Colgate-Palmolive was facing a difficult decision in early 2013; they were trying to extend their growth plan but needed to determine if adding $3 Million to their marketing budget would be beneficial. Richard Werner was given three different perspectives from his colleagues to determine how to increase sales for Colgate Canada, all of the suggestions used the $3 Million differently.
Buying Process Influencers
The typical oral care customer cared more about fresh breath and white teeth compared to the other psychographic segments. This was good news for Colgate since 52% of the population was looking for whiter and shinier teeth and the majority of their products offered those characteristics. The main expectations consumers sought when purchasing tooth paste was improved overall gum health, clean teeth after use, and a competitive price. Consumers also sought toothpaste that provided specific health benefits and improved overall health. Colgate would be able to use the $3 Million to increase awareness of their products which would increase their market share as a result.
Impact of Each Element of the Marketing Mix
Each element of the marketing mix is pivotal for Colgate’s toothpaste since it is a low involvement product and purchased habitually. The features of the product such as preventing cavities, cleaning and whitening teeth, along with added health benefits increases the products value since those are specific of what consumers are looking for. Consumers look for not the cheapest price, but a competitive price amongst different brands. They will rarely purchase the most expensive brand since they cannot see the value in purchasing a product that does the same thing for $2 more. Consumers need to see the added value if there is a discrimination in prices between products. Depending on where the products are sold directly transitions to sales and market share for Colgate. The more products in Loblaw Cos Ltd., Sobeys Inc., and Metro Inc., the more revenue Colgate generates. Colgate still offers their products in other stores but these three hold the largest market share amongst the retail stores in Canada. The promotional items that are used by toothpaste companies can determine what products are purchased in the store. The majority of consumers enter the store without any preference of toothpaste to purchase. This means that promotional items around the products or even as consumers enter the store can help aide the consumer in their decision making process.
There are four main competitors in the oral care market, these four companies hold over 80% of the market share. The top three competitors in the tooth paste industry hold over 75% of the market share with the smaller competitors splitting up the remaining percentages. It is well known that there will always be competition for the number one product, but if a company can portray their brand as the superior brand, their sales will be tremendously higher than their competitors giving them a substantial competitive advantage. The five main categories that all competitors are fighting for share over are oral health, tooth sensitivity, teeth whitening, children’s, and fresher breath. Not every company competes for each category, they mainly focus a specific product on a specific category. The more a product tries to do everything, the lower it’s market share will be.
Break Even Point
For Colgate to gain a 1% share of the market, they would gain $8,104,000 Million. This would give them a 33.4% share of the overall market. Colgate’s current break even point is 3,615,000 units sold at $2.11 resulting in a break even point in sales of $7,627,000. In order to make the $3 Million marketing addition more justifiable, Colgate would need to sell an additional 1,265,143 units.
Currently Colgate spends the most of it’s top competitors and holds the second most sales. If my calculations were correct Colgate would need to sell an astounding amount of toothpaste in order to break even on their marketing budget increase. I think competitors would welcome the fact that Colgate was increasing their advertising budget.
Pro’s and Con’s of Suggestions
Simons suggested increasing the number of promotional items to increase product visibility, I think this is a great idea. Since over 60% of consumers enter the store without any indication of what product they will purchase. If there were promotional items around the products or at the entrance, this would provide aided recall for consumers when they decide on what product to purchase. It’s one last push as the consumer makes their decision. The negative aspect of this decision is that many competitors currently utilize this method and it is difficult and expensive to obtain these ad placements.
Marcos suggested promotional items as well but in an attempt to take brand loyal customers from competitors and gain new consumers who are low involvement shoppers. I like this strategy but I think that it will be difficult to obtain the necessary consumers to switch to Colgate to make the investment successful.
Christopher suggested an increase in ad exposure. He believes that consumers need to see Colgate ad’s more frequently and in better geographic locations. I think that his statement is true of every company’s products since the more you see a product, the more familiar you will become with it. With more frequent advertisements, they may be wasting the majority of their budget by purchasing ad space for consumers who are continuing to see their ads. Colgate ads may not be seen by a different demographic, but the same ones over and over not attracting new consumers.
I would choose Simons method for increasing promotional items through coupons and children’s products with cartoons and characters on them. Pushing products when people walk in to the store will help them actually purchase said product. Out of the five alternatives Richard Werner was debating, I feel that decision one is the best decision to make. There is no need to increase the marketing budget since they would need to sell so many additional bottles of toothpaste in order to break even. I do however suggest adjusting the marketing strategy by having more promotional items in the aisles of the products and when the customer walks in the store. I would also utilize the little coupon dispensers that are in the aisles so consumers are more inclined to try the product and maybe eventually switch to Colgate.