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Arctic Power – A Case Analysis Essay Example
Arctic Power – A Case Analysis Essay Example

Arctic Power – A Case Analysis Essay Example

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  • Pages: 6 (2664 words)
  • Published: October 28, 2018
  • Type: Essay
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ARCTIC POWER—A CASE ANALYSIS

CURRENT SITUATION

It is the summer of 1987. Arctic Power laundry detergent has contracted with the consulting firm of Smith and Jones, LTD to assist Arctic Power in determining their strategic direction and their product positioning.

BACKGROUND AND HISTORY

Arctic Power, a laundry detergent specially formulated to clean in cold water, is part of Colgate-Palmolive Canada family of products. Colgate-Palmolive Canada is a wholly owned subsidiary of the multinational corporation Colgate Palmolive.

In 1986 Colgate-Palmolive had worldwide sales of $4.9 billion with profits of $178 million, with Colgate-Palmolive Canada having sales of $250 million.

Colgate-Palmolive Canada (CPC) has a wide variety of household and personal care products. Among the most popular CPC brands are ABC, Arctic Power, and Fab laundry detergents, Palmolive dish soap, Ajax and Irish Spring body soaps, Ultra Brite and Colgate toothpaste, and Baggies storage bags.

Colgate-Palmolive Canada uses a product management system in which product managers are assigned specific responsibility for a specific brand such as Arctic Power. Their overall goals are to increase sales and profitability of their brands. The project manager is responsible for all the marketing functions, including planning, advertising, selling, promotion, and market research. An assistant product manager is assigned to work with the product manager.

Prior to the late 1970’s Colgate-Palmolive Canada supported their brands on a national basis, then changed strategy as CPC realized they were spreading their resources too thin. During the late 1970’s through the early 1980’s, CPC shifted to a regional strategy.

While Arctic Power was still di

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stributed nationally, by the end of 1981, its share of the Canadian national market was 4% (consisting of an 11% share in Quebec, 5% in the Maritimes, and 2% elsewhere in Canada). As a result, Arctic Power was heavily marketed in Quebec and the Maritimes, with promotion support being withdrawn from the rest of Canada. This regional approach was successful as Arctic Power’s share of the overall Canadian market increased to 6.4% in 1985, capturing 18% of Quebec, 6% of the Maritime markets while dropping to less than 2% elsewhere in Canada.

1986-87: THE WESTERN CAMPAIGN

With the success Arctic Power had in their regional strategy, Arctic Power launched a campaign to increase their market share in the provinces of British Columbia and Alberta. Their 1986 campaign’s objectives were to maintain modest overall volume growth in Quebec and the Maritimes while developing the B.C and Alberta markets.

The short-term objective was to sustain unit growth while building cold water washing dominance.

The long-term objective was to become the number three brand of detergent with a 12% market share and deliver an 18% contribution margin.

Arctic Power’s marketing strategy was to target women between ages 18-49, skewed towards the 25-34 age segment. This was to be accomplished through advertising in the media, consumer promotions, and trade promotions.

The media strategy objective was to achieve high levels of message registration through high message continuity and frequency.

The objective of the consumer promotions campaign is to increase the rate of usage in Quebec and the Maritimes by increasing purchase frequency. The objective in British Columbia and Alberta is to increase the rate of trial.

The copy strategy in

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Quebec/Maritimes was to convince consumers Arctic Power is the superior detergent for cold water washing. The benefit is when consumers are washing in cold water, Arctic Power will clean clothes and remove stains more effectively.

The copy strategy in B.C./Alberta was to convince consumers cold water washing is better than hot. The benefits from cold water washing are it reduces shrinkage, color run, and, energy costs.

The objective of the trade promotions is to maintain regular and feature pricing equal to Tide (the #1 detergent by far in the Canadian market) and encourage prominent shelf facings. Distribution targets are 71% in B.C and 56% in Alberta. A total of $3.46 million will be spent on trade promotions with $1 million targeted to B.C. and Alberta.

Results of the Western Campaign

The results of the campaign clearly had an impact, particularly Alberta where brand and advertising awareness had increased. However, market share had risen and then it dropped towards the end of the campaign.

While the gain in market share in a mature, slow growing market can be encouraging; the cost of this growth was very high. With over $2 million spent on targeting B.C and Alberta, it will take Arctic Power four years to recover their investment if they maintain market share and reduce spending to normal levels. Furthermore, their competitors in the Alberta market, frustrating Arctic Power in meeting their goals, were matching their promotions.

ARCTIC POWER’S MARKET SHARE

Region 1983 1984 1985 1986 1987*

National 4.7 5.6 6.4 6.5 6.7

Maritimes 5.3 5.7 6.3 6.3 6.3

Quebec 12.3 13.8 17.7 17.5 18.0

Ontario 0.9 1.1 1.1 0.8 1.0

Manitoba/Saskatchewan 0.2 0.2 0.1 0.1 0.1

Alberta 0.7 2.3 1.7 2.1 2.0

British Columbia 3.2 4.0 3.9 5.5 6.0

* Estimated

THE CURRENT DEBATE

Senior Product Manager Linda Barton favors using a regional strategy to promote Arctic Power. She believes a national campaign will provoke the competition, particularly Tide, into a trade promotion battle that will make obtaining market share and profitability margins extremely difficult to achieve. Assistant Product Manager Gary Parsons favors a national campaign. He believes Arctic Power is a quality product (equal to Tide), and if they can duplicate their British Columbia success nationwide, they will “turn the market on its ear.”

The doubling, in recent years, of Colgate-Palmolive Canada’s ABC detergent’s market share has to play a role in Arctic Power’s desire to achieve dramatic results. Any decision Barton and Parson agree on will have to be approved by the senior management of CPC.

EXTERNAL ANALYSIS

Customer 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.

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 who were money saving in nature (saves energy, cheaper, saves hot water, saves electricity) and those who related to the quality of the job performed (stops shrinkage, prevents color running, colors stay brighter, easier on clothes). The chart indicates that Quebec, the Maritimes, and British Columbia are more interested

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