Tuesday, October 1, 2019
Colgate Max Fresh: Global Brand Roll-Out Essay
Executive Summary The United States, Mexican and Chinese markets all took very different approaches to the release of Colgate-PalmoliveÃ¢â¬â¢s (CP) newest oral care product in 2004-2005. The new toothpaste is called Colgate Max Fresh (CMF). It is a cavity preventing gel with breath-freshening strips suspended in it that dissolve while consumers brush their teeth. The technology behind the breath strips is patented, and Colgate was hoping the product would be a big success by providing unique freshness. In the United States, research was done and new bottling was designed to optimize the appearance of the new toothpaste. The advertising was also focused on the freshness that result from the breath strips and the product was very successful. CP then decided to release the product worldwide. In Mexico the ad campaign was changed as well as a few other minor changes, but not much was spent on altering the marketing mix for CMF. Colgate Max Fresh proved popular in Mexico and profits were seen in the firs t two years. In China, millions were spent on reconfiguring the marketing mix, and sales were not high enough to make up for the expenses in either of the first two years. In the first year alone, CMF saw a net loss of over $10 million. I have evaluated three options for reducing costs and increasing sales and have determined that the Chinese marketers decided to change the marketing mix too quickly. Instead of looking into what aspects of the U.S. marketing mix would and would not work in China, they made assumptions. The advertising campaign that they came up with was expensive and ineffective. Chinese consumer preferences should have been highlighted in the promotional campaign, and more elements from the original U.S. marketing mix that were costly to Ã¢â¬Å"improveÃ¢â¬ might not have needed to be changed at all. Current Situation Colgate-Palmolive (CP) is a worldwide company that specializes in oral, personal, and home care, as well as pet nutrition. Of particular interest in this case is oral care. Colgate is an oral care name that is known around the world. Colgate-Palmolive has the majority value share in theÃ United States, Mexico, and China. In each country, Procter and GambleÃ¢â¬â¢s (P&G) Crest toothpastes are ranking second in market value share. In Mexico, the difference between PC and P&G is huge Ã¢â¬â PC has market share above 80%. However, in the U.S. and China the market shares are very close: In 2004, Colgate had 34.8% and Crest had 31.6% value shares in the U.S.; in China Colgate had 23.6%, Colgate through partnerships had an additional 8.5%, and Crest had 21.2% shares. CP management was pressured to compete hard against CrestÃ¢â¬â¢s new product called Crest Whitening Expressions (CWE). In August 2004 CP launched a new toothpaste product called Colgate Max Fresh (CMF) in the United States. CMF was advertised as premium toothpaste that would provide a Ã¢â¬Å"whole new dimension of freshness.Ã¢â¬ The product was so successful that CP decided to launch it worldwide. Colgate-PalmoliveÃ¢â¬â¢s organizational structure is split up by geographic lines, each region having its own management. However, there is another split by category Ã¢â¬â there is one group responsible for oral care product strategy, resource allocation, and best-practices transfer between regions. This case focuses on the launches in the U.S., China and Mexico. In all three countries flavors varied and different strategies were used in packaging and promotion of Colgate Max Fresh, as described in the table below. Rock-star Jay Chow and Ã¢â¬Å"extreme living.Ã¢â¬ | Ã¢â¬Å"SnowsurferÃ¢â¬ extreme living; provides Ã¢â¬Å"a joy ride for your mouth.Ã¢â¬ | Additional costs beyond initial product development and standard market testing| Base costs Ã¢â¬â first country to launch the product.| New flavors cost $200,000 to research and develop. New graphics, aesthetics, advertising campaign cost $1.5 million. New packaging (that failed) cost $1.5 million, and would have increased variable cost by 20%.New green color developed for $7,000.| New advertising campaign cost $500,000 total.Not many other expensive changes were mentioned. PackageÃ size is different from the U.S., but with similar packaging types (and probably similar to other Colgate toothpaste packages).| In Mexico the promotional campaign was completely changed from the U.S. campaign and a third product flavor was introduced. The original two flavors were not changed, reducing costs compared to China. Costs in Mexico were kept low, and in the first two years Colgate saw a net profit in the Mexican market with Colgate Max Fresh. In China, however, many aspects of the marketing mix were changed, increasing costs tremendously. The product was changed by eliminating one of the two original flavors, changing the color of the other, and adding two new flavors. CP ChinaÃ¢â¬â¢s management also tried a variety of packaging styles before choosing to use one that would increase the variable cost by 20% per unit. It turned out, however, that the design they chose was not up to CPÃ¢â¬â¢s global standards and after spending $1.5 million the idea was thrown out. The advertising campaign was changed to a riskier campaign Ã¢â¬â that could have been cancelled at any time at CPÃ¢â¬â¢s expense Ã¢â¬â that cost $1.5 million. Even the product name was changed in China. After all of these changes and additional costs, Colgate Max Fresh (Icy Fresh) was not profitable in its first two years. Instead, huge net losses were seen from this product. Problem Identification While CP Mexico made some minor changes to adapt Colgate Max Fresh to their market, CP China redesigned almost every aspect of the product besides the one feature that made it unique Ã¢â¬â the breath strips. These changes were costly and the product failed to make profits in its first two years in China. Instead, the expenses heavily outweighed the revenues. Instead of marketing like one company, CP China behaved as if it had purchased the rights to use the patented design of CMF and then created a marketing plan from scratch. Alternative Solutions Solution A: Test U.S. marketing plans. Start by testing the unaltered U.S. marketing plans. From the results of that testing, decide what areas need to be altered for the Chinese market. Instead of choosing to change a large variety of aspects of the marketing mix for the Chinese market (as described above), the CP Chinese marketing team could have selectively altered aspects that would have big impacts on sales. Solution B: Cut back on marketing research. Eliminate designing a brand new bottle to put the toothpaste in. Either use a slightly altered version of the U.S. packaging developed for CMF, or use a packaging type that has proven successful in China for previous Colgate toothpastes. Also scale back on color design. Instead of developing ten shades of green, develop only three. In every step of redesigning the marketing plan, try to cut costs by being reasonable. Solution C: Emphasize therapeutic attributes. Emphasize the therapeutic benefits of the Colgate Max Fresh toothpaste. CMF is designed to provide extreme freshness, and instead of focusing on the extremeness, focus on the freshness first and cavity-protection and other therapeutic advantages. These are the two most important features for toothpaste to the Chinese market. Although the concept statement mentions the cavity protection, it is overshadowed in the advertising by the Ã¢â¬Å"cooling crystals.Ã¢â¬ Breath strips have already proved unsuccessful in China, so the advertising should not focus on them. Instead, the focus should be on the features and aspects that make sense to consumers Ã¢â¬â freshness and cavity prevention. Evaluation of Alternatives Solution A: Test U.S. marketing plans. By evaluating the effectiveness of the already-produced marketing plan for Colgate Max Fresh, the marketing team would get insight into what works and what doesnÃ¢â¬â¢t Ã¢â¬â what enhances the product in consumersÃ¢â¬â¢ eyes and what needs to be re-done for the Chinese market. Money would be saved on marketing areas that can be directly transferred from the U.S. to China. If the ad campaign proved successful in test groups, up to $1.5 million could be saved. The down side to this plan is that only a finite amount can be saved, and this does very little to address sales (revenues). Solution B: Cut back on marketing research. Just by eliminating the packaging scheme, $1.5 million would be saved. A fewÃ thousand may be saved by reducing the re-coloring efforts for the mint flavored toothpaste. Like solution A, this is a plan that would reduce costs, but that does not address revenues. It is unlikely that these reductions in cost would lead to a profitable first year in the Chinese market. Solution C: Emphasize therapeutic attributes. Although freshness is a growing market in China, breath strips never caught on and therapeutic toothpastes are big sellers. By emphasizing preferred features to the Chinese market, sales may be higher and the product may be successful. Of course, the marketing scheme would need to be tested first. In Exhibit 10A, Colgate Max Fresh ranked lower in the Ã¢â¬Å"Importance of Main MessageÃ¢â¬ category. The main message should be important, so that people will remember it and in turn will remember to buy the new Colgate toothpaste. This solution does not address reducing costs, but instead addresses changing the message and increasing sales. Recommendation I recommend solution C, to change the advertisement message. The first two options would both decrease initial costs but would not decrease costs enough to make up for the low sales. According to Exhibit 13 in the case, in its first year Colgate Max Fresh had net sales of about $20 million and net expenses of about $30 million, leading to a $10 million loss. In the second year sales increased by about $3.5 million, expenses were reduced, and the net loss was only about $1.5 million. Any loss is bad, but at least there was a significant reduction in cost and the product was increasing in popularity. If the product had been more popular the first year, that would have made a big difference. I also recommend solution A, but I think C is more important. Reducing costs by eliminating unnecessary changes to the marketing plan already developed in conjunction with a promotion plan that emphasizes the product features that are most highly sought-after would be ideal for CP China. By reducing expenses and increasing sales, CMF may have been profitable in its second (if not first) year. Implementation An attitude change would need to be addressed first. It seems like theÃ Chinese Colgate-Palmolive oral care management team does not trust that anything the United States team creates will work in China. They created new, expensive schemes for various aspects of the marketing mix without first checking to see if it was necessary or even advisable. Corporate CP needs to get their Chinese team to understand that as part of a global brand, many features can be directly transferred from one country to another Ã¢â¬â especially successful ones. Next, the Chinese team must evaluate numerous aspects of the marketing mix for Colgate Max Fresh. A few things were evaluated properly, like the name of the product and the way the breath strips are described. CP China did their research to find out if the name Ã¢â¬Å"Colgate Max FreshÃ¢â¬ with Ã¢â¬Å"breath stripsÃ¢â¬ would mean anything to the Chinese market. Because it did not translate well, they changed the name. This is the approach the team should take to each aspect of the marketing mix. For instance, when evaluating the advertisements, they should first determine the effectiveness of the United States commercials. If the results are not favorable, they should change the ads to focus on that aspects that the Chinese consumers seek when choosing toothpastes Ã¢â¬â freshness and cavity prevention. After evaluating each aspect, the unsuccessful ones should be remade by the Chinese marketing team. Once the newly developed plans have been evaluated, they should be compared to the original plans. After that, the product should be ready for the market.