Reference no: EM131681044

Case Study: Colgate-Palmolive Draws on Its Global Database to Evaluate Marketing Strategies

With more than $17 billion in annual sales, Colgate-Palmolive’s global operations span dozens of countries. The consumer products giant makes iconic brands such as Colgate toothpaste, Irish Spring soap, Palmolive dish detergent, and Softsoap shower gel and sells them around the world. Besides taking a “bite out of grime” with its soaps and personal hygiene products, the company also makes Science Diet pet foods. Founded by William Colgate in 1806, the Manhattan-based company specialized in soap, candles, and starch. The “Palmolive” brand, featuring fragrant soaps made from palm and olive oils rather than foul-smelling animal fats, was added in mid-century through a merger. The company began expanding abroad by purchasing local soap and toothpaste companies in the 1930s, first in Europe, and then later in emerging economies in Asia and Latin America. In Latin America, for example, Colgate-Palmolive captured 79% of the market for oral care products after it acquired companies in Brazil and Argentina. More than 80% of its net sales now come from other countries, many in Latin America. Managing this sprawling global empire requires a dedication to consistency, not just in the products themselves, but in the data that tracks every aspect of the company’s operations and performance. Colgate’s integrated back-end database and enterprise software, supplied by SAP, supports a consistent approach to master data management. CIO Tom Greene says, “With SAP, the product masters and the customer groupings are all driven by the same master data.” With everyone using the same integrated system, Greene avoids the problem of redundant and inconsistent data entered into separate systems. Disputes about which is the correct “version of the truth” disappear. Greene relies on this consistent back-end database for the Colgate Business Planning (CBP) initiative, which guides Colgate’s investment decisions around the world. Marketing managers for consumer products confront a bewildering array of choices to promote products, from advertising campaigns and TV spots to discount coupons, rebates, and in-store displays. Most companies judge the success of such investments by measuring “uplift”—the difference between actual sales with the promotion and a projection of what sales might have been without the promotion. But CBP, combined with the integrated master database, allows Colgate management to dig far deeper, measuring actual profit, loss, and return on investment. The detailed metrics can be broken down for individual products, regions, and retailers, providing a very clear window into how much any investment contributed to the company’s profit. Corporate headquarters taps these finely tuned results to plan new investments. It is not a cookie cutter approach, however. Guided by their knowledge of local markets, subsidiary managers can tweak the plans to better fit local conditions. Since the results are all tallied consistently, drawing on the database, managers know what works and what doesn’t. Margins are critical in consumer products, so this deeper insight pays off. Thanks to CBP, Colgate reinvested $100 million in promotions found to be more profitable, and its long-term goal is $300 million—a sum that could be reinvested in promotions, or added to the company’s bottom line. As Greene puts it, “You have to understand the technology, but the most important thing . . . is to understand the business so you can marry the two together.”

Discussion Questions:

1. What type of data does Colgate-Palmolive use, and what types of decisions does Colgate-Palmolive make based on the data?

2. Why is it important to Colgate-Palmolive for the data to be integrated across systems?

3. What business benefits does Colgate-Palmolive achieve through use of this data?

4. What types of business knowledge would be necessary for a Colgate-Palmolive manager to analyze the data?