Harvard case study: Procter & gamble

Harvard case study: Procter & gamble

Procter and gambleGlobal leader in branded consumer goods, known for iconic category defining products such as ivory soap, crest toothpaste, and tide detergent laundry. The company owns and controls over two dozen $1 billion brands worldwide.

Company backgroundP&G pursued international expansion as early as the 1930s, and from 1945 to 1980 it began toenter markets in Latin America, Western Europe, and Japan. It expanded into new lines of business through acquisitions, such as Charmin Paper Mill (1957), which opened up the household paper products market (toilet paper, paper towels) for the company, and Folgers Coffee (1963), giving P&G a presence in the food category. Innovations helped round out the companys portfolio: disposable diapers (Pampers), first market-tested in the early 1960s, created a new category; liquid fabric softeners (Downy) and fabric softener sheets (Bounce) led those new popular categories. P&G alsodivested brands that no longer fit the companys overall portfolio.

Innovation and r&DIn 1887, a nephew of one of P&Gs founders, who had a chemistry degree, set up an analytical labfor the company, laying the foundation for a professional R&D division and establishing one of thefirst corporate labs in the field of consumer goods.12 Replacing the trial-and-error methods commonlypursued at the time, P&G took a scientific approach and connected R&D with the companys salesand marketing.13 First-time products included Crest toothpaste (1955), the first toothpaste withfluoride; Head & Shoulders dandruff shampoo; and Pampers disposable diapers (1961).

Marketing at p&GBrands lay at the heart of P&Gs success, and as one observer wrote, On their own, most biggest brands are category killers run by industry leaders with seemingly endless resources at their disposal to exploit unmet consumer needs to drive category growth and market share expansion. And while advertising played a big role in this success, another observer noted, P&G recognized that building brands is not exclusively or even primarily a marketing activity. Rather it is a systems problem. Better brands are based on innovation and continuous improvement throughout the companys operations and activities, starting with developed or acquired products withperformance features that consumers value. Another observer noted that steadily lowering the costs of manufacturing and distribution ensured a brands success.

Commitment to customerP&G had a long history of rigorous product and market testing; the firm was well known as especially process-oriented. P&G invested more in market research than any company in the world, interacting with more than 5 million consumers in almost 100 countries.38 The firm conducted over 20,000 research studies each year, and invested nearly $500 million into developing and executing these studies. P&G took on consumer research through various research methods.

advertisingP&G had been a marketing trailblazer from the outset: Ivory, the first product to be advertised directly to consumers, subverted a traditional reliance on an established network of wholesalers, distributors, and retailers and sold directly to consumers instead. Other brands such as Crisco, Camay, and Oxydol soon followed. Early innovations included sponsorship of daytime radio dramas (1932) and television commercials (first aired in 1939). Soap operas owed their existence to P&G: the daytime drama As the World Turns was launched in 1956 to specifically target women in their homes. Another World, The Young and the Restless, and Guiding Light were other longtime P&G-sponsored daytime dramas. While P&G constantly built on its experience with broadcast media, it also relied heavily on developing long-standing partnerships with advertising agencies to develop robust brand identities for its portfolio of consumer goods.

sponsorshipA range of sponsorship opportunities were leveraged across P&Gs portfolio as well. For example, P&G, a U.S. Olympic team sponsor for the 2010 Games, became a worldwide sponsor, specifically to raise its visibility in emerging markets, for the 2012 winter games to be held inRussia and the 2016 summer games in Brazil.55 A National Football League (NFL) sponsorship gave consumers opportunities to engage with the NFL, just for choosing P&G brands, and tied in with the NFLs Play 60 initiative, a national youth health and fitness campaign focused on fighting childhood obesity and increasing wellness by encouraging youths to be active an hour a day.

Celebrity endorsements P&Gs acquisitions of several beauty companies in the 1990s had brought a number of celebrity endorsers into the P&G stable, including CoverGirl spokespersons Christie Brinkley, Drew Barrymore, Ellen DeGeneres, and Queen Latifah. P&G also developed numerous celebrity endorsements. Most recently, television show Modern Family actress Sofia Vergara was named spokesmodel for CoverGirl cosmetics in May 2011 for an ad campaign launching in January 2012. Taylor Swift also joined the company for the CoverGirl brand.57 Eva Mendes and Naomi Watts were announced as new spokesmodels for Pantene shampoo in the spring of 2011. Other Pantene spokespersons included Gisele Bndchen, Stacy London, and Teri Hatcher.

Media spending In early 2009, as the recession took hold, then-CEO Lafley announced that despite the poor economic climate, P&G would maintain its marketing budget. Though the firms marketing budget was not directly cut, P&G shifted to coupons and in-store promotional activities to maintain the same media presence, while shifting ad costs.63 In 2010, P&G increased ad spending by $1 billion, with a 20% increase in media impressions;64 higher revenues led to an increase in dollars spent. McDonald, who became CEO in 2010, stated that P&G would maintain the same level of spending, while shifting dollars to digital advertising and other new media to broaden the audience.

Digital marketing Throughout the 1990s, P&Gs digital activity had been limited to its operation of brand websites, but the firm expanded its digital content offering in 1999 with the launch of pampers.com. The website contained product information, similar to the other brand websites under P&G, but also provided information for new and expectant mothers and served as an interactive forum. By 2007, the site was translated for 49 countries.66 BeingGirl.com, launched in 2000, provided information and expert advice on issues that teenage girls might be too embarrassed to ask a parent or doctor about, such as menstruation, eating disorders, acne and dating.

Social mediaThe community that pampers.com had built for P&G led it to experiment with additional social media forays. In 2007, P&G launched two social media sites: Capessa for women on Yahoo! Health and the Peoples Choice Community, associated with the Peoples Choice awards. However, with the benefits of social media came risks. Along with its successes, P&G garnered its share of negative consumer reactions to its ads. One blog noted that watching P&Gs online serial Sunset Heat promoting Escada perfume was more painful than reading Ulysses at the beach.

Interactive community promotion In 2005, Tide laundry detergent had its best sales in over a decade after a highly successful post Katrina campaign, Loads of Hope. Tide opened a Laundromat in New Orleans to wash survivors clothes and sold T-shirts with various slogans such as, Be seen, not spotted, worn by celebrities to promote Tide with Febreze. The T-shirts could be purchased online, and all proceeds went toward families affected by the hurricane.82 In 2006, P&G unveiled a major campaign in Times Square targeting holiday shoppers. A large blue neon sign in the middle of a Broadway block read Restrooms and led people up an escalator into a lounge with flat-screen TVs, leather couches, a fireplace, and 20 shiny, spotless toilets. The ad was used to promote Charmin toilet paper, and tourists loved it. The Times Square campaign created nine YouTube ads and generated 20 million views per month. Most viewers were under 30, the holy grail audience for marketers aiming to attract customers for life.

Moving forwardAs P&G continued to push toward reaching 5 billion consumers served worldwide, its evolving marketing capabilities took center stage. The firm had proven its ability to navigate the digital environment with efforts like The Man Your Man Could Smell Like and Manofthehouse.com, had incorporated a sense of design into its culture, and aimed to complement its strong function-driven marketing background by adding emotional efforts such as the Thank you, Mom and Loads of Hope campaigns. Building on its strengths in R&D, consumer research, and product performance,P&G continued to evolve and innovate as the worlds largest marketer.

Analysis of certain products

Ivory soapP&G experimented with several now-classic marketing tools in its efforts to promote and market Ivory soap, the first product to be marketed directly to consumers. P&G relied heavily on magazine advertising focused on a clear message of Ivorys purity (99 and 44/100ths% pure). The company also relied on direct marketing through mass mailings enclosing samples of Ivory, along with a booklet compiling the brands early print advertisements. These were followed up with a letter, sent to women, aimed at making them patronesses for Ivory. The letter reminded recipients of Ivorys purity, warned against counterfeits, enclosed testimonials from the most eminent men in their profession in the country, and urged would-be patronesses to demand Ivory specifically when shopping for soap and to reject any substitutes offered by their grocers.

Originally developed during the height of World War II, Tide (called Product X) was not just a new soap, but a new synthetic formula for a detergenta breakthrough product. Getting the new product to market before Lever or Colgate could launch their own versions meant forgoing P&Gs tried-and-true product development process, essentially skipping blind tests in severalmarkets, analyzing data, reformulating on the basis of the test results, retesting, trying out advertising strategies, polling consumers, running shipping tests, and the host of other careful steps in P&Gs product rollout time table.

pampersA blockbuster brand that almost single-handedly created the disposable diaper category for the mass market, Pampers evolved out of P&Gs experiments in expanding its paper products line in the 1950s. Demographic trends, such as the postwar baby boom, made it clear disposable diapers would find a huge market. But P&G had no indication that disposable diapers would replace cloth, only predicting that about 6% to 7% of cloth users would switch to disposables.

crestThe first toothpaste with fluoride, Crest was also a category-defining product that had gained iconic status along with P&Gs other household names. As the product (and others with fluoride) improved dental health, P&G worked with professional organizations such as the American Dental Association to persuade dentists that their lucrative restorative services, which were in decline due to improved dental health, could be offset by preventative care. However, Crests success also helped ensure the generic status of fluoride toothpaste, and in the 1980s, Crest slipped in the market as baking soda and whitening additives bolstered competitors offerings. P&G responded to these market threats by expanding Crests brand franchise beyond toothpaste, with Crest Whitestrips and, through an acquisition, the Spinbrush, both in 2000.

alwaysAlways sanitary pads, launched in 1984, became P&Gs first truly global product. P&Gs Always brand was behind some of the biggest innovations in feminine hygiene history, including the introduction of winged pads in 1985 and ultra-thin pads in 1990. P&G introduced Always Infinity, a pad made with a newly invented material that enabled women to have the magical combination of absorbency, amazing softness, and flexibility all in one pad. As a global brand, P&G adapted Always (in size and shape) to appeal to women across the globe, and in some international markets, it was the first feminine hygiene product ever marketed to consumers.

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