Resource Management
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Introduction: Procter and Gamble (P&G) was global leader in consumer goods products with strong presence in more than 140 countries, and net earnings of $1.6 Billion in 1990. In 1990, its Canadian subsidiary contributed $1.4 billion in sales and $100 million in net earnings and was recognized as a leader in the Canadian packaged-goods industry. The company needed to decide its marketing strategy to deal with successful launch of new competitor product: Plax in mouthwash industry.
Market and industry Analysis: The Canadian mouthwash market experienced high growth 26% in 1987 due to introduction of new flavors such as peppermint but its growth declined to 5% in 1990. The industry had major sales in drug-stores with share of 65% and food stores sold 35% of overall mouthwash products. P&Gs mouthwash: Scope was leading the market with share of 32%. It dominated sales in food stores (42%) and had share of 27% in drug stores. But, it faced threat from newly launched product: Plax which went on to achieve market share of 10% in 1990. Other major players were: Listerine (16.1%), Listermint (9.8%) and Cepacol (10.6%). Based on the product claims, the companies needed to get certification from Health Protection branch. Canadian Dental Association would also issue certificate after specific tests. Scope had share of 21.6% in US market where Listerine was leading the market with share of 28.7%. A survey indicated that Scope scored below average in the categories: removes plaque and provides healthier teeth and gums; Plax performed above average in same categories. Hence, it can be concluded that Plax successfully created image of mouthwash that removed plaque and provided healthier teeth. In general, customers gave favorable feedback about Listerine. Another survey indicated that strongest reasons for using mouthwash: it was a part of basic oral hygiene and it gets rid of bad breath.
Alternative Evaluation: P&G had 2 alternatives. The first alternative was to add plaque reduction claims to Scope and modify the established product. As indicated by finance and purchasing departments, it was less expensive option. As product was well-known and established, it did not need high advertisement costs compared to advertisement costs required for launch of new product. This option would help to avoid the confusion that could be caused by new product. Hence, it would avoid the risk of splitting of market share between current Scope product and the new product. This option would also allow P&G to increase its sales from Drug-stores category as drug stores contributed for 65% mouth-wash sales. I also feel this option would save expenses and in turn allow P&G to increase its share in US market. Possible drawback of this approach was the possible loss of opportunity to increase market share. This option would also allow P&G to utilize the advantage of being less expensive mouthwash than Plax and it would allow P&G to target