procter and gamble

17
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311-117 Procter & Gamble: Marketing Capabilities

2

to entering new markets was via “acquisition or joint venture on a small scale, and through trial and error, learn the formula for success before making a major commitment.”6

The $57 billion 2005 acquisition of Gillette made P&G the top consumer goods company. While P&G’s then-CEO A.G. Lafley said it had delivered over, “150% of the originally estimated cost synergies,”7 analysts noted that five years after the acquisition most of the Gillette businesses dragged on P&G's top line, most of Gillette’s senior managers had left, and P&G's stock had lagged.8

In 2010, P&G’s stated corporate mission was to build on its company purpose to improve the lives of its customers through continued innovation to reach, “More Consumers, In More Parts of the World, More Completely.”9 P&G was focused on growth and was not afraid to make big bets globally.10 CEO Bob McDonald, who became P&G’s CEO in 2010, explained: “We focused on three specific choices: to grow P&G’s core brands and categories with an unrelenting focus on innovation; to build our business with unserved and underserved consumers; and to continue to grow and develop faster-growing, higher margin businesses with global leadership potential.”11

Innovation and R&D: P&G Marketing’s Secret Sauce

In 1887, a nephew of one of P&G’s founders with a chemistry degree set up an analytical lab for the company, laying the roots for a professional R&D division and establishing one of the first corporate labs in the field of consumer goods.12 Replacing the trial-and-error methods commonly pursued at the time, P&G took a scientific approach and connected R&D with the company’s sales and marketing.13 First-time products included Crest toothpaste (1955), the first toothpaste with fluoride, and Head & Shoulders dandruff shampoo and Pampers disposable diapers (1961).

In June 1999, under then-CEO Durk Jager, P&G reorganized to boost growth after net sales slowed to 2.6% growth from the previous year. P&G cut 15,000 staff and promised to deliver more innovation.14 Seven global business units (GBUs) based on product categories replaced the company’s four geographic business units.15 P&G felt the GBUs would help with global product development and quick-to-market strategies.16 Three new teams supported the GBUs: a business development team focused on innovating in existing categories; a venture team tasked with acquiring brands in new areas and nurturing ideas created by the business development team that did not relate to an existing brand; and market development organizations that would perform intensive market research to ensure global products success in local markets. P&G hoped the net result would be “bigger innovations, faster speed to market, greater growth—innovation vitality.”17

At that time, Jager called for 50% of innovation and new products to come from P&G’s network of labs, and 50% through the labs—i.e., through partnerships and connections with non-P&G scientists and engineers. P&G insiders estimated that, “for every P&G researcher there were 200 scientists or engineers elsewhere in the world who were just as good,” a total of about 1.5 million researchers.18 The trick was to convince the company, stuck in a “not invented here” approach, that P&G’s R&D organization now included 7,500 inside the firm and 1.5 million beyond, “with a permeable boundary between them.”19 Overall, the new structure and approach to innovation identified proven technologies, packages and products that P&G could improve, scale up and market on its own or through partnerships. This structure led to such successful product introductions as the Swiffer Dusters, Olay Regenerist, Crest Whitestrips, and Crest Spinbrush.20 (See Exhibit 3 for details on connect-and-develop.) However, the firm struggled to control costs and its stock slid from $118 to $52 over 18 months. Lafley, who took over as CEO in 2000, remained committed to the reorganization and was convinced it would deliver the innovations promised.

Procter & Gamble: Marketing Capabilities 311-117

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Marketing at P&G

Brands lay at the heart of P&G’s success, and as one observer wrote, “On their own, most of [P&G’s] biggest brands are category killers run by industry leaders with seemingly endless resources at their disposal to exploit unmet consumer needs to drive category growth and market share expansion.”21 And while advertising played a big role in this success, another observer noted, “P&G recognized that building brands is not exclusively or even primarily a marketing activity. Rather it is a systems problem. Better brands are based on innovation and continuous improvement throughout the company’s operations and activities, starting with developed or acquired products with performance features that consumers value.”22 Then steadily lowering the costs of manufacturing and distribution ensured a brand’s success.23 Historically, P&G had pursued a multi-brand strategy, and brands across a category were managed carefully with each getting individual support and satisfying a segment of the market. P&G’s detergent category illustrated this with Tide offered as the premium brand; next came Cheer which “cleaned colors safely,” Gain “had fresh scent,” and at the bottom sat Oxydol which “contained bleach.”24

Marketing Strategy

When Lafley took over as CEO in 2000, he set a goal to make P&G the top product-design company in the world, a departure from P&G’s past focus on function, performance and price. Not long after, Lafley named Jim Stengel chief marketing officer (CMO). Lafley then created a new design unit, separate from P&G’s other business units, and named Claudia Kotchka vice president for design innovation and strategy, giving her decision-making responsibility equal to that of P&G’s CMO and head of R&D. Lafley’s ambitions drove a new and intensified focus on design, married to P&G’s long-standing focus on product functionality and price. “We have an innovation process and we want to make sure that design is plugged in at the front end,” Lafley explained. “We want to design the purchasing experience—what we call the ‘first moment of truth;’ we want to design every component of the product; and we want to design the communication experience and the user experience. I mean, it’s all design. And I think that’s been hard for people to come to grips with.”25

Kotchka sought to bring design to every step of product development and introduce a culture of design to P&G through a number of actions: she hosted a “design tasting,” featuring design case studies for P&G’s top 200 executives; she created a P&G design board, similar to Mattel and Nike, both notoriously strong in design; and, she created the Clay Street Project, bringing cross functional teams from their jobs elsewhere across the firm’s global footprint to Cincinnati for 10 weeks to create new brands based on design.26 The influx of design had a strong impact on P&G’s product development; design informed the innovation process and even changed the function of some products, such as the Tampax Pearl’s more comfortable applicator.27 Design was not used as an antidote to P&G’s function driven process but rather as a complement, helping consumers recognize, understand and in some cases even imagine the functions of a given product.

The new emphasis shifted the company towards a more consumer-centric marketing approach as well. Lafley’s shake up and design emphasis articulated more clearly that P&G’s brands faced two moments of truth: first, on the store shelf; and second, when the consumer used the product and decided whether it delivered on its promise. Then-CMO Stengel moved P&G’s marketing approach away from its traditionally process-oriented and template-driven culture towards a deeper understanding of who the product was for, what was different about that consumer and how that consumer expected to use the product. As Stengel said, “Consumer-centric marketing makes no assumptions. It begins with ‘Who is your consumer, and what’s different about her?’ It sounds like such a simple question, but if you went to most companies and asked that question, you wouldn’t get a very satisfactory answer.”28 The lobby of P&G’s Cincinnati headquarters featured a faux home and

311-117 Procter & Gamble: Marketing Capabilities

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store, so that employees could physically view and experience the “two moments of truth” every day.29 P&G’s reflect.com let customers customize P&G cosmetics and fragrances. Sampling programs ran in the summer of 2001 by P&G’s bathroom brands, including Charmin, outfitting restrooms at 15 state fairs with samples and cleaning people.30 As Stengel noted, “The common theme [in such disparate strategies] is a deep understanding of the consumers who offer the potential for growth.”31

Stengel, with urging from Lafley, also brought a sharper focus to return on marketing investment (ROMI); across the industry this had meant a shift from TV and print to digital and direct marketing.32 Measuring ROMI was notoriously challenging, Stengel noted, “A lot about the way we measure marketing is not appropriate for the kind of marketing we’re doing today. [. . .] To improve our metrics, we state what we’re trying to learn about, make it a priority within our research community, and seek outside partners who have some interesting ideas.”33 “Project Apollo,” a joint venture between media and marketing research firm Arbitron Inc. and VNU, the Dutch media company that owned Nielsen, tracked the media habits of 30,000 households representing 70,000 consumers. The data collected, along with information about online usage and grocery purchases, and frequent surveys of attitudes and lifestyle choices helped subscribers such as P&G understand its marketing tactics’ performance. Stengel also stressed the need to look past short-term results in measuring success, noting, “Because too much we focus on a bustle of activities, not the few things that drive growth of brand. Sales are important but if you don’t look at other measures of brand health, you are being short sighted.”34 Ultimately Stengel and P&G strove to develop metrics that measured brand loyalty and customer relationships.

Customer-centric marketing also focused P&G on what happened in the shopping experience. In 2008, P&G wooed recession-wary consumers with more focused attention to in-store promotions such as coupons, displays, special offers and other promotional materials. Lauded by Global Brand-Building Officer Marc Pritchard, P&G’s “store back” approach was intended to shift P&G’s mindset to the shopper marketing experience, but rather than adjust late in the product’s development and campaign conceptualization cycle, it focused on having the end in mind when first conceiving the marketing idea; as one P&G insider noted, “If it doesn’t work at the store, it’s a miss.”35 Pampers’s 2008 campaign that donated funds for one tetanus vaccine in developing markets for each pack of specially-marked diapers sold was one such example; an industry observer noted, “The ‘1-pack = 1 vaccine’ stickers on pack were easy to understand and worked on the shelf.”36

Pritchard also felt that multi-branding, or leveraging the P&G brand to drive sales to its sub-brands, was a strategy that P&G needed to pursue. “We've found a lot of times that when people know a brand is from P&G they feel better about the brand. And when they know P&G has all these brands, they feel better about P&G.” One of the first examples was P&G’s successful advertising campaign for the 2010 Winter Olympics which combined 18 P&G brands under a common message and featured a commercial thanking moms around the globe for their efforts. Pritchard took on the role of brand manager for the multi-brand marketing efforts which also included companywide coupon circulars, websites and retail promotions.37

Commitment to the Consumer

P&G had a long history of rigorous product and market testing; the firm was well-known as especially process-oriented. P&G invested more in market research than any company in the world, interacting with more than 5 million consumers in close to 100 countries.38 The firm conducted over 20,000 research studies each year, and invested nearly $500 million into developing and executing these studies.39 P&G took on consumer research through various research methods. Qualitatively, it ran focus group discussions, interviewed consumers at home, performed in-context visits and in-store interviews. Quantitatively, the firm gathered data on consumers utilizing blind tests, concept

Procter & Gamble: Marketing Capabilities 311-117

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and use tests, quality monitoring and taking on large scale studies on the habits and practices of consumers who purchased P&G products.40 Innovative approaches to consumer engagement led to new marketing and promotional opportunities: One example was VocalPoint, P&G’s word-of-mouth program that enrolled more than 600,000 women to pitch its products.41 The program crafted product messages mothers and other women shared with peers; P&G also gave them samples, coupons and opportunities to share their opinions with P&G. This personal endorsement approach helped advertisers; as VocalPoint’s CEO said, “We know that the most powerful form of marketing is an advocacy message from a trusted friend.”42

New technologies also continued to provide P&G with ways to engage and measure consumer interests, habits and satisfaction. In June 2010, P&G announced a partnership with Tobii, a leader in eye tracking, which objectively identified visibility and attention given to packaging, displays and advertising.43 In 2008, P&G took a stake in Ocado, a U.K. based online-grocer. P&G saw Ocado as a, "very fertile testing ground," to understand how consumers used the internet and engaged in e-retailing.44 Neuromarketing also played an increasingly important role. P&G employed psychological surveys to measure mood and Electroencephalography (EEG) technology to measure electrical activity in the brain as subjects were exposed to commercials. The approach held that feelings affected decisions and human behavior. P&G sought to better understand how its customers felt—not about a product such as Pantene, but about having a “bad hair day.” Their psychological surveys discovered that women felt less “hostile,” “ashamed,” “nervous,” “guilty,” or “jittery,” depending on the hair product they used, while at other times they said they felt more “excited,” “proud,” and “interested.” The same study found that users of a new version of Pantene, “reported more joy than those in the control group.”45 Integrating these new technologies in an attempt to gain more hard data on consumers dovetailed with P&G’s culture of performance-driven products, as the firm leveraged new and innovative ways to learn directly from consumers while also building the opportunity to create more direct, one-on-one relationships with the target audience(s).

Advertising

P&G had been a marketing trailblazer from the outset: Ivory, the first product to be advertised directly to consumers, subverted a traditional reliance on an established network of wholesalers, distributors and retailers and sold directly to consumers instead. Other brands such as Crisco, Camay and Oxydol, soon followed. Early innovations included sponsorship of daytime radio dramas (1932) and television commercials (first aired in 1939). Soap operas owed their existence to P&G: the daytime drama As the World Turns launched in 1956 to specifically target women in their homes; Another World, The Young and the Restless, and Guiding Light were other long-time P&G-sponsored daytime dramas. While P&G constantly built on its experience with broadcast media, it also relied heavily on developing long-standing partnerships with advertising agencies to develop robust brand identities for its portfolio of consumer goods.46

As P&G encountered a more sophisticated and globalizing consumer market in the new millennium, it faced challenges in winning new customers in less familiar markets outside of the Americas and Western Europe, where it ran up against local and global competitors. In 2002, P&G reconsidered its advertising strategies to better meet the company’s global markets and consumers. Working with agencies, P&G began by first developing a “media neutral” idea,47 that could be translated across a range of media (traditionally this process happened in reverse).48 With Tide, for example, the idea was the detergent, “works wonders on the fabrics that touch your life.”49 The story could then be translated into locally relevant messages. In some markets this meant radical shifts in the use of traditional media, or experiments in new outlets. P&G’s advertising campaigns for Vidal Sassoon hair-care products, for example, were customized by region. In South Korea, P&G limited

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advertising to a few niche television channels, with greater emphasis on huge outdoor displays at a Seoul shopping center; in Japan, the campaign focused on mobile devices.50 For Safeguard soap in Pakistan, the firm created a superhero, Commander Safeguard, with his own television show, music videos and website.51 Across the industry, many were finding that while television was still the best way to reach many customers at once, they were not necessarily all repeat customers. Still, in 2011, the bulk of P&G’s advertising spend went towards television.52

For many years, P&G’s staple TV ads were ones that focused on P&G’s product superiority and the clear functional benefits of the products. P&G marketing had been built around the idea that functionality would sell over emotional connection.53 However, while that strong connection to functionality and benefits remained central to P&G advertising, Lafley, Stengel and Kotchka aimed to shift P&G toward more design and emotion driven advertising, Stengel commented, “If you go back at Procter & Gamble, and in a lot of the industry, we often thought of our brands in terms of functional benefits. But the equity of great brands has to be something that a consumer finds inspirational and an organization finds inspirational.”54

Sponsorships A range of sponsorship opportunities were leveraged across P&G’s portfolio as well. For example, P&G, a U.S. Olympic team sponsor for the 2010 Games, became a worldwide sponsor, specifically to raise its visibility in emerging markets, with the 2012 winter games to be held in Russia, and the 2016 summer games in Brazil.55 A National Football League (NFL) sponsorship gave consumers opportunities to engage with the NFL, “just for choosing P&G brands,” and tied in with the NFL’s Play 60 initiative, a national youth health and fitness campaign focused on fighting childhood obesity and increasing wellness by encouraging youths to be active an hour a day.56

Celebrity Endorsements P&G’s acquisitions of several beauty companies in the 1990s had brought a number of celebrity endorsers into the P&G stable, including CoverGirl spokespersons Christie Brinkley, Drew Barrymore, Ellen DeGeneres, and Queen Latifah. P&G also developed numerous celebrity endorsements, most recently television show Modern Family actress Sofia Vergara was named spokesmodel for CoverGirl cosmetics in May 2011, for an ad campaign launching in January 2012; Taylor Swift also joined the company for the CoverGirl brand.57 Eva Mendes and Naomi Watts were announced as new spokesmodels for Pantene shampoo in the spring of 2011. Other Pantene spokespersons included Gisele Bündchen, Stacy London, and Teri Hatcher.58

Tennis star Roger Federer was featured in Gillette Fusion Products ads in the U.K. in 2010. In the commercial he knocked a can off a film crew member’s head in a single take. (Gillette refused to confirm or deny that the scene was real.) The YouTube version attracted over 2 million visitors to the Gillette YouTube channel.59 During the same year, NHL player Alex Ovechkin was named a Gillette Brand Ambassador and starred in TV commercials in Russia and Eastern Europe promoting Gilette’s Fusion razors and other new products. The campaign also featured Ovechkin in print and online ads, along with charity programs sponsored by Gillette.60 In 2010, Sebastien Vettel, the “youngest-ever”61 Formula One champion, secured a long-term sponsorship with P&G to promote Head & Shoulders shampoo. That same year, P&G also had at least 16 U.S. Olympic athletes in individual sponsorship deals.62 P&G also pursued a host of promotion, sponsorship and endorsement relationships as well as other non-traditional outlets such as product placement in television and film.

Media Spending

In early 2009, as the recession took hold, then-CEO Lafley announced that despite the poor economic climate P&G would maintain its marketing budget. Though the firm’s marketing budget did not see direct cuts, P&G shifted to coupons and in-store promotional activities to maintain the same media presence while shifting ad costs.63 In 2010, P&G increased ad spending by $1 billion,

Procter & Gamble: Marketing Capabilities 311-117

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with a 20% increase in media impressions;64 higher revenues led to an increase in dollars spent. McDonald stated that P&G would maintain the same level of spending, while shifting dollars to digital advertising and other new media to broaden the audience.65

Digital Marketing

Throughout the 1990s, P&G’s digital activity had been limited to its operation of brand websites, but the firm expanded its digital content offering in 1999 with the launch of pampers.com. The website contained product information, similar to the other brand websites under P&G, but also provided information for new and expectant mothers and served as an interactive forum. By 2007 the site was translated for 49 countries.66 BeingGirl.com, launched in 2000, provided information and expert advice on, “issues that teenage girls might be too embarrassed to ask a parent or doctor about, such as menstruation, eating disorders, acne and dating.”67 The site advertised P&G tampons and offered free samples. But P&G slowed its digital push after the dot-com bubble burst, and through the early 2000s focused its efforts primarily on “proven media,” i.e., television and print advertisements, along with its product websites.68 The company was back online when it undertook aggressive marketing of its over-the-counter heartburn treatment Prilosec, after a 2006 study found that most people dealing with heartburn conduct research online before making a purchase.69 Digital media enabled a raft of niche experimentation targeted to specific customers; including online serials (Escada perfume), video games, and YouTube channels for specific products.

P&G launched its first mobile marketing ad campaign in 2006 to promote Crest Whitening Plus Scope toothpaste. The campaign advertised on bar napkins and club bathroom mirrors to encourage customers to text the words “IQ” or “Extreme” to 27378 (C-R-E-S-T) and take an “Irresistibility IQ quiz.” Participants were offered the chance to win iPods or other prizes. The campaign also released TV commercials and print advertisements, and had an online presence.70

In 2009, as P&G struggled behind rivals, McDonald announced the firm planned to reach a billion new customers by 2015; the firm’s worldwide Olympic sponsorship, announced in 2010 was one part of this effort, as P&G’s global marketing head noted, these kinds of sponsorships were aimed to “build our developing markets.”71 Digital marketing efforts were also a large part of McDonald’s plan. Although in 2010 only 5% of P&G’s $3.2 billion was spent on online marketing, many smaller P&G brands (Pepto-Bismol, Braun) relied primarily on digital media for their marketing campaigns.72

P&G’s line of “My Black is Beautiful” products, targeting African American women, introduced two web series in 2010 to showcase its products: Buppies, a scripted drama which integrated Cover Girl’s Queen collection on BET.com; and My Black is Beautiful, a TV series on BET (also available online) by the same name, showcasing the collection of P&G products in a makeover setting. Buppies attracted over 2 million views online since its launch, while My Black is Beautiful averaged 3.6 million viewers in its second season on BET.73 The collection sales grew 20% in the first half of 2010,74 and second quarter dollar share increases for Pantene were up 14%, 4% for Cover Girl, and 3% for Olay.75

P&G’s Old Spice television commercial and YouTube sensation, “The Man Your Man Could Smell Like,” gave P&G its greatest exposure in the online community in 2010, and bridged the power of digital and social media. The original (TV) ad was created for the Super Bowl in February 2010, but was pulled at the last minute and aired later. Part of P&G’s ongoing efforts to establish one-on-one relationships with consumers, the campaign went viral when it was posted on YouTube, garnering millions of views. When a Wieden + Kennedy executive noted how many comments “The Old Spice Guy” received on the YouTube videos, the agency developed a “response” campaign, with 180 videos featuring “The Old Spice Guy” responding to questions posed by fans, bloggers and celebrities; these generated over 2 billion media impressions.76 The agency expanded the campaign in July 2010 when it

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8

announced that Isaiah Mustafa, star of the ads, would respond to tweets in real time for 48 hours. Within three days, the response videos attracted 13.7 million individual views; YouTube’s Old Spice channel was the most viewed channel that week, and became the third-most subscribed channel ever in the site’s “sponsor” category. By the response campaign’s third day (Wednesday), Old Spice’s official Twitter account had 32,000 followers; by the following Monday, 94,000 followers, and the account was featured on over 2,300 Twitter lists.77 The campaign was seen as a milestone in P&G’s transition from a mass-marketer to a one-on-one digitized marketer.78

Social Media

The community pampers.com had built for P&G led it to experiment with additional social media forays. In 2007, P&G launched two social media sites: Capessa for women on Yahoo! Health and the People’s Choice Community, associated with the People’s Choice awards.79 However, with the benefits of social media came risks, and along with its successes, P&G garnered its share of negative consumer reactions to its ads; one blog noted that watching P&G’s online serial “Sunset Heat,” promoting Escada perfume was “more painful than reading Ulysses at the beach.”80 In 2010, P&G began using Facebook as a marketing tool and by 2011 had 15 brands with “friends” in the six figure range. Pringles and Old Spice had 9 million and 1.3 million fans respectively. Facebook was used as a marketing supplement, not a replacement; 2010 was the year identified by P&G to acquire Facebook friends, but the years beyond that were for figuring out how to use them.81

In 2011, when company research showed that men were going to women’s sites for information on recipes, cleaning the house, or getting a stain out of a shirt, P&G rounded out its earlier social media efforts with Manofthehouse.com, which featured household advice for men, including tips on grilling burgers, cleaning toilets and disciplining children. In contrast to other similar sites focused on single men, and heavy on sex advice, Manofthehouse.com aimed to “speak to the whole man.”

Interactive Community Promotion

In 2005, Tide Laundry detergent had its best sales in over a decade after a highly-successful post-Katrina campaign, “Loads of Hope.” Tide opened a laundromat in New Orleans to wash survivors’ clothes and sold t-shirts with various slogans such as “Be seen, not spotted” worn by celebrities to promote Tide with Febreze. The t-shirts could be purchased online, and all proceeds went towards families affected by the hurricane.82 In 2006, P&G unveiled a major campaign in Times Square targeting holiday shoppers. A large blue neon sign in the middle of a Broadway block read “Restrooms” and led people up an escalator into a lounge with flat screen TVs, leather couches, a fireplace, and 20 shiny, spotless toilets. The ad was used to promote Charmin toilet paper, and tourists loved it. The Times Square campaign created nine YouTube ads and generated 20 million views per month. Most viewers were under 30, the “holy grail” audience for marketers aiming to attract customers for life.83

Moving Forward

As P&G continued to push toward reaching 5 billion consumers served worldwide its evolving marketing capabilities took center stage. The firm had proven its ability to navigate the digital environment with efforts like “The Man Your Man Could Smell Like” and Manofthehouse.com, had incorporated a sense of design into its culture, and aimed to complement its strong function driven marketing background by adding emotional efforts such as the “Thank you Mom” and “Loads of Hope” campaigns. Building on its strengths in R&D, consumer research, and product performance, P&G continued to evolve and innovate as the world’s largest marketer.

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Exhibit 1 Select P&G Iconic Brands’ Marketing

Ivory P&G experimented with several now-classic marketing tools in its efforts to promote and market Ivory soap. The first product to be marketed directly to consumers, P&G relied heavily on magazine advertising focused on a clear message of Ivory’s purity (99 and 44/100ths% pure). The company also relied on direct marketing through mass-mailings enclosing samples of Ivory, along with a booklet compiling the brand’s early print advertisements. These were followed up with a letter, sent to women, aimed at making them “patronesses” for Ivory. The letter, “reminded recipients of Ivory’s purity, warned against ‘counterfeits,’ enclosed testimonials from ‘the most eminent men in their profession in the country,’ and urged would-be ‘patronesses’ to demand Ivory specifically when shopping for soap and to reject any substitutes offered by their grocers.” The message that Ivory equaled purity withstood the test of time; by 2001 this message was so ingrained that the company could rely on the heritage of the brand’s message about purity and simplicity, as consumer tastes trended towards simplicity in the new millennium. The new multimillion dollar campaign ran a contest with about one-third (55 million) bars in packaging based on the firm’s original late-19th century design. Of these, 1,051 bars would sink, and purchasers could win $250,000. As one industry observer noted, “A lot of successful brands are taking the retro approach, [. . .] things that have stood the test of time are what people are finding appealing.” Ads ran in magazines aimed at women in their 30s with children, primarily The Oprah Magazine, People, Parenting and Parents. P&G spent about $3 million on the promotion, including in-store merchandising displays. Along with P&G’s many other brands, Ivory was featured on P&G’s various social media sites, such as Manofthehouse.com.

Tide Originally developed during the height of World War II, Tide (called Product X) was not just a new soap, but a new synthetic formula for a detergent—a breakthrough product. Getting the new product to market before Lever or Colgate could launch their own versions meant forgoing P&G’s tried-and-true product development process, essentially skipping over blind tests in several markets, analyzing data, reformulating on the basis of the test results, re-testing, trying out advertising strategies, polling consumers, running shipping tests and the host of other careful steps in P&G’s product roll-out timetable. Instead, to gain a two-year lead on the competition, the company decided to risk going straight to market, despite the chance Tide would cannibalize P&G’s other laundry soap products. Branding efforts began immediately, with an exasperated engineer contributing the initial tag line, after being hounded in interviews by the agency’s team: “Oh, Tide makes oceans of suds.” Donald Desky, a famous architect and industrial designer, designed the bold orange circle logo incorporating the new “Day-Glo” colors. With the introduction of top-loading washing machines, P&G played up Tide’s compatibility with the new appliances—which were enjoying huge popularity after the World War II. Tide’s two-year lead on the competition made speed-to-market an ingrained imperative for the firm, impacting all aspects of the P&G system.

Pampers A blockbuster brand that almost single-handedly created the disposable diaper category for the mass market, Pampers evolved out of P&G’s experiments in expanding its paper products line in the 1950s. Demographic trends, such as the post-war baby boom, made it clear disposable diapers would find a huge market. But P&G had no sense that disposable diapers would replace cloth; the most it predicted was about 6% to 7% of cloth users would switch to disposables. The true secret to Pamper’s success, however, were the manufacturing efficiencies P&G managed to achieve, keeping up with demand while keeping costs down, making the product affordable for the average family. Luvs, P&G’s “premium” disposable diaper brand gave P&G the chance to offer additional features, but also forced the company to learn several difficult lessons as the market became commoditized and competitors matched Luvs’ premium feature (e.g., its hour-glass shape) while offering it for a lower price. The so-called diaper wars taught P&G five strategic lessons:

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Never give your consumer a product-based reason to switch away from your brand. Think of every brand that we have, and treat every brand that we have, as though it were our

only brand. Always determine whether a product innovation is brand-specific or generic. Competition will always follow your technology, not your brand. After you have defined your options, always test your worst-case scenario in the market. If you

don’t, and if you have made the wrong move, the market will be the worst-case scenario.

Pampers.com, launched in 1999, created an early online community for mothers and other family members involved in child care to find information, exchange tips and stories, and get discounts and other promotional materials for P&G products.

Crest The first toothpaste with fluoride, Crest was also a category defining product which had gained iconic status along with P&G’s other household names. As the product (and others with fluoride) improved dental health, P&G worked with professional organizations such as the American Dental Association to persuade dentists that their lucrative restorative services, which were in decline due to improved dental health, could be offset by preventative care. However, Crest’s success also helped ensure the generic status of fluoride toothpaste, and in the 1980s, Crest slipped in the market as baking soda and whitening additives bolstered competitors’ offerings. P&G responded to these market threats by expanding Crest’s brand franchise beyond toothpaste, with Crest Whitestrips and, through an acquisition, the Spinbrush, both in 2000.

Always Always sanitary pads, launched in 1984 became P&G’s first truly global product. P&G’s Always brand was behind some of the biggest innovations in feminine hygiene history, including the introduction of winged pads in 1985 and Ultra-thin pads in 1990. P&G introduced Always Infinity, a pad made with a new-to-the-world material that enabled women to have the “magical combination of absorbency, amazing softness, and flexibility all in one pad.” As a global brand, P&G adapted Always (in size and shape) to appeal to women across the globe, and in some international markets it was the first feminine hygiene product ever marketed to consumers.

Source: Casewriter research; Jane L. Levere, “The Media Business: Advertising; Ivory soap uses a bar that sinks, a $250,000 contest and old-style packaging to increase sales,” The New York Times, October 25, 2001, http://www.nytimes.com/ 2001/10/25/business/media-business-advertising-ivory-soap-uses-bar-that-sinks-250000-contest-old.html, May 2011; Brenna Ehrlich, “Lessons Learned From The Old Spice Campaign & Its Imitators,” http://mashable.com/2011/ 03/16/old-spice-imitators/, accessed May 2011; Davis Dyer, Frederick Dalzell and Rowena Olegario, Rising Tide. Lessons From 165 Years of Brand Building at Procter & Gamble, (Boston, MA: Harvard Business School Press, 2004), 36.

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311-117 Procter & Gamble: Marketing Capabilities

________________________________________________________________________________________________________________ 12

Exhibit 3 Connect-and-Develop

Behind the success of connect-and-develop lay a careful process that clearly articulated the characteristics P&G considered in selecting potential partnership products. Candidates had to exhibit some degree of success (working prototype, evidence of consumer interest), and had to represent ideas and products that could benefit from existing P&G technologies, marketing, distribution or other firm capabilities. Given that the company held more than 300 brands, the funnel had to be somewhat well defined. The firm instituted a top-ten needs list, one for each business and one for the company overall, that drove the growth of P&G’s brands. These lists—including things such as “reduce wrinkles, improve skin texture and tone,” and “create softer paper products with lower lint and higher wet strength”—were translated into science problems for P&G scientists and engineers to solve. In addition, the firm looked for new products or concepts that could leverage P&G’s existing brand equity. Baby care items such as wipes and changing pads leveraged the Pampers brand; whitening strips, power toothbrushes, and flosses expanded the Crest brand. To round out its innovation methodology, P&G used technology game boards—planning tools that resembled a multi-level game of chess—to “evaluate how technology acquisition moves in one area might affect products in other categories.”

Additionally, P&G had a network of 70 technology entrepreneurs—senior P&G people leading the development of the firm’s needs lists, and creating adjacency maps and technology game boards. The technology entrepreneurs built and maintained external connections with university and industry researchers, labs and supplier networks. Located in six connect-and-develop hubs (in China, India, Japan, Western Europe, Latin America and the U.S.), the technology entrepreneurs focused on products and technologies specific to the specialties of the hub’s region. The firm also relied on several important global networks, along with outside facilitators to make connections for them. These included: suppliers, whose own R&D could combine with P&G’s interests to solve problems; NineSigma, who connected companies with science and technology problems with universities, government and private labs, and consultants with solutions; InnoCentive, and Eli Lilly company, that brokered “solutions to more narrowly defined scientific problems; YourEncore, an independent P&G entity that connected about 800 high-performing retired scientists and engineers from 150 companies with client businesses; and Yet2.com, an online marketplace for intellectual property exchange that brokered technology transfers both into and out of companies, universities and government labs.

Connect-and-develop had to combat P&G’s long-standing centralization and internal focus, which only started to shift in 2006. Rewards were structured to ensure that the “best ideas, wherever they came from, rise to the surface,” and to, “exert steady pressure on the culture, to continue to shift mind-sets away from resistance to ‘not invented here.’” Rather than eliminate R&D jobs internally, connect-and-develop forced P&G to adapt and develop new skills. By 2006, more than 35% of P&G’s new products had elements that originated from outside the firm and 45% of P&G’s initiatives had key elements discovered externally. P&G’s R&D productivity increased by nearly 60%, and the firm’s innovation success doubled, with a simultaneous drop in cost of innovation; R&D investment as a percentage of sales dropped from 4.8% in 2000 to 3.4% in 2006.

Source: Adapted from Larry Huston and Nabil Sakkab, “Connect and Develop: Inside Procter & Gamble’s New Model for Innovation,” Harvard Business Review, March 2006.

Note: China’s hub focused on that region’s ability to make things at low cost; India’s leveraged local scientific talent to solve problems using tools such as computer modeling.

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Exhibit 4 P&Gs Billion- and Half Billion-Dollar Brands

Billion Dollar Brands Half-Billion Dollar Brands Actionell Ace Always Asacol Ariel Bold Bounty Boss Fragrance Braun Cascade Charmin CoverGirl Blast Crest Dash Dawn Dolce & Gabbana Fragrance Downy Eukanuba Duracell Gillette Venus Febreze Herbal Essence Gain Mr. Clean Magic Eraser Gillette Fusion Nyquil Gillette Mach 3 Pearl Gillette Odor Shield Prilosec Head & Shoulders Rejoice Iams Safeguard Koleston SK-II Olay Swiffer Dusters Oral-B Tampax Pampers Pantene Tide

Source: Adapted from http://www.pg.com/annualreport2009/brands/index.shtml, accessed June 2011.

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Endnotes

1 Davis Dyer, Frederick Dalzell and Rowena Olegario, Rising Tide. Lessons From 165 Years of Brand Building at Procter & Gamble, (Boston, MA: Harvard Business School Press, 2004), p. 1.

2 “Company History,” Hoovers Inc., www.Hoovers.com, May 2011, accessed May 2011.

3 “Company History,” Hoovers Inc., www.Hoovers.com, May 2011, accessed May 2011.

4 Dyer, Dalzell and Olegario (2004), p. viii.

5 Dyer, Dalzell and Olegario (2004), p. 192.

6 Dyer, Dalzell and Olegario (2004), p. 6.

7 A.G. Lafley, “I Think of My Failures as a Gift,” (Interview by Karen Dillon), Harvard Business Review, April 2011, pp. 1-5.

8 Jack Neff, “Why P&G's $57 Billion Bet on Gillette Hasn't Paid off Big – Yet” February 15, 2010, http://adage.com/article/news/marketing-p-g-s-57-billion-bet-gillette-years/142116/, accessed June 2011.

9 “Company Strategy, Strategic Focus,” Procter & Gamble, http://www.pg.com/en_US/investors/ company_strategy.shtml, accessed May 2011.

10 Ellen Byron, “Febreze Joins P&G's $1 Billion Club,” The Wall Street Journal, March 9, 2011, http://online.wsj.com/article/SB10001424052748704076804576180683371307932.html, accessed June 2011.

11 Procter & Gamble, 2010 Annual Report, “Letter to Shareholders,” http://www.pg.com/ annualreport2010/letter-to-shareholders/index.shtml, accessed May 2011.

12 Dyer, Dalzell and Olegario (2004), p. 49.

13 For example, “Pilot plants became part of factory architecture—and part of everday assumptions throughout P&G about how the company developed, refined, and reformulated products.” Dyer, Dalzell and Olegario (2004), p. 49.

14 Procter & Gamble, 1999 Annual Report, “Letter to Shareholders,” http://www.pg.com/en_US/ downloads/investors/annual_reports/1999/annual_report_1999.pdf, accessed May 2011.

15 Marianne Kolbasuk McGee, “Lessons From A Cultural Revolution,” Information Week Online, http://www.informationweek.com/758/prgam.htm, accessed May 2011.

16 Procter & Gamble, 1999 Annual Report, “Letter to Shareholders,” http://www.pg.com/ en_US/downloads/investors/annual_reports/1999/annual_report_1999.pdf, accessed May 2011.

17 Procter & Gamble, 1999 Annual Report, “Letter to Shareholders,” http://www.pg.com/ en_US/downloads/investors/annual_reports/1999/annual_report_1999.pdf, accessed May 2011.

18 Larry Huston and Nabil Sakkab, “Connect and Develop: Inside Procter & Gamble’s New Model for Innovation,” Harvard Business Review, March 2006, via Harvard Business Publishing, May 2011.

19 Huston and Sakkab (2006).

20 Huston and Sakkab (2006).

21 Bill Schmitz Jr., Faiza Alwy, and Nicholas Cavallo, “Procter & Gamble. Riding the Tides—Upgrade to Buy,” Global Markets Research, Deutsche Bank, April 28, 2011, p. 3, via ThomsonOne, May 2011.

22 Dyer, Dalzell and Olegario (2004), p. 5.

23 Dyer, Dalzell and Olegario (2004), p. 5.

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24 Dyer, Dalzell and Olegario (2004), p. 231.

25 Jennifer Reingold, “What P&G Knows About the Power of Design,” Fast Company, June 1 2005, http://www.fastcompany.com/magazine/95/design-qa.html, accessed June 2011.

26 Jennifer Reingold, “The Interpreter,” Fast Company, June 1, 2005, http://www.fastcompany.com/magazine/95/open_design-kotchka.html, accessed June 2011.

27 Jennifer Reingold, “The Interpreter,” Fast Company, June 1, 2005, http://www.fastcompany.com/magazine/95/open_design-kotchka.html, accessed June 2011.

28 Rob O’Regan and Constantine von Hoffman, “Interview: Jim Stengel, Procter & Gamble,” CMO Magazine, September 2005, available at http://magnostic.wordpress.com/best-of-cmo/interview-jim-stengel-procter-gamble/, accessed June 2011.

29 Peter Breen, “The Consumer Advocate,” promomagazine.com, July 1, 2002, http://promomagazine.com/mag/marketing_consumer_advocate/, accessed June 2011.

30 Breen (2002).

31 Breen (2002).

32 Diane Brady, “Making Marketing Measure Up,” BusinessWeek, December 13, 2004, http://www.businessweek.com/magazine/content/04_50/b3912109.htm, accessed June 2011.

33 Alex Csergo, “Marketing’s Inconvenient Truth,” Insight42, 2008. www.insight42.net/page24.php, accessed June 2011.

34 “Five lessons on brand building from Jim Stengel, P&G’s former Chief Marketing Officer,” October 20, 2008, post on “Hard Knox Life,” http://www.hardknoxlife.com/2008/10/20/five-lessons-on-brand-building-from-jim-stengel-pgs-former-chief-marketing-officer/, accessed June 2011.

35 Jack Neff, “P&G Taking Its Marketing Back to the Store,” AdvertisingAge, September 21, 2009, http://adage.com/article/news/retail-p-g-focuses-shopper-marketing-ad-agencies/139127/, accessed June 2011.

36 Neff (2009).

37 Jack Neff, “Why P&G Is Bringing 18 Brands Together for Olympics Push,” AdvertisingAge, February 15, 2010, http://adage.com/article/cmo-strategy/marketing-p-g-brings-18-brands-olympics-push/142128/, accessed June 2011.

38 “Core Strengths,” Proctor & Gamble Website, http://www.pg.com/en_US/company/core_ strengths.shtml, accessed May 2011.

39 “Core Strengths,” Proctor & Gamble Website, http://www.pg.com/en_US/company/core _strengths.shtml, accessed May 2011.

40 P&G beauty and grooming, “What is consumer research,” P&G website, http://www.pgbeautygroomingscience.com/what-is-consumer-research.html, accessed May 2011.

41 Robert Berner, “I Sold It Through the Grapevine,” BusinessWeek, May 29, 2006, http://www.businessweek.com/magazine/content/06_22/b3986060.htm, accessed June 2011.

42 Berner (2006).

43 “Tobii Announces Collaboration Agreement with P&G,” Cisionwire.com, June 2, 2010, http://www.cisionwire.com/tobii-technology-ab/r/tobii-announces-collaboration-agreement-with-p-g,c494666, accessed June 2011.

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44 Elizabeth Rigby, “P&G takes stake in lossmaking Ocado in boost to online retailer,” The Financial Times, November 27, 2008, http://www.ft.com/cms/s/0/bea48e56-bc26-11dd-80e9-0000779fd18c.html#axzz1On65cwQW, accessed June 2011.

45 Marc Narine, “Pantene Shampoo—Neuromarketing to Your ‘Heart,’ to Get to Your Scalp,” 3Brain Marketing, July 7, 2010, http://3brainmarketing.com/index.php/2010/07/07/pantene-shampoo-neuromarketing-heart-to-get-to-your-scalp/, accessed June 2011.

46 Dyer, Dalzell and Olegario (2004), p. 3.

47 Jack Neff, “Digital A-List; P&G,” Advertising Age, February 28, 2011, via Factiva, accessed May 2011.

48 Renuka Rayasam, “Procter & Gamble Takes Marketing into a New Era,” US News & World Report, March 23, 2007, http://www.usnews.com/usnews/biztech/articles/070323/23pg.htm, accessed May 2011.

49 Rayasam (2007).

50 Rayasam (2007).

51 Rayasam (2007).

52 Neff (2011).

53 Jack Neff, “Why P&G won't win many Cannes Lions,” AdvertisingAge, June 13, 2005, http://adage.com/article/news/p-g-win-cannes-lions/103440/, accessed June 2011.

54 Geoff Colvin, “Selling P&G,” Fortune, June 17, 2008, http://money.cnn.com/magazines/fortune/ fortune_archive/2007/09/17/100258870/?postversion=2007090511, accessed June 2011.

55 Jonthan Birchall, “Olympic sponsorship in P&G’s track to a billion new customers,” Financial Times, July 28, 2010, http://blogs.ft.com/beyond-brics/2010/07/28/olympic-sponsorship-is-pgs-track-to-emerging-market s/#, accessed May 2011.

56 “Latest innovations,” Procter & Gamble website, http://www.pg.com/ en_US/downloads/innovation/factsheet_NFL.pdf, accessed May 2011.

57 Erin Donnelly, “Soia Vergara—CoverGirl’s New Face,” Fashion Etc., May 11, 2011, http://fashionetc.com/news/beauty/1822-sofia-vergara-cover-girl, accessed May 2011.

58 Donnelly (2011).

59 Shirney Brady, “Is This Federer’s Trickery—Or Gillette’s?” BrandChannel, August 19, 2010, http://www.brandchannel.com/home/post/2010/08/19/Gillette-Fusion-Roger-Federer-Viral.aspx, accessed May 2011.

60 Jeff Clabaugh, “Gillette Signs Alex Ovechkin,” Washington Business Journal, December 7, 2010, http://www.bizjournals.com/washington/news/2010/12/07/gillette-signs-alex-ovechkin.html, accessed May 2011.

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63 Jack Myers, “Procter & Gamble Not Practicing What it Preaches,” Huffington Post, February 3, 2009, http://www.huffingtonpost.com/jack-myers/procter-gamble-not-practi_b_163400.html, accessed May 2011.

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