Procter & Gamble : Marketing Capabilities

Harvard Business CaseAn Evaluation

Product Categories

Earnings and Net Sales

● Evaluation of P&G’s marketing strategy● Is their heavy financial investment in advertising and marketing campaigns

working for them? Or is capital better invested elsewhere?

● P&G has been the largest spender in market research. Is it effective?

What we’re asking

R&D replaces Trial and Error (1887)● Chemistry lab set up ● Sales and Marketing connected to R&D department● Ahead of their time and competition● Have been relentlessly innovative ever since

Global Expansion (1930s)● Founded in USA in 1837● Expansion attempts in 1930s● 1945 to 1980s - expanded to Latin

America, Western Europe and Japan

● Forward thinking and ambitious

Breakthrough Products (1960s)● Developed breakthrough products ● Not afraid to take risks, pioneers in

several fields

Acquisitions (1950s)● Acquired many companies

that served as gateways into new markets

● Many successful acquisitions in short span of time

● Good at predicting trends and demands

● Not afraid to take risks

Global Brands (1980s)● Developed highly successful Global Brands● Diversified acquisitions and entered new markets● Foresaw importance of and potential in global expansion● Not afraid to take calculated risks

High Profile Acquisitions (1990s)● Acquired three top cosmetics

companies and became top company for cosmetics in USA

● Diversified into many markets● Large portion of market share

in numerous industries ● Had tried, tested and perfect

the art of acquisitions ● Made good decisions and

predictions

Decline in Growth (1999)● Cut down on staff● Greater emphasis on innovation● More number of Global Expansion Units - Risky step ● Greater emphasis on research ● Greater emphasis on acquisition ● Did not let go of tried and tested company strategy during testing times despite

huge risks ● Cut down on expenses ● Doubled down on proven methods

Connect and Develop (1999)● New structure and approach to innovation● Identified proven technologies, packages, and products● Undertakings P&G could improve, scale up, and market on its own or through

partnerships● Cost control failed● Restructuring needed ● Continued to execute strategy despite failure● Modified strategy to root out problems

● Great emphasis on design across industries in 1990s● Focus on product design following years of focusing on function, performance and

price● Indicative of capability to recognize emerging trends● Design at front end of innovation process ● In depth focus on product, purchasing and user experience ● P&G Design Board set up● Design informed innovation and lead to success● Unique and inventive sources of market research ● Consumer marketing developed

Emphasis on Product Design (post 2000)

Focus on Return on Market Investment (post 2000) ● In depth studies tracking customer behaviour conducted - focus on customer for

product development is a valuable practice● Focus on customers offering potential for growth - expansion into new markets● Measured brand loyalty and customer relationships - retain and adapt values

company is built on ● Shift to digital marketing - capitalised on emerging trend, more effective

Connect and Develop (post 2006) ● Combat long standing centralisation and

internal focus● Forged partnerships with numerous bodies

with technology and products that showed promise - avoided stagnation;

● Constant focus on growth● Best ideas rise to the top - involving employees

from all levels ● Steady pressure on culture● Forced adaption of new skills ● Productivity, innovation, success improved

greatly ● Cost in innovation dropped

Recession (2008)● Marketing Investment Maintained● Took appropriate measure to compensate and mitigate losses ● Did not face too much damage● Focus on shopping experience - exploring innovative concepts to avoid stagnation

of brand equity ● Final product kept in mind in early stages - focus on more wholesome view of

marketing ● Sophistication and refinement of processes● Multibranding - Leveraging P&G brand for sales ● Held off on digital marketing when dot com bubble burst - took calculated steps,

avoided failure

● Acquired Gillette in 2005● Great degree of sustained success expected● 150% returns initially● Sales died down a brought down the brand in 2010 ● Performed damage control ● Sales went back up by 2012 with 80% market share in USA and India

Potential Failure - Gillette (2005 - 2012)

Strategy Shift (2010)● Grow core brands and

categories with unrelenting focus on innovation - They still haven’t let go of the factor that was the source of their success in the beginning

● Build business with unserved and underserved customers - smart strategies for expanding customer base

● Focus on fast growth - coping with swiftly increasing competition

● High margin businesses with global leadership potential

● Neuromarketing - constant incorporation of latest technology

● Strong shift to digital marketing - focus on greater ROMI

● Olympic Sponsorship - built upon developing markets; thought long term

More Customers, More Parts of the World, More Completely (2010)

Post 2010● Continues to grow and

evolve through tried and tested methods

● Incorporates new technologies and ideas along the way

● Still the world’s largest marketer

Brands at at the heart of P&G’s success

● Acquire on a small scale ● Trial and error● Learn formula for success before scaling● Scale if successful and viable

Acquisition Process

Highly successful brands born out of acquisitions and mergers

First Chemistry Lab set up in 1887

● R&D replaced trial and error in 1887● Crest Toothpaste was a first of it’s kind product in

the dental care sector and it was born out of research in laboratories

Crest Toothpaste - Breakthrough Products

Heavy focus on innovation since inceptionMany category defining products

● Took heavy risks to get ahead of competition when Tide was developed since it was very ahead of it’s time.

● Evaluated competition well ● Immediate, sustained branding efforts - Left no

stone unturned to strive for success in state of heavy risk

● Success, two year lead on competition● Speedy release to market became a part of

system - capitalised on strategy that proved useful

● Developed Pampers post war baby boom in 1950s - timely recognition of potential market

● Only 6% - 7% of potential market expected to use product. Took huge risk again, with innovation as the pillar

● Mitigated risks via efficient operations Efficient, low cost manufacturing

● Mitigated risks by offering product at low price

● Came up with premium diaper brand, Luvs. Attempted to cater to another segment of market they had monopoly on

● Competition stole technology and offered products for lower price - Faced with failure

● Learnt many strategic lessons and incorporated them into systems

● Crest Toothpaste was category defining breakthrough

● Faced with heavy competition due to new technology

● Capitalised on brand success to release peripheral products like Crest Whitestrips

● Acquired other potential competitors

First company to advertise directly to customers

● Advertising Pioneer - First ever magazine ad for Ivory Soap

● Focus on purity ● Inventive - Mass

mailing customers with samples

● Brand became synonymous with purity and simplicity over the years

Product Segmentation● Products satisfying

similar needs are segmented based on function, luxury and affordability

● Marketed according to usability and target market

● Each product treated individually following temporary failure of Luvs - Rectify past mistakes and incorporate learnings

Region specific Ad Campaigns● The same product was marketed differently in

different target geographical markets ● Products positioned as being of high quality,

pure ● Very effective market research led to

successful campaigns and hence success of the product

● Recognisable characters were created for products, often with TV shows and merchandise of their own.

● Boosted sales● Increased brand awareness ● Brand equity increased

My Black is Beautiful ● Extremely successful campaign,

My Black is Beautiful campaign linked the emotions of a certain demographic with P&G products

● A hit TV show was produced following the campaign

● Testimony to good understanding of customer base

● Sales of products shot up ● Brand equity and awareness

increased

Interaction With Community ● Philanthropic undertakings like

the Tide campaign after Hurricane Katrina - promotion of product on large scale while giving back to community

● Witty restroom campaign in Times Square promoting Charmin - Unique, catchy, high visibility ways of increasing brand awareness

● Primary target was people under 30 - focus on potential lifelong customers; long term thinking

Shopper’s Market Experience● ‘If it doesn’t work in the

store, it’s a miss’● Packaging and labelling

attracted customers’ attention and schemes made them want to purchase products

Sponsored numerous high profile sports events

Sponsored daytime dramas, giving rise to Soap Operas

High Profile Celebrity Endorsements

● Long standing partnerships with broadcast and advertising agencies from the early days of advertising

● Have been sponsors for The Olympic Games multiple times● Celebrity endorsements generate product awareness● Increased Brand Awareness and Equity

2008 Recession ● Marketing Budget

Retained ● Coupons and Displays in

place of more expensive avenues

● Shift to digitals ads

Consumer Centric Marketing (post 2000)

Reflect.com● Customers could customize

products according to their preferences

● Excellent source of market research

● Innovative, unique research tactic

● Website translated for 49 countries - catered to global markets, valued customers

● Forged emotional connections with customers

Numerous websites catering to specific demographics● beinggirl.com● Manofthehouse.com was

created when they realised men were visiting websites meant for women for recipes and tips - catered to needs of new demographic following observation of users

● Increased brand awareness● Increased brand equity

Digital Marketing Excellence● The Old Spice ‘Smell Like a Man’ campaign gathered great traction● The company set up various digital meet and greets on Twitter, etc following the

endorser’s fame ● Brand’s awareness and equity increased, billions of ‘friends’ on Facebook and

Twitter● Excellent timing ● Recognition of opportunity● Marked transition from mass

marketer to one on one digitized marketer

SummaryWhat makes P&G’s marketing ventures so successful

● P&G have been pioneers in the field of marketing ● Have developed a unique, ever evolving formula for marketing success● They have coped with failures well in the past by adapting to changing

environments and thinking long term ● The company tends to think out of the box ● Their marketing tactics are effective to a great extent (5 billion strong customer

base) ● P&G’s investment and heavy focus on marketing activities is justified ● The company should invest more in environmental and humanitarian causes

DISCLAIMERThis presentation was made by Aarzoo Sharma, BITS Pilani during an internship under

Prof Sameer Mathur, IIM Lucknow.