Monday, February 2, 2009

Why Would Mentadent Style Toothpaste Die???

Some may ask, "why would you think that Mentadent style toothpaste might die in the first place." The reason is that it may take a patent monopoly to generate enough profit, not counting advertising expense (that is, what the profit would be if there was no advertising but sales were the same) to fund an advertising campaign needed to promote the Mentadent style to the point where it is worthwhile for stores to carry it. Monopoly profits will be the greatest. If competitors enter the field, total profits will decline, and profits for the original patent holder will drop dramatically. Under these circumstances, the erstwhile patent holder has neither the means nor the incentive to spend much money promoting the Mentadent style and neither do the new market entrants. Accordingly, total sales of that style may drop. At the same time, the stocking problem of the stores carrying the style are greatly complicated. Should they carry only the original?  Or the original plus one competitor? or two competitors? And this is for declining sales for that style of toothpaste. Under these circumstances, it is likely that some stores will opt out altogether, sales will fall even more, and eventually all the market participants will withdraw. 

If would-be competitors do this analysis they might not enter that competitive space. Or, if they do enter that space, it may just be for the purposes of killing Mentadent, either to claim the space for their own, or to get rid of that part of the market, leaving the consumer with only the tube style toothpastes to choose from.

No comments:

Post a Comment