Knot Case

9-803-063

REV: JULY 21, 2009

WILLIAM A. SAHLMAN

Dr. John's Products, Ltd.

“That’s great news,” stated John Osher, cofounder and CEO of Dr. John’s Products, Ltd., as he responded to a phone call from one of his partners who was in Cleveland checking on sell-through rates of the company’s new product, Dr. John’s SpinBrush™. The SpinBrush was a simple electric toothbrush that operated on batteries and was designed to sell at retail for under $6.00. Competitive electric toothbrushes from companies like Braun (Oral B™) sold at retail for well over $50.00. In August of 1999, Osher and his colleagues had arranged for Meijers stores, a well-respected mass merchant, to run a limited test with the SpinBrush. The reports from the field were extraordinary: average daily sales of the SpinBrush were seven per day per store, in sharp contrast to the typical toothbrush sales pattern of one per week per store for most other brands. The store managers were extremely enthusiastic about the product and its potential. By early 2000, the company was selling almost 6,000 units per day and had expanded the test distribution system to include such retail chains as Wal-Mart and Target. Osher had also learned in early 2000 that sales at retail were sufficiently large for the SpinBrush to make its first appearance on the IRI (Information Resources, Inc.) list of top selling products. IRI collected detailed data on retail sales of a broad range of consumer products. Osher was not surprised to learn that the product was doing well. He had started the company with certain extremely tough criteria for product development. In order to compete in a very mature market controlled by giant consumer product companies, the toothbrush had to exceed the performance of manual toothbrushes by a considerable margin. The SpinBrush had to retail for under $6.00 through the traditional FDM channel (food/grocery store, drugstore, and mass merchandise store) and under $5.00 through retail giants such as...