Arctic Power
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.