Toothbrush disruption

Provide the following information to the interviewee if requested:

Till last year, the toothbrush market was 75% manual and 25% rechargeable toothbrushes. The 2% market share gain of battery spinbrush has come mostly at the expense of rechargeable toothbrush sales.

Manual toothbrush:

• The net profit margin on sales of manual toothbrushes is 70%
• On average, a manual toothbrush consumer buys 2 toothbrushes per year

Rechargeable toothbrush:

• Rechargeable toothbrushes are sold as two separate parts- 'base' that sells for $60 (with a 65% net profit margin) and 'head' that sells for $5 (with a 90% net profit margin) - Both are needed for the device to work
• Life of an average base is 10 years
• Life of an average head is 6 months

Spinbrush:

• We believe that we can produce it at a cost of $5 per brush

The candidate should ask questions regarding the background of the case.

To answer this question, we should calculate the profit per customer per year for all three segments.

Assumption - The life of a spinbrush is 6 months.

We can see that the manual and spinbrush are similar in terms of profitability. But the manual is unlikely to lose share to spinbrush as it is cheaper.

Rechargeable is the most profitable segment out of the three and is losing share to spinbrush. If the client starts producing a similar spinbrush it will further threaten the rechargeable segment.

Therefore, the client should consider alternative means (and not knockoff) to respond to the spinbrush product.

The client should consider alternative means to respond to spinbrush as producing a similar product will further threaten its most profitable rechargeable segment.