procter & gamble package soap and detergent quarterly marketing review july 18, 2002
TRANSCRIPT
The Marketers Consulting
• Dursun Nas
- Executive Director
• Barry Luong
- Program Executive
• Erguen Aldeniz
- Finance Director
• Richard Ching
- Graphics Director
• Ann Smalley
- Sales Director
• Lily Cooc
- Consumer Analyst
• Juny Kim
- Marketing Director
Chris Wright Dilemma
• Introduction of a new brand
• Product Improvement
• Increased marketing expenditures
Product Improvement
• Add H-80 to Dawn Liquid
- Customer preference
- High NPV
- Low Cannibalization
• Restage Joy with the new “no-spot” formula
- Customer preference
- Quick return of investment
Procter & Gamble
• Quality Goods
• Honesty
• New-product development
• Dedicated and talented resources
• Prudent and conservative management
• Innovative products
• Marketing expertise
Consumer Preference
• Top five attributes
• Feelings on dishwashing
• Wants and Needs
• Initial capital investment and cost
• Time to introduction to marketplace
• Cannibalization
• Net present value
Why Not a New Product?Why Not a New Product?
Net Present Value of a New ProductNet Present Value of a New Product
New Brand Introductionin $000,000's
1982 1983 1984 1985 1986
Revenue21 99.8 101.5 103.4 105.8 108.3COGS2 50.9 51.7 52.7 54.0 55.2Gross Margin 48.9 49.7 50.7 51.9 53.1GM% 49% 49% 49% 49% 49%
General, Selling & Administrative1,2 10.0 10.1 10.3 10.6 10.8Distribution 7.0 7.1 7.2 7.4 7.6Marketing Expenditures 20.3 20.7 21.2 21.7Operating Margin 32.0 12.2 12.4 12.7 13.0Operating % 32% 12% 12% 12% 12%
Initial Investment Exp 20.0Marketing 60.0
Cash Flow (48) 12 12 13 13
Net Present Value6 ($8)($12)($12)
Why Not More Marketing?Why Not More Marketing?
• Cannibalization
• Break Even Analysis
Break-Even AnalysisBreak-Even Analysis
Break-Even
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
0 800,000 1,600,000
Units
Cost
Var Cost
Fix Cost
Why Product ImprovementWhy Product Improvement
• H-80 Formula
• $20 Million Initial Investment
• $10 Million Incremental Marketing
• Time To Market
Which Product to Improve UponWhich Product to Improve Upon
IIVORY VORY LIQUIDLIQUID
DAWDAWNN
Financial Analysis – Ivory LiquidFinancial Analysis – Ivory Liquid
Ivory in $000,000's
1982 1983 1984 1985 1986
Revenue2 182.5 183.7 184.7 186.8 187.7COGS2 93.1 93.7 94.2 95.3 95.7Gross Margin 89.4 90.0 90.5 91.5 92.0GM% 49% 49% 49% 49% 49%
General, Selling & Administrative1,2 18.3 18.4 18.5 18.7 18.8Distribution 12.8 12.9 12.9 13.1 13.1Marketing Expenditures 36.5 36.7 36.9 37.4 37.5Operating Margin 21.9 22.0 22.2 22.4 22.5Operating % 12% 12% 12% 12% 12%
Initial Investment Exp 20.0Marketing 10.0
Cash Flow (8) 22 22 22 23
Net Present Value6 $62
•Consumer preferenceConsumer preference• ThrillThrill
JoyJoy
• No-Spot Formula
• Financial Analysis
Financial Analysis - JoyFinancial Analysis - Joy
Joy with "no-spot" re-launchin $000,000's
1982 1983 1984 1985 1986
Revenue2 143.6 145.8 147.7 150.7 153.8COGS2 70.4 71.4 72.4 73.8 75.4Gross Margin 73.3 74.4 75.3 76.8 78.4GM% 51% 51% 51% 51% 51%
General, Selling & Administrative1,2 14.4 14.6 14.8 15.1 15.4Distribution 10.1 10.2 10.3 10.5 10.8Marketing Expenditures 28.7 29.2 29.5 30.1 30.8Operating Margin 20.1 20.4 20.7 21.1 21.5Operating % 14% 14% 14% 14% 14%
Initial Investment Exp
Marketing 10.0
Cash Flow 10 20 21 21 22
Net Present Value6 $70$70$70
DawnDawn
• Performance Enhancement
• Consumer Preference
• Financial Analysis
Financial Analysis - Dawn
Dawn with HD-80 formula without test market delayin $000,000's
1982 1983 1984 1985 1986
Revenue2 173.1 177.8 184.7 191.6 199.8COGS2 88.3 90.7 94.2 97.7 101.9Gross Margin 84.8 87.1 90.5 93.9 97.9GM% 49% 49% 49% 49% 49%
Incremental Revenues from Price increase
General, Selling & Administrative1,2 17.3 17.8 18.5 19.2 20.0Distribution 12.1 12.4 12.9 13.4 14.0Marketing Expenditures 34.6 35.6 36.9 38.3 40.0Operating Margin 20.8 21.3 22.2 23.0 24.0Operating % 12% 12% 12% 12% 12%
Initial Investment Exp 20.0Marketing 10.0
Cash Flow (9) 21 22 23 24
Net Present Value6 $62
Implementation Plan
• Commercial campaigns on day-time and prime-time television
• Publications
• Rebates/coupons
• Direct mailer
Conclusion
• Combined NPV
• Consumer preference maximized
• Continuity of Procter & Gamble corporate philosophy