Question: For many years Procter Gamble as well as the
For many years, Procter & Gamble, as well as the Mother giant consumer packaged goods manufacturers, used special deals and merchandising campaigns as the mainstay of their channel management strategy for dealing with channel members. Special discounts, allowances, slotting fees, coupons, payments for displays, and similar tactics were used abundantly to get retailers and wholesalers to push their products. The main problem with that approach to motivating channel members is that it can be very expensive for the manufacturer. It often requires higher costs for special packaging and handling, creates “peaks and valleys” in production, and increases the manufacturer’s promotional costs. Moreover, from the consumer’s point of view, the ups and downs in prices, when one week a box of Tide might sell for $3.79 and the next week for $7.79, fosters price sensitivity and erodes brand loyalty. In a fundamental break with this status quo approach to channel management, P&G offered its products to channel members at lower prices on an everyday and sustained basis. P&G believed this would reduce its own costs and enable channel members to pass on lower prices to consumers, also on an everyday basis. What do you think of P&G’s channel strategy? What are its possible strengths and weak- nesses? Discuss from the standpoints of the manufacturer and the channel members.
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