Marketing Plan for Product Line Extension for Colgate
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Transcript of Marketing Plan for Product Line Extension for Colgate
TERM PAPER
ON
MARKETING PLAN OF A PRODUCT LINE EXTENSION FOR COLGATE
PREPARED BY: OLAKUNLE OLADIPUPO[STUDENT NUMBER: M1002157]
&
SUBMITTED TO
IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER IN BUSINESS ADMINISTRATION (MBA)
TO BE AWARDED BY
SUBMITTED ON
MONDAY 11TH JANUARY, 2010.
[WORD COUNT: 3,049]
Table of Contents
1.0 Abstract - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4
2.0 Executive Summary - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4
3.0 Situational Analysis - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 5
3.1 Product line extension – The Colgate Palmolive Mouth Freshening Mint - - - - 6
3.2 Product situation - - - - - - - - - - - -- - - - - -- - - - - - - - - - - - - - - - - - - - -- - - - - - - 7
3.3 Competitive situation - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - 7
3.3.1 The competitive landscape for the product line extension - - - - - - - - - 7
3.3.2 Factors to which competition is sensitive - - - - - - - - - - - - - - - - - - - - - 8
3.4 Distribution situation - - - - - - - - - - - -- - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - 8
3.5 Environmental factors - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9
3.5.1 Economic factor - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9
3.3.2 Sociological factor - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9
3.6 SWOT analysis - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9
3.6.1 Strengths - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9
3.6.2 Weaknesses - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 10
3.6.3 Opportunities - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 10
3.6.2 Threats - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - -- 10
4.0 Marketing strategy - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 10
4.1 Strategies used by Colgate - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- 11
4.1.1 Market Dominance - - - - - - -- - - - - -- - - - - - - - - - - - - - - - - - - - -- - - - 11
4.1.2 Porter’s generic strategy - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - 11
4.1.3 Product differentiation - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 12
4.2 Market Segmentation - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 12
4.2.1 Geographic segmentation - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - 12
4.1.2 Demographic segmentation - -- - - - - - - - - - - - - - - - - - - - - - - -- - - - - - 13
4.1.3 Behavioural segmentation - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 13
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4.3 Marketing the product line extension - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 13
5.0 Financial Matters - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 14
6.0 Controls - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 15
7.0 Assumptions made in the product line extension report - - - - - - - - - - - 16
8.0 Conclusion - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 16
References - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 17
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1.0 Abstract
The purpose of this paper is to carry out an analysis of the product line extension for
Colgate Palmolive. The paper shall consider the product closely and will elaborate
on the fundamental principles behind the product line extension as well as
performing a detailed situational analysis for the product. The paper will analyze the
competitive landscape that exists for the product as well as the distribution platform
on which the product shall be brought to the consumers. Factors such as
environmental factors shall also be considered for the product as well as a
comprehensive analysis of the strengths, weaknesses and threats for the company
along with the opportunities that are open for the product. Furthermore, the paper will
shed light on the marketing strategy that is fundamentally adopted by Colgate
Palmolive as well as the marketing strategy that would be most appropriate for the
product line extension. Financial matters and controls for Colgate Palmolive shall
also be discussed before the paper comes to a conclusion with the presentation of
any and all assumptions that were made during the formulation of the paper.
2.0 Executive Summary
The origins of Colgate date back to 1806 to New York City (Colgate Palmolive
Company, 2010). Initially, Colgate began by selling soap and starch along with
candles and the first factory was not set up until almost two decades from its origin
had passed. Currently, Colgate revenues are reported to be over $15 billion and
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Colgate is known as Colgate Palmolive. Along with its numerous subsidiaries,
Colgate Palmolive functions in the personal, oral and home care industry and the pet
nutrition industry (Hoover's, Inc. 2010). Colgate has followed a strategy through
which it distributes its products to retailers and wholesalers in the case of the
personal, oral and home care segment. Colgate Palmolive currently has a human
resource capital exceeding thirty six thousand with its head quarter still based in New
York (Hoover's, Inc. 2010).
Colgate Palmolive faces off competition from Church and Dwight Co. Inc., Clorox
Corporation and Procter and Gamble Co (Yahoo! Finance 2010). The publicly held
company is positioned in a competitive landscape where the demand is driven by
population growth and the growth in the demand for household products in the
consumer sector. The revenues in this capital intensive industry are more dependent
on operational effectiveness and the sales and marketing strategies involved.
Competition is influenced heavily by innovations in the industry (Hoover's, Inc. 2010).
3.0 Situation Analysis
This paper explores a product line extension for Colgate Palmolive. The product is
the Colgate Palmolive Mouth Freshening Mint and has been designed to be in line
with Colgate Palmolive’s standard methodology of operation which is to ensure
dental care. However, as it shall become evident in the later paragraphs, it shall also
serve as Colgate Palmolive’s entry to the confectionary market while playing the role
of a breakthrough in affordable and convenient dental care. The product will make
use of the Colgate Palmolive distribution system as well as the brand name. The
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product may have to face off aggressive attack strategies from the confectionary
industry if it captures a significant market share and may therefore have to sustain its
position through a well defined defence strategy (Kotler and Keller 1998 p.365).
3.1 Product Line Extension – The Colgate Palmolive Mouth Freshening Mint
Toothpaste is often minty and is designed in a manner so that it does not come as
unpleasant to the person using it. Modern day toothpastes are generally sweet in
nature and maintain an appearance that is meant to appeal to the user’s sense of
sight as well. It is not uncommon for a person to think about the random thought of
consuming toothpaste while brushing with it. The smaller the child is, the stronger
the thought of consuming the toothpaste. While Colgate Palmolive has produced
numerous dental care products that have done quite well with consumers to date; for
the purpose of this paper, the product line extension that shall be considered will be
the introduction of the Colgate Palmolive Mouth Freshening Mint. The purpose of the
launching of this mint shall be to cash in on the desire that people feel to eat
toothpaste.
The mint will be designed to resemble the smell and taste of the Colgate Palmolive
toothpaste but will be customised to make the two attributes more edible. An
alternative would be to launch the product in the form of paste, which would perhaps
be more direct in addressing the subconscious tendency that users have to consume
the toothpaste. However, there is a possibility that confusions between the
toothpaste and the mint-paste may cause the occurrence of unwanted incidents;
which could in turn have a negative impact on brand image.
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3.2 Product Situation
The core product in the case of the Colgate Palmolive Mouth Freshening Mint shall
be the minted candy. The core product shall attempt to cater for the desire to
consume the toothpaste that becomes extensively tasteful when it is being used.
Instead of letting the consumer consume the inedible toothpaste, the consumer will
be allowed to enjoy the very same taste and freshness in the form of edible mints
that shall taste like the product’s flagship toothpaste.
The secondary product shall be the service that the core product shall provide the
consumer in the form of the protection of the teeth from decay and harm while
providing a minty fresh feeling at the same time. The idea will be to allow consumers
to chew on the Colgate Palmolive Mouth Freshening Mint every time they wish to
acquire the same fresh feeling that they would if they brushed their teeth but are not
present in any location from where they could acquire access to toothpaste and a
toothbrush.
3.3 Competitive Situation
The main competitors of the product shall be the few chewing gums in the market
which claim that their chewing gums are sugar free and are therefore not harmful to
health. The chewing mint may also face competition from the dental care industry in
the future if consumers adopt it as a substitute to toothpaste.
3.3.1 The competitive landscape for the product line extension
The product shall be sold as an over the counter product. It is essential to note that
the product will not be sold as a medicine and will not be marketed as a drug either.
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This way, the product will be able to avoid getting caught up in a position where it
can possibly face the immense competition from the confectionary industry or the
intense competition from the dental care industry.
3.3.2 Factors to which competition is sensitive
The competitive landscape for this product shall be more sensitive to innovation in
the field of dental care than it will be to developments in the confectionary industry.
This is because of the fact that the product shall continue to depict a brand image
that is meant to assist children in eating more candy. For instance, it can be
marketed to be one mint that nobody can say no to thereby making the consumer to
take more candy on account of the benefits of consuming the mint.
3.4 Distribution Situation
The mint shall be available at confectionary stores as well as in the position of an
over the counter consumable at drug stores and pharmacies on account of its
multiple roles. The product shall make use of Colgate’s current distribution network
which is to sell to retailers and wholesalers who in turn serve as distributing agents
for the products. This will allow costs of setting up a distribution network from scratch
to be saved. The current distribution of Colgate works on the very same lines and
has proved to be effective through time.
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3.5 Environmental factors
3.5.1 Economical factor
The product shall be priced to be affordable and available in smaller denominations
and packaging. This will allow consumers to purchase the various quantities of the
product that they may require.
3.5.2 Sociological factor
The product may experience obstructions in market penetration on account of the
sociological factors according to which consumers are hesitant in trying new
products that pertain to healthcare unless they are provided with assurances. For
this purpose, the product can be subjected to assessment and subsequent approval
by a credible medical committee of the board.
3.6 SWOT analysis
3.6.1 Strengths
The product is one that will serve to make dental care more affordable than it ever
was before on account of its availability in smaller packages. The product makes
dental care more convenient and can also be marketed to consumers who seldom
have time in the mornings to make sure that their teeth are good to go for the day. It
is imperative to note in this regard that the product can not only be marketed to
children but also to the working class and to students as well.
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3.6.2 Weaknesses
The product holds a weakness in the fact that unless consistent and continuous
marketing operations are performed to reinforce the brand image, consumers may
be able to take account of competition from the dental care industry and the
confectionary industry. Also, the product is one that may cause a decrease in the
sales for other products by Colgate as well.
3.6.3 Opportunities
The product will be able to replace toothpastes and toothbrushes in industries such
as the travel industry and the medical industry if expansion in the product range is
designed to meet the requirements that the two industries have for dental care. For
instance, airlines will have the option of providing passengers with this product rather
than supplying them with a complete set of toothpaste, toothbrush and mouth wash
for which the passengers will then have to go to the restroom in turns.
3.6.4 Threats
The product may fall into a position where it will run into competition from the dental
care industry as well as the confectionary industry. A situation such as this will serve
to contribute towards a bad brand image.
4.0 Marketing strategy
The general marketing strategy that is used by Colgate is the niche / mainstream
positioning strategy. The target market for the organization is the consumers who are
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worried about the gum disease. Colgate is using the differentiated marketing strategy
which means that they have different flavours for different customers of different age
groups, like for example Colgate junior is a product by Colgate which is entirely
targeting the children who are aged between 4-9 years.
The marketing strategies are the plans that take the organization towards the way
where they can achieve their goals. Strategies would lead the organization towards
their desired objective or the preferred future.
4.1 Strategies used by Colgate
Following are the strategies used by Colgate
Market dominance
Porter generic strategies
Product differentiation
4.1.1 Market dominance
Without a doubt it can be said that Colgate is the market leader and the king in the
oral care industry. The reason for this is because they are catering for the needs of
all the segments of the market through their long and extended product lines. Also,
Colgate makes use of massive advertising campaign which helps to continuously
develop the awareness in the target market and especially in the children segment.
4.1.2 Porter’s generic strategy
Colgate achieves its competitive advantage through its product differentiation and
market segmentation strategies. As mentioned above Colgate has an extended
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product line which helps them to take care of all the target markets that they have
segmented as their potential customers.
4.1.3 Product differentiation
Colgate has adapted the product differentiation strategy to good effect and evidence
of this could be observed from the fact that if anyone asks about red colour
toothpaste the first thing that would come into the mind of a layman is Colgate. This
is the impact of product differentiation this results in differentiating your product from
competitors’ product and also by offering something extra to the customer. For
instance Colgate has launched Colgate herbal which is dedicated for a certain class
of people. The basic reason for developing a product differentiation strategy is to
provide a unique attribute about the product to the potential customer which he can
remember and use to easily differentiate it from other similar products.
4.2 Market segmentation
The market segmentation strategy adopted by Colgate primarily focuses on the
following variables geographic, demographics, and behavioural.
4.2.1 Geographic segmentation
As the name suggests, this is segmentation based on the geographical area in which
the product is being launched. This may include important geographical locations as
different continents, regions or major cities of the country etc.
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4.2.2 Demographic segmentation
In demographics the major variable which is considered is the age factor. This is a
very crucial factor because lots of marketing strategy depends on the age of a
particular target markets.
4.2.3 Behavioural segmentation
Behavioural segmentation is the segmentation of the market based on the overall
attitude of the people for that product like for example now in this age people are
quite aware of the oral health and they seems to be cautious about their oral health
so this shows a positive sign towards brushing teeth and keeping it clean and free
from germs. This is an important variable of the overall marketing strategy because it
would present the overall approach of that region towards toothpaste.
The reason why all these issues are taken into account is because based on the
results of these finding the strategy of the product is designed. All these play their
role in the developing the overall marketing strategy of the product.
4.3 Marketing the product line extension
It would be less risky to begin the marketing of the product in a selected region
rather than to take the product on a full scale distribution spree without judging the
response from a sample of the target population. Once the product has been
deemed as potentially popular and sufficiently acceptable, it can be put forward for
large scale manufacturing and can be part of Colgate Palmolive's current network of
distribution to retailers and wholesalers.
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Considering the fact that the choice in the purchase of consumer goods is influenced
considerably by women, it would be practical to spearhead the promotional
campaign by designing a brand image that appeals to women with children.
Colgate Palmolive is a well established and recognized name in the dental care
industry amongst consumers. This recognition and credibility will play an undeniable
role in the development of the brand image for the Colgate Palmolive Mouth
Freshening Mint. The credibility of the Colgate Palmolive brand name will allow the
Colgate Palmolive Mouth Freshening Mint to acquire a channel through which
consumers can be educated about the product and shall also serve to assist in the
selling of the product to the distributing agents in the distribution system used by
Colgate Palmolive.
5.0 Financial Matters
The net sales in 2008 for Colgate Palmolive have continued to follow a trend of
profits that can be observed through the decade. However, the gross profit margin
for Colgate Palmolive has still not reached the peak it had in 2007; after which it
experienced a decline in 2008 and is expected to rise beyond 56.7% of sales from
2008 but not beyond 57.3% of sales as was recorded in 2007 (Colgate Palmolive
Company 2010). However, earnings per share have continued to show a steady
increase.
In a more recent perspective, Colgate Palmolive experienced a growth in organic
sales and an increase in the margin of gross profit. In 2009, Colgate reported an
increase in worldwide sales as well as an increase in the gross profit margin,
operating profit, net income and diluted earnings per share.
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6.0 Controls
The company's controls are managed through adherence to the Securities Exchange
Act and are directed by the Company's chairman, the president of the company, the
chief executive officer and the chief financial officer. Policies for disclosure controls
are established through them in the form of a committee (Colgate Palmolive
Company 2008). The financial reporting although is headed by the chairman, the
president and the chief financial officer. The company follows generally accepted
accounting principles in the preparation of the disclosure reports and assistance is
taken in the evaluation of the company's accounting standards by comparing the
standards followed to the thresholds set by the Committee of Sponsoring
Organizations of the Tread way Commission.
It is imperative to note that the company makes use of an independent and external
accounting firm, PricewaterhouseCoopers LLP (Colgate Palmolive Company 2008),
which performs the audits for the company which provides the company with a report
on its evaluation of the company's accounts for every year. The statements given by
the external auditing firm is included in the company's annual reports.
In this regard, the product shall be made part of the company's annual report
evaluations and information regarding the accounts exercised in the development,
promotion and distribution of the product shall also have to be made available to the
external auditing firm employed by Colgate Palmolive for the respective term.
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7.0 Assumptions made in the product line extension report
The report on the product line extension would not be justified unless the
assumptions and considerations of the report were presented. The report made use
of the annual report for Colgate Palmolive for the year 2008 because the company
does not publish its annual reports for the previous year until the end of the first
quarter of the next year. Also, the data provided was taken from the Colgate
Palmolive website. The paper also assumed that Colgate Palmolive is currently
stable and is in a position where it can consider and exercise a product line
extension. It was also considered that the current distribution network for Colgate
Palmolive is adequate and functioning appropriately.
8.0 Conclusion
The product line extension of the Colgate Palmolive Mouth Freshening Mint appears
to be one that shows favourable signs and indications of success. The paper found
that Colgate Palmolive is currently in a position where it can make use of its current
set up to launch the product line extension. It was also found that as much as the
product line extension of the Colgate Palmolive Mouth Freshening Mint appears to
be favourable, it is also one that may face extensive competition in its later days and
will therefore require a dedicated and consistent approach.
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References
Colgate Palmolive Company. (2008) 2008 Annual Report. New York: Colgate
Palmolive Company
Colgate Palmolive Company. (2010) Colgate Palmolive Company History [online]
available at: <www.colgate.com/app/Colgate/US/Corp/History/1806.cvsp> [accessed
3 January 2010]
Colgate Palmolive Company. (2010) Colgate's World Fact Sheet - Financial
Highlights [online] available at:
<http://investor.colgate.com/ColgateWorld/colgate_world-fin3.cfm?header=fin>
[accessed 3 January 2010]
Hoover's, Inc. (2010) Colgate Palmolive Company [online] available at
<http://www.hoovers.com/company/Colgate Palmolive_Company/rfyjyi-1-
1njdap.html> [accessed 3 January 2010]
Hoover's, Inc. (2010) Colgate Palmolive Company Competitors [online] available at
<http://www.hoovers.com/company/Colgate Palmolive_Company/rfyjyi-1-
1njea3.html> [accessed 3 January 2010]
Kotler, P. and Keller, K. (1998) Marketing Management: Analysis, Planning, and
Control. New York: Prentice-Hall
Yahoo! Finance. (2010) Colgate Palmolive Co [online] available at
<http://finance.yahoo.com/q/co?s=CL> [accessed 3 January 2010]
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