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Research paper example essay prompt: Arctic Power Canada - 1542 words
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Arctic Power Canada Colgate-Palmolive Canada Arctic Power Detergent Introduction The Canadian laundry detergent market is mature, very competitive and dominated by three major consumer packaged goods companies, one of which is Colgate-Palmolive Canada (CPC). Arctic Power is CPC's top-of-the-line offering in its laundry detergent line. Arctic Power is specially formulated for washing in 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 two problems.
First, they must determine whether to continue developing the brand in their already strong regional markets of Quebec, the Maritimes and British Colombia, or go national with marketing efforts. Second, they must decide whether to use a single positioning strategy (as was successfully implemented in Quebec) or continue to use a dual positioning strategy. The dual strategy consisted of highlighting Arctic Power as a superior detergent in areas with strong sales, and focusing on encouraging Canadians to use cold water washing in areas with relatively weak sales. Analysis When it comes to laundry detergents, Canadians primarily think of one name, Tide. Procter and Gamble's Tide detergent has captured over one-third of the market and is twenty percentage points ahead of its closest competitor in market share.
While Tide and Arctic Power are equivalent brands in terms of cleaning power, Tide outsold Arctic Power by a 5 to 1 ratio in 1986. The market share for Tide has remained level (at approximately 34%) during the same time that Arctic Power has enjoyed a market share 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. A break-even analysis for the market (see Appendix A) indicates that a detergent must capture approximately 8% - 8.5% of the market in order to break even nationally.
Detergents with small portions of market share have experienced diminishing sales (see Appendix B). Of the twelve offerings (or group of offerings) that held 10% or less of the market share, only two experienced sales growth from 1983 to 1986 - Wisk and Arctic Power. To keep its market share, Wisk spent disproportionately high amounts of money on advertising (see Appendix B). In such a competitive market with a high break-even threshold and increasing prices for materials, it is reasonable to believe that the offerings with lower market shares will continue to decline. This decline will provide opportunity for Arctic Power (although CPC's economy detergent offering, called ABC, has consumed 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 regions comprise 44% of the total volume of detergent sales for the country. Other regional market sizes are displayed in Appendix C. For Arctic Power to capture 12% 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's penetration into this large region is a meager 0.8%.
For Arctic Power to reach its goal of 12% market share, Ontario must be considered a major part of the strategy. Ontario has the highest return on media expenditure of any region (see Appendix D). Ontario is also changing the way that it washes clothes. The proportion of households in Ontario that use cold water washing has increased from 14% in 1981 to 17% in 1986. Hence, a marketing strategy that will provide further penetration into Ontario is quite desirable. Arctic Power's positioning strategy has been twofold.
First, Arctic Power has been positioned in eastern Canada as a superior laundry detergent, especially formulated for cold water washing. In the western market, Arctic Power has attempted to develop the cold water market. In either case, Arctic Power's position is connected to cold water. The good news is that regular cold water washing has increased nationally from 20% in 1981 to 29% in 1986. Another 25% of consumers could be described as occasional users of cold water for washing.
Hence, 54% of Canadians wash in cold water. When people were asked about the benefits of washing in cold water, the results were astounding. The eight most common answers could be easily divided into two categories - those that were money saving in nature (saves energy, cheaper, saves hot water, saves electricity) and those that related to the quality of the job performed (stops shrinkage, prevents color running, colors stay brighter, easier on clothes). Appendix E analyzes the responses given by region. The results clearly indicate that Quebec, the Maritimes, and British Columbia are more interested in the cost saving aspects of cold water washing.
Conversely, Ontario, Alberta and the Manitoba/Saskatchewan believe that cold water washing's positive treatment of clothes is its greatest benefit. The nation is actually divided on its perception of the benefits of cold water washing. Consequently, giving the customer what he/she wants may necessitate two different marketing positions. One position should highlight the cost saving benefits of cold water washing, while clearly stating that Arctic Power is formulated to be the best detergent for the job. The other position should focus on the positive features of washing in cold water (less shrinkage, easier on clothes, colors stay brighter) while stating once again that Arctic Power is specially formulated to be the best detergent for cold water washing. On average, Canadians kept 1.3 laundry detergents in their homes.
This means that more than two-thirds of buyers purchase only one detergent. A detergent that is positioned as effective in all temperatures would most likely be purchased. Tide holds a great marketing position as a superior-cleaning detergent that works in all temperatures. Arctic Power's advertising states that detergents that work in hot water will not be as effective in cold water. Their message would lead the consumer 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 temperatures and wants to purchase only one detergent. Arctic Power is in a good position to be 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 quality cleaning in hot and warm loads, she will also buy Arctic Power for high quality cleaning in cold water. Tide aired copy in Quebec that stated its efficacy in cold 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, since its market share there is already less than one percent. Although it is equal to Tide in cleaning ability, it is not perceived that way. The western campaign was generally unsuccessful in Alberta, however CPC learned that sales of Arctic Power more than doubled almost instantly (from 1.1 to 2.8 market share) with the implementation of the trial size box with coupon followed by the $.40 Free Standing Insert coupon. Recommendation Based on the analysis, Arctic Power must go beyond the three strong regions and market nationally if it is to eventually obtain the desired 12% of the market share. Particularly, the large market of Ontario must be penetrated, where brand and advertising awareness are at 0.0% and 0.7% respectively.
Furthermore, having two positioning strategies will benefit Arctic Power. A positioning strategy of a money-saving cold water detergent should be further developed for Quebec, Maritimes and British Columbia. A positioning strategy of a superior-cleaning cold water detergent that is gentle on clothes can be expressed to Ontario, Alberta and Manitoba/Saskatchewan. Appendix A National Break-Even Analysis Fixed Costs = .23 Sales 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 of market share = $3 million in sales: A detergent would need 8.4% market share to break even. Arctic Power is presently at 6.5% market share.
Appendix B Detergent Offerings with 10% or Less of Market Share (1986) % of Nat'l Share Percent Media Expend. Company Offering 1983 1986 Change Change in 1986 CPC Arctic Power 4.7 6.5 +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 Other 4.7 4.3 - .4 - 9 na Lever All 4.1 3.2 - .9 -22 4.0 Surf 2.6 2.2 - .4 -15 na Wisk 3.8 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 Power gained market share between 1983 and 1986. Wisk spent a relatively large amount of money on media to maintain (and slightly grow) its market share Appendix C Size of Regional Markets (in 1986) Arctic Power Total Market Volume Percent of Region Market Share (in Million Liters) National Market Maritimes 6.3 32.6 8% Quebec 17.5 113.8 28% Ontario .8 158.5 39% Man/Saskat .1 28.4 7% Alberta 2.1 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% of national market Arctic Power is strong in 44% of Canada. Hence, Arctic Power would need 27% market share in these three regions in order to achieve a total national 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 $ per Media $ Maritimes 2,055 91 22.6 Quebec 19,914 800 24.9 Ontario 1,268 24 52.8 Man/Sask 28 13 21.5 Alberta 853 263 3.2 British Columbia 1,788 195 9.2 Most sales revenue per media dollar are realized in Ontario. The Western Campaign, a recent advertising campaign in Alberta and B.C. showed mixed results. The sales results in Alberta were disappointing. Marketing and Advertising.
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