Colgate Cannibalization Case
What is the main business problem the firm is facing?
The main business problem facing Colgate-Palmolive (CP) is deciding the positioning of Colgate Precision. CP has the opportunity to position Precision as mainstream or niche. By our definition, mainstream would target engaged brushers (brushing multiple times a day and highly involved in multiple facets of oral hygiene), while niche would focus on customers who have one specific identifiable concern, namely gum disease in this case.
What are CPs objectives?
CP would like to establish Precision as the best brush in the super premium product tier. As with most firms, CP aims to increase market share through the launch of a new product while minimizing the cannibalization of the existing Colgate Plus product.
What segment should CP target and why? (Exhibits 1 and 2)
Positioning Precision as a mainstream toothbrush will allow CP to effectively target consumers who fall into the “engaged brushers” customer segment. We define “engaged brushers” as a combination of consumers who brush for therapeutic and cosmetic benefits and are looking for a multitude of benefits from their toothbrush; these customers account for 67% of the market.
82% of toothbrush purchases result from impulse. We know that customers are not heading to the store with a specific product or need in mind. Thus, positioning Precision as niche would assume that customers are specifically shopping for gum disease relief, which we know is untrue.
While we believe that CP should minimize cannibalization of its existing professional tier offering Colgate Plus, we do not believe that cannibalization should be a major concern. If Precision erodes the sales of Colgate Plus but increases CP’s overall market share this will leave the company in a better position. The minimum additional revenue due to cannibalization is 12.4 Million to 23.15 Million. (Cannibalization at higher sales price results in the increased revenues) Given the financials, we see
The main business problem facing Colgate-Palmolive (CP) is deciding the positioning of Colgate Precision. CP has the opportunity to position Precision as mainstream or niche. By our definition, mainstream would target engaged brushers (brushing multiple times a day and highly involved in multiple facets of oral hygiene), while niche would focus on customers who have one specific identifiable concern, namely gum disease in this case.
What are CPs objectives?
CP would like to establish Precision as the best brush in the super premium product tier. As with most firms, CP aims to increase market share through the launch of a new product while minimizing the cannibalization of the existing Colgate Plus product.
What segment should CP target and why? (Exhibits 1 and 2)
Positioning Precision as a mainstream toothbrush will allow CP to effectively target consumers who fall into the “engaged brushers” customer segment. We define “engaged brushers” as a combination of consumers who brush for therapeutic and cosmetic benefits and are looking for a multitude of benefits from their toothbrush; these customers account for 67% of the market.
82% of toothbrush purchases result from impulse. We know that customers are not heading to the store with a specific product or need in mind. Thus, positioning Precision as niche would assume that customers are specifically shopping for gum disease relief, which we know is untrue.
While we believe that CP should minimize cannibalization of its existing professional tier offering Colgate Plus, we do not believe that cannibalization should be a major concern. If Precision erodes the sales of Colgate Plus but increases CP’s overall market share this will leave the company in a better position. The minimum additional revenue due to cannibalization is 12.4 Million to 23.15 Million. (Cannibalization at higher sales price results in the increased revenues) Given the financials, we see