Proctor & Gamble has been recognized globally as a marketing powerhouse. They have successfully developed and nurtured numerous branding initiatives that have lead to sustained market leadership. “Proctor & Gamble (P&G) is one of the most skillful marketers of consumer packaged goods. (P&G) is a global leader in the majority of 22 different product categories in which they compete; and has total world wide sales of more than $76 billion a year.” (Kotler and Keller. 2009. pg. 239)
P&G utilizes and implements several capabilities and philosophies that help them thrive in the market. Among these are five key drivers that include customer knowledge, product innovation, quality strategy, an aggressive sales force, and manufacturing efficiency and cost cutting.
It is very difficult to succeed in business if you are trying to sell a product or service to a specific audience if you don’t know what your audience wants, likes and needs. Customer knowledge is very important in delivering products to the market in fulfillment of a need. “P&G studies its customers – both end consumers and trade partners – through continuous marketing research and intelligence gathering. (P&G) generates more than 3 million consumer contacts via its email and phone center. It also puts more emphasis on getting its marketers and researchers out into the field, where they can interact with consumers and retailers in their natural environment.” (Kotler and Keller. 2009. pg. 239) Such front line exposure to the consumer helps management understand their desires. Valuable information can be gathered and implemented to better meet the demands of the consumer.
Consider this analogy if you will. After a long, tough day at work, you decide to treat yourself to a nice relaxing dinner at one of your favorite restaurants. You sit down and the waiter brings you a glass of water. After about 10-15 minutes, he returns with your dinner, piping hot and ready to consume. You’d be a little puzzled wouldn’t you? Unless you were a frequent patron who had a standing order, you would expect the waiter to take your order first. If he simply decided what to serve you for dinner, what are the chances you would be satisfied? With dozens of different types of food, chances are he would not deliver what you had in mind. The only way for him to know what will satisfy you is to take your order. A successful waiter seeks customer knowledge because he asks questions and listens to the customer. Knowing your customer is one of the most important, if not the most important, aspects to providing satisfactory products and services. P&G recognizes this important issue and takes the necessary steps to know the customer.
Product innovations are also very important in gaining and maintaining market leadership. “P&G is an active product innovator, devoting $1.8 billion (3.5% of sales) to research and development, an impressively high amount for a packaged-goods company. It employs more science PhDs than Harvard, Berkeley, and MIT combined and applies for roughly 3,000 patents each year.” (Kotler and Keller. 2009. pg. 239) Such innovation helps provide products that are developed with cutting edge technology. As sciences and technologies advance, products and services must follow.
With innovative advancements, products continue to evolve and the market continues to expand. In a speech in 2000, Federal Reserve Chairman Alan Greenspan summed it up when he stated, “We appear to be in the midst of a period of rapid innovation that is bringing with it substantial and lasting benefits to our economy.” (Mandel. 2009. p. 36) New benefits typically means increased demand. It helps retain loyal customers and attract new ones. At the time of his speech, it seemed like we were experiencing a boom in innovation that was helping markets to thrive. “But (today) there’s growing evidence that the innovation shortfall of the past decade is not only real but may also have contributed to today’s financial crisis. . . With far fewer breakthrough products than expected, Americans had little new to sell to the rest of the world.” (Mandel. 2009. p. 35-36)
This recognizable trend demonstrates the importance of innovative capabilities and R&D philosophies within a company. Innovation can dramatically differentiate products within the same category, providing the competitive advantage needed to emerge as a market leader. “Part of (P&G’s) innovative process is developing brands that offer new consumer benefits.” (Kotler and Keller. 2009. pg. 239) This innovation has helped them stay on top of the industry. Lack of innovation may have affected other companies, but P&G’s commitment to innovation has helped it maintain its leadership position.
Another vital key to a company’s success is the quality of their products or services. “P&G designs products of above average quality and continuously improves them. When P&G says ‘new and improved,’ it means it.” (Kotler and Keller. 2009. pg. 239) In today’s hyper competitive markets, quality products can provide a competitive advantage through differentiation among numerous offerings. An increase number of consumers are considering quality over cost, focusing on the value of a product that will last. It has been unfairly perceived that among low income families, that cheaper is considered a better way to go. Research is uncovering that in today’s markets, low-income families are also considering quality as an important aspect to the decision making process of a purchase.
Another capability and philosophy that sustains P&G as a market leader is an aggressive 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 ties its sales force forms with retailers, notably Wal-Mart.” (Kotler and Keller. 2009. pg. 239) As a critical part of the marketing effort, the sales force must ensure that P&G’s products are visible, accessible and prominent among the various offerings within the retail stores. By proactively leveraging positive working relationships with retailers, P&G can streamline the operational and promotional efficiencies, from production to distribution. The sales force can work closely with the retailer to gather useful information which can help improve the product. Improved product quality in turn helps the retailer by increased demands and ultimate sales, as well as helping the profits of P&G. In addition, improved products increase the likelihood of satisfied consumers.
Positive working relationships can also help in negotiations and by establishing a partnership mentality between the 2 companies. In the case of Wal-Mart, a strong working relationship established by an aggressive sales force might provide P&G with a competitive advantage over the competition. The “partnership power” of the relationship can help P&G avoid certain elements required of other companies seeking to do business with Wal-Mart. “A recent JPMorgan Chase report says Wal-Mart wants manufacturers to spend more on promotions and ads that appear on the retailer’s in-store TV network. ‘Failure to participate could have meaningful consequences,’ the report concluded.” (Boyle. 2009. p. 52-53) A strong historical relationship developed by an aggressive sales force may encompass more bargaining power and a reflection of partner as opposed to manufacturer. This can be a very valuable asset for power promoting a company’s brands.
As stated earlier, quality is definitely a valuable aspect of P&G’s products. However, cost considerations are also very important in many consumer minds. Many consumers are willing to pay a premium for superior product quality. However, each product premium has a limit based on perceived value. The goal of a good marketer is to help develop cost efficient operations that can help set proper pricing levels for a product. “P&G’s reputation as a great marketing company is matched by its excellence as a manufacturing company. P&G spends large sums developing and improving production operations to keep its costs among the lowest in the industry, allowing it to reduce the premium prices at which some of the goods sell.” (Kotler and Keller. 2009. pg. 239) Providing top quality products at lower prices develops competitive advantages that will sustain market leadership.
P&G has proven that they have what it takes to sustain market leadership. As P&G states on its website, “Invest in technology. Create superior products. Make each product a brand behind a distinctive strategy. And when you get it right, invest in it over time to establish a brand equity.” (P&G. Nd. para. 7) They have accomplished this through capabilities and philosophies that have been engrossed throughout the company. Among the five key drivers that P&G uses include customer knowledge, product innovation, quality strategy, aggressive sales force, and manufacturing efficiency and cost cutting. Their success can not be attributed to one simple task, but on the successful combination and relational interdependency of many different aspects. As a result, this combined effort has developed a market leader that has been recognized globally, as a benchmark for success.
References
Kotler, P., Keller, K. L. (2009). Marketing Management. New Jersey: Pearson Prentice Hall.
Mandel, M. (2009, June 15). Innovation Interrupted. Business Week. The McGraw-Hill Companies.
Boyle, M. (2009, June 15). Management & Leadership. Wal-Mart’s Magic Moment. Business Week. The McGraw-Hill Companies.
P&G Global Operations. Nd. Retrieved June 20, 2009 from Proctor & Gamble. Website: http://www.pg.com/jobs/jobs_us/usinfo/building_brand_gl.shtm l
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