Arctic Power Case Study

Arctic Power Case Study

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 distributed 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 As a result, Arctic Power was heavily marketed in Quebec and the Maritimes, with promotion support being withdrawn from the rest of Canada.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 campai...

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Budget

Despite facing cutthroat competition that has seen the cost of goods sold rise 15% during the past three years and prices rise only 5%, Arctic Power should be able to continue to have an 18% contribution margin for its sales dollars. Our primary budget strategy would be to reduce costs and promotion expenses, while increasing the use of cheaper television and radio advertising. This would allow Arctic Power to increase brand awareness as well as promote the benefits of cold water washing. Arctic Power will also look to new cost saving technologies and other measures to assure profitability over the long run.

14 YEARS LATER: THE CONCLUSION

The year is 2001. Through the efforts of Smith and Jones, LTD’s marketing strategy, Arctic Power is the leading cold water laundry detergent in Canada and has expanded internationally. The 1987 Arctic Power campaign will be widely studied by MBA students from Palm Desert, California to Palm Beach, Florida as one of the great marketing success stories. Spiel and Dimick, LTD, will later go on to help some nerdy Bill Gates kid market this unique idea of his called Windows while assisting Al Gore in his new invention, the Internet.