ($0.36 and $0.15 respectively). ● Ingredients for CMCP+SAN are cheaper than ingredients for Colgate Total. ● Advertising and promotional expenditures are higher for the new product. If the company chooses this strategy, the price of the new CMCP+SAN will be just below Colgate Total. It is possible to achieve reduced profits per kilogram. However, this pricing strategy creates a risk of switching from more expensive Colgate Total to less expensive, but still premium new toothpaste. If it happens, the company’s profit will decrease. Advertising support Positioning CMCP+SAN as a premium product will require a bigger advertising budget, and
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Colgate plans to spend $6 million over the first three months and $15 million over the first year. This budget will be divided between public relations, professional relations, and consumer marketing teams. Having a bigger budget for professional relations, Colgate will be able to involve more professionals in the campaign and distribute more toothpaste samples via BSBF kits. Shelf placement/point-of-purchase materials Would be placed at the most prominent position on the shelf, alongside with Colgate Total to catch customers’ attention for the first three months. After three months, it will be placed beneath Colgate Total, but above Big Red because it is still a premium product. Product positioning The toothpaste that gives the most effective cavity protection at a premium price. Packaging Package in 70g packages - consumers may be more willing to buy a premium product if they have to pay less for it (i.e., smaller quantity, less initial investment). Competition Colgate Total, other premium toothpastes. Pros ● Most toothpaste category growth was driven by innovation in the premium tier, which aimed to trade up consumers to higher-value products (pg. 3). ● CMCP+SAN contains a patent-protected, anti-caries formula featuring Arginine. It has been clinically proven as superior to fluoride and could provide a compelling value proposition to consumers. For this reason, it should command a higher price than Big Red. ● Big Red and other baseline products still own their market share because the new product does not threaten their already established markets. ● Positioning CMCP+SAN in the premium tier would reduce the risk of loss-making cannibalization and significant trade-downs from the premium tier to the Mid-Tier (pg. 11). Cons ● With the launch of CMCP+SAN, Colgate Brazil might have to allocate more funds to Colgate Total to reemphasize its premium positioning (pg. 11). ● The lower price of CMCP+SAN and the superior caries prevention, compared to Colgate Total, may trigger some consumers to trade down from the latter, and as a result cause Colgate Total to lose long-term customers, and potentially lose its position as a leading product (pg.8).
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Solution 3: Launch a line extension Colgate could add a line extension to its existing anti-caries/Big Red products that would only feature the CMCP+SAN technology. A line extension would allow CMSP+SAN to be priced above the base product, but would be less likely to motivate trade-downs from premium-priced Colgate TotalÂŽ. Launching CMCP+SAN as a line extension of the existing anti-caries products could ensure that superior cavity protection is accessible to consumers who need it the most, which would produce greater public health benefits and, over time, could convince consumers to trade up.
Target audience Since Colgate strives to produce greater public health benefits, their audience are those who look for premium cavity protection, and are more concerned with the cheapest price, but are able to pay a higher price. It will also target existing Colgate brand enthusiasts. That may be people who live in the poorest areas of Brazil with limited access to oral health facilities, aging populations, or with high consumption of sugary foods and beverages. Pricing strategy Launching a line extension to its existing suite of anti-caries/Big Red products, this solution involves the same spending for packaging and distribution as Big Red, but more expensive ingredients. Price of the CMCP+SAN will be premium to base, but lower than price of the toothpastes of Premium Tier (e.g. Colgate Total). CMCP+SAN could be positioned as a MidTier toothpaste based on the price level. Advertising support A line extension would allow CMCP+SAN to be priced above the base product and lower than the premium product. There will need to be an increase in advertising and promotional spending compare to the base segment, because Big Red no longer received advertising support, but there costs per kilogram will be lower than the one for premium tier. Colgate plans to allocate advertising budget between $3 million (for a value-priced product) and $6 million (for a premium-priced product) over the first three months. That means that for mid-tier spending for
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advertising and promotion could be $4.5 million over the first three months or $11.25 million over the first year. This budget will be spent on establishing and maintaining professional relations, public relations, and consumer marketing activities. Shelf placement/point-of-purchase materials CMCP+SAN would be placed between the Big Red and Colgate Total, with the Total on the top of the shelf. It will be distributed to general grocery stores, and other “mom-and-pop” retail outlets. Product positioning The toothpaste that gives the most effective cavity protection at a reasonable price point, without the risk of consumers trading down from any other premium products. This toothpaste is more efficient than the base Big Red, but its price is only slightly higher. Packaging Available in both 90g and 70g packages - this will entice consumers to try out the smaller version first if they are sensitive to price, later if they like the new product they will move to a bigger version. Competition Other effective fluoride toothpastes, other types of toothpastes for whitening, halitosis, gum care, etc. Pros ● A line extension would allow CMCP+SAN to be priced above the base product, but avoid trading down from Colgate Total (pg. 8). ● Since CMCP+SAN is a product that ensures superior cavity protection, it will be accessible to emerging markets where people need the products the most, which will produce greater public health benefits. ● CMCP+SAN would be placed at eye-level-a high visibility location, before eventually moving next to or above Big Red. (pg.13) This would increase Colgate brand awareness, also introduce to the customers about the product new innovation. Cons ● The formula’s similarity to Big Red would make it easier to move consumers to CMCP+SAN, but they might have difficulty understanding the value proposition of the higher-priced CMCP+SAN (pg. 8) because caries protection is no longer considered a “premium benefit” in the category (e.g., all other toothpastes sold on the basis of caries protection were value-priced), so consumers might be unwilling to pay a higher price for additional caries protection (pg. 8). ● A new mid-tier toothpaste could prevent switching customers from Big Red directly to Colgate Total®, because there will be another better, but cheaper toothpaste.
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Recommendation Solution 3 - Launch a line extension We recommend Colgate introduce CMCP+SAN as a line extension to its existing anti-caries/Big Red products that would only feature the CMCP+SAN technology. A line extension would allow CMCP+SAN to be priced above the base product, but would be less likely to motivate tradedowns from premium-priced Colgate Total®. Launching CMCP+SAN as a line extension to the existing anti-caries products would ensure that superior cavity protection is accessible to consumers who need it the most, which would produce greater public health benefits and, over time, could cause customers to trade up. CMCP+SAN will be positioned as an advanced base product, because the price will be within range of the mid-tier products due to its superior anti-caries technological advancements. In order to ensure that consumers understand the value proposition of this new product, the marketing, advertising, and PR efforts will need to demonstrate the continued need for anticaries products, and their value as preventative measures for consumers who have limited access to oral health care facilities. By increasing the price of CMCP+SAN to just above the base level, Colgate will have money in the operating budget to address these critical advertising and public relations needs. “Caries prevention is important, but currently consumers and dentists aren’t that focused on caries,” (p. 11). This solution will ensure that Colgate has the resources it needs to address this issue through establishing and maintaining professional relations and advertising and PR initiatives. The new CMCP+SAN product will be packaged in both the normal 90g tubes and the 70g tubes. The rationale for offering this product in a smaller tube size is that the smaller tube’s price will be more comparable to current base tier products. Additionally, it will allow consumers to test out this new product without investing a large quantity. If they decide the product is superior to the existing products within the same tier, they may trade up to the slightly larger size. Later Colgate may launch whitening and junior variants additionally. By positioning CMCP+SAN as an advanced base product, Colgate could significantly improve oral health for a much broader segment of the Brazilian population. By launching a new more advanced base-tier product, Colgate may distribute it through BSBF kits and partnership with the Brazilian Ministry of Health. While keeping the same level of profit, Colgate may execute its oral health educational program, and partner with public health-focused organizations and government health agencies to train dentists and hygienists to reach the in-need population in an effective way. This strategy fits Colgate’s image of building sustainable communities.