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Transcript of Toothpaste Industry

Discussion Paper No. 0407

December 2004



Note: UPCBA discussion papers are preliminary versions circulated privately for critical comments and are not for quotation or reprinting without prior approval. They are protected by Copyright Law (P.D. No. 49)

Differentiating Among Major Philippine Toothpaste Brands: A Quantitative Study Ben Paul B. GutierrezThis paper investigates toothpaste brand choice behavior of consumers in urban Philippines. After generating attributes using the Sheth-Newman-Gross (1991) model, a pilot study is conducted to reduce the number of attributes to a manageable level. The main study obtained consumers evaluation of toothpaste brands and their preferred brands which were then used to estimate discriminant models. Results indicate that functional, cosmetic and sensory benefits are useful for classifying consumers into their brands. Aside from identifying implications to management, the paper clarifies methodological issues when applying some common statistical analyses used in marketing. Key words: Brand choice; Sheth-Newman-Gross (1991) model; Philippines toothpaste consumption

1. The Consumer Market in a Less Developed Country Consumer markets in less developed countries differ from North American or European counterparts in several aspects: average household disposable income is low, income disparity between the rich and poor is high, youths represent more than two thirds of the population, literacy level is low, and access to a wide variety of communication media is poor. According to the 1994 Family Income and Expenditure Survey in the Philippines, rural families have an annual average income of Ps53,483 and an average expenditure of Ps44,427. By contrast, urban families have twice the average income and expenditure of rural families. Urban families have an annual average income of Ps113,121 and an average expenditure of Ps 91,115. In Metropolitan Manila, the most urbanized area, the difference between urban and rural income is more than three times. Families in Metro Manila have an annual average income of Ps173,599 and an average expenditure of Ps138,427. While it is true that the average income is growing, in real terms, this growth is insignificant. In 1994, the average income of Filipino families grew by 27.6 percent to Ps83,161 compared to the 1991 level of Ps65,186. However, net of inflation, the average income actually dropped by 0.2 percent between 1991 and 1994. The last four Family Income and Expenditure Surveys in the Philippines indicated a general trend towards lower spending on food. However, the share of food expenditures is still almost half of the family income at 47.8 percent, dropping to 44.2 percent in Metro Manila (Figure 1). When families have extra income there is a tendency to buy durables rather than consumables, especially in the rural areas as shown by the steady increase in the share of household furnishings and equipment. Spending on personal care and effects1 *Associate Professor of Marketing, College of Business Administration, University of the Philippines Diliman, Quezon City. (

Personal care and effects category is composed of the following: beauty aids and toilet articles (deodorant, oil, make-up, toothpaste, shampoo, soap, etc.), personal effects (jewelry, bag, watch, etc.), beauty parlor or barbershop services (haircut, perm wave, manicure, etc.), and other services (sauna, aerobics classes, etc.).



is only 3.3 percent in Metro Manila but it has been relatively stable over the last nine years. Whilst the share of personal care products or toiletries is low, Metro Manilas population of 9,454,040 grows at 3.3 percent per annum, as compared to national population growth rate of 2.3 percent (National Statistics Office, 1995 Census of Population). Such population dynamics suggests that the growth in the personal care product market would be significant. Therefore, the personal care product market remains attractive to manufacturers and marketers. The growth rate of toothpaste consumption in the Philippines follows the population growth rate. The toothpaste market volume of 14,000 metric tons grew by 16.7 percent over the 1993 volume because of the entry of lower priced brands. This volume translates to a per capita consumption of 237.2 grams per year, less than 1 gram per day. Toothpaste consumption is expected to rise as household incomes increase.


Others 14%

Household furnishings 3% Personal Care 3% Clothing 4% Education 4%

Food 47%

Transportation 5% Utilities 6%

Housing 14%

Source: 1994 Family Income and Expenditure Survey, Series No. 80, National Statistics Office, Manila, Philippines, Table E, xxxvi.

2. The Objectives of the Study The paper applies discriminant models in investigating brand choice behavior for toothpaste products in Metro Manila, Philippines. Toothpaste can be considered an important personal care product because its usage is independent of age, sex, or disposable income. Since toothpaste products have high usage and familiarity, it will be easier to obtain survey respondents, and this could minimize data collection costs. Moreover, the


investigator has considerable knowledge of the personal care products and their markets, having worked with the Philippine marketers for nine years from 1985 to 1993. The scope of the study, however, is delimited to Metro Manila, Philippines. Compared to the rural areas, urban communities have higher market potential. Metropolitan Manila is the most urbanized region of the Philippines and all the marketers of the target products have strong marketing presence. Smaller companies have distribution problems penetrating the rural areas because of the archipelagic nature of the country. Moreover, the Metropolitan Manila region is very important because it accounts for at least forty percent of the sales of most companies. The findings of the study will apply to the rapidly urbanizing areas of the country to a lesser degree. The comprehensive study of the aggregate toothpaste market attempts to address three specific objectives below. 1. To identify and measure the dominant attributes and situational factors that determine toothpaste brand choice; 2. To formulate and estimate the relationship between brand choice and its determinants; and 3. To test the predictive adequacy of the estimated models in terms of prediction rates and statistical information measures. An understanding of brand choice and its determinants would improve decision making in market segmentation, new product development and product positioning. Thus, this knowledge would benefit manufacturers in the Philippines by improving their performance in marketing toothpaste products. 3. Method 3.1 Sampling

To limit the choice determinants to a manageable number, a pilot questionnaire was administered. A convenience sample of 105 toothpaste consumers who represent the households was selected in Quezon City. Potential respondents were screened for three requirements. First, the respondent must be a user of shampoo (or toothpaste) and must have purchased the product within the past six months. Second, only respondents who make the buying decision, or who influence the buying decision of their respective households were chosen. Finally, the respondent must not have a family member or a close relative working for a toothpaste marketer, an advertising agency, or a marketing research agency. Sheth, Newman and Gross (1991) recommended a choice-based sample where equal numbers of users from each brand are to be used. This is appropriate because their objective is to obtain the independent variables to be used in a discriminant analysis later. In discriminant analysis, the objective is to start with known groups and to determine the factors that describe these groups. In using the Sheth, Newman and Gross (1991) framework the recommended choice-based sample was modified. The objective of the pilot study is to identify the salient attributes in the brand choice and these salient attributes are eventually used in discriminant and logistic regression analyses. In this case, a simple


random sample was considered more representative of the market because the brands do not have equal market shares. Some brands tend to dominate the market and hence by intuition, the major brands attributes arguably stand out more than the smaller brands. To collect the brand choice data, the main questionnaire was administered. Except for the sampling method, the characteristics of the respondents in the survey sample are the same as the pilot study (i.e. satisfy the three requirements described above). A total of 451 individuals were selected using a multistage sampling with area quotas to reduce the normal sampling variation associated with simple random sampling and systematic sampling.2 Respondents were selected by the interviewers from various suburbs in each city or municipality. Interviewers were directed to get only one respondent from a household and the quota allocated for a certain suburb. Hence, interviewers were selected based on their familiarity to certain suburbs in the sampling area. The main survey was conducted last July to August 1996 with the assistance of fifteen interviewers. The composition of the sample is similar to the pilot study sample in many aspects. Unmarried females, and those under the 26 years of age comprise most of the respondents to the survey. A majority of the respondents possess at least 10 years of education, and earn an average monthly income between Ps5,000-15,000. Table 1 describes the sample.

Table 1. SAMPLE DEMOGRAPHIC SUMMARYDemographic Variable Numb