Marketing strategies and their applications

Sensodyne is one of the most well-known brands when it comes to dental products. A registered mark of GlaxoSmithKline (GSK), the world's largest pharmaceutical company, Sensodyne has developed as a powerful health product on the market, with an inclination towards the niche market (individuals with gum or teeth sensitivities). Sales have remained at a constant level, mainly due to the characteristics and particularities of the targeted market.

GlaxoSmithKline (GSK), the mother company, employs over 100,000 people in 116 countries, of which more than 15,000 work in research. R&D activity is quite important for the GSK because it is the base of innovation. In 2006, the R&D expenses accounted for more than $6 billions. The company's current 92 brands and over 1,000 products have registered a $45,000 million turnover in 2006. The turnover growth rate was 7% compared to 2005.

The healthcare is a billion dollars oligopoly industry. This type of organization is characterized by a small number of manufacturers and a large numbers of consumers with insignificant negotiation power which would normally imply relatively high prices for all products. However, because all manufacturers have a wide variety of products which are competing against each other to be bought by the same consumer, the prices cover a large scale, depending on the product type.

Consumer healthcare is a small part of the large health care industry. It is this part that is the subject of our study. GSK had more than $6 billions from its sales volume from consumer healthcare products, namely OTC medicines, oral care and nutritional healthcare. The sales volume from oral care only was about a third of this amount.

In the consumer healthcare section, GSK comes in third place as market share and it holds the market leader position for nutritional healthcare products in UK, the European Union and India.

This part of industry is very competitive. The consumers are permanently demanding high quality, the retailers are strengthening their negotiating power, the time period for innovation cycles have reduced dramatically and the manufacturers compete globally and have become more aggressive with their marketing strategies.

The purpose of this paper is to evaluate the company's and product's position in its industry, to determine its competitive advantages and weaknesses when compared to its competitors, to suggest improvements and the way to implement them.

Situation analysis

Multinationals compete globally and their activity is different from one region to another depending on the customers' needs and preferences. The most common segmentation refers to 3 regions: EMEA (Europe, Middle East and Africa), U.S. And Asia-Pacific. However, pharmaceutical companies are likely to have one segment dedicated to Africa alone, as this region has special needs when it comes to healthcare.

The competition is very tight because the product lines are much diversified and consumers are faced with a difficult choice for a large variety. The main competitors for toothpaste are: Colgate-Palmolive - with a 33.4% market share, P&G- with a 27.4%market share, Unilever - with a 8.3% market share, Church & Dwight - 8.3% too and Rembrandt with a 3.1% market share (see Appendices, table 3). On the overall oral care industry, the international competitors are: Colgate-Palmolive, Johnson&Johnson, P&G, Unilever and Wyeth. There is also a large number of companies that compete with GSK locally.

The political, economic, social, demographic and technological factors have a great impact on the company's evolution (Kotler & Armstrong, 1999).

Political factors. GSK's runs its activity in the U.S., as well as globally, in a strictly regulated market. Therefore, being in compliance with all industry rules and laws is a strict necessity. In the global business environment, the company has to maintain its flexibility when it comes to market regulations because some of those have a local content.

For instance, the entire group has to provide details in state government investigations about the pricing, marketing procedures and reimbursement of the drug prescription products. These investigations may be related to false civil claims and may have different effects on the company, such as fines, damage of public image, etc. In terms of market share, even though GSK is a large multinational company with 11 digits turnover, it is not a monopoly in its market. Hence is not subject to any monopoly regulation.

Economic factors. The global wealth has reached consistent growth rates in the last years. The numbers have had dramatic changes in East Asia, considerably high changes in South-Pacific Asia and substantial in Europe and Japan. After analyzing these trends, it seems that the highest growth rates and in the poorest countries with emerging economies. Nevertheless, increased wealth growth rates translate into a higher potential turnover in those regions and/or countries.

The U.S. economy has been performing at high level, despite some periods of recession, over the last decades. From this perspective, the U.S. market is likely to ensure consumers with high incomes that can both afford and are willing to pay the premium price that Sensodyne has.

Social factors. By being present in 116 countries, the company has to deal with a wide cultural diversity. Its employees and customers come from a variety of nations with different cultural identities. Different nations have different oral care habits, which imply that the marketing strategies have to be adapted to the local markets. Customers are also educated when it comes to this type of habit. Thus, GSK adapts its oral care education programs to the local habits and needs.

On the U.S. market, there has been a constant trend towards products that can improve one's health. This trend has been increasingly important over the last years, with more people interested in a healthy way of living. From this point-of-view, the market is properly educated and perfectly adapted for the success of a product such as Sensodyne.

Demographic factors. The world population has a growth population of over 1% (U.S. Census Bureau, 2007). The number implies that the potential customers' number increases with 1% if all other factors remain constant. However, we know that the world wealth is also increasing. This suggests that oral care habits become more important for consumers, giving GSK the possibility to expand its activity more that proportional to the population growth rate. The company has a large product portfolio to cover all age intervals, from infants to seniors. The flavor variety covers both genders as well.

Technological factors. GSK is a research-based pharmaceutical company. The company is constantly creating new products for its customers. The industry it runs its activities in is a very competitive one, when it comes to change. New patents appear constantly and to maintain competitive companies have to make massive investments in R&D. GSK invested more than $6 billions in this activity in 2006.

Technological development has to be applied to the internal organizational processes. Nowadays any large multinational needs to make use of complex high-tech systems to deal with its customers and suppliers in a more efficient way. Supply chains are easily managed through such systems (de Kok and Graves, 2003).

SWOT Analysis

Strong Points

Weakness points

Multiple research divisions - extended product innovation;

Long-term research experience - high quality products;

Well known brand name- stands for good reputation;

Re-launching Sensodyne to a more commercial level (supermarket distribution, not only in pharmacy);

Well established supply chain management;

Aggressive promotional activity that pushed up Sensodyne sales;

Aquafresh has reached a maturity point and registered negative growth rates;

Reduced range of flavors for Sensodyne;

Lack of complementary oral care products for Sensodyne, such as tooth brushes;

High shareholder power. Those may block certain decisions from being made and change the management board. One of those situations was met in 2003 (BBC, 2003);

Opportunities

Threats

Expand further the health care products to body and hair care - i.e. creams, shampoos, hair conditioners, etc.

Distribute some of the products that are traditionally places in pharmacy in supermarkets as well, when applicable - enhance sales;

Competing companies joined together have a higher power to generate new or improved products and diminish Glaxo's market share;

Government regulations when it comes to healthcare products may become tougher and have negative impact on turnover and key performance indicators;

Environmental and animal protection entities may block some products from being tested and/or produces, which would have a negative impact on turnover.

Target market

Sensodyne addresses a particular niche market, formed from individuals with sensitive gums or teeth. These are generally adult individuals, with medium to high income (so that they will be able to pay the premium price that the Sensodyne products have) and with college education (they are able to understand the problems and causes of sensitive teeth and gums and to act accordingly by using products such as Sensodyne to relieve their pain).

On the U.S. toothpaste market, the main competitors in terms of brands are Colgate- with a 32.1% market share, Crest- with a 27.4% market share and Arm&Hammer - with a 8.3% market share (see table below). On the overall oral care industry, the U.S. competitors are: Colgate-Palmolive, Johnson&Johnson, P&G, Unilever and Wyeth.

US TOOTHPASTE MARKET SHARE - 2000 and 1999

Brand

Company

2000 market share

1999 market share

Colgate

Colgate-Palmolive

Crest

P&G

Aquafresh

GSK

Arm&Hammer

Church&Dwight

Mentadent

Unilever

Sensodyne

GSK

Source: OligopolyWatch (2003)

Product strategies

Sensodyne has a reasonable-sized variety of products: Fresh mint, Extra whitening, Cool gel, Tartar control and whitening, Original flavor, Fresh impact, Full protection and ProNamel. The flavors are quite simple, as the company chooses to focus more on the toothpaste's health characteristics, rather than the taste.

The product has one size and the packaging is made of plastic, which is more hygienic than metal, as the later one may go through oxidation. This type of packaging differentiates the product from other toothpastes and marks its individuality.

The product is always strictly associated with the idea of relieving tooth sensitivity and pain from sensitive teeth. The name itself was thus conceived so as to associate the brand with the effect of having used the product.

On the other hand, for a long period of time, Sensodyne was associated with the idea of medication and the company has committed a lot of effort in the last decade to diversify the consumer perception and induce the idea that Sensodyne is less a medication and more of a product available to all individuals with sensitive teeth. Its move meant that Sensodyne became more available to the general public willing to try the product.

On the toothpaste market for around 30 years, Sensodyne is in its maturity phase of the lifecycle. Given the particular characteristics of the product and the fact that the targeted market is a niche market, who will most likely always need to the product, one can draw the conclusion that the product is likely to remain in the maturity phase for a long period of time, without the risk of it actually disappearing from the market.

Distribution strategies

Given its initial characteristic and presentation as a medicine, Sensodyne was initially distributed in pharmacies.

However, recently, distribution was expanded to supermarkets, hypermarkets and small shops, so that it could be available to all consumers, who had better access to the product. Basically, it reached all types of customers.

The distribution strategy also impacted the pricing strategy. The initial distribution through pharmacies implied a premium price that was too high to make the product attractive to most of the regular toothpaste customers. However, with its present higher accessibility and with the fact that distribution now includes supermarkets and small stores, the price is only slightly higher.

Distribution needs to be closely related to brand perception. In the beginning, it was important for the product to be distributed only in pharmacies, because it ensured that individuals perceived the product for what it was: an toothpaste to be used as a medical solution for sensitive teeth and gums. This also implied that physicians could recommend it as a medical solution and that it could be used as such.

With customers' perception already well established, the company could now expand its distribution channels to include various types of retailers, as previously shown. Sensodyne became available to a larger number of individuals with a strategy that included lower prices and higher availability.

Direct sale, such as through the Internet, is not generally used on this market. The reason for this might be related to the fact that toothpaste is one of the items that the customer is used to purchasing at the supermarket when doing his or her weekly shopping. It is less probable that toothpaste could be ordered online, unless in very large quantities. From this perspective, Sensodyne will remain to the distribution channels previously described.

Promotion mix strategies

Sensodyne is promoted through various channels. First of all, advertising includes TV and radio commercials, magazines, the Internet and dentist cabinets. The latter is particularly important because it ensures the idea that Sensodyne is a toothpaste recommended and endorsed by dentists as a solution to sensitive teeth and gums.

This can further emphasized if dentists themselves recommend this in TV commercials or in their cabinets (Sensodyne generally appears as #1 Dentist-Recommended). This can be assimilated to a form of personal selling and Sensodyne sales can be boosted through contracts with dentists who can receive a commission on the total volume of Sensodyne sales they can achieve through their cabinets.

The Internet has become more and more used as a promotion channel in the last years. The site: http://us.sensodyne.com/,customized for the U.S. audience, provides information on the different types of Sensodyne toothpaste, full explanations on sensitive teeth (there is a page on How it works) and even a link towards a free sample. The latter ensures that new potential customers develop an interest in Sensodyne and are willing to try it.