COLGATE-PALMOLIVE: CLEOPATRA

The Cleopatra case deals with the introduction of Colgate-Palmolive new soap product, Cleopatra, into the
Canadian Market. After its launch in 1984 in France, the product was a huge success. By the end of 1985,
market share rose to 15% and it became No.1 brand. In 1986, the company decided to launch it in Quebec,
Canada. Quebec was chosen for majority of French population in the country. Two researches were
conducted- one on super-group of articulate professional women and other on typical consumers of
Toronto. The research results were positive. The product was finally launched as a premium priced product
and the company aimed a target of 4.5% market share to be captured. The product did not sell good during
the first year and a decision was to be made regarding whether to continue the product with minor changes or
call off the program

SWOT ANALYSIS


Strengths

Unique packaging- The gold packaging laminate reflected light and prevented
perfume from escaping.
Easy to hold and use.
Differentiating feature - Cleopatra logo stamped on bar.




Weaknesses
The price was the highest among all other soaps.
The television commercial did not leave an impact on most viewers.
Cleopatra was promoted as a womens (age group 18-49) product.
Low availability in stores.
The market research was too broad and occurred in a city that wasnt the intended
launch location.
No exhaustive research was done to determine consumers reaction even after a year.


Opportunities
1% consumers stopped using Cleopatra as compared to 19% for Dove.
Value for money for 30% users. This is the highest among all the soaps in the
market
64% of people will buy Cleopatra after trying at home.



Threats
Dove offers a $3 off-invoice allowance to its retailers while Cleopatra offers nothing.
Dove has a loyal customer base
Launched as a skin care product but it was liked for its lather, perfume etc rather than
its softness, mildness, etc.
Quebec is a huge market and is having big competitors like Lux, Ivory and Dove.








CUSTOMER LIFETIME VALUE ANALYSIS
Marketing Expenditures: Total marketing expenditure for 1986 = Consumer promotion expenditure +
Commercial and air-time expenditure = $ 401,000 + $ 465,000 = $ 866,000
Total marketing expenditure for 1987 Q1 = Consumer promotion expenditure + Commercial and air-time
expenditure = $ 34,000 + $ 94,000 = $ 128,000
Past Margin Percentages: Margin percentage for 1986 = (Margin/Revenue)*100 = (477,000/755,000)*100
= 63.18%
Margin percentage for 1987 Q1 = (Margin/Revenue)*100 = (108,000/167,000)*100 = 64.67%
Based on the above, we are assuming a margin percentage of approximately 64% going forward since we are
doing the calculations under the scenario that Colgate-Palmolive does not alter its strategy with regards to
Cleopatra.
Sales and Margin Forecast: Sales in the first year (1986) are slightly distorted by the excessive sales in
February and March due to the initial euphoria surrounding the launch of Cleopatra. Hence, we are taking the
sales from April 1986 March 1987 as representative of annual sales figures. This comes out to be 15,500
cases which amount to $ 646,500 in sales (15,500 * $ 41.71 per case. It follows that the margins from 1987
onward will be = 64% of 646,500 = $ 414,000 (approx.)
Since soap is a consumable good, we can assume that sales will remain fairly constant under the existing
strategy (we are ignoring the retention rate since only 7% of people said that they wouldnt use Cleopatra for
a second time after using it the first time). Advertising costs should come down as Cleopatra reaches more
consumers. Assuming the advertising costs keep decreasing in a geometric progression, we have the following
advertising costs:
1986 -> $ 866,000 (given), 1987 -> $ 512,000 (prorated), 1988 -> $ 303,000, 1989 -> $ 179,000 and so on
Therefore, cash flows are:
CF1 (cash flow in first year) = Margin Marketing Costs = $ 477,000 - $ 866,000 = -389,000
Similarly, CF2 = -98,000, CF3 = +111,000, CF4 = +235,000 and so on
As per http://www.bankofcanada.ca/wp-content/uploads/2010/09/selected_historical_page14.pdf, the
benchmark interest rates in Canada during our period of study were on average around 10%.
Therefore, for a four year period, NPV comes out to be -190,723. This implies that even under the very
positive assumptions taken, it would take Cleopatra well over 4 years to break even, let alone make any profit.
In fact, as shown below, the break even period is approximately 5 years.

-600,000
-400,000
-200,000
0
200,000
End of 1986 End of 1987 End of 1988 End of 1989 End of 1990
Accumulated NPV
Accumulated NPV



4P ANALYSIS
PRODUCT
Cleopatra is premium quality soap with rich, creamy lather, highly perfumed and well shaped for holding
Cleopatra had glittery gold colored laminated packaging, which reflected light and attract customer easily
Apart from that, the unique packaging will prevent any leakage of perfume
Very few users felt that the soap melts fast
PLACE
Cleopatra is launched in Quebec of Canada focusing the large French speaking population (80%) in the
region. As Cleopatra has a sensational success story in France, the strategist assumed that it would not fail in
French Speaking communities in other part of the world.
29% customer reported that Cleopatra is not available in local shop. Moreover, shelf position of Cleopatra is
in the bottom with most of the generic and inexpensive soap.

PRICE
Cleopatra was launched as a premium product at a premium price
($1.29) with high margin, which is higher than all other
counterparts.
Cleopatra targeted the customers directly through advertisement
they didnt provide discounts and incentives to the retailers.
However, from the diagram in the left it can be inferred that
Cleopatra has some provision to give some margins to retailers
90% of Non-Cleo triers think Cleopatra is expensive whereas
30% of Cleo triers admit the soap is good value for money
keeping in mind that Canadians are more price sensitive than
France


PROMOTION
Though Cleopatra was placed in Skin Care segment, it does not have any claim in Advertising Copy Claim as
well as in consumer research in advertising segment; only 5% recalled it as a skin care product.
The product targeted customers directly Retailers were given very less importance, Cleopatra wanted the
customers to demand the product to the retailers
Initially free coupons (around 250000) were distributed (only 21% redeemed) to households in Quebec, and
then other promotion activities like Cleopatra gold collection and sweepstakes promotion were conducted

From the 4P analysis it is evident that Cleopatra has major issues with retailers. Most of the retailers placed
Cleopatra in bottom shelf in their soap section and many of them even do not sell Cleopatra at all. Cleopatra
targeted in Skin Care segment whereas based on the customer feedback on promotion and Advertising Copy
Claim, it more of beauty/ refreshment soap than skin care soap.

ANSOFFS MATRIX
It is evident from the SWOT and CLV analysis that the current product with the current marketing strategy is
not a favorable option for the Colgate-Palmolive company. We use Ansoff Matrix to analyze the various
strategies that Colgate-Palmolive may use to grow the business of Cleopatra in Quebec region. Below are the
two suggestions we have for increasing market share of Cleopatra:
1. Market Penetration: Cleopatra is an old product in an old market. From Ansoff Matrix it is evident that
penetrating into the red sea of skincare segment in Quebec is the most suitable approach for Cleopatra. A
few ways in which this can be achieved-
0.87
0.83
0.42
0.36
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Cleopatra Dove
Margin
Unit Price
a. Sales Promotion:
i. Cleopatra should include retailers in their selling strategy. The advantages of this would be twofold.
Firstly, it will improve availability in retail stores. As we have seen, 29% consumers have said that the
primary reason for them not using Cleopatra is its unavailability in the retail stores they visit. Secondly,
a commission to retailers will give Cleopatra a better shelf position. Currently, Cleopatra is on the
bottom shelf and they need the support of retailers to move up to the eye level.
ii. Cleopatra should launch a promotional event to make the general public more aware. In the past, their
target audience was women between ages 19-49. This time, they should target a larger crowd. The
promotional event should be held in Quebec rather than in Toronto, as the culture and needs of
Quebec cannot be gauged by responses in Toronto.
b. Advertising:
i. Cleopatra needs to be portrayed as a family soap, rather than a soap only for women. It cannot
compete with Dove if it targets only about half as many people as Dove does.
ii. The advertising of Cleopatra should improve, to show it as a face + body soap. The previous TV
commercial of Cleopatra did not indicate that it can be used as a face soap. Moreover, 76% of
Cleopatra users have accepted that they use the soap only on their bodies.
iii. The TV commercial focused on sensuousness and beauty of Cleopatra. In order to compete with
Dove, Cleopatra needs to appeal as a skincare soap.
c. Personal Selling:
i. As we have seen, only 1% of Cleopatra users have stopped using Cleopatra. This is a significantly
small number indicating that most people, who have used Cleopatra once, are likely to continue using
it. Colgate-Palmolive Company should dedicate more resources for door to door selling.
ii. In the previous promotional event, coupons for free soap were distributed. That did not turn out to be
very successful since only 21% people redeemed their coupon. In the new promotional event,
Cleopatra should directly distribute free bars of soap.
d. Steal share to drive out competition:
Cleopatra can challenge customers to try the soap for 5-days. This will be effective against competitors
like Dove. As evident from the case, people who once use Cleopatra are likely to continue using
Cleopatra. Therefore, the focus should be on getting them to use it once.
2. Product Development: Many features of the product make Cleopatra unsuitable for its current position
as a premium product in the skincare segment. Only 20% if Cleopatra users liked it as a good for skin
product. These are our recommendations for changes in the product, to make it a better fit in the
skincare segment-
a. Softness:
i. As low as 7% users have expressed a liking for the softness of Cleopatra. If Cleopatra wants to be
used as a facial soap as well, this is definitely an area for improvement.
ii. Cleopatra is known specifically for its unique formulation and moisturizing capabilities. For
Cleopatra to compete better with Dove, it needs to increase its softness.
b. Understanding Market needs:
It is apparent from the case that the idea behind Cleopatra was predominantly what Colgate-
Palmolive wanted to sell, rather than what the consumers wanted to use. We strongly recommend that
a market survey be done to exactly understand the customer needs, and work in that direction to
develop the product.