SM B15 Cottle

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1. What factors determine the demand for toothbrushes? How can demand be increased?

The factors determining demand for toothbrushes are as follows:

(a) Disposable income of consumers Due to the economic liberalization in 1991, there has been continuous increase in the GDP of India, In 2009 I ndias GDP is 146 times greater thanthe GDP in 1991. The disposable income with the Indian population has also been increasing.The types of oral care products purchased by customers vary as per the disposable income ofconsumers. Rural and semi-urban consumers are extremely price sensitive and cannot affordexpensive and sophisticated dental products while urban consumers prefer high quality

products that deliver better value.(b) Consumer education and Oral hygiene awareness Awareness of dental health benefits

determines the brushing and consumption habits of the consumers. Rising awareness makesconsumers knowledgeable of different categories of products and motivates them to use

better products. Consumer education partnered with IDA showed exposed rural residentswere twice as likely to adopt tooth brushing. Many Indians associate dental problems with

bad eating habits and genetics. Consumer education and Oral hygiene awareness campaignsadvocate for oral care and result in increase in demand for toothbrushes.

(c) Frequency of use and replacement The greater the number of time a consumer brusheshis teeth, greater is the demand for new toothbrushes. Consumers who have knowledge aboutwhen to replace toothbrush contribute to greater demand.

(d) Accessibility A product that is well distributed and readily available has a greater demandsince it is a regular use product.

(e) Influence of Western habits Because of globalization there has been tremendous cross

cultural exchanges between Indian and the Western world which has resulted in the change inthe oral habits of Indians to some extent.

The demand for toothbrushes can be increased in the following manner:

(a) Reaching out to rural India 64% of the Indian expenditures is made by this group aloneand hence it must be targeted.

(b) Advertising Increase in advertising budget to tap into the huge market of non-users and prevent loyal consumers from straying away to competitors.

(c) Increase dental health awareness Dental health benefits must be promoted and Cottle stooth brushes must be positioned as the best to prevent dental problems.

(d) Distributor Education Distributor must be aware of Cottles USP for pitching to retailersin rural areas to promote the product.

(e) Free sampling Free sampling is necessary to create brand awareness and let non-usersexperience the benefits of the product.

2. How is Cottle-Taylor doing in India? Has Cottle leveraged its first mover advantage? How?

Cottle-Taylor has been in India for over 50 years with its product lines in toothpaste, toothpowderand tooth brushes. With its strategy of using oral care product categories in emerging markets thecompany has struck the right chords to make a symphony out of economically improving population

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(a) Restructuring the advertising mix The current distribution of ad budget for Cottle is 50%television, 30% newspaper ads, 15% outdoor advertising and 5% on radio. Since 87% of theirrevenue comes from low-end manual toothbrushes sold in rural and middle income areashaving low television penetration, they should increase their advertisement budget on radio

and local dailies because they are more accessible in rural India. Communication can also bedone via billboards, magazines and cinema to deliver the message.(b) Distributor Education and Incentivization As distributors handle multiple manufacturers

and product lines, they do not understand the key selling points of Cottle ss toothbrushes. I t isessential to educate them about the product and make them learn the local language forincreasing rapport with retailers and ensuring that the products are at the forefront of clutteredrural grocery stores. The best performing distributors can be incentivized positively.

(c) Differential communication campaign strategy As the needs and issues at each incomelevel is different, a differential strategy should be adopted highlighting the key message to bedelivered. P eople who dont use a brush should be persuaded to brush for the first time.People who are already brushing should be motivated to increase the frequency of brushing.High end consumers should be encouraged to upgrade their toothbrush to premium electric

brushes that provide 20% better results.(d) Collaborating with dentists to endorse product Dentists are the key influencers of oral

care products. Cottle must collaborate with reputed dentists to recommend Cottle brushes andtoothpaste. Doctors have credibility within society and urban consumers religiously followtheir doctors advice. This method was effective in Thailand.

(e) Consumer Education about oral care Cottle must continue to partner with IDA forawareness campaigns and free dental check-ups. Sampling at such events helps to increase

visibility and induce first trial among non-users. These campaigns are twice as likely toconvince rural consumers to start tooth brushing.

(f) Reaching out to rural India Aanganwadi workers can be included in the oral hygiene programme to convince rural consumers to start brushing. They can visit schools and collegeswith dentists in mobile vans to assist in free health check-ups and provide free samples. Fairs,haats, street plays can be used to educate the users and promote the brand in rural areas.

4. Develop two 2010 income statement projections for toothbrushes- (i) based on Patel'sestimate that there will be a 20% increase in sales (vs 2009) and (ii) based on Lang's estimate

that there will be a 25-30% unit increase in toothbrush sales (vs. 2009)

Patel (E) Lang (E) 2009

Toothbrush gross revenues 100179124.7 107313079.4 70139267.6

Less: Trade Discounts 10017912.47 10731307.94 7013926.76

Net Revenues 90161212.21 96581771.49 63125340.84

Less: Variable manufacturing, selling and 46082397.35 49364016.54 32264063.1

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distribution costs

Gross Margin 44078814.86 47217754.95 30861277.74

Less:

Advertising 9016121.221 12877569.53 6312534.084

Consumer Promotion and Merchandising 3005373.74 3219392.383 2104178.028

Selling, General and Administrative costs 14025077.45 15023831.12 9819497.464

Profit from operations 18032242.44 16096961.91 12625068.17

Note: For Langs projections, advertising expenses have been increased by 3% i.e. 12% of gross

revenues.

5. Is it possible to attain 25-30% increase in toothbrush sales as suggested by Lang? If yes, howwould you plan to achieve it?

Our analysis suggests a 27.5% increase in toothbrush sales is possible in India.

Products Unit Sales 2009 Langs Projection % increaseLow-end Manual 299460960 381812724 27.5%

Mid-Range Manual 43026000 54858150 27.5%Battery Operated 1721040 2194326 27.5%Total 344208000 438865200 27.5%

The three key messages that are to be addressed are

1) Persuading consumers to brush for the first time

2) Increasing the frequency of brushing

3) Persuading consumers to upgrade to mid-range and premium products

Recommendations:

The solution will be to first understand the dynamics of economic and social conditions of the population of India. Thus the strategy to increase revenues in this competitive market should be to:

Different messages should be focused for different segmentso Urban, semi urban Message 1 10%; Message 2 40%; Message 3 50%o Rural - Message 1 60%; Message 2 35%; Message 3 5%

The population should be divided into segments and for each segment a different line of

product should be advertised which can cater to their needs and should be affordable. For E.g.

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Low end toothbrush line to be marketed for the economically weak people and mid-range or premium products for people with income above 5000$/year (80 Million households).

Cottle should partner with IDA more and more to create awareness among the people in ruralareas about Oral Hygiene and also use this opportunity to advertise their products. Also, at

the same time partner with the dentists to get help in the advertisement of mid-range or premium products for the urban As the markets for Toothpaste, toothpowder and toothbrushes already have several

competitors, the focus should be on ancillary products like mouthwash and Dental flosswhere market is fresh and the growth rate is highest (62% growth in period 2004-09).

More budgets should be allocated for advertisement in rural areas which could be in the formof radio broadcasts and billboards.

Relationship with seed distributors should be established and local population should be usedto more and more to counter the language problem. Also, the distributor should be trainedfor key selling points of the Cottles product s which will help the distributor to push the

product to the customer. Also, a reward program should be initiated for the distributors whoachieve the sales target decided by the company

SM B15 Cottle

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