Written Case Analysis Evaluation
Case1: Procter and Gamble
Due: September 11, 2018
File name: Fall2018-Group2-Proctor & Gamble
Type names of group members:
Diego Monroy Marinkovic
Criteria E (5) G (4) S (3) P (2) VP (1) Total
1 Understand and define the problem
2 Identify possible alternatives to solve the problem 3 Analysis and evaluation: Quantitative
4 Analysis and evaluation: Qualitative
5 Make a decision with justification
6 Suggest specific methods to implement the decision 7 Overall quality (10 points)
Total score (40 points)
Scope has been a very successful and profitable product for Procter & Gamble’s brand. However Plax in a pre-brushing rinse that now has gain around 10 percent of the market which now possess a threat to the product line of Scope. Mouthwash products have been known to kill germs and give the consumer fresh breath after using it. However with the introduction of Plax mouthwash they had a completely different goal for their product, their mouthwash would be a pre brushing rinse that would be used before brushing rather than after. This was a new idea for this type of product for their consumer which in turn poses a threat to exciting mouthwashes like Scope. Procter and Gamble is a very successful company providing consumer goods to over 140 counters in the world, the company in 1990 made net earnings of 1.6 billion of dollars. Procter and Gambles believes firmly in providing their consumer with high quality and value products while optimizing cost efficiency for their company as well.
The current issue Procter and Gamble is facing is the increase in competition in the market for mouthwash products. With the increase of different variety of mouthwash product that provides different benefits besides fresh breath and its taste this puts the product line of Scope in a tight situation. Scope is mainly centered on its mouthwash taste and fresh breathes benefits. Scopes claims “Scope fights bad breath. Don’t let the good taste fool you” to its consumers. However with Plax now in the market, consumers are now looking at more of health benefits of mouthwash product lines rather than taste. Plax being a pre brush mouthwash instead of an after brush mouthwash puts other products like Scope on a different playing field. The problem is whether Scope should produce a line extension on its existing line or to completely changes its product to lean more toward health benefits. Scope would need to be classified as a drug status product rather than a cosmetic status if were to create a new product in preventing
plaque and cavities for their consumers.
Scope focusing more on health benefits towards it consumers would help its product line in the market. Also increasing awareness to its consumers of the new benefits of Scope besides its great taste however this would also affect advertising cost as well from their traditional position. However producing a new product line could be a huge risk for Scope if it were to fail to catch the attention of its consumers and would lead to profit lose. The public likes to see seals of recognition from prestige associations such as the American Dental Association and Canadian Dental Association if Scope were to develop a new product line of mouthwashes that have test data to prove the benefits of its mouthwash this would help significantly gain attention of the consumer.
The major task for P;G is the responsibility of making a marketing plan for the next three years. By implementing a successful plan, the company is ensuring that they will continue to be profitable and are able to face any threats from competitors. The goal for P;G is to be able to out shine their competitors by making sure their ranks on the market does not decrease.
The company’s mission is to successfully provide products that are the best quality and value for the consumer. Three alternatives are available for the company to choose from in order to protect themselves from their competitors.
Alternative 1: Product Line Extension
For the first alternative it is important that Scope understands that Plax is known for their mouthwash to have plaque fighting abilities. By recognizing this Scope is able to focus in on the competition and make a product line that is focused just on plaque fighting but add their strong qualities which are better taste, strong and fresh breath, and eliminating germs. By creating this product, they are able to focus in on what their competitor is putting out.
Alternative 2: Market Segmentation
Almost all companies want to look for customer comments and reviews, so they are able to identify what the consumers are actually looking for in their products. If P&G were to release any new products and are unsure if they will do well in the market they can allow customer feedback to be either in a form of a survey and offer discounts for customers whom complete the surveys. Discounts will allow more people to complete the survey and also buy more products.
Alternative 3: Market-Penetration Strategy (Repositioning)
Another avenue to reach out to the market population is to recreate a slogan that they can target the competitors. By releasing a slogan that states, “Scope can fight plaque stronger than brushing your teeth because of the antibacterial ingredients that are found in Scope formula”. By releasing this slogan, they are able to target in on their consumers’ needs when looking for better oral hygiene products.
Alternative 1: Product Line Extension
Mouthwash is regarded an adjunct to oral health. The satisfactory of mouthwash overall performance depends on the renovation of tooth and gums. Plax, a Scope competitor, is acknowledged for its plaque battle advantage, but it has a negative taste. Product improvement stated that the important gain of P;G creating a line extension would be developing a plaque getting rid of rinse that gives a higher taste, clean breath, and antibacterial properties, making P;G’s Scope the better product, however, there are worries that the product will be too comparable to Plax. But, launching a new line extension can make bigger current and possible users, ensuring that Scope maintains its position of being a market leader. Creating a line extension will supply the customers assurance that P&G pursuits at offering merchandise of gold standard excellent and fee that excellent fill the wants of the customers. There ought to also be situation replicating Plax’s scientific look at and the fear of losing their credibility with the dental professional. Launching a line extension will result in product trying out fees of $20,000. In the long run, launching a new line extension should expand current and doable consumers, thereby ensuring that Scope continues its role of being the market leader. The sales department believes that Scope need to react quickly, due to the development that Plax is making. Meanwhile, the retail industry is turning into stricter about stocking low profitability products at an excessive stock cost. Market research findings show that launching a new line extension does now not enlarge purchase intent amongst human beings that do now not use dental rinse and that the new line launched would likely result in a 6.5 percent share of the complete mouthwash and rinse market. Previous records show that it would take two years to get to an ongoing stage and it is hard to determine Scope’s viable product cannibalization. It is unlikely that it will be one hundred percent incremental to the business. The market lookup indicates that the product would possibly cannibalize somewhere between 2 and 9 percentage of Scope sales. To hold credibility and no longer confuse contemporary users, the brand name must additionally be put into consideration if a new line is launched. Two from the finance department’s factor of view, Plax commands a higher dollar price per liter so a new Scope pre-rinse would possibly be a worthwhile option. However, the capital and advertising charges must be put into consideration. There are greater than 75 percent of customers who use extra than one mouthwash product in the Canadian market. The customer’s grasp of the Scope manufacturer photograph is about average. However, customer’s perception on Plax is above average. Creating a line extension will give the customer assurance that P;G pursuits at providing products made of superior great and cost that pleasant fill the wishes of the customers (Exhibit 3). Alternative 2: Market Segmentation A new pre-brushing rinse may also perform as well as Plax but may also now not work any better than Plax when it comes to plaque reduction, however, the point of distinction is that it will taste higher than Plax. When a new line is not generating profitable sales, present products underneath the equal company title would possibly be substituted for the new product (cannibalization), which should reason the manufacturer to pay up to about$50,000 per stock-keeping unit in carrying charges to add the new brand. Using choice 2, Scope can create a new section with a special characteristic to amplify sales and acquire greater market shares. The entry of Plax into the market has won the company a 10% market share. Introducing a new section that can meet the customer’s immediate needs will appeal to new and current customers. However, creating a section would not likely be one hundred percent incremental to present income and creating that new section could confuse loyal clients and lead to loss of sales.
Alternative 3: Market-Penetration Strategy (Repositioning)
Regarding the Market penetration strategy, the product development department was in favor of avoiding the option of launching a new product but rather repositions the current product by enhancing the current Scope’s formula and includes plaque-reduction features. Even though, it is unlikely that this will improve the competitive users desire to purchase Scope, it will prevent current loyal users from switching to the competitor’s products and at the same time, it will potentially stabilize the business. However, it is important to mention that this might not lead to a substantial growth. According to the company’s statistical records, the most important reasons for using mouthwash are oral hygiene and avoiding bad breath. Scope is a very well-known Brand and has achieved an important market position for removing bad breath and its great taste.
According to the company’s records, Scope is priced a little bit below the average weighted index in food stores and around 16 percent in drug stores due to advertising.
The alternative of repositioning the product through advertisement and focusing on promotional efforts highlighting the unique benefits of Scope as tasting great and reducing plaque due to antibacterial new ingredients, could potentially lead to an increase in Scope’s potential new customers. This could be cheaper and more effective than creating a totally new product with plaque reducing capabilities. However, the advertising agency in charge of the marketing campaigns, considers that making any new claims could be confusing for customers and thus not a very strategic option. They consider that there is a lot of risk involved and that this move could negatively affect the current captive market of Scope. In this context, the alternative of repositioning Scope will result in short term profitability and might stand the risk of not being the market leader in the long run.
Make a Choice
In order to choose the best alternative for this case of study, several variables have to be evaluated. Taking this into account, a chart comparing all the possibilities available, also known as a “decision matrix” (Refer to the appendix below), is used to choose the best alternative for Scope’s current situation. Regarding “Alternative 1,” where Scope decides to create a product line extension under “Scope” brand name umbrella, including new features such as plaque removing properties, is the best alternative. Considering that Scope is already a well-known household name associated with “Fresh breath and oral hygiene”, and on the other hand, its customer base is well established and loyal, the alternative of mixing its already popular “great taste” and “fresh breath” features with enhanced “germ killing” and “plaque removing” properties, can be very powerful. This new product line extension could potentially become a best seller in a brand new market segment.
The alternative of creating a new line extension for Scope, implicitly let customers know that the company is concerned about their needs and that P&G is permanently evaluating the changing trends of the industry in order to satisfy the consumer’s needs. On the other hand, the fact that Scope will keep and remain true to its name thus keeping its famous qualities, reinforce the fact that it will remain appealing to its loyal customer base while including new product’s features highlighting the company’s customer satisfaction compromise and strengthening the idea that Scope is a superior Brand. On the other hand, as it was mentioned earlier, creating a line extension under “Scope” umbrella is the most cost effective alternative. This guarantees that the costs related with marketing and advertising will be manageable at relatively low cost while expanding the product’s reach into new market niches.
Furthermore, it is also feasible to streamline the distribution channels and offer the product in more drug stores retail spaces and getting “shelf preference” over other brands if the product line extension becomes successful. Even though there is always risk likelihood involved when starting a new project, it is possible that P&G may incur in some losses at the initial life cycle of the new product line extension, however, this does not has to be always the case. Regarding to profit margins, in the long run, the likelihood of profits going up is very high.
Finally, there is always the market segmentation threat related to Scope if it stays as a “breath only” brand and loose a substantial market share in the long run or eventually disappear. The alternative of creating a Scope line extension under the umbrella of a well-known brand and positioning it as a front line competitor of Plax will be the best option. This strategy will enable P&G to focus on multiple market niches while keeping up the company’s mission and image.
Implement the Choice
The implementation stage of any project is arguably the most important one as once it can truly have a detrimental effect on even the right decision if the process isn’t adapted or implemented in the correct manner. Procter and Gamble’s business development team have had to consider all the alternatives before it to decide how it can offset the seemingly aggressive growth of Plax in its market share of the newly segmented dental health/pre-rinse category. Scope is undoubtedly the market leader in the mouthwash market with most recently accounting for 32% of the total market but it has achieved this feat by following its strategy of addressing unmet consumer needs and providing superior products. To sustain Scope’s current market leader standing it must carefully dissect all aspects of entering or not entering this new market segment. While taking the right action is essential, it must be done so considering that it is also important to control costs related to any new campaign that maybe undertaken by the company as it would affect the profit and loss bottom-line.
To implement any strategy, we must first analyze the three options put forth by the business development team. Proctor and Gamble’s business development team consists of the product development, sales, market research, finance, purchasing and advertising departments. Representatives from each of these groups give their input so any decision taken has everyone on board and considers factors affecting the complete life cycle of a product. These teams come together to work on the company’s three-year plan. Scope has traditionally marketed itself as a mouthwash that provides fresh breath while tasting a lot better than its counterpart Listerine. Plax, a new product, has been introduced in a new category of “pre-brushing rinse” which also has the additional benefit of fighting plaque. Several team members felt that Plax didn’t really pose a threat as it was its own niche category, one which was completely different from the one Scope was the leader of. While this may be true, who is to say that rapid expansion of this category may not dwarf the other segments in this market and in effect leave Scope and its parent company at a disadvantage for having done nothing at the opportune moment.
One of the options is for Scope to market itself as something different than what is being done right now. With a market segmentation effort, Scope could reposition itself as a mouthwash that reduces plaque more than by just brushing alone. This could prove to be rather risky as it may mislead the current consumer base Scope has worked very hard to build up. The consumers may get confused about whether this is the same scope providing fresh breath or it is meant for fighting plaque. The product development team felt it was best to add plaque fighting claims to Scope instead of pursuing a line-extension. Another option was to use market differentiation strategy by commissioning surveys and collecting data from different markets and launching an altogether new product for this market segment. The most viable option though would be a line extension where the company would build on the current strengths of scope while adding the additional benefits that Plax provides. To successfully implement this strategy, the line extension should be introduced through the three-year plan and use the different departments to make sure they cover all the aspects necessary to make sure this is successful.
The sales department would play a pivotal role in making sure they are updated on any new features that Plax might have introduced in the market. The retail industry these days is extremely picky about their shelf space and expects any new product to prove its worth before it is willing to carry it on its shelves as this is a chance it must take against proven products. To land prime shelf space, any new product must differentiate itself from its counterparts otherwise such a product will be replaced existing product by the same brand with a proven track of having a high selling rate. This would not be an issue for Scope’s line extension though as it would be a superior product compared to Plax in terms of offering additional benefits of not only fighting plaque but providing fresh breath with a pleasant tasting mouthwash.
Product Development department is specifically concerned that Plax and Scope maybe considered as the same as Scope may not be able to prove that it is a better product than its competitor. To reiterate, Scope with the line extension will be a superior product as not only will it provide plaque fighting abilities, but it will do so while providing a fresh breath and a pleasant taste. It is true that coming up with such a product will require additional capital investment but that can be recouped many folds once the line extension provides additional profits and greater market share.
The job of determining a product’s profitability lands squarely with the finance department. Finance department will have the key task of determining how to control the marketing and capital costs which will have to be incurred to launch a line extension. Cost of delivery and the ingredients will have to be taken into consideration to find the perfect balance to have a competitive price point when compared to Plax. Market research’s primary concern will be regarding whether the consumers will respond positively to the new Scope with the line extension or not. While these processes take time, they must also test Plax’s current consumers with the new improved Scope to see how they respond to it.
Advertising department will be concerned with coming up with a creative marketing campaign that will focus on the new benefits of Scope with the line extension. They would most likely agree that repositioning the product may confuse the consumers and instead starting with a line extension will give them the freedom to start out a new campaign altogether where they could make new claims without any effect on the existing product line. So, from the perspective of the advertising department, a line extension strategy would work the best.
Taking everything into consideration the line extension would be the best and most viable option for Procter ; Gamble to tackle Plax’s growing market share in the new segment. This strategy would not only be competitive but also consider the costs involved in the process and would be a feasible option to make sure Scope does not lose out on any viable opportunities to capture market share and remain the leading company in all segments of the mouthwash business. Furthermore, following this option, Scope would also stay true to what Procter & Gamble’s primary mission as a company is to provide a superior product to its consumers.
The table below shows all user ratings about the different product on different characteristics. The different characteristics of reducing bad breath, killing germs, remove plaque, healthier teeth and gums, good for preventing colds, recommended by doctors/dentist and clean your mouth. We can see a mixed result. However, in total the scores were, Cepacol 15, Colgate 13, Listerine 16, Listermint 14, Plax 16 and Scope 11, making Listerine and Plax the best product among all users.
A similar survey was conducted on the basis of brand users on the same characteristics and the same products, which gave the following results. The total score for different product were: Cepacol 15, Colgate 14, Listerine 18, Listermint 8, Plax 12 and Scope 9, making Listerine the best product among brand users.
Anyone who uses mouthwash is included in the survey and there are also respondents who were asked to rate all of the brands, even if the brand was never used by them. As there are score assignments in the survey, higher score represents a better product. In detail:
3 means that the brand rates higher than the average
2 means the brand is average
1 means the brand is below average.
Base on the above survey results, if we create a line extension for Scope, it will increase the user perception for Scope.
Exhibit 4: Market Share
The graph below shows how the Canadian market share has changed from 1988 to 1990. It shows that how the market share has remained consistent over the years to 33%.
The below decision matrix shows three different alternatives and what happens to different criteria’s under different alternatives.