Arctic Power Canada Essay

This essay has a total of 1678 words and 12 pages.

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

Continues for 6 more pages >>




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