Segmentation and Positioning in the Toothpaste Industry - Essay Example

Segmentation and Positioning in the Toothpaste Industry This paper discusses market segmentation and product positioning. It provides details in these two marketing concepts and how they are used to help ensure product and company successes for their product offerings. As cases in point, aspects of the toothpaste industry are used to provide practical applications of the processes involved in market segmentation and product positioning. Three toothpaste brands, as well as their brand owners are looked into in detail in so far as market segmentation and product positioning are concerned. These are Colgate-Palmolive and Colgate toothpastes, Procter & Gamble and Crest toothpaste, and Glaxo Smith Kline and Aquafresh toothpaste. Segmentation and Positioning in the Toothpaste Industry From a scan of various internet and other sources, the worldwide toothpaste industry is comprised by thousands of formulations and hundreds of brands. According to Oligopoly Watch, in the year 2000, the toothpaste industry in the U.S. alone was worth USD 1.3 billion with two leading brands owning sixty percent of the market. As in most industries, the toothpaste industry necessarily conducts market segmentation activities in order to provide focus for production, sales and marketing programs that will target specific market segments. Market segmentation helps ensure high returns for production, marketing and sales expenditures. Market Segmentation The process of market segmentation identifies parts or portions of the market that can be differentiated from one another. Within a segment, members are supposed to have the same characteristics, which are different from the characteristics of members in other segments. With the identification of these characteristics, marketers are able to better satisfy the needs of prospective customers. Since different customers may have different needs, it is not always possible to satisfy all customers by treating them in the same way (NetMBA 2007). As part of the bigger oral care business, the toothpaste industry segments the market both in terms of mass marketing and target marketing. Simplified formulations are marketed as regular, as against special, toothpaste to serve the mass market, treating the market as a homogenous group which appreciates anyway, a teeth cleaning paste. This is the reason why almost all brands have a 'regular' formulation. Through mass marketing, economies of scale are realized because products which appeal to a mass market results in savings from mass production, mass distribution and mass communication (NetMBA 2007). Toothpaste manufacturers also employ target marketing, which is the reason for the wide variety of formulations for the products they carry. They recognize the diversity of customers and do not need to please everybody with the same offering. Consumer markets are segmented according to geographic, demographic, psychographic, and behavioral characteristics of consumers. Some geographic variables are region, continent, country, state, neighborhood, size of metropolitan area, population density, climate and other variables (NetMBA 2007). Toothpaste manufacturers with international operations use geographic segmentation in developing formulations with local appeal as well as marketing and sales programs that will be appreciated by the target segment. In 2000, although Colgate was the market leader in India, it faced stiff competition from Hindustan Unilever and low-priced regional competitors like Anchor Healthcare and Ajanta India. To combat their low-priced competitors, Colgate revitalized its Colgate-Cibaca brand and Hindustan Unilever, its Aim brand. Colgate-Cibaca, which is not a brand that is marketed internationally, effectively garnered the top position in the low-price segment in India (Comstrat 2006). Demographic segmentation variables include age, gender, family size, family lifecycle, generation, income, occupation, education, ethnicity, nationality, religion, social class (NetMBA 2007). In terms of demographics, toothpaste manufacturers develop products and marketing programs targeting kids, teen-agers, adults, even those with dentures. Crest toothpaste formulations for kids include Burstin Bubblegum, Barbie Burstin Bubblegum, Cinnsational Swirl, Kids' Spider-Man Super Action Liquid Gel, Sesame Street Kids' Cavity Protection, Kids' Crest Cavity Protection Sparkle Fun (Crest 2008). Procter & Gamble which owns the Crest brand has effectively produced products for young girls with the Barbie formulation, or young boys with Spider-Man Super Action, or with pre-school children with the Sesame Street formulation. On the other hand, Glaxo Smith Kline has Polident-Corega, their brand of denture care products which include cleansers, creams and fixative strips (GSK 2008). Psychographic segmentation groups customers according to lifestyle measured through surveys of activities engaged in, interests of particular groups, opinions and values (NetMBA 2007). Many toothpaste manufacturers have identified that white teeth and long lasting fresh breath are especially important to young adults. And so formulations like Colgate's Simply White Advanced Whitening Toothpaste, Procter & Gamble's Crest Whitening Expressions Extreme Herbal Mint, or Glaxo Smith Kline's Aquafresh Multi-Action + Whitening have been put on the market. Behavioral segmentation variables include benefits sought, usage rate, brand loyalty, user status, readiness to buy, and occasions. According to Brand Keys, the annual Brand Keys Customer Loyalty Engagement Winners are the brands which best engage consumers and create loyal customers. They annually examine customers' relationships with 382 brands in 57 categories and for toothpaste, the 2008 winners are Crest, Colgate, Arm & Hammer, Listerine Aim, Tom's of Maine, Aquafresh, Sensodyne, and Ultra Brite in order (Brand Keys 2008). For segmentation to be practicable, according to NetMBA (2007), segments should meet certain criteria. A segment should be identifiable and its attributes which differentiate it from other segments should be measurable so that they can be identified. In a demographic segmentation, toothpaste companies use available demographic data to determine market size in terms of age. This directs production quantities and marketing activities targeting different age groups, such as kids, young adults and older adults. The segment should be accessible and may be reached by communication channels. It is a fact that a lot of toothpaste advertisements frequently appear on television because this medium enjoys very wide reach. The segment should be substantial or large enough to justify expenditures for targeting segment members. Colgate's Bright Smiles Bright Futures program targeted not only kids, but teachers, parents and oral health educators as well (Colgate 2008). The program was launched internationally and involved huge expenditures but according to High Beam Research, it drove the company's gross profit margins to an all time high of 54.7% in 2000 (Highbeam 2008). Additionally, the segment must respond differently to the different marketing mixes and the segment should be relatively stable to minimize the cost of frequent changes. It is common to see certain toothpaste formulations introduced to the market and subsequently pulled out because of market responses. Positioning Product position refers to what the consumer thinks of the product when they make the decision to purchase (Tronstad 1995). It is a marketing method that creates the perception of a product, brand or company identity relative to the position of competitors. Successful positioning strategies usually depend on the company's sustainable competitive advantage in terms of product features; benefits, needs or solutions; use categories; usage occasions; placing and comparing it relative to another product; and product class dissociation. There are three bases for positioning. Functional positioning solves problems or provides benefits to customers. Symbolic positioning refers to image enhancement, ego identification, belongingness and social meaningfulness, and affective fulfillment. Experiential positioning provides sensory stimulation or cognitive stimulation (Value Based Management 2008). Decisions regarding whether a company should take a market niche position or that of low prices and large volume sales depend on the goals set by the company, competition, and availability of resources. However, the importance of quality characteristics, appearance or condition, taste or flavor are minimum standards that have to be met even if a low price position is taken (Tronstad 1995). This is true for the toothpaste industry. Moreover, according to Tronstad (1995) consumers look at products beyond price and quality components. They also evaluate services offered, location, and their overall experience associated with their purchasing outing. Toothpaste Brands According to Oligopoly Watch (2003), the top toothpaste brands are Colgate, Crest and Aquafresh. Colgate is a billion dollar brand worldwide and Crest is a close second, while Aquafresh holds a strong third place. In the world market the three companies which hold the said brands enjoy global reach, deep pockets and marketing savvy that allow them to keep building their brands, especially in big new markets like China and India. In terms of low price position, all three brands compete by strategically conducting brand on sale promotions, value packs or packaged freebies. They also strongly compete using a medicinal position with their cavity protection, plaque prevention, gingivitis protection, tartar control and sensitivity relief. On the cosmetic position, they use whitening, baking soda, peroxide and bright smiles. On the taste or flavor position, various formulations are marketed which include mint, spearmint, peppermint, cinnamon, vanilla, bubblegum, watermelon, lemon, strawberry, green tea, herbals. Colgate-Palmolive introduced its first aromatic toothpaste in jars in 1873. But as an international organization today, it has taken the position of being a total Colgate world of care. Its scope includes oral care, personal care, home care and pet nutrition. Its operations span 51 countries in different continents (Colgate 2008). Procter & Gamble co-developed Crest toothpaste with Indiana University in 1955. The product is said to be a breakthrough in the use of fluoride to protect against tooth decay, the second most prevalent disease at the time. P&G product lines include personal and beauty, house and home, health and wellness, baby and family, pet care and nutrition. Crest toothpaste is part of the personal and beauty line (P&G 2008). At first blush, both Colgate-Palmolive and Procter & Gamble have taken the same directly competing positions for their products. However, in the toothpaste industry, Colgate-Palmolive has taken a more focused oral care position for its toothpaste products than P&G. Glaxo Smith Kline, then called Beecham, acquired Macleans Ltd in 1938 along with Macleans toothpaste, which was the precursor of GSK's entry into the toothpaste industry. GSK's product lines today are prescription medicines, vaccines and consumer healthcare, which includes dental health products, over-the-counter medicines and nutritional drinks (GSK 2008). The position that GSK has taken is that of a more serious medical/pharmaceutical organization. That is why, for their dental health product line, they have more medicinal formulations rather than everyday toothpaste. In terms of functional positioning, which deals with solutions to consumer problems, both Colgate and Crest address almost the same problems. Cavity prevention is supposed to be solved using Colgate's Cavity Protection Great Regular Flavor or Cavity Protection Winterfresh Gel, and Crest's Cavity Protection Regular Paste, Cavity Protection Cool Mint Gel. Tartar control can be solved using Colgate's Tartar Control Whitening Cool Mint Gel or Tartar Control Whitening Crisp Mint Paste, and Crest's Tartar Control Whitening Plus Scope Cool Peppermint Liquid Gel, Tartar Control Whitening Plus Scope Minty Fresh Liquid Gel, Tartar Protection Whitening Cool Mint Paste, Tartar Protection Fresh Mint Gel, Tartar Protection Regular Paste. On the other hand, Aquafresh has not been so keen in defining a specific functional position, but GSK has put out Polident / Corega for a niche position for denture care products. Again, for symbolic positioning, which deals with image enhancement, all three have taken neck-and-neck positions. They all have whitening formulations like Colgate Simply White Advanced Whitening Toothpaste Spearmint, Crest Whitening Plus Scope Minty Fresh Striped Paste and Aquafresh Multi-Action + Whitening. In terms of experiential positioning, both Colgate and Crest have various and very similar flavor formulations as mentioned earlier. Part of experiential positioning is also the way product packaging is designed. As early as 1986, Colgate had dental cream or toothpaste in collapsible tubes instead of jars, which also increased the functionality of the product. In support of its world of care position, Colgate distributed millions of tubes of toothpaste and toothbrushes as early as 1911. Colgate also continuously cemented its leadership position worldwide with the setting up of operations in different countries. Examples of this are in Hong Kong with the acquisition of Hawley & Hazel, a leading oral care company, in Latin America with Kolynos Oral Care, in Europe with GABA. Today, with sales surpassing $13 billion, Colgate sells its products in over 200 countries and territories worldwide. (Colgate 2008) In 1924, P&G was the first company to conduct deliberate, data-based market research with consumers. According to them, this forward-thinking approach enabled the company to improve consumer understanding, anticipate consumer needs and respond with appropriate products (P&G 2008). It has been very successful in its house and home products especially with the Tide brand. P&G has leadership position in this line, although its Crest toothpaste has also developed a very strong foothold in the toothpaste industry. Conclusion Market segmentation is an important marketing concept, especially in consumer marketing. It helps product manufacturers in the development, production, marketing and sales of their products. It allows them to understand their intended customers so as to prevent production and marketing mistakes which can spell success or failure of products and even companies in general. Understanding customers through market segmentation also helps in determining product positioning. Depending on the segment targeted, certain positions can be taken that would provide the most benefit to the company in terms of sales. The toothpaste industry is a prime example for the use of market segmentation and product positioning, not only for the top three industry players but especially so for the regional or local manufacturers. References Aquafresh. 2008. Toothpaste. http://www.aquafresh.co.uk (accessed August 20, 2008). Brand Keys. 2008. 2008 Brand Keys Customer Loyalty Engagement Index. http://www.brandkeys.com/awards/ (accessed August 20, 2008). BRS Center for Business Planning. 2008. Market Segmentation. Business Resource Software, Inc. http://www.businessplans.org/Segment.html (accessed August 20, 2008). Colgate-Palmolive Company. 2008. Our Company Home. http://www.colgate.com/app/Colgate/US/Corp/History/1806.cvsp (accessed August 20, 2008). Comstrat. 2006. 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Market Analysis and Pricing. http://www.ag.arizona.edu/AREC/pubs/dmkt/PRODUCT.pdf (accessed August 20, 2008). Value Based Management. 2008. Positioning - Trout & Ries. http://www.valuebasedmanagement.net/methods_trout_positioning.html (accessed August 20, 2008). Read More