Positioning of Precision Tooth Brush

The first step to deciding the positioning of precision in Niche or Mainstream segment requires development of proforma
Income statement.
Income Statement of Precision (Niche Positioning)
(Referred Table-C,E, Page 7,8)
Niche Positioning
Particulars

Year 1

Year 2

Sales
Retail (5%
Discount)
Professionals

80%
20%

Sampling
Manufacturing cost
Gross Profit
Expenses
Advertising
Depreciation
Total Expenses
Net Profit

Qty

Per unit

Total

Qty

Per unit

Total

8
2.4
0.6
2
13
13

2.02
0.79
0.95

16.160
1.896
0.570
0.000
18.626
8.580
10.046

15
2.4
0.6
2
20
20

2.02
0.79
0.95
K

30.300
1.896
0.570
0.000
32.766
13.200
19.566

0.66

0.66

11.200
0.317
11.517
-1.471

11.700
0.45
12.150
7.416

Income Statement of Precision (Mainstream Positioning)

(Referred Table-C,E, Page 7,8)
Mainstream Positioning
Particulars

Year 1

Year 2

Sales
Retail (5%
Discount)
Professionals
Sampling
Manufacturing cost
Gross Profit
Expenses
Advertising
Depreciation
Total Expenses
Net Profit

80%
20%

Qty

Per unit

Total

Qty

Per unit

Total

27
6.4
1.6
7
42
42

1.76
0.79
0.95

47.520
5.056
1.520
0.000
54.096
26.880
27.216

44
6.4
1.6
7
59
59

1.76
0.79
0.95

77.440
5.056
1.520
0.000
84.016
37.760
46.256

0.64

32.800
0.887
33.687
-6.471

0.64

29.000
1.27
30.270
15.986

However we cannot take a decision by taking into account only Precision Income Statement, as there is an effect on the
entire toothbrush segment due to cannibalization of sales of the Classic and Plus range of toothbrushes.

Thus a comparison of two positioning using income statement of the entire segment is done. This has been done for the
worst case (60% cannibalization) and the best case (35% cannibalization) situation.

Income Statement of US Toothbrush Segment (Niche Positioning)

(Referred Table-C,E; Exhibit- 1, 6; Page 2,7,8,9)
Particulars

Sales

See
Note

Plus
Classic

90.602
14.749

Sub Total

105.352

Precision

18.626

Total Sales
Manufacturing cost

Niche Positioning (in $ Million)

Year 1
Year 2
No
Cannibalization
No
Cannibalization
Cannibalizatio
Cannibalizatio
n
35%
60%
n
35%
60%

123.978

58.89
1
9.587
68.47
8
18.62
6
87.10
4

36.241
5.900

106.005
17.257

68.903
11.217

42.141

123.261

80.120

42.402
6.903
49.304
5

18.626

32.766

32.766

32.766

60.767

156.027

112.886

82.071

17.758
2.891

51.942
8.456

33.762
5.496

20.777
3.382

20.649
8.580

60.398
13.200

39.259
13.200

24.159
13.200

29.229

73.598

52.459

37.359

Plus
Classic

44.395
7.227

Sub Total
Precision

51.622
8.580

Total Mgf. Cost

60.202

28.85
7
4.698
33.55
4
8.580
42.13
4

Gross Profit

63.775

44.97
0

31.538

82.429

60.427

44.711

12.56
5

12.565

13.822

13.822

13.822

24.100
11.200
0.317

24.100
11.700
0.450

24.100
11.700
0.450

24.100
11.700
0.450

48.182

50.072

50.072

50.072

-16.644

32.357

10.355

-5.361

Expenses
Fixed Overheads
Advertisement

12.565

Plus/Classic
Precision
Precision Depreciation

24.100
11.200
0.317

Total Expenses
Net Profit
Notes w.r.t. no cannibalization

48.182

24.10
0
11.200
0.317
48.18
2

15.593

-3.212

Estimated increase in sales during 1992 is about 19%. In view of expected lower growth rate, due to inventory
1 build up in household, growth rate for Plus / Classic has been taken 15% in year 1 and 17% in year 2. Further
break-up between plus and classic is as per dollar market share break-up for 1992 (E).
2 Manufacturing cost for Plus / Classic has been taken at 49% as per 1992 (E).
3 Fixed expenses increase have been taken at 10% based on trend in 1992 (E).
4 Advertisement expense has not been increased for Plus / Classic as advertisement expense for Precision is
incremental over 1992(E) level.
5

It has been assumed that depreciation for Plus / Classic has been included in fixed overheads.
Income Statement of US Toothbrush Segment (Mainstream Positioning)
(Referred Table-C,E; Exhibit- 1, 6; Page 2,7,8,9)
Particulars

Sales
Plus
Classic

See
Note

1
90.602
14.749

58.891
9.587

36.241
5.900

106.005
17.257

68.903
11.217

105.352
54.096

42.141
54.096

123.261
84.016

159.448

68.478
54.096
122.57
4

96.237

207.277

80.120
84.016
164.13
6

44.395
7.227
51.622
26.880
78.502

28.857
4.698
33.554
26.880
60.434

17.758
2.891
20.649
26.880
47.529

51.942
8.456
60.398
37.760
98.158

33.762
5.496
39.259
37.760
77.019

20.777
3.382
24.159
37.760
61.919

80.945

62.140

48.708

109.119

87.117

71.401

12.565

12.565

12.565

13.822

13.822

13.822

24.100
32.800
0.887
70.352

24.100
32.800
0.887
70.352

24.100
32.800
0.887
70.352

24.100
29.000
1.270
68.192

24.100
29.000
1.270
68.192

24.100
29.000
1.270
68.192

10.593

-8.212

-21.644

40.927

18.925

3.209

Sub Total
Precision
Total Sales
Manufacturing cost
Plus
Classic
Sub Total
Precision
Total Mgf. Cost

42.402
6.903
49.30450
2
84.016
133.321

Gross Profit
Expenses
Fixed Overheads
Advertisementa
Plus/Classic
Precision
Precision Depreciation
Total Expenses

Mainstream Positioning (in $ Million)

Year 1
Year 2
No
Cannibalization
No
Cannibalization
Cannibalizatio
Cannibalizatio
n
35%
60%
n
35%
60%

Net Profit
Notes w.r.t. no cannibalization

Estimated increase in sales during 1992 is about 19%. In view of expected lower growth rate, due to
1 inventory build up in household, growth rate for Plus / Classic has been taken 15% in year 1 and 17% in year
2. Further break-up between plus and classic is as per dollar market share break-up for 1992 (E).
2 Manufacturing cost for Plus / Classic has been taken at 49% as per 1992 (E).
3 Fixed expenses increase have been taken at 10% based on trend in 1992 (E).
4 Advertisement expense has not been increased for Plus / Classic as advertisement expense for Precision is
incremental over 1992(E) level.
5

It has been assumed that depreciation for Plus / Classic has been included in fixed overheads.

Niche Positioning
Precision can be positioned as a niche product targeted at consumers conscious of gum health and can hence charge a
price premium of upto 15% over its nearest competitor over Oral-B. Moreover, Steinberg estimates that retails sales will
grow from 3% volume share in the first year to about 5% in the second year. Also since this segment is expected to have
35% volume share and 46% value share, precision can claim a major portion of it by its high effectiveness. Positioning
Precision as a niche product would give CP enough time to build a stock of the product without taking the Childrens Plus
model off store shelves. Precision toothbrush will also give CP entry into the super-premium product market without
cannibalizing its other brands.
Mainstream Product:
Positioning Precision as a mainstream brand will provide the appeal to customers of it being the most effective brush
available. Steinberg estimates that this positioning would help capture 10% of the market by first year and about 14.7% by
end of second year.

Niche Positioning
Pros
Overall lower loss of the
segment in Year 1 (-$3.2
Mn to 16.6 Mn)
Less/ No pressure on
production/ supply.

Less Cannibalization
expected than Mainstream
Niche can be further
broadened to mainstream
Can be distributed via retail
outlets, specifically drug
stores where people look
for protection for their
gums.

Cons
Overall higher loss/ lower
Profit of the segment in
Year 2 (-$5.4 to 10.4 Mn)

Mainstream Positioning
Pros
Cons
Overall higher profit of the Overall higher loss of the
segment in Year 2 ($3.2 Mn segment in Year 1 (-$8.2
to 18.9 Mn)
Mn to -21.64 Mn)
Limited production can
Possible pressure on
lead to stockouts which can production/ supply.
create an image in
customers mind that the
product is selling fast
More Cannibalization
Expected than Niche

Conclusion: Based on the above the product should initially be launched in the Niche positioning as the product was
designed for this positioning and this shall lead to less/ no pressure on the production. Also the losses are lower for Niche

in Year-1. The positioning should slowly be moved to mainstream from Niche positioning. So that by Year-2 when
production is ramped up and higher profits can be made from mainstream the positioning is changed.

SWOT Anlysis:
Strengths
Colgate Palmolive is global leader in the segment and has a strong brand image it can leverage.
Precision launched has a triple action brushing effect which improves surface plaque removal by 35% and gum line
plaque removal by 100%as compared to other brands.
CP makes use of infrared motion analysis and technique to measure levels of plaque removal
CP has a task force comprising executives from R&D and Marketing, dental professionals, and outside consultants.
CP can leverage its relations with retailers to position Precision next to competition(Reach & Oral B)
Weakness
33% of adults are not involved in oral health and are indifferent to toothbrush brands providing barriers to penetrate this
segment of population
Oral-B has professional endorsements and is known as the dentists toothbrush.
Opportunities
Tests have shown that 77% found precision more effective as compared to their current toothbrush
Baby boomers are a potential market because of their high purchasing power and concerns relating to gum health
55% of testers saw Precision as very different than brushes they had tried before
Research by Colgate Palmolive has indicated that 46% of consumers are ready to pay a premium for products addressing
concerns regarding health of gums
Consumer research revealed that the test consumers showed positive response on learning about its unique working with
triple action

Threats

The market is saturated resulting in Competitors are offering buyers with attractive promotional incentives including buyone-get-one-free, mail in refund coupon deals and toothbrush free with toothpaste
Competitors are working on improving their products and launching new products to target the same market as CP
Precision
There is a threat of cannibalization of existing CP brands due to launch of precision if it is launched as a mainstream
product