Master of Business Administration (MBA) Examination

III Semester

(Advertising and Brand Management)

Time : 3 Hours]                                                                                               [Max. Marks : 80

Section A

1.         'Well begun is half done." Discuss DAGMA as a tool of objective-setting in the light of the statements.

2.         Discuss the various media decision required to be taken while developing a media strategy.

3.         What is the importance of measuring ad effectiveness? Discuss variouspre and post testing techniques.

4.         Discuss the importance of Brand Identity. What elements constitute brand Identity? Compare Brand Identity and Brand Image.

5.         Write short notes on any two :

(a)        Brand personality.

(b)        Creative Appeals.

(c)        Brand Equity.

(d)       Types of Advertising.

6.         What are the social, ethical and regulatory aspects of advertising?

Section - B

Read and analyze the case. Answer the questions given at the end :


You probably know about colgate toothpaste-perhaps you've even used it. But what would you think of Colgate dandruff shampoo?

That is exactly what colgate-Palmolive would like to find out. Colgate wants. to investigate the possibility of entering the over-the-counter (OTC) drug market. Can it use its Colgate brand name developed in the oral-care products market, in the OTC health-care market?

Why is Colgate interested in the OTC market? The first reanson is market size. The worldwide OTC market annually accounts for $2 7.3 billion in sales-the largest nonfood consumer products industry. the $1 .t.9 billion U.S. market is growing at a 4.4 percent annual rate, and international markets are growing at 25 percent annually! Analysts perdict that the U.S, market will reach $30 billion by 2010.

Several trends. Are fueling this rapid growth. Consumer are becoming more sophisticated and increasingly are interested in self-medication as opposed to seeing a, doctor. Companies are also switching many previously prescription only to Oft drugs. Moreover, OTC drugs tend to have very long product life cycles. medical researchers are also discovering new drugs and new uses or benefits of existing drugs.

Colgate also knows that the OTC market can be extremely profitable. Analysts estimate that the average cost of goods sold for an OTC drug is only 29 Percent, leaving gross margin of 71 percent. Advertising and sales promotions are actually the largest expenditure categories for their products, accounting for an average of 42 percent of sales. OTC drugs produce an average 11 percent after-tax profit.

Because of the OTC market's attractiveness, Colgate conducted studies to learn the trength its brand name with consumers. Colgate believes in the following equation : brand awareness +brand image = brand equity.

Its studies found that Colgate was number one in brand awareness, number two in brand image, and number two in brand equity among OTC consumers, even though it did not sell OTC products. The Tylenol brand name earne the number-one spot in both brand image and brand equity.

Colgate realizes that entering the OTC market will not be easly. First, its research suggests that the typical OTC product does not reach the breakeven point for four years and does not recover development costs until the seventh year. Second, OTC drugs require a high level of advertising and promotion expenditures, 25 percent of sales on year-round media alone. Third, because of the market's attractiveness, entering forms face stiff competition. Established companies like proctor and Gamble Johnson, and Warner-Lambert have strong sales forces and marketing organizations. Fourth, industry observers estimate that an OTC firm must have at least several hundred million dollars in sales to be large enough to afford the fixed costs of advertising and R & D and to have power versus the major retailers like wal-Mart. So, the OTC firms are willing to fight aggressively for market share.

Given all these barriers to ' entry you might wonder why Colgate would want to pursure OTC products. Colgate has adopted a strategy that claims to make it the best global consumer products company. It believes that oral-care and OTC products are very similar. Both rely on their ingredients for effectiveness; both are strictly regulated; and both have virtually identical marketing elements, including common distribution channels.

Colgate set up its Colgate 1-lealth Care Laboratories to explore product and market development opportunities in the OTC market. In the late 1980s Colgate Irried out a test market for a line of OTC products developed by its

Health Care Laboratories. In cities like San Antonio, Texas, and Richmond, virginia, it marketed a wide line of OTC products, from a nasal decongestant to a natural fiber laxative, under the brand name Ektra. The predominantly white packages featured the Ektra name with the Colgate name in smaller letters below it.

Based on the results of that test market, Colgate quietly established a test market in Peoria, Illinous, to test a line of ten OTC health-care products, all using the Colgate name as the brand name The line includes Colgate aspirin-free pain reliever to Compete with ' Tylenol, Colgate ibuprofen to compete with Nyquil, Colgate antacid to Compete with Rolaids, Colgate natural laxative to compete with metamucil, and Colgate dandruff shampoo to compete with Head and shoulders.

Responding to inquiries, Colgate chairman Reuben Marks suggests that "The COlgate name is already strong in oral hygiene, now we want to learn whether it can represent health care across the board. we need to expand into more profitable categories."

Colgate won't talk specifically about its new line. Peoria drugstore operators say, however, that Colgate has blitzed to town with cupons and ads Representatives have given away free tubes of toothpaste with purchases of the new Colgate products and have handed out coupons worth virtually the full price of the new products. One store owner notes. "They're spending major money out here."

If all that promotion weren't enough, the manager of one walgreen store points out that Colgate has priced its line wit below competing brands, as much as 20 percent below in some cases. The same manager reports that the new products sales are strong but also adds, ' ' With all the promotion they've done, they should be. They're cheaper, and they've got Colgate's name on them. People are looking at it right now as a generic-style product. Peopll are really price conscious, and as long as the price is cheaper, along with a name that you can trust, People are going to buy that over others."

Yet, even if Colgate's test proves a resounding success, marketing consultants say expanding the new line could prove dangerous, and ultirri6tely, more expensive than Colgate can imagine. ' If you but the Colgate brand name on a bunch of different products, if you do it willy-nilly at the lowest end, you're worthless,: observes Clive Chajet, chairman of Lipincott and Margulies, a firm that handles corporate identity projects.

Mr. Chajet suggests that Colgate also might end up alienating customers by slapping its name on so many products. If consumers are ' dissatisfied with one product, they might be dissatisfied with everything across the board. I wouldn't risk it," he says.

Cdolate's test is one of the bolder forays into line extensions by consumer products companies. Companies saddled with mature" brands-brands that can't grow much more-often try to use those brands' solid gold names to make a new fortune, generally with a related product. Thus, Procter and Gamble's Ivory soap came up with a shampoo and conditioner.

M Reis, chairman of Trout and Ries, a Greenwhich, Connecticut, marketing consultant, questions whether any line extensions make sense-not only for Colgate, but other strong brand names. Mr. Ries argues that Colgate and the traditional over-the-counter medicine companies are basically turning their products into generic drugs instead of brands. They are losing ' the power of a narrow focus" they wouldn/t leave room for an outsider such as Colgate."

It Colgate is too successful, meanwhile, it also risks cannbalizing its flagship product. Consultants note that almost all successful line extensions, and a lot of not-so-successful ones, hurt the product from which they took their name Mr. Chajet agrees. Colgate could "save tens of millions of dollars by not having to introducce a new brand name" for its new. products, he says. But in doing so, it might also ' kill the goose that laid the golden egg."

Althougn chairman Marks admits that Colgate will continue to try to build share in its traditional cleanser and detergent. markets, the company seems to consider personal care as a stronger area. But leveraging a name into new categories can be tricky, requiring patience from skeptical retailers andlickle consumers. ' It isn't so much a question of where you can putt the brand name," says one marketing consultant. ' It's what products the consumers will let you put the brand name on."


1.         What core product is Colgate seuing when it sells toothpaste or the other products in its new line?

2.         How would you Classify these new products? What implications does this classification have for marketing the new line?

3.         What brand decisions has Colgate made? What kinds of product line decisions? Are these decisions consistent?

4.         If you were the marketing manager for the extended Colgate line, how would you package the new products? What risks do you see in these packaging decisions?