A Marketing Strategy Development: The Procter & Gamble Experience - Essay Example

A MARKETING STRATEGY DEVELOPMENT: THE PROCTER & GAMBLE EXPERIENCE Table of Contents 3 Procter & Gamble: A Brief Background 3 The Marketing Strategy Development of Procter and Gamble 5 Marketing Strategy # 1: Utilization of Design as a Consumer Experience in Its Products 5 Strategy # 2: From Traditional Media Marketing to Relationship Marketing 6 Strategy # 3 Market Research As Basis in Making Decisions 8 Strategy # 4: Sponsorship 9 Strategy # 5 Promoting Business Responsiveness in Global Marketing Efforts 11 The Tools and Techniques in Preparing a Strategic Marketing Plan 13 Thorough Planning 13 Market Identification and Segmentation Through Market Research 13 Identifying Networks of Marketing Devices 13 An Outline of a Strategic Marketing Plan 14 Strategic Planning 14 Strategic Market Research 14 Feedback Generation 15 Recommendations 15 References 16 Abstract This paper discusses the current marketing strategy employed by Procter & Gamble in its products. A discussion of the company’s brief profile and background is imperative in giving a glimpse of the nature of its business. With marketing strategy being identified, detailed marketing pursuits are reflected in P&G’s product management alongside the flaws it had recently undertaken. The paper also identifies tools and techniques in carrying out a marketing plan, as well as an outline of a strategic marketing plan. In enhancing the marketing strategy employed by Procter & Gamble, recommendations are as well identified. Procter & Gamble: A Brief Background Procter & Gamble has one of the largest portfolios of consumer brands that are commonly known in the household, such as Pampers, Tide, Ariel, Pantene, Bounty, Always, Folgers, Downy, Crest, Olay, Pringles, Actonel, Wella, lams, Gillette, and Charmin. Its community consists of over 138, 000 employees in over 80 countries worldwide, making P&G a company whose products reach households of different nationalities. The company started as a small, family-operated soap and candle business, which later transformed into a big transnational corporation that provides products and services of superior quality and value to consumers in more than 180 countries. Procter & Gamble is a Fortune 500, American global corporation based in Cincinnati Ohio whose focus of manufacturing is a wide range of consumer goods. As of 2008, it has placed itself as the 14th largest US company by profit and 23rd by revenue. In 2007, it was placed 10th in Fortune’s Most Admired Companies list.1 It was recorded that it spent more on U.S. advertising than any other company in 2007, doubling the $2.62 billion spent by General Motors.2 Procter & Gamble was founded in 1837 by William Procter, a candle maker, and James Gamble, a soap maker. William Procter was an immigrant from England while James Gamble was from Ireland who both settled in Cincinnati and met each other when they married sisters Olivia and Elizabeth Norris.3 As electricity became more and more common, the company stopped producing candles in 1920 and as it grew larger in the early 20th century, it began building factories in other parts of the United States because of a high demand of products outgrowing the Cincinnati facilities. P&G also became known for its research laboratories in the 1900s, in which chemists produced new products. It also pioneered in the area of market research, probing on product appeal and consumer needs. When radio became popular in the 1920s and 1930s, Procter & Gamble sponsored a number of radio programs, resulting for them to be called “soap operas.”4 In 1946, the company introduced Tide laundry detergent, Prell shampoo in 1950, Crest, the first toothpaste to contain fluoride in 1955, Downy fabric softener in 1960, and Bounce fabric softener in 1972. In 1981, it began manufacturing its most revolutionary product, Pampers, in a market wherein diapers were unheard of, simplifying the diapering process. On the second half of the 20th century, Procter & Gamble acquired several companies, diversifying its product line and increasing profits significantly, such as Folgers Coffee, Noxell, Richardson-Vicks, and Max Factor, among others. In 2005, it acquired Gillette, Duracell, Braun, and Oral-B. The Marketing Strategy Development of Procter and Gamble Procter & Gamble uses effective marketing strategy that is sure to fulfill its financial, management, and marketing goals, such as utilization of design, the usage of relationship marketing from traditional media marketing, market research as a basis of making decisions, sponsorship, and promoting business responsiveness in global marketing efforts. Marketing Strategy # 1: Utilization of Design as a Consumer Experience in Its Products The marketing strategy of Procter & Gamble relied on innovation to corner the market with new products and services alongside new and revolutionary components of already stable products. With definite intensification of global competition, Procter & Gamble needs to be on guard of current market research and apply such in its marketing of products and services. Predicting its unique selling proposition is not the key towards this, as competitors will easily knock off the company with this concept. The company understands that extensive consumer research is the key to great design, which involves in-depth research of the consumer, which it has been doing for several years. Through research, Procter & Gamble observes and studies consumers’ interaction and experience with its products, in which valuable information is yielded. Studies like this assist Procter & Gamble to deliver the brand first, and products and services second, signifying the importance given by the company’s marketing strategy on the design of the product that encompasses consumers’ experience with it. Observing how consumers interact with the company’s line of products through feedback, the creative consultancies of Procter & Gamble design the most satisfying customer experiences. Procter & Gamble has already embraced the concept of designing the total customer experience with its consumer brands and product lines, and has become design-centric in its focus of sector.5 This emphasis in design is exemplified by its CEO, Alan G. Lafley, in his statement, “I want P&G to become the number one consumer-design company in the world, so we need to be able to make it part of our strategy. We need to make it part of our innovation process.”6 Design is so important to P&G’s marketing strategy to the point that it is integrated to purchasing experience, making it an every component of the product, as well as the communication experience and the user experience. This significant emphasis on marketing design brought P&G marketing veteran and VP for design innovation and strategy Claudia Kotchka to turn the company into a “design-centric culture.” With this exemplification of the linkage between marketing and design, a powerful new trend is signaled in the corporate world. This move towards “design-centrism” integrates creative, innovative design with analytical management in the highest circles of business and marketing. This corporate trend has been referred to as the “Rise of the Creativity Economy” wherein the corporate and design sectors integrate their analytical and creative problem solving strategy with true design solutions. Procter & Gamble attempts to integrate the full potential of brand loyalty and brand equity through yielding dividends on one hand, and building customer experiences that deepen into meaningful relationships built on trust.7 Strategy # 2: From Traditional Media Marketing to Relationship Marketing From traditional media, Procter & Gamble trailed the path towards relationship marketing with attempts to integrate its marketing efforts across its 86 brands. This concept is based on the notion of “targeted scale,” in which it pours its marketing efforts through relationship marketing, such as direct mail, online communities, content plays, among others.8 The gist of this targeted scale is reinforcing a relationship with consumers, which traditionally used to be the forte of service companies, particularly in banking and airlines industry. Procter and Gamble is now utilizing this marketing strategy in reaching consumers better while optimizing available resources, such as electronic advertising. Segmentation is a concept that goes along with the notion of “targeted scale,” one that is modified to service consumers using an integrated approach.9 When a communication goes to a consumer, it bears the name of the corporate brand, and not the individual brands of P&G, thereby marketing the company itself, and instilling trust and dependability. With the rising cost of raw materials alongside decreasing returns, P&G’s marketing is shifting towards this non-media one, wherein aggressive efforts are bound to focus on online space, in-store promotions, induce trials for consumers, among others. Strong brands, customer awareness, market share, and satisfied consumers are not the ends of a certain marketing strategy, but means in creating shareholder value, which Procter & Gamble continuously undertakes. Understanding how a brand creates value takes an understanding of how the company that produces it creates value. The resource-based theory of the firm enters the scenario, in which it states that defining a firm in terms of its core capabilities and assets offers a stronger basis for strategy than one based upon a consumer needs which the business seeks to satisfy.10 Hence, sustained success is dependent on having the special capabilities to deliver at higher quality or lower cost than competition, which traditional media advertisements are exemplifying. With relationship marketing, Procter & Gamble drifts away from this traditional trend. It is significant to mention that strong brands can be undermined by a poor marketing strategy – one that is not apt for creating shareholder value. This might happen if more attention is focused on maximizing awareness, growth, or market share instead of the value of long-term cash flow. With this strategy, the brand’s value erodes due to the cost of servicing several low-profit accounts, underpricing, and overinvestment in marketing communications.11 In contrast to this, successful product brands direct impacts on the customer relationship management process, which enhances both the confidence and satisfaction of customers about such product. Procter & Gamble was a star at brand management along with Gillette, Unilever, and Kellogg, but it has delivered very poor returns to shareholders in recent years, just like the rest mentioned.12 The reason for this was an intense competition in the grocery market, in which they predominantly operated, caused by “me-too” products, excess capacity, own-label products, and little growth, leading to delivery of poor returns. It indicates that while Procter & Gamble maintained high awareness and market shares, the absence of volume growth alongside with pressures on profit margins caused decline in the financial value of these brands as well as the company itself. Indeed, the recent shift from traditional media advertising to “targeted scale” is drifting away from this picture. Strategy # 3 Market Research As Basis in Making Decisions Procter & Gamble optimizes its use of market research and the benefits it can provide its products, often undertakes thorough research before launching a new product. The company uses research in making decisions about the marketing mix and its marketing strategy and tactics. The launch of Crest White strips is a product of a market research, which proved both useful and effective for P&G, with enormous returns that the new product brought to the company as a result. Before, whitening products were not available in the market, and one had to visit the dentist in pursuit of this. However, when P&G launched its new Crest White strips, consumers can already whiten their teeth at the comfort and pleasure of their homes, and in an affordable price. In this example, P&G used market research in determining whether there was a need for a whitening product for in-home use, the appropriate type of product, and how such product would fit to P&G’s marketing strategy. Through an initial research, it was confirmed that there was an unmet need in the market pertaining to tooth whitening, in which even a product that requires 30 minutes of use would be acceptable. Market research shapes the product identification, its brand name, and promotional strategy. In the case of a whitening product, Crest and Cover Girl were the options in which the new product will be launched, and certain considerations were undertaken. First, Crest denotes hygiene and tooth care as an established toothpaste brand; second, Cover Girl is a cosmetics line and if the whitening product would be integrated to it (i.e. “Cover Girl White Strips”), it will definitely limit the number of consumers who will possibly use it. Strategy # 4: Sponsorship P&G adheres to various forms of sponsorship, such as product sponsorship and cause sponsorship as a marketing strategy. When Tsunami struck South East Asia and certain portions of India, P& G donated a total of Rs. 32 lakhs for rehabilitation purposes through the Prime Minister Relief Fund. Aside from funds, it also participated in Tsunami efforts through the distribution of its “PUR” water purifying sachet products to victims.13 However, with this strategy, consumers need to see P&G apply sincere long-term commitment to cause marketing strategies like the one mentioned, without which, a possibility of a perception that it is benefiting from the cause than genuine helping might surface. The company’s extensive cause marketing strategies in India sufficiently demonstrates a strategic intent toward this end. Project Drishti, the first ever sight restoration corporate project, was launched by Procter & Gamble Hygiene and Health Care India, along with the National Association for the Blind (NAB). Project Drishti undertook corneal transplant operations, an initiative supported by Whisper feminine napkins, triggering its sales by 32% despite stiff competition with lower-priced brands.14 Another cause-marketing program that Procter & Gamble undertook was Shiksha, which aimed at helping children across India achieve their right to education.15 This project was undertaken in association with India’s premier child rights organization, Child Rights and You (CRY) and Sony Entertainment Television. In support of Shiksha, some of India’s film stars called for buying large packs of Ariel, Tide, Pantene, Rejoice, Head & Shoulders, Whisper, Vicks VapoRub, Gillette, and Pampers, in order to help lead a child to the path of education. The slogan was, “Buy a P&G product, and educate a child.” Procter & Gamble gave a minimum of Rs/ 1 crore to Shiksha, meant to be allocated to education-focused projects. As a result, Shiksha received an ample support from consumers, news media, and individual supporters in 2005, in which more schools with better infrastructure were built. Shiksha ran as a joint educational initiative between Procter & Gamble and MAA TV in Andrha Pradesh.16 Tench and Yeomans17 suggest that community relations can have an influence on the corporate reputation, and this is increasingly an important measure for individuals and institutional investors for the quality of an organization, such as Procter & Gamble. Community relations and cause-related sponsorships are parts of an overall strategy that not only supports the business interests of an organization but also contributes to organizational efforts in meeting its responsibility of supporting the community, a conceptual embodiment of corporate social responsibility. These definitions imply that the activities surrounding community relations are vital to the success of an organization, such as Procter & Gamble. Knowingly, the result of all these endeavors is for the public to have trust in the company and its product lines through the established integrity of community service that the corporation has established. It is a deliberate effort of Procter & Gamble to communicate effectively with its public and to take efforts in being a part of a larger community where they are able to take care of matters pertaining to their welfare while contributing to the improvement of the general lot. Strategy # 5 Promoting Business Responsiveness in Global Marketing Efforts Given that today’s transnational corporations are faced with the strategic challenge of resolving conflicts that go along with national responsiveness, global competitiveness, and worldwide learning, Procter & Gamble adheres toward undertaking the necessary steps for these capabilities. It is important for the company to build an organization that uses learning in creating and spreading innovations that require the capacity to transfer specialized knowledge. Thus, functional marketing managers scan for specialized information worldwide, which may offer transnational opportunities and applications. Most innovations start when a particular opportunity or market threat is perceived, such as a revolutionary technological development, an emerging consumer trend, or a pending government regulation, which require the corporation to take a stance forward. With the right perspective and expertise to detect trends, P&G is able to transform piecemeal information into strategic intelligence. Informal networks link the corporation to channels that communicate specialized information and proprietary knowledge. Through such link, P&G’s European operations disapproved its high-walled organizational structures that isolated the technical development in each subsidiary’s laboratories.18 When Zaki became Head of Research and Development of P&G in Europe, he formed European technical teams and conducted a series of conferences in which information and informal communication networks may be built. He further distributed staff among the European technical center in Brussels and the development groups of P&G’s subsidiaries, thereby ascertaining the possible duplication of activities on a country-by-country basis. Procter & Gamble is always on the lookout for possible marketing trend by its rivals, such as Unilever, Colgate-Palmolive, Henkel, among others, and in response, its European headquarters requested the Brussels-based research center to develop a new liquid laundry detergent. The presence of a close-knit network of intelligence and product expertise made the endeavor an easy task, having established a technical team that had built up relationships among its members.19 A product profile for healthy sales in multiple markets with diverse needs was drawn in line with this. The new liquid detergent would have to be accomplished into a product of powdered detergents that contain enzymes, which break down protein-based stains. It was important to consider the prevailing detergent usage in various countries. A bleach substitute was important in some markets, while in others, hard water had the toughest challenge, and in some, environmental concerns posed limits on the usage of phosphates. The new detergent had to address all these concerns, and was characterized as one that was effective in large-capacity, top-loading machines as well as in small front-loading machines commonly seen in Europe. The Tools and Techniques in Preparing a Strategic Marketing Plan The tools and techniques in preparing a strategic marketing plan as cited in this paper are (1) thorough planning, (2) market identification and segmentation through market research, and (3) Identifying networks of marketing devices. √Thorough Planning Thorough planning is an important aspect of preparing a strategic marketing plan, without which, the product being marketed might not mount revenues and good returns to the company. Thorough planning involves top managers and marketing specialists, as well as research marketers who are to undergo market research in determining the suitability and appropriateness of the product to the needs of the consumers as well as the current environment trend. √Market Identification and Segmentation Through Market Research In pursuing a strategic marketing plan, market identification and segmentation through market research is important. This will ensure through a systematic manner the packaging and design of the new product, its brand name, and its components that will click to the market and consumers. √Identifying Networks of Marketing Devices A strategic marketing plan identifies networks of marketing devices to ensure the continuous existence of the product in the market. Various forms of sponsorship will account to this, such as product sponsorship, charitable sponsorship, and cause-marketing sponsorship. Identifying a cause or advocacy, such as education in the case of Procter & Gamble, proves to bring mutual benefits for both the corporation and the sponsored group. An Outline of a Strategic Marketing Plan The strategic marketing plan identifies objectives and strategies used for planning, implementation, control, and evaluation. They are depicted as the following: 1. Strategic Planning 2. Strategic Market Research 3. Feedback Generation Strategic Planning Strategic planning is an important aspect of strategic marketing plan whose objective is to ensure that goals are identified and proper network coordination is undertaken before furthering towards product design. Its implementation is carried out through a designed schedule for this purpose, in which detailed documentation is conducted for every session, serving as control, alongside the conduct of evaluation through a comprehensive checklist that determines whether the strategic planning stage for a new product is met. Strategic Market Research The benefits of market research have already been mentioned in this paper, but a strategic marketing plan must involve not just a market research but a likewise strategic conduct of research, enabling all dimensions and aspects of the market be studied, analyzed, and evaluated as basis for the emergence of a new product line. A strategic market research may be implemented through a research team with diverse but integrated tasks. The conduct of the market research may be evaluated through a comprehensive evaluation tool aiming to determine if the job was undertaken within desired goals. Feedback Generation In carrying out a strategic marketing plan, how feedbacks may be determined strategically is a significant dimension. Feedbacks serve as a checking mechanism if the product or service is preferred by consumers, along with the aspects that they like and the ones that they discard. Conducting feedbacks may be undertaken in a regular basis in various forms and may be evaluated according to the specified checklist intended for such purpose. Recommendations The following are recommendations for further enhancement of the marketing strategy of Procter & Gamble: 1. Using appropriate products aligned to a certain cause that it supports in its cause-marketing sponsorships; 2. Continuing the usage of relationship marketing as a replacement of traditional media marketing that entails high financial costs that exacerbate the company’s low revenue returns. References Dyer, Davis, Frederick Dalzell, & Rowena Olegario. Rising Tide: Lessons from 165 Years of Brand Building at Procter & Gamble. Harvard Business School Press, 2004. Fortune [accessed May 30, 2008] Marconi, Joe. Cause Marketing: Build Your Image and Bottom Line Through Socially Responsible Partnerships, Programs, and Events. Dearborne Trade Publishing. 2002 Mininni, Ted. Design: The New Corporate Marketing Strategy, 2005. Retrieved on May 31, 2008 from http://www.marketingprofs.com/5/mininni1.asp?part=2#403 Swacy. Alecia. Soap Opera: The Inside Story of Procter & Gamble. New York: Times Books, 1993. Sundar, S. Cause Related Marketing: Tactic or Strategy? International Marketing Conference on marketing & Society, 2007. Tench, Ralph and Yeomans, Liz. Exploring Public Relations. Essex. Pearson Education, 2006. The Nielsen Company Issues Top Ten U.S. Lists For 2007 [accessed May 30, 2008] Till D. Brian, Novak I. Linda. Towards Effective Use of Cause-Related Marketing Alliances, Journal of Product and Brand Management. Vol. 9 No. 7. Read More