9.35 Procter & Gamble Company

Procter & Gamble is a Fortune 500 American multinational corporation that provides consumer products in the areas of pharmaceuticals, cleaning supplies, personal care, and pet supplies. P&G brands are sold in 180 countries, to some 4.2 billion of the 7 billion people in the world.

Currently investing $400 million in over 20,000 research studies a year, P&G has become a recognized innovator, and over the last 16 years the company succeeded in placing 132 products on the top 25 Pacesetters list — more than their six largest competitors combined. In 2007, P&G was the 25th largest US Company by revenue, 18th largest by profit, and 10th in Fortune's Most Admired Companies list. Some 23 of P&G's brands aggregate over a billion dollars in annual sales, and another 18 aggregate $500 million to $1 billion. In 2009, SymphonyIRI recognized P&G as the most innovative manufacturer in the consumer packaged goods industry for the last decade, and in 2010 alone, the company launched 4 of the top 10 most successful nonfood products. {5} {13}

P&G is a forward-looking company that makes much use of Internet technologies, including social media, {3} {14} {19} blogs, {4} business intelligence systems {7}, e-document management systems {9} and private industrial networks. {6}

Connect and Develop

After a continued slide in P&G's share price, A.G. Lafley took the helm in 2000, adopting a new approach to Research and Development. Instead of simply pumping money into the division, his 'Connect & Develop' policy expanded internal research by outside partnerships. The aim was to develop 50% of its innovations by this route, a goal reached in 2007, when R&D productivity had risen 85% for a very small increase in spending. 'Connect & Develop' had a three-pronged approach: {1}

1. Encourage senior scientists from P&G business units to develop individual relationships with researchers at universities and other companies.
2. Put problem-solvers in touch with each other through the Internet, enabling winning solutions to earn cash prizes from $5,000 to $1 million. Some of these connections were through 'Innocentive', originally set up by the drug maker Eli Lilly but developed into an independent intermediary linking government, nonprofit, companies like P&G and Solvay and the Rockefeller Foundation.
3. Knowledge was also drawn from retirees through YourEncore.Com, which was to act as innovation bridge to the outside world.

What's in a Name?

Crest

P&G entered the Chinese oral care market with two versions of Crest. The premium brand, Ku Bai, targeted urban consumers wanting teeth whitening and breath freshening. Marketing was through ads and Crest's Chinese website, which featured Li Yuchan, a popular singer voted 'Super Girl' in an American Idol-type contest in 2007. Ku Bai retails for US 95 cents per 5 ounce tube.

The green brand, Cha Shuang, targets rural customers, and has a tea flavour. It retails for US 88 cents per 5 ounce tube.

In brief, P&G leveraged the Crest brand across two market segments by making the distinction clear to customers. {2}

Clorox

P&G market Clorox, a strong cleaning agent, associated in the popular mind with bleach and industrial chemicals. Research showed that American customers were attracted to more natural products, but did not want those products to be ineffective or only available at separate stores. The company therefore re-introduced the product as part of its Green Works line, emphasizing both its effectiveness and natural affiliations. The Sierra Club endorsed the product, and sales were five time those expected by eleven months into the campaign. {2}

Brand Awareness

Tremor, the P&G social networking site launched in 2001, enlists teenagers to pitch brands to their friends. Vocalpoint is P&G's social network involving mothers and women generally. Both have armies of 'connectors' numbering hundreds of thousands. {3}

Pampers Village is P&G Internet community providing information on parenting, baby care products and blogs from moms and pediatricians. {4}

Pur is a P&G water purifier made freely available to third-world countries lacking clean water supplies, {8} an example of cause-related marketing. {15}

Points to Note

1. Importance of social media to branding.
2. Forging new relationships with companies and individuals.
3. Search for markets outside middle America. {16}

Questions

1. Describe the extended nature of Procter & Gamble.
2. Which Internet technologies does P&G employ?
3. What is P&G's 'Connect and Develop'. How does it compare with GlaxoSmithKline's 'Patent Pool'?
4. How does P&G relate to its customers? Give an analysis in terms of the Osterwalder and Pigneur business model.
5. How does P&G use social media to strengthen brand awareness?

Sources and Further Reading

1. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers by Alexander Osterwalder and Yves Pigneur. Wiley 2010. 112
2. Strategy from the Outside In by George S. Day and Christine Moorman. McGraw Hill. 2010. 192-3.
3. Day and Moorman, 206.
4. Day and Moorman, 156.
5. Proctor & Gamble. Wikipedia. Detailed account of P&G's successes.
6. E-Commerce 2010 by Kenneth C. Laudon and Carol Guercio Traver. Pearson. 2010. 12.35.
7. How Procter and Gamble Survived through Innovation. Knol. Company's innovation strategy.
8. Case study: Proctor & Gamble's Pur by Carol Seagle and Lisa Jones Christensen. FT. March 2011. P&G's philanthropy and its water purifier.
9. A Document Management Case Study: Procter and Gamble by Samuel Greengard. Baseline. August 2008. Development of an e-document management system.
10. Open Innovation Insights — P&G Case Studies by Stefan Lindegaard. Blogging Innovation. October 2010. See also P&G Case studies: Latin America. 15Inno.
11. Restructuring P&G. ICMR. 2003. Discusses the six-year 'Organization 2005' program.
Detailed treatment with extensive references.
12. Digital Media Across Asia. Wet Paint. P&G's social media marketing in Japan. See also Marketing 101. Jap@nInc. July 2008.
13. Proctor & Gamble. P&G. Company website with promotional information.
14. P&G Shifts Marketing Strategy from Soap Operas to Social Media by Jennifer Van Grove. Mashable. P&G's social media and marketing budget.
15. Cause Related Marketing by Tapan Trivedi and Ravneet Kaur. Dspace. April 2007. Examples and application to India.
16. As Middle Class Shrinks, P&G Aims High and Low by Ellen Byron. Wall Street Journal. September 2011.
17. Clorox: A Mini-Procter & Gamble, and Cheaper by Jeff Bailey. YCharts. November 2010.
18. P&G Chief Wages Offensive Against Rivals, Risks Profits by Ellen Byron. WSJ. August 2010.
19. P&G Corporate Newsroom. P&G. Accessed September 2012.
20. Procter & Gamble Profit Up 6% but Its Forecast Disappoints. N.Y.T. April 2013.