P&G : Marketing Capabilities
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Transcript of P&G : Marketing Capabilities
Company Background Founded in 1837 and Headquartered in Cincinnati , USA
Had become largest cosmetics brand in US in early
1990’s by acquisition of Noxwell
Pursued global expansion from 1930’s and entered Latin
America, West Europe and Japan from 1945-80 period
Expansion included increasing line of business
Since 1980’s worked on developing global brands like
Pringles, Pantene and Whisper/Always
Why study this case
P&G – A successful global brand
Large number and wide range of consumers globally
Model organisation in terms of performance and quality with
focus on innovation
Provides good idea of strategies pursued, successes and
failures of such a large organisation in various aspects of its
strategies
Situation analysis
Operations in 80 countriesWide range of products ranging from beauty, grooming, snacks, fabric care, baby care and home care
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10
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80
2008 2009 2010
Net sales of P&G at end of previous decade
Net sales in billion $ Share of developing markets
Company expansion
Has expanded to operate in 180 countries
Entered new markets by small scale acquisition or joint ventures, trial and error and understand how to succeed before full scale expansion
42%
21%
15%
9%
13%
Sales
North America
Western Europe
Asia
Latin America
Central and EasternEurope+Middle East+Africa
Previous structurePrevious structure was of clear hierarchy
- often prevented ideas from reaching the top or was very slow
Had business units on geographic units
- Less focus on individual brand
Also had focus less on design of product and completely on
functionality, performance and price
- less consumer connect
Leaders in the organisation
Durk Jager – ex CEO
A.G Lafley – succeeded Jager as CEO
Bob McDonald – who CEO who succeeded Lafley
Jim Stengel – Chief
Marketing Officer
Claudia Kotchka – Vice President, Design
Innovation and Strategy
New structure
Shift of structure from geographic to global business units (GBUs) based on product categories
Three support teams for GBUs – venture team(to acquire new brands) business development teams
(innovate in current sectors) and market development team (perform intensive market research)
Segments P&G caters to:
Shift of strategy
Shift to global business units due to sales drop and connect-and-develop strategy (explored in depth later)
Freshly emphasis and focus on design to complement existing product characteristics of performance and functionality
Move from process oriented to consumer centric marketing
Also aided to understand customers better
Goal reach more consumers globally
Structure was also varied to decentralise and bring ideas to surface faster
Changes made to organisation structure to enhance newly adopted strategy
VP, Design and strategy was given wide ranging powers equivalent to CMO to ensure
faster decisions and intense focus on design
Called in cross functional teams from across the world at Cincinnati for 10 weeks to
create new brand designs
Improved P&G’s product development and innovation process
Also helped consumers understand and recognise products better, and some cases
even imagine its functions more easily
Shift of strategy
Commitment to consumer
P&G – history of rigorous product and market testing
Invested more than any other company on market research
20000 research studies annually in almost 100 countries interacting with 5 million consumers
Qualitative methods of researchFocus group discussionsInterview consumers at homeIn-context visitsStore interviews
VocalPoint – Word-of-moth program which enrolled 600000 women to pitch it’s products
Quantitative methods of researchFirm gathered wide range of data by blind testsAlso used concept and use tests Quality monitoring Large scale study of consumer habits
Advertising
Celebrity association has been well used by P&G with strong
association with focus on women, especially under CoverGirl line
Was a consequence of large number of beauty products it acquired
Also engaged with sprots stars like Roger Federer and Rahul
Dravid under its Gillette brand ads
Also sponsored many events like NFL games to engage more
number of people and potential users
Raised visibility of brands by becoming a sponsor Olympics
Challenges faced Connect and Develop strategy
Highlighted P&G’s caution while choosing partnerships Involved identifying proven technologies, packages and products to improve and scale up in market by itself or by partnerships Resulted in successful product introductions like Olay Regenersitand Crest SpinbrushInitially Cost of to was very high, and firm struggled to control costs Stock slid from $118 to $52 due to this
Challenges faced Connect and Develop strategy
Also had to combat the centralised structure of P&G and internal focus Eventually was key to firms successesParameters were set while choosing potential partners Had to represent ideas that could benefit from existing P&G technologies, marketing, distribution Company used chess boards to evaluate how technology acquisition in one area affected others
Challenges faced Connect and Develop strategy
Employed 70 tech entrepreneurs to develop firms’ needs list and adjacency maps and maintain and connect with innovation hubs like labs, universities and suppliers Six connect-and-develop hubs in India, China, Japan, Western Europe, Latin America and USA)Also relied on outside facilitators to make viable connections Contacted suppliers to solve its’ problems and NineSigma to connect science and technology with other innovation hubs mentioned
Challenges faced Return on market investment (ROMI) calculation Difficult as type of marketing’s success could not be measured directly Used data from Project Apoollo by Nielsen and online usage and grocery purchase to understand customer needs Finally was done by developing metric to measure brand loyalty and customer relationships Other Challenges• Intially Gillette acquisition resulted in a Gillette’s businesses drag on
P&G’s top line; lots of senior staff of brand leaving and P&G stock lag • Dot-com bubble burst was challenge since P&G had expanded
digital marketing and had to return to TV and print
Failures
Luvs failure
Was positioned as premium disposable diaper with lots of additions to Pampers but taught it many lessons strategically
1.One brand shouldn't cause consumer switch away from
other in-house brand
2.Treat every brand as the only one
3.Determine whether innovation is generic or brand-specific
4.Competition follows technology not brand
5.Market becomes worst case scenario if options not well
defined
Failures Despite strong push the firm struggled behind rivals in 2009; eventually resulted in strong push towards sponsorship and improving brand recognisability
Online failures
Some online initatives “Sunset Heat ” used to promte Escada perfume failed and bored viewers
Using Facebook to connect with consumers
- each brand setup accounts with “friends”
- large number of connects but took till 2010 how to use this to enhance connect with these people
BrandOne of the main reasons why company has been so successful
globally and across segments
Marketing strategy variations
• Has adapted different strategies for each brand in each market
with all media of ads varied to connect with consumers of that
region
• During recession attracted consumers with in-store offers like
coupons and special offers
Always brand was varied to appeal to women globally, being first
feminine hygiene product in many of these markets
BrandVaried its ads to focus on adding design and emotion drive in
addition to central theme of functionality
Was necessary to improve connect with people, as previously ads
focussed on product superiority and functional benefits of
product
Was part of 2002 re-strategizing to better meet global markets
Added men's’ website (Manofthehouse.com) to cater specifically
to men, who often used women's websites for recipes, stain
removal information, cleaning the house etc.
Successes
Has a large number of first and successes to it name
Connect-and-develop strategy has worked well By 2006, resulted in 35% of new products with elements from outside the firmR&D productivity increased by 60%Cost of innovation decreasedInvestment decreased from 4.8% to 3.6% as percent sales
Successes
Campaigns was conceptualised with the end in mind and thought of -If it doesn’t work in the store it’s a miss
Ivory – first product directly sold to customers
P&G innovated by sponsoring daytime radio shows and dramas
In 2009, despite tough economic situation maintained marketing budget and shifted ad costs and simultaneously broadening customer base
Successes
Active community interaction
Enhanced brand image and sales of Tide by helping in post
Hurricane Katrina efforts and T-shirts sold to raise funds
under “Loads of Hope” campaign
New initiatives have complemented function based ads by
adding emotional touches like “Thank you, Mom”
Has built on strengths of strong R&D, consumer research
and product performance
Successes
TIDE
Was a breakthrough product at end of World War 2
Since new product, could skip blind tests, retests, polling consumers,
redeveloping product and other intermediatery steps
despite risk of harming P&G as a whole
Got attractive new logo designed by famous industrial designer further increasing visibility and popularity
Successes
PAMPERS
Brand that revolutionised disposable diaper market
Success also could be attributed demographic trends
Post world-war 2, and subsequent baby boom.
Main reason for success was manufacturing efficiencies of
P&G, keeping costs low and making product affordable for
large number of users
Successes
CREST
Another category defining product
Became household name and was first toothpate
with Flouride
Tie-up with American Dental Assn. helped increase use
ALWAYS
Sanitary pads launched in 1984
Was one biggest innovation in feminine hygiene with equally successful variation in terms of size and constant improvement
Achieved global appeal very rapidly
Alternatives possible Leveraging various brands’ strong presence for even stronger
multi-branding strategy
In-store promotions to club various products of different
categories which may complement users requirements. E.g:
Offering Tide and Crest toothpaste together at special rates
Associating with new TV series content developers like Netflix to
imprive rand visibility and further broaden customer base
RECAP
Company background
Why study this case
Situation analysis
Strategy shift
Challenges faced
Failures
Brand adaptability
Successes
Alternatives possible ahead