Co-Opetition - Adam M. Brandenburger [76]
Softsoap repeated its test-market success, reaching $39 million in sales the first year. Taylor believed that the liquid-soap market would reach $400 million. But what share could he keep once the leading bar-soap manufacturers came out with their own versions of Softsoap?
The threat of imitation was real. Softsoap was hardly a patentable innovation. Pumps have been around since Archimedes. The brand name was good, but there were other, more established brand names in the soap business. The Ivory name, for one, was over a hundred years old.
Taylor had experienced the problem of imitation before. He had tried bringing fruit shampoos to the mass market: “I can remember when I saw the Clairol knock-off of our shampoo.… We create the concept and they take it to the marketplace.… When they moved theirs into drugstores and food stores, our line just withered.”38 How could he preserve any added value once the likes of Armour-Dial, Procter & Gamble, Lever Brothers, and Colgate-Palmolive muscled in with their brands and distribution clout?
Taylor had a window of opportunity. The majors adopted a wait-and-see stance. Liquid soap was still unproven and they preferred to let Softsoap be the guinea pig. Once they saw that Softsoap was a success, the majors decided to do their own test-marketing. A surprise awaited them.
An essential part of any liquid-soap product is the little plastic pump, and Taylor realized that there were just two suppliers. In a bet-the-company move, he locked up both suppliers’ total annual production by ordering 100 million pumps. Even at 12 cents apiece, this was a $12-million order—more than Minnetonka’s net worth. Capturing the supply of pumps gave Taylor another eighteen to twenty-four months. Softsoap had bought some more time to build brand loyalty and thus establish its added value.
When Procter & Gamble finally test-marketed a liquid soap, it used the name Rejoice rather than risk sullying the Ivory brand. The results weren’t encouraging, so Procter & Gamble again delayed. Through a combination of pluck and luck, Taylor had a three-year window. It wasn’t until 1983 that Procter & Gamble finally introduced its Ivory brand liquid soap, which quickly gained almost 30 percent of the liquid-soap market. Jergens liquid soap from American Brands was a distant third. By 1985 the liquid-soap market had grown to $100 million. Softsoap maintained its lead position with a very respectable 36 percent share. Two years later, Colgate-Palmolive, which had missed the boat on liquid soap, played catch-up by buying Softsoap for $61 million.
There wasn’t anything Minnetonka could patent. But even a patent doesn’t completely protect you from unhealthy imitation. You have to plan for the day when the patent expires or someone comes up with an alternative solution. In the NutraSweet-Holland Sweetener story back in the Players chapter, we saw how NutraSweet used the period of patent protection to prepare for future imitation. It made big investments in branding its product and in moving down the learning curve. Once the patent expired, Holland Sweetener couldn’t match NutraSweet’s product or cost position. NutraSweet also made it harder for Holland to catch up. By aggressively fighting Holland’s entry in Europe, NutraSweet denied Holland volume and thereby slowed its progress down the learning curve.
Antidotes to Unhealthy Imitation
1. Collect customer feedback to customize your product—competitors can’t copy you because they don’t have the information.
2. Create a brand identity.
3. Build volume to move down the learning curve.
4. Compete aggressively for volume so that competitors can’t follow you down the learning curve.
Individual, Inc., Minnetonka, and NutraSweet faced clear