Launch of Precision Toothbrush
The Launch of a Precision Toothbrush
Task 1. What are the arguments for launching Precision as (a) a niche and (b) a mainstream brand?
A precision toothbrush is one that is of the highest quality ever and best serves its intended purposes of particle removal and plaque removal in teeth. Many arguments arise as to why a precision toothbrush should be launched as both a niche and a mainstream brand. A niche is a segment of a whole say a market to which a product being launched is targeted to reach. A market niche would be therefore said to be a gap or an opportunity in the market that has not been utilized. A mainstream brand on the other hand is one that the public views as normal to use or that the public views to be used as a norm. This paper intends to give the arguments as to why precision toothbrushes should be launched as both a niche and a mainstream brand.
A precision toothbrush is made with the highest technology to ensure that it is the best in food particle and plaque removal in teeth (Lakshmi, Marwah, Chaturvedi, & Mishra, 2018). It is therefore in this perspective that it should be launched as a niche for it can meet the needs of every member of the public as far as teeth hygiene is concerned. The brush is made with high technology making it to occupy a niche in the market that no other toothbrush has occupied before. It can therefore be sold in all shop outlets including drugs and food stores (Worthington, Kennedy, & Jimenez, 2017). Positioning the precision toothbrush as a niche gives the brush a competitive advantage over the other available brushes since its uniqueness and super quality features will automatically give it a greater preference for use by the customers. This is because a niche is a gap or opportunity which has not yet been utilized (Lakshmi, at.al 2018). Utilizing the opportunity through the manufacturing of a product that best suits the gap then positions the product in a better position to better compete with the available market competitors. In this case, launching the precision toothbrush as a niche allows it to better compete well with the available toothbrush brands.
Where the precision toothbrush is to be launched as a mainstream brand, the Colgate Palmolive company has to make sure that it makes some adjustments have to be put in place to promote the sale of the brand. The product will have the most product appeal to the customers than any other available toothbrush. Merchandisers and brand ambassadors would facilitate product promotion and thus the sales would shoot with a great percentage. Lead times will have to be reduced to a period of not more than two weeks to ensure that there is an adequate supply of the product to the market (Worthington, at.al, 2017). Launching the product as a mainstream product is advantageous because whenever the consumers consider it normal to use a particular product, they tend to prefer it to other competing brands. The customers would then in turn normalize purchasing the product and thus a bigger market acceptance of the brand which would lead to increased sales and productivity to the manufacturing firm (Amani, Vorobei, & Razumova, 2018). The increased sales however will come after much inputs in the side of product promotion by the manufacturing firm, Colgate Palmolive Company.
Task 2. What recommendations would you make to Steinberg? Include a pro forma/profit and loss forecast for the Precision Toothbrush (incl. cannibalization) under the niche and mainstream scenarios.
Cannibalization cost is the cost incurred due to the loss of market share of a product when a similar product is produced by the same producer and offered to the same market. In this case study of Colgate Palmolive company, this cost lower when launching the precision toothbrush as a niche than when launching it as a mainstream brand. Steinberg had predicted a total of less than 60% of the precision volume to come from the existing product lines (Worthington, at.al, 2017). When the whole lot of 60% of the total customers purchased Colgate plus, the maximum loss would be incurred due to cannibalization. On the other hand, when 35% of the total customer volume shifts from purchasing Colgate classic to buying the new product, precision, the minimum loss due to cannibalization would be incurred.
Based on this study, it is, therefore, wiser to position the product as a niche at the beginning of the launch and then later shift to positioning it as a mainstream brand. This is because positioning the precision toothbrush as mainstream at the beginning would result in the inadequacy of the products leading to increased losses due to irrelevant production of the products. This would in turn lead to fewer sales volumes than projected (Mohammad, & Arfat, 2016). A shift to mainstream positioning from niche positioning ensures that customers who remain loyal to the other range of oral products would continue with their purchases even after the shift to mainstream positioning. Taking cannibalization into account, shifting to mainstream positioning ensures that the profits are kept at a maximum. From the analysis of the profit and loss forecast, positioning the precision toothbrush as a mainstream brand would be more profitable.
When trying to find a good brand name, Steinberg encountered a dilemma of whether to name the brand precision by Colgate or precision Colgate. To maintain the cannibalization costs at the lowest possible levels, the focus should always be put on trying to use precision more (Amani, et. al 2018). Using the names precision by Colgate or Colgate precision implies rising the cannibalization costs and in turn, would result in more expenses in trying to promote the sales of the products.
| Profit and Loss forecast for the precision toothbrush as a niche and as a mainstream brand | |||||
| a) as a niche | |||||
| (y-1) | (y-2) | ||||
| ($) | ($) | ||||
| Net Sales | 13 units*202000 | 2626000 | 20 units*202000 | 4040000 | |
| Less Cost Of Sales | 13 units*66000 | 858000 | 20 units*66000 | 1320000 | |
| Gross Profit | 1768000 | 2720000 | |||
| Expenses; | |||||
| Additional Capacity | 3250000 | 4550000 | |||
| Depreciation | 316667 | 450000 | |||
| Advertising | 5000000 | 5000000 | |||
| Consumer Promotions | 4600000 | 4000000 | |||
| Trade Promotions | 1600000 | 2700000 | |||
| Less Total Expenses | 14766667 | 16700000 | |||
| Net Profit | 2913330 | 10500000 | |||
| b) As a mainstream brand | |||||
| (y-1) | (y-2) | ||||
| $ | $ | ||||
| net sales | 42 units*1760000 | 73920000 | 59 units* 1760000 | 103840000 | |
| less cost of sales | 42 units*640000 | 26880000 | 59 units*640000 | 37760000 | |
| gross profit | 47040000 | 66080000 | |||
| expenses: | |||||
| additional capacity | 9100000 | 13000000 | |||
| depreciation | 886667 | 1270000 | |||
| advertising | 15000000 | 12000000 | |||
| consumer promotion | 13000000 | 10000000 | |||
| trade promotion | 4800000 | 7000000 | |||
| less total expenses | 42786667 | 432700000 | |||
| net profit | 4253333 | 22810000 | |||
References
Amani, W., Vorobei, P. S., & Razumova, A. A. (2018). Inorganic components of indigenous toothpastes produced by OJSC «Modum» and toothpastes produced Colgate-Palmolive company.
Lakshmi, V., Marwah, N., Chaturvedi, Y., & Mishra, P. (2018). Evaluation of brushing techniques and toothbrush grips among rural and urban children. Power, 14, 13. https://www.oraljournal.com/pdf/2018/vol4issue2/PartC/4-2-18-988.pdf
Mohammad, K., & Arfat, A. (2016).Financial Performance Evaluation of Fmcg Companies In India: A Comparative Study Between Colgate Palmolive And Dabur India Limited. Editorial Board, 5(6), 1.
Worthington, B. G., Kennedy, S., & Jimenez, E. J. (2017). U.S. Patent No. 9,554,641. Washington, DC: U.S. Patent and Trademark Office.