BRIGHTER SMILES FOR THE MASSESCOLGATE V/S P&G

Group 11 Sec B
Partha P. Chowdhury- PGP/17/099 Parvathy Rajan- PGP/17/100 Pooja Punjabi PGP/17/102 Sandesh A PGP/17/109 Sonia Manglani PGP/17/114

DEFINING INDUSTRY

We have taken the Industry as Teeth Whitening Products Industry and analyzed it on the basis on available products in the market. The market is however captured by only two major players: Colgate and P&G(Crest)

PORTERS FIVE FORCES ANALYSIS

Threat of new entrants Economies of Scale Product Differentiation Capital Requirement Access to Distribution Channel Government Policy Competitors Rivalry Numerous competitors Industry growth Fixed cost Exit barriers Diversity of Rival groups LOW High High Low Low -HIGH High High Low High Low Many products available but market captured by two major players Market is growing Advertising and R&D costs are high Huge cost has already been incurred in R&D Similar business strategies and offerings Mass production Innovative products, patent protection, not similar products High R&D costs to come up with new products Extensive, through dentists, retail, wholesale, everything is being used Not given

PORTERS FIVE FORCES ANALYSIS

Customers Bargaining Power Volume of Purchases Switching Costs Price Sensitivity Percentage of Buyers Expenditure Importance of Quality Number of customers Suppliers Bargaining Power Threat of Substitutes The dentistry charges are much higher and convenience factor is also low Other substitutes such as whitening toothpastes are not effective much MODERATE Low Low High Low High High -Whitening products are to be used twice a week or month People can switch between products Cheaper products are preferred but not at expense of quality Not a high percentage of monthly expense People want whiter teeth Market is expanding Data not available in Case Low

Industry: Unattractive (High Costs and Competition, Innovation Required)

KEY ISSUES
Market share of P&G dropped from more than 80% in August 2002 to 37% in October 2002 because of Colgates new product Price difference of 40$ (WhiteStrips) vs. 15$ (Simply White) Psychological perception of same whitening effect of both products Focus of P&G only on b* test to which there was some opposition Convenience of using Simply White(30 sec) as compared to White Strips which took 30 min Conveying the effectiveness of its product as compared to Colgates to the customers Competitive environment of P&G with the entry of Simply White What changes to be made in their product ? (If any) Evaluating options to challenge Colgate based on eachs effectiveness in gaining the market back Mumbles advertisement- Should it be changed? Anticipating the response of Colgate

Key issues faced by P&G

Issues for further Analysis and Recommendations

Strengths and Weaknesses of P&G and Colgate

P&G
Strengths: First entry advantage Patented Technology Changes in b* value of whitestrips is at least 5 times as large as Simply White, 10 times better than other products

Colgate
Strengths: Low Price($15) High Contribution Margin (45%) Easy to use

Weaknesses: High Price($40) High product application time (30 mins) Difficult to use

Weaknesses: Less effective False claims Simply White and Simply White Night did not have distinct features

How costly is the entry of simply white for P&G?

Before October 2002 P&G share in teeth whitening market : 83% In October 2002 P&G share dropped to 37% ( Colgate launched simply white in August 2002 ) and to 42% in November P&G sales (Oct-Nov 2002) in the absence of Simply White (83%): $63.63 m P&G sales (Oct-Nov 2002) in the presence of Simply White : $30.28 m

Loss in sales : 33.35 m

(excel sheet attached)

Price of White strips : $ 40 Contribution margin : 45%

Loss in contribution margin : 33.35 m * 0.45 = $15.0075 m

Assumptions : Both P&G and Colgate has the same percentage contribution margin for their products

Competitive Rivalry and Dynamics

To gain Market share To gain Advantageous market position Go for Innovation Competitive Landscape Launch of crest white strips by P&G First innovative product launch by P&G Launch of Simply white by Colgate as a counter Simply white, cheaper than white strips and easier to use

COLGATE

Competitive Rivalry
P&G

Competitive Dynamics: P & G losing the first mover advantage Colgate being the second mover tries to capitalize on the shortcomings of P&G Emphasis on Innovation and Technology

Competitive Analysis Market CommonalityHigh Both P&G and Colgate competed in the same geographies, same products in oral care Resource SimilarityModerate Both P&G have same facilities, inventory levels etc, so similarity is high. Higher financial muscle of P&G though gives it more resources in terms of capital Drivers of Competitive Behaviour Awareness: High Operate in the same Oral Care market Resources used are more or less comparable Motivation: High Quest to attain Market Leader position Ability: High Similar tangible and intangible resources R&D skills are high

Competitive Analysis
Market Commonality
H

L L

Resource Similarity

Competitive Rivalry and Dynamics

Inter firm Rivalry
First

mover-P&G: Launched Crest White Strips

Organizational

Size: P&G has upper

hand
Quality: As

Outcomes of Inter firm Rivalry

P&Gs Crest White strips captured 80% of the market
First Mover Incentive was not sustainable for long

per P&Gs tests Colgates product inferior

Likelihood

of Response (Competitive

Response) Strategic Actions by Colgate

Innovative product Simply White, a gel that ensures a similar effect Price was much lesser than P&G s product, positioned it better Convenience factor, a big selling point for Colgate. Claimed similar effect in 30 seconds as compared to P&Gs 30 min P&G s Reputation at Stake

Tactical Actions

Colgate's Simply White, came as a second mover and could capture 50% of market in 2 months-Market follows Standard cyclical Pattern
P&G market share reduced to 37% P&G envisaging multiple tactical options to combat Colgates move Industry estimates the whitening business to be worth $4 Bn by 2010

Needs

to come up with a tactical move

Mumbles Commercial- A look in

Points in Favour Points Against
1. The veracity of the documenting method using digital imaging has not yet been standardized and there are critics like Prof Westland from Leeds University who think it is a mistake 2. The Advert fails to portray more than one differentiating factor 3. Consumers indifference to the effectiveness and longevity of whiteness as they were already satisfied with the results of Simply White.

1. Will make the customer aware about the advantages of Crest Whitestrips over Simply White 2. The Advert can also help build P&G s brand identity 3. Can attract more consumers into the market

Suggested Changes for Mumbles Commercial

1.

2. 3. 4.

Can also introduce a character of a scientist portraying a NAD official who is justifying the claim of P&G Introduce more points of differences like uniformity, effectiveness, longevity of whiteness etc Can subtly attempt to educate the consumers about its digital imaging based results Can also attempt to show simplicity of usage as that was a prime differentiating factor with Simply White.

P&Gs strategy

Likelihood of Response by Colgate

Colgates response / likely response Anticipated by Colgate - Yes Actions taken Ad campaign which emphasises on differentiating product from Simply White

Impact on P&G & Colgate (possible retaliation ) Colgate revenues are affected P&G a. If Colgate advertises reduced revenues b. If Colgate doesnt advertise increased revenues from new product

Introduce a new product which can compete with Colgates Simply White

New value proposition for White Strips

Anticipated - yes Actions taken emphasis on the benefits and effectiveness

Anticipated yes Actions taken improve media relationships -Emphasise on the effectiveness of White Strips so as to get favourable response during NADs customer survey Likely response-Hire good legal expertise to fight Colgate's case Anticipated yes Actions taken ad campaign that compares Simple White, effectiveness to P&Gs product Likely response question the effectiveness and the testing methods of P&Gs product

P&G Positive; less if Colgate responds / retaliates

a. Colgate affect revenues negatively P&G damage of brand reputation or possible fines or other action b,c. Colgate Effect on the brand image and credibility of the product. - Impact on profits due to increased legal costs - P&G - Conduct retest and find the actual effectiveness P&G If the campaign backfires it would impact P & Gs brand image Colgate depending on the impact of the new ad campaign

Legal or other actions against Colgate and its ad campaign by a. Filing complaint with NAD b. Demanding television networks to withdraw Colgates advertisements c. Sue Colgate for false advertisement under Lanham Act

Comparative advertisement campaign to counter the effect of Simply White

P & Gs Strategy

Likelihood of Response by Colgate

Colgates Response/Likely Response Anticipating a price cut by P & G on Colgates new product introduction priced Simply White at a low price of $15

Impact on Colgate and P & G

Drop in price

P & Gs operating margins are lower than Colgate hence a price cut would impact P & G more . Increased sales through price cut would mean a further reduction in operating margin and thus the increased sales would have to offset reduction in price to translate into higher profitability Might lead to a slight increase in revenues for P & G and would thus not impact Colgate much P & G could emphasize its product superiority through increased association with dentists ( who would recommend the same) . It could question the credibility of Colgates product Decreased profit margins

Increased use of coupons

Already priced their product Simply White at a low price of $ 15 Colgate entered the market with a strategy of low prices and aimed at communicating it product benefits through it

Look at increased association with dentists like it did when it launched Whitestrips

Increase in media weights

Anticipated yes Actions taken increase ad expenses

Recommendations- How should Ayman Ismail respond?

Increased use of coupons

Substitute for price cuts Leads to a rising number of repeat purchases Encourage shopkeepers to increase their stock of White Strips and hence enhance brand awareness Increased customer loyalty

Launch a comparative ad campaign but refrain from including controversial statements since the testing methods are not standardized across the industry and those used by P&G have been repeatedly challenged (b* test)

Recommendations- How should Ayman Ismail respond?

New value proposition for White Strips emphasising on its superior features like effectiveness, lasting impact etc P&G can take legal action against Colgate only if it can prove the credibility of its testing methods and prove without doubt its claims of superior performance (recognised testing methods) Introducing a new product that can compete with Simply White is not recommended because of the huge R&D costs involved and the possibility of cannibalizing the sales of White Strips

Thank you