Case 3. 3 Colgate-Palmolive: Cleopatra in Quebec? Johansson – Pages 325 to 334 The Canadian launch extravaganza in February 1986 began with cocktails served by hostesses dressed like Cleopatra, the queen of ancient Egypt. Then followed a gala dinner with a dramatic, multimedia presentation of the new brand, ending with the award-winning commercial and these words: Today the memory comes alive, a new shape rises up, a new texture, a new standard of beauty care worthy of the name it bears, Today the memory frozen in ancient stones comes alive… Cleopatra.
Each of the retailer guests had received an exclusive, golden, three dimensional pyramid invitation to the launch, and expectations were high. The retailers were sick of discounted brands, all basically the same, and looking for something different and exciting. Finally, the new soap Cleopatra was revealed to the audience of nearly 1,000 – a huge turnout by Canadian standards – and the response was overwhelmingly positive. So enthusiastic was the audience, that by the end of the evening the Colgate-Palmolive salespeople had received orders for 2,000 cases.
Bill Graham, the divisional vice president of marketing for Canada, and Steve Boyd, group product manager, agreed that the night had been a grand success and that Cleopatra’s future looked very rosy. THE FRENCH EXPERIENCE WITH CLEOPATRA Cleopatra soap was first introduced in France in November 1984. By May of the following year, the brand had reached an amazing market share of 10%, despite its 23% price premium compared with other brands. In fact, Colgate-Palmolive’s biggest problem was keeping up with demand. By the end of 1985, market share shot up to 15%. Cleopatra had actually become the number one brand in France.
Cleopatra’s success in France received a great deal of publicity within the organization. Encouraged by the experience, the Global Marketing Group, situated in New York, set out to find other markets for the product. They reasoned that if Cleopatra had worked well in France, it should do likewise elsewhere in the world. Canada, especially French-speaking Quebec, seemed like an obvious choice to the Global Marketing Group. At the annual update meeting in New York, the group strongly recommended to the Canadian management that a test be done in Canada to see if Cleopatra was a proposition for them.
THE REACTION OF THE CANADIAN SUBSIDIARIES TO CLEOPATRA The idea of a market test for Cleopatra was greeted with mixed feelings by the Canadians. Some managers, such as Stan House, assistant product manager, were enthusiastic, especially because they knew that Steve Boyd, group product manager for Canada, was convinced it would work. In Boyd’s opinion, Canada could show the people in New York that the same formula would do as well or even better than in France. Other managers, like Ken Johnson, were more sceptical. They resented having a brand thrust on them.
Johnson believed that what Canada really needed was a strong “national” brand, and he doubted that Cleopatra could ever be that. Nonetheless, a decision was made to proceed and test the Canadian market. One fundamental question had to be answered: Was there reasonable certainty that Cleopatra would be accepted by consumers in Quebec? Two types of research, both conducted in Toronto, tried to answer that question. The first study was among a “super group” of articulate professional women, specially chosen and brought together for the event.
They were introduced to the product, its price, and the advertising, then they were asked to discuss their likes and dislikes openly. On balance, the results were positive; the women seemed to like the soap and the concept. The second research study used more typical consumers; these people were exposed to the proposed advertising for Cleopatra and then were asked whether they would buy it. Fifty percent said they would. They were also given a bar of soap to try at home and were phoned a week later for their reactions. Sixty-four percent of the group who used the soap said they would buy Cleopatra as soon as it was available on the shelves.
The research confirmed the feelings of Boyd, and most of the marketing team in Toronto that Cleopatra could indeed be a winner. Immediately, plans were made for an early launch the following year. The Canadian marketing team was determined not to allow Cleopatra to go to war with all the other brands. They felt something had to be done to reverse the negative profit trends that had been brewing in the industry for some time. This was the ideal opportunity. They would position Cleopatra as the premium-quality, premium-priced soap and differentiate it from all the others.
They wanted to avoid having a price war at all costs. SOME BACKGROUND ON COLGATE-PALMOLIVE CANADA Colgate-Palmolive, a multinational consumer package goods corporation operating in 58 countries, marketed a variety of personal care and household products worldwide. With annual sales of $5. 7 billion, many of its brands were global leaders. For example, Colgate toothpaste was number one and Palmolive soap was number two in the world in their respective markets. The Canadian subsidiary opened its doors in 1912, and since then had grown into a $250-million-a-year corporation.
Together with two competitors, Procter & Gamble and Lever (both $1-billion subsidiaries of their parent companies), they dominated the aggressive and innovative personal care and household market sectors in Canada. Colgate-Palmolive Canada manufactured and marketed a wide range of personal care and household products inside Canada and also supplied brands to the United States and Puerto Rico. The major products marketed in Canada were as follows: The Colgate-Palmolive head office and manufacturing facility were both located in a building in Toronto.
Sales offices were in each of the six major regions across Canada, namely the Maritimes, Quebec, Ontario, the Prairies, Alberta, and British Columbia. Marketing was organized at the head office under a product management system, whereby each person was responsible for a brand or group of brands and reported to a group product manager who, in turn, was responsible to the vice president of marketing. The brand managers made decisions on all aspects of marketing planning and execution, from market research to consumer and trade promotion. The product managers made sure that their brands received the needed resources from the head office.
THE STATE OF THE CANADIAN SOAP MARKET In 1986, the soap market in Canada was worth $105 million to manufacturers. This revenue figure was projected to grow by 4 to 5% in the years ahead. The Canadian soap market was probably one of the most competitive in which Colgate-Palmolive competed – a fact that even the average consumer could see each time he or she turned on a television set or opened a magazine. The competition would continue at the store level, where limited shelf space was at a premium. Because of the intense competition, retailers were all-powerful. They literally could pick and choose with whom to do business.
Inside the store, a brand’s fate was in their hands; they decided what to promote, which prices to cut, and how to allocate shelf space. Competition was extremely fierce for some of the following reasons: 1. Volume growth in the market had slowed and coincided with the growth of the Canadian population (1. 0-1. 5% annually). No further rapid expansion was expected. 2. The only method of survival for the many new brands and new variants of existing brands was to steal share from other products in the market. 3. Competition from no-name and private label products had increased. 4.
Technological advances were slowing, and relaunches were increasingly “cosmetic” in nature (new color, new fragrance, etc. ). 5. Consumers had a group of “acceptable” brands that they were willing to purchase (usually 3 to 4 in number). Buying decisions within this group were based on price. There were 15 mainstream brands, along with 20 to 25 minor ones, fighting to become one of these “acceptable” choices. 6. Trends toward larger bundle packs had developed (more than one bar of soap packaged and sold as a unit), reducing the number of purchases each consumer made during the year.
For example, in the skin care segment, twinpacks (two bars sold together) were becoming the norm, whereas the refreshment segment was dominated by three- and four-packs, and the utility segment by four-, five-, and six-packs. 7. Competition was based on price, as there were no real competitive advantages or meaningful differences among most brands, and because of increased pressure from the retail trade to meet competitive deals and prices. 8. Liquid soaps had entered the market and held an 8% share. Based on current consumer reaction, the maximum share was not expected to grow beyond 10% in the future.
For most consumers, “a soap is a soap is a soap,” with few perceivable differences among brands. Bombarded by advertising in every conceivable type of media, consumers mainly bought the “acceptable brands” on price. Therefore, becoming and staying an “acceptable brand” was where the ongoing competitive battle among the various brands took place. The soap market was divided into three distinct groups: the skin care segment, the refreshment segment, and the utility segment (see Exhibit 1). The skin care market was the largest of the three segments, which were split as follows: |1985 |1986 |1987 | | |(%) |(%) |(%) | |Skin care |37. 3 |38. 4 |38. 8 | |Refreshment |34. 9 |33. 4 |32. 3 | |Utility (price) |27. 8 |28. |28. 9 | Exhibit 3 contains details of market share for each of the three large companies and their competitors. Although there were at least 15 mainstream brands (Exhibit 2), only 4 had managed to create a really distinctive niche. In the skin care segment, Dove had been advertised for years as the facial soap. It had a loyal customer base, mainly because of its unique formulation and moisturizing capabilities. Low on additives and scent, it was seen as the “Cadillac” of this segment and was priced accordingly.
Ivory was an “institution” in the Canadian soap market, with its 100-year heritage and ever-powerful “I use it because my mother used it” pure soap positioning. The market leader, it successfully competed with all three markets. Irish Spring, made especially for men, did well in the male market as a refreshment soap, although females used it as well. Consumers associated its strong scent and high lathering capability with cleaning strength. Zest was also positioned in the refreshment segment. Seen as the “family brand that gets you cleaner than soap,” it was low in additives and perfume.
It especially appealed to people in “hard water” areas of the country. Its detergent formulation allowed it to make special claims against other brands, such as “it rinses clean and doesn’t leave a soapy film. ” THE QUEBEC MARKET Quebec is Canada’s second largest province in population and the largest in geographical size. The 6. 7 million people (or 26% of Canada’s population) are clustered throughout the southern portion of this immense region, which is 2. 5 times the size of France. Unlike the other nine provinces whose populations are of British ancestry, Quebec has a population that came originally from France.
In fact, over 80 % of the 2. 3 million households in Quebec list French as their mother tongue. Needless to say, with this unique culture, marketing strategies sometimes differ from those used in the rest of the country. Quebec accounts for 28% of the Canadian soap market volume and is, therefore, slightly overdeveloped in proportion to the country’s total population. The major brands and their positions in the Quebec market are similar to those throughout the rest of Canada. The exceptions are Zest, which does poorly because Quebec is mainly the soft-water market, and Lux, which has done extremely well due to its strong European image.
THE CANADIAN CLEOPATRA MARKETING STRATEGY Cleopatra looked like an excellent prospect for Canada. Not only was it a premium quality product in all respect, but it complemented Colgate-Palmolive’s Canadian product line and had a past history of success. If launched, the product line would include Irish Spring, well positioned and strongly niched in the refreshment segment; Cashmere Bouquet, performing well in the utility segment; Palmolive soap, positioned as the all-family skin care bar; and Cleopatra, the premium quality skin care brand worthy of competing with the segment leader, Dove.
After considering these facts as well as the positive research results from the two analyses, Colgate-Palmolive decided to launch Cleopatra as the “premium quality, premium priced beauty soap. ” The marketing team, however, decided that it would not be financially feasible to launch Cleopatra like any other soap, where ultimately its success would be determined by its ability to compete on price. Although the marketing team knew the risks, they wanted to avoid having to rely on retailers and being forced to offer large trade allowances and discounts.
They wanted the demand to come directly from the consumers, by generating their interest in Cleopatra through strong media and consumer promotions. This approach was very different from the industry norm, where manufacturers traditionally paid large sums of money to retailers just to get the product listed in their “accounts order books. ” Then, manufacturers would have to pay even more in discounts and allowances to have a showing in the retailers’ weekly advertising fliers. Once management decided to forgo these payments, it was critical for the company to make the best possible media and consumer promotion schedule for the launch.
The company set ambitious objective: a 4. 5% market share for 1986; 100% distribution of the product with retail accounts; maximum shelf presence, defined as the same number of facings as the current segment leader Dove; proper shelf positioning, which meant being next to Dove; and, finally, maintaining Cleopatra’s premium pricing strategy. To make the strategy work, especially since targets were based on an 11-month first year, the company knew it had to get both consumers and salespeople enthusiastic about the brand. Therefore, it was essential to generate excitement from day one.
The promotion had to be very powerful. In fact, it had to be so good that the consumers would demand the brand and force retailers to stock it. That meant the emphasis would be on advertising. Television was chosen as the most obvious way to focus resources and create an impact and instant awareness among the target group – women between the ages of 18 and 49. The campaign, which the marketing team wanted to be “an event”, began the first week in May. The budget was set to make Cleopatra the number one spender in the entire soap market.
The objective was clear to all: ensure that Cleopatra gets the most “share of voice” in its category in Quebec, which amounted to 15%. In other words, for every 100 minutes of advertising for soaps, 15 minutes would go to Cleopatra. The Quebec TV commercial was the same one used in France, with one or two minor and hardly noticeable modifications. This commercial, shot in Rome on a very elaborate set, had been one of the most memorable aspects of the French marketing strategy. It showed the Egyptian Queen taking a perfumed bath.
The feedback from consumer research in France had been particularly positive, and the commercial had received a number of awards for excellence. Equally important in the marketing strategy was sales promotion, always popular with the average Canadian consumer. Since the team’s research had established that 64% of the market would buy Cleopatra after trying it at home, the first and foremost aim was to be sure that people tried it. Thus the promotion campaign, scheduled to run from May to October, centered on the product being tried.
Approximately 250,000 households in Quebec received free bar coupons that could be exchanged for a free bar of soap at the nearest store. All stores were fully informed. There was also the “Cleopatra Gold Collection and Sweepstakes Promotion,” which offered consumers a wide range of popular and fashionable costume jewelry at very reasonable prices. For example, one could send for a necklace and earrings that cost only $12. 99. Consumers who bought the jewelry received forms and were automatically entered into the grand prize draw, a chance to win a Cleopatra-style, 14-karat gold necklace worth $3,500.
Research among current brands on the market showed that mail-in offers and sweepstakes were very successful with consumers, and management had high hopes that this promotion would stimulate interest in the brand. The promotion began in August and ended with the draw in early January 1987. Since Cleopatra had been positioned as the premium quality brand in soap, no discounts were offered. Single cartons were packed 48 to a case, at a price of $41. 71. Cleopatra’s pricing strategy was to be higher than Dove, historically the most expensive brand. (Comparative prices are shown in Exhibit 3. The product itself had been developed in France, with no changes made for the Canadian market. As it turned out, Cleopatra was the finest quality soap made by the company in Canada. Its unique formulation contained the best ingredients, including the equivalent of 15% beauty cream, which delivered a rich creamy lather and was noticeably soft on the skin. The perfume, blended in France, was said “to produce an unforgettable fragrance. ” The soap was also carved into a special shape to make it easy to hold and use. The Cleopatra logo was stamped on the ivory-colored-bar – nother differentiating feature intended to convey quality, luxury, and prestige. The bar was slightly larger than the French product, to conform with the other Canadian brands. Each bar of soap came in its own gold-colored laminated carton, a difference from being wrapped in paper as in France. The laminated material was unique in that it not only reflected light, which made it stand out against the other brands on the shelves, but it also prevented the perfume from escaping. THE RESULTS OF THE CANADIAN LAUNCH Due to the launch, sales had started off with a bang.
On the first evening along, 67% of the first month’s objectives had been achieved. But from then on, the brand started missing its targets. Steve Boyd had warned his team not to expect an instant miracle. After all, the Quebec soap market was one of the most competitive, and it took time to establish a brand. As the retail trade had been so positive at the launch, he felt sure that things would eventually pick up. The results, however, continued to be discouraging well into the first year. Cleopatra simply was not selling and could not seem to reach the explosive growth everyone was anticipating and expecting to be “just around the corner. After 13 weeks, the advertising commercial had created awareness of 63%, the highest in the skin care segment. At that time Camay was at 49%; Dove, 24%; and Aloe and Lanolin, 13%. By the end of 1986, Cleopatra had achieved its “share of voice target” – that is, the number one position in advertising intensity in Quebec. By the end of the promotion period, the free bar coupon had been distributed to households throughout Quebec, and 21% of the coupons had been redeemed. The sweepstakes, however, had been disappointing: only 1,500 people had entered by the December deadline. Market share reached only 0. %, peaking in October/November at 1. 8%, compared to the 4. 5% goal. Sales, which were expected to reach $3,775,000, were only $755,000. Instead of a $389,000 positive contribution to sales, contribution was negative $442,000. (The performance figures for 1986 and for the first three months in 1987 are shown in Exhibit 4. The financial losses of 1986 and the first part of 1987 are presented in Exhibit 5. ) Distribution also fell short of expectations, and presence and shelf positioning gradually deteriorated to the point where Cleopatra was placed on the bottom shelf next to generic soap.
The sales force, however, did manage to restrict any discounting of the brand. Over the first year, some small-scale research had been done in stores to determine consumer reaction, but nothing else had taken place. By January 1987, it was clear that some serious market research was needed, and a full-blown tracking study was commissioned. Two panels from Quebec were chosen: a random sample of 204 consumers and an oversample of 99 Cleopatra “triers. ” Over 90 questions were asked to obtain key information on brand awareness, usage, brand ratings, likes and dislikes, advertising recall, and trial information (see Exhibit 6-11 for the results).
THE DILEMMA OVER CLEOPATRA’S FUTURE Steve Boyd fumbled with his papers as he listened to Bill Graham, divisional vice president for marketing Canada, say, “I can’t understand it. It was a star performer in France. The French loved it, and Quebec is after all, part of the French culture. Why has the brand flopped so badly? ” Boyd knew that for Cleopatra to success as a major brand in Quebec and perhaps in all of Canada, as the Global Marketing Group had first suggested, he had to react quickly to rectify the situation. But how? The research results on Cleopatra lay on the table.
Product Manager Ken Johnson and Assistant Product Manager Stan House had been over the research with Boyd to try and solve the Cleopatra riddle. But they could not agree about what should be done. Johnson wanted to scrap the brand. He said that Cleopatra was just plain wrong for Canada and should never have been launched there in the first place. He believed there was no point in letting more good money chase a loser. House was adamant that what the brand needed was time. He accused Johnson of being shortsighted and impatient.
It was, he believed, totally unrealistic to expect a new brand to succeed overnight, and Cleopatra had only been on the market a little over a year. With a sizeable investment and some patience, House believed they could recreate momentum and achieve a target of 4. 5% market share. The Global Marketing Group in New York was convinced that there was nothing wrong with the brand but that implementation had been poor. They proposed rethinking the basic strategy and suggested that perhaps Cleopatra should not be positioned as a skin care product at all, competing head on with Dove.
A smaller niche might be more sensible. Boyd knew that he had three options: • Admit defeat and discontinue the brand. • Continue the strategy with minor modifications if necessary, and try to get a 4. 5% market share by giving it more time and support. • Alter the strategy or even the product itself. Boyd could not help feeling that he should try to find a way to make Cleopatra work. Giving up would be such a shame. Yet, with retailers literally pulling the brand off the shelves, did he really have a choice? DISCUSSION QUESTIONS 1.
What are the similarities between the French and the Quebec markets which suggests acceptance for the Cleopatra after the French success? Any significant differences which would alert you to potential problems ahead of the launch? 2. How would you evaluate the positioning of Cleopatra in Canada? Any alternative options? 3. Evaluate the promotional launch and the advertising campaign. Were mistakes made that could have been anticipated? 4. On the basis of the consumer research data collected, what is your diagnosis of what went wrong? 5. If you were Steve Boyd, which of the three options would you pursue? Justify your choice.