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.