Play To Win, Not "Catch up" - Colgate's Opportunity
- We too often think of competition as "head to head"
- Smart competitors avoid direct competition, instead using alternative methods in order to lower cost while appealing directly to market needs
- Proctor & Gamble has long dominated advertising for many consumer goods, but the impact, value and payoff of traditional advertising has declined markedly as people have switched to the web
- New competitors can utilize internet and social media tools to achieve better brand positioning and targeted marketing at far lower cost than old mass media products
- Colgate is in a great position to blow past P&G by investing quickly and taking the lead in internet marketing for its products
- Eschew calls for investing in old methods of competition, and instead find new ways to compete that allow you to end-run traditional leaders
According to a recent Advertising Age article ("To Catch Up Colgate May Ratchet Up Its Ad Spending") Colgate has done a surprisingly good job of holding onto market share, despite underspending almost all its competitors in advertising. This is no mean feat in consumer products, where advertising dominates the cost structure. But the AdAge folks are predicting that to avoid further declines, and grow, Colgate will have to dramatically up its ad spending. That would be old-fashioned, backward-thinking, short-sighted and a lousy use of resources!
Colgate competes with lots of companies, but across categories its primary competitor is Proctor & Gamble. In toothpaste, P&G's Crest outspends Colgate by over $25M - or about 35%. In dishsoap Colgate spent nothing on Palmolive in 2010, compared to P&G's spend of $30M on Dawn. In deodorant/body soap Colgate spent about $9M on Softsoap, Irish Spring and Speedstick while P&G spent 9 times more (over $82M) on Old Spice and Secret. (Side note, Unilever spent $148M on Dove and a whopping $267M when adding in Axe and Degree!) In pet food, Unilever spends $35M dollars more (almost 4x) on Iams than Colgate spent on Hills Science Diet. Altogether, in these categories, P&G spent almost $158M more than Colgate (2.5x more)! As a big believer in traditional advertising, AdAge therefore predicts that Colgate should dramatically increase its annual ad budget - and maintain these higher levels for 5 years in order to overcome its historical "underspending."
But that would be like deciding to trade punches with Goliath!
Why would Colgate want to do more of what P&G does the most? While advisors try to pit competitors directly against each other, head-to-head "gladiator style" combat leaves the combatants bloody - some dead. That's a dumb way to compete. Colgate has long spent in other areas, such as supporting dog rescue operations and with product specialists gaining endorsements while eschewing more general advertising. Now, if Colgate wants to take action to grow share, it should pick up a sling (to continue the (Biblical metaphor) in its ongoing battle. And the good news is that Colgate has an entire selection of new, alternative weapons to use today.
Across all its product categories, Colgate can utilize a plethora of new social media marketing tools. At costs far lower than traditional mass advertising, Colgate can build promotional web programs that appeal directly to targeted consumers. Twitter, Facebook, Foursquare, Groupon, YouTube, Google and many other tool providers allow Colgate to spend far, far less than traditional advertising to provide specific brand promotions, product information, purchase incentives (such as coupons) and product variations targeted at various niches.
With these tools Colgate can not only reach directly into buyer laptops and mobile devices, but offer specific information and incentives. Traditional advertising, whether print (newspaper and magazine), radio, television or coupons is a low percentage tool. Seeking response rates (or even recall rates) of just 1 to 5 percent is normal - meaning 90% percent of your spending is, quite literally, just "overhead" cost. But with modern on-line tools it is very common to have response rates of 50% - or even higher! (Depending upon how targeted and accurate, of course!)
Colgate is in a great position!
It has spent much less than competitors, and maintained good brand position. It's biggest competitors are locked-in to spending vast sums on traditional tools that have low impact and are in declining media. Colgate could now decide to commit itself to using the new, modern tools which are lower cost, and have decidedly more targeted results. In this way, Colgate can get out of the "colliseum" where the gladiators are warring, and throw rocks at them from the stands. Play its own game - to win - while letting those in the pit whack away at each other becoming weaker and weaker trying to use the old, heavy and unsophisticated tools.
Now is a wonderful time to be the "underdog" competitor. "Media" and advertising are in transition. How people obtain information on products and services is moving from traditional advertsing and PR (public relations) focused through mass media to networks with common interests in social media. Instead of delays in obtaining information, based upon publisher programming dates, customers are seeking immediate, and current information, exactly when they need it - on their mobile devices. Those competitors who rapidly adopt these new tools are well positioned to be the new Davids in the battle with old Goliaths. And that includes YOU.