Colgate-Palmolive Canada Arctic Power Detergent

Introduction

The Canadian laundry detergent market is mature, very competitive and dominated by three major
consumer packaged goods companies, one of which is Colgate-Palmolive Canada (CPC). Arctic
Power is CPC's top-of-the-line offering in its laundry detergent line. Arctic Power is specially
formulated for washing in cold water. The detergent has risen in market share from 4% in 1981 to
6.5% in 1986, and the Senior Product Manager has established a goal of reaching 12% market share
by 1996. Problem Definition Linda Barton and Gary Parsons face two problems. First, they must
determine whether to continue developing the brand in their already strong regional markets of
Quebec, the Maritimes and British Colombia, or go national with marketing efforts. Second, they
must decide whether to use a single positioning strategy (as was successfully implemented in
Quebec) or continue to use a dual positioning strategy. The dual strategy consisted of highlighting
Arctic Power as a superior detergent in areas with strong sales, and focusing on encouraging
Canadians to use cold water washing in areas with relatively weak sales.

Analysis

When it comes to laundry detergents, Canadians primarily think of one name, Tide. Procter and
Gamble's Tide detergent has captured over one-third of the market and is twenty percentage points
ahead of its closest competitor in market share. While Tide and Arctic Power are equivalent brands
in terms of cleaning power, Tide outsold Arctic Power by a 5 to 1 ratio in 1986. The market share
for Tide has remained level (at approximately 34%) during the same time that Arctic Power has
enjoyed a market share increase from 4% to 6.5%. Due to Tide's dominance in the detergent market,
it will play an important role in any major change in Arctic Power's strategy. Costs and profit
structures for leading detergent brands were similar. A break-even analysis for the market (see
Appendix A) indicates that a detergent must capture approximately 8% - 8.5% of the market in
order to break even nationally. Detergents with small portions of market share have experienced
diminishing sales (see Appendix B). Of the twelve offerings (or group of offerings) that held 10%
or less of the market share, only two experienced sales growth from 1983 to 1986 - Wisk and Arctic
Power. To keep its market share, Wisk spent disproportionately high amounts of money on
advertising (see Appendix B). In such a competitive market with a high break-even threshold and
increasing prices for materials, it is reasonable to believe that the offerings with lower market shares
will continue to decline. This decline will provide opportunity for Arctic Power (although CPC's
economy detergent offering, called ABC, has consumed much of the market share that was lost by
the smaller competitors). Arctic Power holds a strong share of the market in three regions: Quebec
(17.5%), Maritimes (6.3%) and British Columbia (5.5%). These three regions comprise 44% of the
total volume of detergent sales for the country. Other regional market sizes are displayed in
Appendix C. For Arctic Power to capture 12% of market share, it must look beyond these three
regions (see Appendix C). Thirty-nine percent of the Canadian market is held in Ontario. Arctic
Power's penetration into this large region is a meager 0.8%. For Arctic Power to reach its goal of
12% market share, Ontario must be considered a major part of the strategy. Ontario has the highest
return on media expenditure of any region (see Appendix D). Ontario is also changing the way that
it washes clothes. The proportion of households in Ontario that use cold water washing has
increased from 14% in 1981 to 17% in 1986. Hence, a marketing strategy that will provide further
penetration into Ontario is quite desirable. Arctic Power's positioning strategy has been twofold.
First, Arctic Power has been positioned in eastern Canada as a superior laundry detergent,
especially formulated for cold water washing. In the western market, Arctic Power has attempted to
develop the cold water market. In either case, Arctic Power's position is connected to cold water.
The good news is that regular cold water washing has increased nationally from 20% in 1981 to
29% in 1986. Another 25% of consumers could be described as occasional users of cold water for
washing. Hence, 54% of Canadians wash in cold water. When people were asked about the benefits
of washing in cold water, the results were astounding. The eight most common answers could be
easily divided into two categories - those that were money saving in nature (saves energy, cheaper,
saves hot water, saves electricity) and those that related to the quality of the job performed (stops
shrinkage, prevents color running, colors stay brighter, easier on clothes). Appendix E analyzes the
responses given by region. The results clearly indicate that Quebec, the Maritimes, and British
Columbia are more interested in the cost saving aspects of cold water washing. Conversely,
Ontario, Alberta and the Manitoba/Saskatchewan believe that cold water washing's positive
treatment of clothes is its greatest benefit. The nation is actually divided on its perception of the
benefits of cold water washing. Consequently, giving the customer what he/she wants may
necessitate two different marketing positions. One position should highlight the cost saving benefits
of cold water washing, while clearly stating that Arctic Power is formulated to be the best detergent
for the job. The other position should focus on the positive features of washing in cold water (less
shrinkage, easier on clothes, colors stay brighter) while stating once again that Arctic Power is
specially formulated to be the best detergent for cold water washing. On average, Canadians kept
1.3 laundry detergents in their homes. This means that more than two-thirds of buyers purchase
only one detergent. A detergent that is positioned as effective in all temperatures would most likely
be purchased. Tide holds a great marketing position as a superior-cleaning detergent that works in
all temperatures. Arctic Power's advertising states that detergents that work in hot water will not be
as effective in cold water. Their message would lead the consumer to believe that their detergent
will not work well in hot water. Hence, removing themselves as an option for the buyer who washes
in all temperatures and wants to purchase only one detergent. Arctic Power is in a good position to
be purchased as a second (complementary) detergent in markets such as Ontario - for those who use
more than one detergent. When a consumer buys Tide for quality cleaning in hot and warm loads,
she will also buy Arctic Power for high quality cleaning in cold water. Tide aired copy in Quebec
that stated its efficacy in cold water. These efforts made little difference in Tide or Arctic Power
sales. Arctic Power has great room to grow and almost nothing to lose in Ontario, since its market
share there is already less than one percent. Although it is equal to Tide in cleaning ability, it is not
perceived that way. The western campaign was generally unsuccessful in Alberta, however CPC
learned that sales of Arctic Power more than doubled almost instantly (from 1.1 to 2.8 market share)
with the implementation of the trial size box with coupon followed by the $.40 Free Standing Insert
coupon. Recommendation Based on the analysis, Arctic Power must go beyond the three strong
regions and market nationally if it is to eventually obtain the desired 12% of the market share.
Particularly, the large market of Ontario must be penetrated, where brand and advertising awareness
are at 0.0% and 0.7% respectively. Furthermore, having two positioning strategies will benefit
Arctic Power. A positioning strategy of a money-saving cold water detergent should be further
developed for Quebec, Maritimes and British Columbia. A positioning strategy of a superior-
cleaning cold water detergent that is gentle on clothes can be expressed to Ontario, Alberta and
Manitoba/Saskatchewan.

Appendix A National Break-Even Analysis Fixed Costs = .23 Sales Volume in $ = $19,805,500
Contribution Margin = .18 Break-Even = [(.23) x (19,805,500)] / (.18) = 4,555,265 / .18 =
$25,309,027 Assuming each percent of market share = $3 million in sales: A detergent would need
8.4% market share to break even. Arctic Power is presently at 6.5% market share.

Appendix B Detergent Offerings with 10% or Less of Market Share (1986) % of Nat'l Share
Percent Media Expend. Company Offering 1983 1986 Change Change in 1986 CPC Arctic Power
4.7 6.5 1.8 38 9.3 Fab 2.1 1.4 - .7 -33 na Punch 2.0 .3 -1.7 -85 na Dynamo 1.0 .5 - .5 -50 na P&G
Oxydol 4.9 3.3 -1.6 -33 6.4 Bold 4.8 2.3 -2.5 -52 na Other 4.7 4.3 - .4 - 9 na Lever All 4.1 3.2 - .9
-22 4.0 Surf 2.6 2.2 - .4 -15 na Wisk 3.8 4.4 .6 16 14.6 Other .9 .4 - .5 -56 na All Others 10.4 9.8 - .
6 - 6 na Of the smaller market share offerings, only Wisk and Arctic Power gained market share
between 1983 and 1986. Wisk spent a relatively large amount of money on media to maintain (and
slightly grow) its market share

Appendix C Size of Regional Markets (in 1986) Arctic Power Total Market Volume Percent of
Region Market Share (in Million Liters) National Market Maritimes 6.3 32.6 8% Quebec 17.5 113.8
28% Ontario .8 158.5 39% Man/Saskat .1 28.4 7% Alberta 2.1 40.6 10% British Columbia 5.5 32.5
8% Arctic Power's Strongest Regions: Maritimes 8% of national market Quebec 28% of national
market British Col. 8% of national market Arctic Power is strong in 44% of Canada. Hence, Arctic
Power would need 27% market share in these three regions in order to achieve a total national
market share of 12%.
Appendix D Sales and Media Expenditures by Region (in 1986) Media Expenditures Region Sales
in $000's (in $000's) Sales $ per Media $ Maritimes 2,055 91 22.6 Quebec 19,914 800 24.9 Ontario
1,268 24 52.8 Man/Sask 28 13 21.5 Alberta 853 263 3.2 British Columbia 1,788 195 9.2 Most sales
revenue per media dollar are realized in Ontario. The Western Campaign, a recent advertising
campaign in Alberta and B.C. showed mixed results. The sales results in Alberta were
disappointing. Word Count: 1690