Company Case 10
Colgate: Squeezing More From a Brand Name
You probably know about Colgate toothpaste – perhaps you’ve even used it. But what would you think of Colgate aspirin or Colgate antacid? How about Colgate laxative or Colgate dandruff shampoo?
That’s exactly what Colgate-Palmolive wants to know. To find out how consumers would react to such products sold under the Colgate brand, the massive packaged-goods company has quietly established a test market in Peoria, Illinois, to test a line of ten over-the-counter (OTC) health-care products, all using the Colgate name. The line includes Colgate aspirin-free pain reliever, to compete with Tylenol; Colgate ibuprofen, to compete with Advil; Colgate cold tablets, to compete with Contac; Colgate night-time cold medicine, to compete with Nyquil; Colgate antacid, to compete with Rolaids; Colgate natural laxative, to compete with Metamucil; and Colgate dandruff shampoo, to compete with Head & Shoulders.
Colgate’s new line represents a significant departure from the higher-margin, high-visibility household goods that Colgate traditionally markets. Colgate chairman Reuben Marks indicates that “The Colgate name is already strong in oral hygiene, now we want to learn whether it can represent health care across the board. We need to expand into more profitable categories.”
Colgate won’t talk specifically about its new line, but Peoria drugstore operators say the company began the test marketing last fall. Since then, Colgate has blitzed the town with coupons and ads. Representatives have given away free tubes of toothpaste with other Colgate purchases and handed out coupons worth virtually the full price of the new products. One store owner notes, “They’re spending major money out here.”
If all that promotional support weren’t enough, the manager of one Walgreen store points out that Colgate has priced its line well below competing brands, as much as 20 percent below. The same manager reports that the new products’ sales are strong but also adds, “With all the promotion they’ve done, they should be. They’re cheaper, and they’ve got Colgate’s name on them.”
Yet, even if Colgate’s test is a resounding success, marketing consultants say expanding the new line could prove dangerous and ultimately more expensive than Colgate can imagine. “If you put the Colgate brand name on a bunch of different products, if you do it willy-nilly at the lowest end, you’re going to dilute what it stands for – and if you stand for nothing, you’re worthless,” observes Clive Chajet, chairman of Lippincott & Margulies, a firm that handles corporate identity projects.
Mr. Chajet suggests that Colgate also might end up alienating customers by slapping its name on so many products. If consumers are “dissatisfied with one
product, they might be dissatisfied with everything across the board. I wouldn’t risk it,” he says. What would have happened to Johnson & Johnson during the Tylenol poison scare, he asks, if the Tylenol name were plastered across everything from baby shampoo to birth control pills?
Colgate’s test is one of the bolder forays into line extensions by consumer products companies. Companies saddled with “mature” brands – brands that can’t grow much more – often try to use those brands’ solid gold names to make a new fortune, generally with a related product. Thus, Procter * Gamble’s Ivory soap came up with a shampoo and conditioner. Coca-Cola concocted Diet Coke. Arm & Hammer baking soda expanded into carpet deodorizer.
Unlike those products, however, Colgate’s new line mover far afield from its familiar turf. And although its new line is selling well, sales might not stay so strong without budget prices and a barrage of advertising and promotion. “People are looking at it right now as a generic-style product,” observes one store manager. “People are really price conscious, and as long as the price is cheaper, along with a name that you can trust, people are going to buy that over others.”
Al Ries, chairman of Trout & Ries, a Greenwich, Connecticut, marketing consultant, questions whether any line extensions make sense – not only for Colgate, but for other strong brand names. He says the reason Colgate has been able to break into the over-the-counter drug market in the first place is because other drugs have expanded and lost their niches; Tylenol and Alka-Seltzer both now make cold medicines, for example, and “that allows an opportunity for the outsiders, the Colgates, to come in and say there’s not perception that anybody is any different. The consumer will look for any acceptable brand name.”
Mr. Ries argues that Colgate and the traditional over-the-counter medicine companies are basically turning their products into generic drugs instead of brands. They’re losing “the power of a narrow focus,” he says, adding, “It reflects stupidity on the part of the traditional over-the-counter marketers. . . . If the traditional medicines maintained their narrow focus, they wouldn’t leave room for an outsider such as Colgate.”
If Colgate is too successful, meanwhile, it also risks cannibalizing its flagship product. Consultants note that almost all successful line extensions, and a lot of not-so-successful ones, hurt the product from which the took their name. They cite Miller High Life, whose share of the beer market has dwindled since the introduction of Miller
Lite. “If Colgate made themselves to mean over-the-counter medicine, nobody would want to buy Colgate toothpaste,” contends Mr. Ries.
Mr. Chajet agrees. Colgate could “save tens of millions of dollars by not having to introduce a new brand name” for its new products, he says. But in doing so, it might also “kill the goose that laid the golden egg.” Other marketing consultants believe that Colgate may be able to break into the market but that it will take a lot of time and money. “They just don’t bring a lot to the OTC party,” one consultant indicates.
Although chairman Marks admits that Colgate will continue to try to build share in its traditional cleanser and detergent markets, the company seems to consider personal care as a stronger area. But leveraging a name into new categories can be tricky, requiring patience from skeptical retailers and fickle consumers. “It isn’t so much a question of where you can put the brand name,” says one marketing consultant. “It’s what products the consumer will let you put the brand name on.”
- What core product is Colgate selling when it sells toothpaste or the other products in its new line?
- How would you classify these new products? What implications does this classification have for marketing the new line?
- What brand decisions has Colgate made? What kinds of product-line decisions? Are these decisions consistent?
- If you were the marketing manager for the extended Colgate line, how would you package the new products? What risks do you see in these packaging decisions?
Source: Adapted from Joanne Lipman, “Colgate Tests Putting Its Name on Over-the-Counter Drug Line,” The Wall Street Journal, July 19, 1989. Used with permission. Also see Dan Koeppel, “Now Playing in Peoria: Colgate Generics,” Adweek’s Marketing Week, September 18, 1989, p. 5.