Procter & Gamble (P&G) began in 1837 when brothers- in-law William Procter and James Gamble formed a small candle and soap company. Over the next 150 years, P&G innovated and launched scores of revolutionary products with 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 1 961 . The company also opened the door to new product categories by acquiring a number of companies, including 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 pet food company.
Today, Procter & Gamble 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 121,000 people in about 80 countries worldwide, has 25 billion-dollar global brands, spends more than $2 billion annually on R&D, and has total worldwide sales in excess of $84 billion a year. Its sustained market leadership rests on a number of different capabilities and philosophies. These include:
Customer knowledge: P&G studies its customers— both the end consumers and its trade partners—through continuous marketing research and intelligence gathering. It spends more than $100 million annually on more than 10,000 formal consumer research projects and generates more than 3 million consumer contacts via its e-mail and phone center. The company also encourages its marketers and researchers to be out in the field, interacting with consumers and retailers in their home environment.
Long-term outlook: P&G takes the time to analyze each opportunity carefully before acting. Once committed, the company develops the best product possible and executes it with the determination to make it a success. For example, it struggled with Pringles potato chips for almost a decade before achieving market success. Recently, P&G has increased its presence in developing markets by focusing on affordability, brand awareness, and distribution through e-commerce and high-frequency stores.
Product innovation: P&G is an active product innovator. The company employs 1,000 science PhDs, more 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 effectively removes dust, dirt, and hair from floors. Larry Huston, former innovation officer at P&G, stated, “P&G is largely a branded science company.”
Quality strategy: P&G designs products of aboveaverage quality and continuously improves and reformulates them. When the company says “new and improved,” it means it. Recent examples include Tide Pods, a compact laundry detergent tablet; Pampers Rash Guard, a diaper that treats and prevents diaper rash; and improved two-in-one shampoo and conditioner products 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. Often, P&G will leverage the technologies already in place to create a brand extension. For example, when Crest successfully extended its brand into a new tooth-whitening system called Crest Whitestrips, the company used bleaching methods from P&G’s laundry division, film technology from the food wrap division, and glue techniques from the paper division.
Multibrand 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, the company is careful not to sell too many brands and recently reduced its vast array of products, sizes, flavors, and varieties to assemble a stronger brand portfolio.
Strong sales force: P&G’s sales force has been named one of the top 25 sales forces by Sales & Marketing Management magazine. A key to its success is the close tie 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. The company has successfully developed and continually improves its production operations, which keep costs among the lowest in the industry. As a result, it is able to offer reduced prices for its premium products.
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 that a category manager runs each brand category and has 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 177 years have come from successfully managing the numerous factors that contribute to market leadership. Today, the company’s wide range of products are used by 4.8 billion people around the world in 180 different countries.
Source: Kotler Philip T., Keller Kevin Lane (2015), Marketing Management, Pearson; 15th Edition.