The 4% to 6.5%. Due to Tide’s

The 4% to 6.5%. Due to Tide’s

The Canadian laundry detergent market is mature, very competitive and dominatedby three major consumer packaged goods companies, one of which isColgate-Palmolive Canada (CPC).

Arctic Power is CPC’s top-of-the-line offeringin its laundry detergent line. Arctic Power is specially formulated for washingin 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 twoproblems. First, they must determine whether to continue developing the brand intheir already strong regional markets of Quebec, the Maritimes and BritishColombia, or go national with marketing efforts. Second, they must decidewhether to use a single positioning strategy (as was successfully implemented inQuebec) or continue to use a dual positioning strategy. The dual strategyconsisted of highlighting Arctic Power as a superior detergent in areas withstrong sales, and focusing on encouraging Canadians to use cold water washing inareas with relatively weak sales.

Analysis When it comes to laundry detergents,Canadians primarily think of one name, Tide. Procter and Gamble’s Tide detergenthas captured over one-third of the market and is twenty percentage points aheadof its closest competitor in market share. While Tide and Arctic Power areequivalent brands in terms of cleaning power, Tide outsold Arctic Power by a 5to 1 ratio in 1986. The market share for Tide has remained level (atapproximately 34%) during the same time that Arctic Power has enjoyed a marketshare 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.

Abreak-even analysis for the market (see Appendix A) indicates that a detergentmust capture approximately 8% – 8.5% of the market in order to break evennationally. Detergents with small portions of market share have experienceddiminishing sales (see Appendix B).

Of the twelve offerings (or group ofofferings) that held 10% or less of the market share, only two experienced salesgrowth from 1983 to 1986 – Wisk and Arctic Power. To keep its market share, Wiskspent disproportionately high amounts of money on advertising (see Appendix B).In such a competitive market with a high break-even threshold and increasingprices for materials, it is reasonable to believe that the offerings with lowermarket shares will continue to decline. This decline will provide opportunityfor Arctic Power (although CPC’s economy detergent offering, called ABC, hasconsumed 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 regionscomprise 44% of the total volume of detergent sales for the country. Otherregional market sizes are displayed in Appendix C. For Arctic Power to capture12% 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’spenetration into this large region is a meager 0.8%. For Arctic Power to reachits goal of 12% market share, Ontario must be considered a major part of thestrategy. Ontario has the highest return on media expenditure of any region (seeAppendix D). Ontario is also changing the way that it washes clothes.

Theproportion of households in Ontario that use cold water washing has increasedfrom 14% in 1981 to 17% in 1986. Hence, a marketing strategy that will providefurther penetration into Ontario is quite desirable. Arctic Power’s positioningstrategy has been twofold.

First, Arctic Power has been positioned in easternCanada as a superior laundry detergent, especially formulated for cold waterwashing. In the western market, Arctic Power has attempted to develop the coldwater market. In either case, Arctic Power’s position is connected to coldwater. The good news is that regular cold water washing has increased nationallyfrom 20% in 1981 to 29% in 1986.

Another 25% of consumers could be described asoccasional users of cold water for washing. Hence, 54% of Canadians wash in coldwater. When people were asked about the benefits of washing in cold water, theresults were astounding. The eight most common answers could be easily dividedinto two categories – those that were money saving in nature (saves energy,cheaper, saves hot water, saves electricity) and those that related to thequality of the job performed (stops shrinkage, prevents color running, colorsstay brighter, easier on clothes). Appendix E analyzes the responses given byregion. The results clearly indicate that Quebec, the Maritimes, and BritishColumbia are more interested in the cost saving aspects of cold water washing.

Conversely, Ontario, Alberta and the Manitoba/Saskatchewan believe that coldwater washing’s positive treatment of clothes is its greatest benefit. Thenation is actually divided on its perception of the benefits of cold waterwashing. Consequently, giving the customer what he/she wants may necessitate twodifferent marketing positions. One position should highlight the cost savingbenefits of cold water washing, while clearly stating that Arctic Power isformulated to be the best detergent for the job.

The other position should focuson the positive features of washing in cold water (less shrinkage, easier onclothes, colors stay brighter) while stating once again that Arctic Power isspecially formulated to be the best detergent for cold water washing. Onaverage, Canadians kept 1.3 laundry detergents in their homes. This means thatmore than two-thirds of buyers purchase only one detergent. A detergent that ispositioned as effective in all temperatures would most likely be purchased. Tideholds a great marketing position as a superior-cleaning detergent that works inall temperatures.

Arctic Power’s advertising states that detergents that work inhot water will not be as effective in cold water. Their message would lead theconsumer 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 temperaturesand wants to purchase only one detergent. Arctic Power is in a good position tobe 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 qualitycleaning in hot and warm loads, she will also buy Arctic Power for high qualitycleaning in cold water. Tide aired copy in Quebec that stated its efficacy incold 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, sinceits market share there is already less than one percent. Although it is equal toTide in cleaning ability, it is not perceived that way.

The western campaign wasgenerally unsuccessful in Alberta, however CPC learned that sales of ArcticPower more than doubled almost instantly (from 1.1 to 2.8 market share) with theimplementation of the trial size box with coupon followed by the $.40 FreeStanding Insert coupon. Recommendation Based on the analysis, Arctic Power mustgo beyond the three strong regions and market nationally if it is to eventuallyobtain the desired 12% of the market share.

Particularly, the large market ofOntario must be penetrated, where brand and advertising awareness are at 0.0%and 0.7% respectively.

Furthermore, having two positioning strategies willbenefit Arctic Power. A positioning strategy of a money-saving cold waterdetergent should be further developed for Quebec, Maritimes and BritishColumbia. A positioning strategy of a superior-cleaning cold water detergentthat is gentle on clothes can be expressed to Ontario, Alberta andManitoba/Saskatchewan. Appendix A National Break-Even Analysis Fixed Costs = .23Sales 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 ofmarket share = $3 million in sales: A detergent would need 8.4% market share tobreak even.

Arctic Power is presently at 6.5% market share. Appendix B DetergentOfferings with 10% or Less of Market Share (1986) % of Nat’l Share Percent MediaExpend. Company Offering 1983 1986 Change Change in 1986 CPC Arctic Power 4.

76.5 +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 Other4.7 4.3 – .4 – 9 na Lever All 4.1 3.

2 – .9 -22 4.0 Surf 2.

6 2.2 – .4 -15 na Wisk3.8 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 Powergained market share between 1983 and 1986. Wisk spent a relatively largeamount of money on media to maintain (and slightly grow) its market shareAppendix C Size of Regional Markets (in 1986) Arctic Power Total Market VolumePercent of Region Market Share (in Million Liters) National Market Maritimes 6.332.

6 8% Quebec 17.5 113.8 28% Ontario .8 158.5 39% Man/Saskat .1 28.

4 7% Alberta2.1 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% ofnational market Arctic Power is strong in 44% of Canada.

Hence, Arctic Powerwould need 27% market share in these three regions in order to achieve a totalnational 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 $ perMedia $ Maritimes 2,055 91 22.6 Quebec 19,914 800 24.9 Ontario 1,268 24 52.8Man/Sask 28 13 21.5 Alberta 853 263 3.

2 British Columbia 1,788 195 9.2 Mostsales revenue per media dollar are realized in Ontario. The Western Campaign, arecent advertising campaign in Alberta and B.C. showed mixed results.

The salesresults in Alberta were disappointing.