Procter & Gamble

Procter & Gamble $($P&G$)$ began in $1837$ when brothers$-$inlaw William Procter and James Gamble,

whose wives were sisters, formed a small candle and soap company. From there, P&G innovated

and launched scores of revolutionary products of superior quality and value, including Ivory soap

in $1882,$ Tide laundry detergent in $1946,$ Crest toothpaste with fluoride in $1955,$ and Pampers

disposable diapers in $1961.$ P&G also acquired a number of companies to open the doors to new

product categories. Among these were Richardson$-$Vicks $($makers of personal care products like

Pantene, Olay, and Vicks$),$ Norwich Eaton Pharmaceuticals $($makers of Pepto$-$Bismol$),$ Gillette,

Noxell $($makers of Noxzema$),$ Shulton$$s Old Spice, Max Factor, and the Iams Company. Today,

P&G is one of the most skillful marketers of consumer packaged goods in the world and holds

one of the most powerful portfolios of trusted brands. The company employs $138,000$ people in

more than $80$ countries worldwide and has total worldwide sales of more than $$79$ billion a year.

It is the leader in $15$ of the $21$ product categories in which it competes, has $23$ billion$-$dollar global

brands, spends more than $$2$ billion annually on R&D$,$ and serves more than $4$ billion people in

$180$ different countries. Its sustained market leadership rests on a number of capabilities and

philosophies: $$ Customer knowledge. P&G studies its customers$$ both end consumers and

trade partners$$through continuous marketing research and intelligence gathering. It spends

more than $$100$ million on over $10,000$ formal consumer research projects every year and

generates more than $3$ million consumer contacts via its e$-$mail and phone center. It also

emphasizes getting its marketers and researchers out into the field, where they can interact with

consumers and retailers in their natural environment.

Long$-$term outlook. P&G takes the time to analyze each opportunity carefully and prepare the

best product, then commits itself to making this product a success. It struggled with Pringles

potato chips for almost a decade before achieving market success. Recently, P&G has focused on

increasing its presence in developing markets by concentrating on affordability, brand

awareness, and distribution through e$-$commerce and high frequency stores.

$$ Product innovation. P&G is an active product innovator, devoting $$2$ billion annually to research

and development, an impressively high amount for a packaged goods company. It employs more

science PhDs than Harvard, Berkeley, and MIT combined and applies for roughly $3,800$ patents

each year. Part of its innovation process is to develop brands that offer new consumer benefits.

Recent innovations that created entirely new categories include Febreze, an odor$-$eliminating

fabric spray; Dryel, a product that helps $$dry$-$clean$$ clothes at home in the dryer; and Swiffer, a

cleaning system that more effectively removes dust, dirt, and hair from floors and other hard

surfaces.

$$ Quality strategy. P&G designs products of above average quality and continuously improves

them in ways that matter to consumers, including Tide compact detergents, Pampers Rash Guard

$($a diaper that treats and prevents diaper rash$),$ and improved two$-$in one shampoo and

conditioner products for Pantene, Vidal Sassoon, and Pert Plus.

$$ Brand extension strategy. P&G produces its brands in several sizes and forms. This strategy

gains more shelf space and prevents competitors from moving in to satisfy unmet market needs.

P&G also uses its strong brand names to launch new products with instant recognition and much

less advertising outlay. The Mr$.$ Clean brand has been extended from household cleaner to

bathroom cleaner, and even to a carwash system. Old Spice extended its brand from men$$s

fragrances to deodorant. Crest successfully extended into a tooth$-$whitening system called Crest

Whitestrips that removes surface stains from teeth in $14$ days.

$$ Multi$-$brand strategy. P&G markets several brands in the same product category, such as Luvs

and Pampers diapers and Oral$-$B and Crest toothbrushes. Each brand meets a different consumer

want and competes against specific competitors$$ brands. At the same time, P&G is careful not to

sell too many brands and has reduced its vast array of products, sizes, flavors, and varieties in

recent years to assemble a stronger brand portfolio.

$$ Communication pioneer. With its acquisition of Gillette, P&G became the nation$$s largest

advertiser, spending over $$2\mathrm{.}3$ billion a year or nearly twice as much as the number two company,

General Motors Corp. P&G pioneered the power of television to create strong consumer

awareness and preference. In recent years, the company has shifted more of its advertising

budget to online marketing efforts and social media such as Facebook, Twitter, and blogs. These

efforts help infuse stronger emotional appeals into its communications and create deeper

consumer connections.

$$ Aggressive sales force. P&G$$s sales force has been named one of the top $25$ by Sales &

Marketing Management magazine. A key to its success is the close ties its sales force forms with

retailers, notably Walmart. The $150-$person team that serves the retail giant works closely with

Walmart to improve both the products that go to the stores and the process by which they get

there.

$$ Manufacturing efficiency and cost cutting. P&G$$s reputation as a great marketing company is

matched by its excellence as a manufacturing company. P&G spends significant amounts

developing and improving production operations to keep its costs among the lowest in the

industry, allowing it to reduce the premium prices at which some of its goods sell.

$$ Brand$-$management system. P&G originated the brand$-$management system, in which one

executive is responsible for each brand. The system has been copied by many competitors but

not often with P&G$$s success. Recently, P&G modified its general management structure so each

brand category is now run by a category manager with volume and profit responsibility. Although

this new organization does not replace the brand$-$management system, it helps to sharpen

strategic focus on key consumer needs and competition in the category.

P&G$$s accomplishments over the past $173$ years have come from successfully orchestrating the

myriad factors that contribute to market leadership.

Questions:

$1.$ P&G$$s impressive portfolio includes some of the strongest brand names in the world. What are

some of the challenges and risks associated with being the market leader in so many categories?

$2.$ With social media becoming increasingly important and fewer people watching traditional

commercials on television, what does P&G need to do to maintain its strong brand images?