HARVARD

BUSINESS

CASE

STUDY

KRUNAL CHAKRAVORTY

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

ANALYSIS

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

20

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60

70

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

Lets now look at

Challenges faced

Failures

Brand adaptability

Successes

Of P&G

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