P&G's Brand Management System

"The brand-management aura has propagated one of the biggest myths about P&G, that it does nothing but influence consumers to buy the company's products. P&G has always been misunderstood as a marketing company. Thefact is that P&G's fortunes have been built on product innovation. Brand management is an integral aspect of it, and it's the way the business is managed. ..I - John Smale, Former Chairman, P&G. "Our brand is our bond with consumers. When we succeed, we convert a trademark into a trustmark, and another P&G brand becomes a valued and trusted member of the household ..2 . - John Lafley, President & CEO, P&G.

INTRODUCTION
Based in Cincinnati, US, Procter & Gamble (P&G) was one of the largest manufacturers of fast moving consumer goods (FMCG) in the world. For the financial year ending June 2003, P&G reported revenues of$43.38 bn and net earnings of$5.18 bn. In 2003, the company was ranked 31st among the Fortune 500 companies. P&G had operations in 80 countries globally, with an employee-strength of around 1,10,000 worldwide. Analysts attributed the evolution of P&G, from a small soap and candle maker into a multi-billion dollar company, to its highly successful marketing and brand management strategies (Refer Exhibit I for P&G's competitive advantage in branding). In 2003, the company marketed more than 300 brands to nearly five billion consumers in 160 countries across the globe. P&G had a significant market share in several product segments. (Refer Exhibit II) including laundry and cleaning (fide, Cascade, Dawn),· paper-goods (Bounty, Channin, Pampers), beauty care ·{Pantene, Olay, Cover Girl), food and beverages (Folgers, Pringles, Duncan Hines), and health care (Crest, Scope, Metamucil). Commending P&G's exceptional growth, an analyst said, "Within a paternalistic corporate culture, P&G pioneered in brand management, in consumer surveys for marketing research and in new product research and development. ,,3 A pioneer in introducing a formalized brand management system way back in the 1930s, P&G constantly modified its brand management strategies as and when the company expanded its product & brand portfolio and its business QP~lt~Qnl?,,¥"\obal\y. The company introduced the category management model in tM 19S'@s, fOCUsed on the 'glocal' branding strategy in the early 1990s and made changes in its brand management system under the Organization 2005 restructuring exercise" in the late 1990s. In 2000, P&G introduced the 'cohort management strategy' for managing brands. The strategy involved grouping of brands to appeal to similar consumer groups. Describing the future of cohort management strategy, Robert Rubin (Rubin), Director
In the article titled "1931 Memo First Devised Role of the 'Brand Man," by Cliff Peale, The 20, 2001. In the article titled "Report on the Business 2000 Annual Meeting of Shareholders," in www.pg.com, May 4, 2001. In the article, "Corporate Watch: Procter & Gamble," in www.corporatewatch.org.uk. The detailed description about P&G's organizational restructuring under Organization 2005 and its implications is covered in the ICMR case study, "Restructuring P&G."
Cincinnati Enquirer, May

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Brand Management of Netquity at Forrester Research.' said, "The days of reaching large audiences with generic messages and promotions will give way to a new era in which individuals will be targeted and measured based on their behavior. To compete, consumer packaged goods (CPG) manufacturers will abandon brand and category management and discover new marketing efficiencies as they learn to use Internet technology to focus on cohorts of consumers.?"

BACKGROUND NOTE
Procter & Gamble was established in 1837 when candle maker William Procter and his brother-in-law, soap maker James Gamble merged their small businesses. They set up a shop in Cincinnati and nicknamed it "porkopolis" because of its dependence on swine slaughterhouses. The shop made candles and soaps from the leftover fats. Since the very beginning, P&G laid major emphasis on developing brands. The earliest brands of P&G, which were advertised in a Cincinnati newspaper in 1838, were Palm Oil soap, Rosin soap, Toilet and Shaving soap, and Tallow candles. By 1.859,P&G had become one of the largest companies in Cincinnati, with sales of $1·

mn.

In 1879, P&G introduced Ivory, an all-purpose soap, for the first time in the US. Ivory could be used for both personal cleansing and household cleaning. Soon Ivory emerged as the most popular soap brand in the US. By the 1880s, P&G sold brands like White, Famous, Perfect, Queen Olive, Topaz, Handy, Town Talk, Good Luck, Blue, Princess Olive, Duchess Olive, Very Good, Countess Olive, Toilet, Green Seal, Polo, Japan Olive, Simon Pure, Yellow Erasive, German Olive, Lenox, Velvet and Golden Bar. By 1890, P&G was selling more than 30 different varieties of soap including 'Ivory.' . . At that time, P&G's advertising comprised of full-color print ads in national magazines. The advertisements were very creative, resulting in a gtowing demand for its soaps from consumers. P&G encouraged the promotion of rival brands within the company to compete against one another. In the early 1920s, when Lux, Palmolive and Cashmere Bouquet soaps were introduced by P&G's competitors, P&G introduced Camay. When Camay did not perform well, the management felt that it was because it had not been allowed to compete head-to-head with Ivory. This episode resulted in the development of a brand management system at P&G.

TIlE BRAND MANAGEMENT SYSTEM
The Initial Decades
The brand management system at P&G came into existence in 1931 when Neil H. McElroy (McElroy), P&G's Promotion Department Manager, formed a marketing division based on competing brands, controlled by a group of employees. The system enabled P&G to design and customize its marketing strategies for each brand. The concept of a 'brand man' (later known as brand manager) was also introduced in P&G's brand management memo. The memo listed the duties and responsibilities of a 'brand man' (Refer Exhibit III>..
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Based in Massachusetts (US), Forrester Research focuses on the implications of technological changes on business. As quoted in the article "The Internet Will Force Brand Management to Evolve to Cohort Management by 2005," posted on www.forrester.com. September 7, 2000.

124

P&G's Brand Management

System

When a product emerged from the R&D department of P&G and was ready to be marketed, it was assigned to a brand manager. P&G's brand management system empowered the brand manager significantly. A brand manager focused on a single product or a small family of products. He/She coordinated activities ranging from market research and manufacturing to sales, package design and advertising. Brand managers were given the responsibility of identifying and understanding the consumers' needs, sharing customers' feedback about their products with the R&D department and monitoring their product trials across the world. Each brand manager was also made responsible for the financial performance of his/her brand(s). In the late 1940s, in an attempt to build a healthy competition and keep its salesforce alert, McElroy introduced new brands to compete with the existing brands of P&G. For instance, the launch of Tide affected P&G's already established 'Oxydol ' brand. Soon, P&G introduced 'Cheer' in the same product line. Commenting on this innovative measure, TIN-IE magazine in its cover story in October 1953 reported, "McElroy thought of a free-for-all among brands, with no holds barred. He was really responsible for the refinement of the system, which led to individual brands competing against one another."? P&G's brand names were typically one or two syllables long, easy to pronounce, distinct and easy to remember. P&G looked for design elements consistent with the brand's positioning. For instance, the Tide graphics conveyed power and heavy duty. The baby on Pampers suggested gentle softness. The shape of Mr. Clean bottle resembling its mascot - Mr. Clean, a character with the cross-armed stance, suggested the strength of the product. P&G attempted to maintain consistency while presenting its brands to the consumers and was very cautious about changing anything about the brand that the consumer had become familiar with, including logo, package design, colors or flavors. P&G brands had different performance characteristics and provided distinguishable consumer benefits. For example, when Tide was introduced as the first heavy duty synthetic detergent in 1946, it was claimed to be the most effective detergent in the market. Soon, other effective detergents .were introduced in the market by p&d to compete with Tide. Some were positioned to compete head-to-head with Tide; others offered additional benefits such as cleaning and whitening. A few other brands that were introduced by P&G later were positioned for different applications such as cleaning delicate fabrics. All these brands competed with one another around the edges, but they stood for different primary benefits. P&G did not seem to believe in product life cycles and took steps to ensure that its brands did not mature. The company regularly revitalized its brands by improving their performance or adding functionality. In the 1950s, white cotton was the predominant fabric. So P&G improved Tide's whitening power with fluoresces. In the 1960s and 1970s, brighter colors and synthetic fabrics became more popular resulting in clothes that were tougher to clean. P&G's "Extra Action" Tide came with new technology that facilitated soil removal for all kinds of clothing. In 1984, a liquid version of Tide was introduced. In the case of Crest, the development of tartar control technology was a major achievement and added vitality to the brand. P&G also evolved a product through different forms, such as gels and pump dispensers. Typically, P&G introduced a new brand for every significant technological innovation mat occurred. As the operations of P&G grew over the decades, multiple product lines were introduced, each having several competing brands resulting in a major expansion of P&G's brand portfolio. This led to a gradual transformation of the brand management

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ill the article titled "1931 Memo First Devised Role of the Brand Man," by Cliff Peale, The Cincinnati Enquirer, May 20,2001. 125

Brand Management

system, prevalent at P&G during the 1940s and 1950s. During the mid-1980s, P&G introduced the new 'category-management" model' (CMM).

THE CATEGORY

MANAGEMENT

MODEL

Under the CMM, the brand managers did not compete against each other with similar product brands - contrary to the idea envisioned by McElroy. For instance, in the detergent product category, brands like Tide and Cheer shared the available marketing expenditure and other financial resources but were not allowed to compete for the same segment of customers. Hence, while Tide was positioned as the premium brand, Cheer targeted the customers in the economy segment. Though the brand managers enjoyed the same autonomy, they were accountable to the category managers. The category managers were made responsible for the inventories, sales and profits of an entire product category or product line. The brand managers under each category worked together in close coordination with each other. For instance, Bobbie 10 Ehlers (Ehlers), the brand manager of P&G's personal cleansing division, comprising Olay bar soaps and body wash, worked in close coordination with the brand manager of Olay facial care. Ehlers also had to work in coordination with other soap brands such as Zest on joint merchandising programs, resulting in common store displays. Highlighting the importance of such coordination as a core element of category management, Ehlers explained, "From the retailer's point of view, he or she is buying the category. There's still some healthy competition. But we have a broader portfolio now, and it would be silly of us to ignore the power of that portfolio, to ignore this lever that we didn't have before.:" The CMM also increased the responsibilities of brand managers. Noel Geoffroy (Geoffroy) was the brand manager for Dryel, P&G's home dry-cleaning kit, launched in the late 1990s, In the first year of Dryers launch, Geoffroy had to travel extensively and visit approximately 300 shopping-mall demonstrations. TWQ brand assistants and a brand administrator extended their support to Geoffroy .. They met once a week and coordinated the activities of sales, finance, product development and packaging divisions related to the Dryel brand. Geoffroy also had to maintain a regular contact with Dryel's advertising agency, Leo Burnett US (based in Chicago). The brand managers at P&G also performed some of the functions of a general manager (like overseeing inventory stocks), in addition to their marketing functions. Commenting on the dual role, Geoffroy said, "To me, that's what makes Procter unique, you're doing both of those things. I truly feel like I'm running a company called Dryel. I run this business, I'm closer to consumers. I know what works and what doesn't." 10 The CMM enabled P&G to manage its brands more effectively. Moreover, it also helped in further professionalizing the sales team and their efforts. For instance, prior to the implementation of this model, P&G's sales representatives focused on promoting an individual product or brand. Now, they had to promote all product brands under one category. Hence, the focus shifted from promoting individual brands to improving the profitability and market share of the entire product category.
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Category Management is a distributor/supplier process of managing categories as strategic business units (SBUs), producing enhanced business results by focusing on delivering consumer value. Category management includes six inter-related components, of which two - Strategy, and Business process - are most essential and called the 'core' of category management. The other four are called enabling components and include scorecard for SBU performance, Organizational capabilities, Information Teclmology, and Collaborative relationships between trading partners. In the article titled "Branded for Success at P&G," by Cliff Peale, The Cincinnati Enquirer, May 20, 200l. In the article titled "Branded for Success at P&G," by Cliff Peale, The Cincinnati Enquirer, May 20, 200l.

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P&G's Brand Management System

THE 'GLOCAL'

BRANDING STRATEGY

By the early 1990s, as P&G's operations expanded globally, the top management felt the need for further streamlining the brand management system. Earlier, P&G was known as "the one-page memo company." The brand managers ofP&G were asked to offer their ideas, suggestions, or business plans in just one-page. The plan was communicated to the respective functional unit heads and the top management, who reviewed the document and returned it back for necessary changes. This process continued until the memo was finally accepted. P&G decided to replace the one-page memo by a 'talk sheet.' The talk sheet was an informal outline that allowed brand managers at several levels to develop and refine a business proposal through discussions, rather than through written memos alone. P&G also emphasized greater cooperation among different functions. For instance, in the past, if a P&G brand manager put for-yard a proposal; it had to pass through the hierarchy of functional unit heads and the top management. Under the new approach, teams were often put together. These included representatives from different .functional areas who were involved right from the start of the proposal. This enabled P&G to cut costs, reduce product development time and increase sales. By the mid 1990s, P&G had establifhed global strategic planning groups (GSPGs) that constituted of 3 to 20 individuals, for each of its product categories. Each GSPG was assigned several tasks. They developed global manufacturing & sourcing strategies and gathered data about the country-specific marketing strategies. The GSPGs were also responsible for developing global and local brand policies that involved decision-making on the elements of brand strategy that had to be standardized across the world, and the elements that had to be customized according to the local markets ..They were also responsible for gathering knowledge and best practices of various countries and disseminating them globally. Explaining the function of GSPGs, Kerry Clark, -P&G's President of Market Development and Business Operations said.. "With a typical transnational customer, we conduct business on a day-to-day basis with our local teams in each of the customers' countries. However, we coordinate this work via a very lean, global multifunctional team that quickly and efficiently shares and builds best practices across borders. ,,11 While the GSPGs were responsible for developing branding strategies, the implementation of these strategies was carried out by a global category team (GeT). Each of the product categories of P&G was handled by a GeT which was headed by an executive vice president. The GeT constituted top management executives handling different line responsibilities like production, marketing and research & development for their respective product categories within their assigned geographical region. Hence, there were no organizational barriers in carrying out decisions. The country specific brand managers implemented the branding strategy in local markets. P&G encouraged 'branding teams' at the country level to develop their own brand building programs. When a branding program was highly successful in a country, it was tested in other markets and implemented immediately. For instance, in 1985; P&G acquired Pantene Pro-V. The company faced difficulties expanding the product into markets outside the US and France. In 1990, the branding team in Taiwan discovered that the image of models with shiny hair reflected the customer's aspirations for healthy hair. Soon the team introduced a new tagline in its. advertisements - "Hair so healthy it shines." The campaign was very successful and
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In the article titled "How P&G Leverages Its Scale," posted on www.emmconsulting.net dated March 2003.
127

Brand Management

Pantene Pro- V emerged as a market leader in Taiwan within six months of the launch of the campaign. Soon, the global strategic planning group of the hair care product category tested the concept and its supporting advertising, and subsequently introduced it in 70 countries.

BRANDING UNDER ORGANIZATION 2005
In July 1999, P&G launched Organization 2005, a six-year long organizational restructuring exercise. Under this exercise, P&G sought to reorganize its organizational structure from having four geographically-based business units to five product-based global business units. There were four important components of P&G's new organization structure (Refer Exhibit IV) - global business units (GBUs), market development organizations (MDOs), global business services (GBS) and corporate functions (CF). Under the new structure, the GBUs defined the brand equity for each of their brands. For instance, Pantene's brand equity, as tile consumers perceived, was providing 'healthy, shiny hair.' The Pantene Team falling under tile Beauty Care GBU was responsible for further building on this brand equity. The whole brand equity building exercise would start with the launching of a new product or the upgradation of existing products. In a majority of the cases, a new product was launched simultaneously around tile world. The marketing campaign communicated the same fundamental benefit and tile product was manufactured according to the standardized global formula and package specifications. The MDOs were responsible for promoting the sales of the 'Pantene brand' in their region. For example, in tile US, this could imply focusing on sales through WalMart's' stores. This-required working in close collaboration with theGBUs for developing large size packages as per the demand of the stores that. wanted to maximize the valuefortheir shoppers. On the contrary, the focus in Asian countries like India could be on developing small product packages like sachetssince the consumers in India usually bought products in lesser quantity, avoiding major expenditure on hair care products in one go. . The GBS provided business services including accounting, employee benefits and payroll, order management, product logistics and systems operations to the branding team in its area. For example, GBS located in Costa Rica served the US markets while the GBS located in Manila served the Indian markets. Each CF worked as a consulting group and ensured that the brand building teams were leveraging upon the latest information and best practices prevalent in the product category. The extent of support lent by the CF depended upon tile number of people associated directly with a brand, including members of both GBUs and MDOs.

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BUNDLING BRANDS AROUND CONSUMER GROUPS
During the initial years of the new millennium, P&G introduced its new brand management strategy that grouped brands together to appeal to consumers with similar attitudes and needs. The strategy (coined by Forrester Research as 'cohort management') focused on bundling many brands into online as well as offline marketing efforts aimed at similar consumer groups. This was contrary to P &G 's previous practice of grouping brands according to similar product categories. The 'cohort management' strategy also helped in developing better consumer relationships by using behavioral data about consumers gathered from traditional and online retailers. 128

P&G's Brand Management

System

The new strategy led to the emergence of cohort managers whose primary responsibility was to identify and segment consumers into groups of individuals who possessed similar needs. preferences, attitudes and the ability to purchase. The cohort managers were required to possess .strong analytical capabilities in order to capitalize on the information gathered about consumer behavior. Differentiating between the role of cohort and brand managers, Rubin explained, "Cohort managers operating across brands will decide which ads and promotions to present to consumers based on continuous consumer information. Brand managers will focus on detailed operational issues like inventory and product formulation."! 2 According to analysts, the best cohort management initiative by P&G was the introduction of its website 'www.homemadesimple.com,' launched in mid 2000. The website targeted household consumers by offering theiil special promotions, inviting them to participate in online contests, making them fre.e offers, sweepstakes, and offering new and innovative products before these products were available in retail stores. It also posted content/articles on household management, explaining how P&G's five brands - Swiffer (household sweeper system), Dawn (dish wash liquid), Mr. Clean (multipurpose cleaner), Febreze (fabric spray and laundry aid) and Cascade Complete (dishwashing detergent) - could help in maintaining a clean household and make household activities simpler. The website also offered consumers an option to subscribe to a free monthly e-mail newsletter offering valuable advice and informative articles on household management. By February 2002, the website had 1.16 million unique visitors (Refer Exhibit V) while more than 2.4·million individuals subscribed to its free e-mail newsletter. The cohort management strategy enabled P&G to market complementary products together. It increased the marketing efficiency of P&G by reducing the number of consumers the company targeted and maximizing the time it had with each consumer, Explaining the significance of the Intemet to target consumer groups; Andy Walter, Director, 'HomeMadeSimple' project, said, "The Intemet adds significant value to the cohort 'concept and really allows you like no other medium to take this cohort and bring it to life.,,!3 By mid 2002, P&G launched the 'Golden Households' program that involved bundling of 16 of the company's key household brands and marketing them jointly through direct mails, e-mails and other marketing media rather than on an individual basis. The program aimed at identifying those customers who contributed the highest revenue & profit and had high loyalty for each of these brands. It also aimed at crossselling other P&G brands to high value customers and building long terms relationships with them. Analysts felt that the program was in the right direction towards an effective cohort management strategy. Throwing light on the rationale behind launching this program, Alan Middleton, Marketing Professor at Schulich School of Business, York University, Toronto, said, "This is an attempt to see if by bundling different brands together, the consumers can get the same overall solution. It makes a lot of sense for what consumers want and it's also more cost-etfective.':"

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As quoted in the article, "The Internet Will Force Brand Management to Evolve to Cohort Management by 2005," posted on www.forrester.com. September 7, 2000. As quoted in the article, "P&G Online Strategy Challenges Martha Stewart," by Jack Neff, www.adage.com, April 8, 2002. As quoted in the article, "Packaged Goods Marketers Test Solutions-Based Approach," by Bernadette Johnson, www.strategymag.com, February 25, 2002.

129

Brand Management

Explaining the importance of measuring the customer value in the cohort management strategy, Rubin said, "The real value of each brand to consumer packaged goods (CPG) manufacturers will become evident once they're able to identify and measure their most profitable consumers across all their brands. The ability to link specific marketing activities to product purchases at an individual level will form the basis of lifetime value analysis and will enhance today's analysis based on raw sales volume
metrics."

Questions for Discussion: 1. P&G was a pioneer in introducing a formalized brand management system. Discuss the evolution and growth of the brand management system at P&G. What according to you is the significance of having a formalized brand management system for managing a large portfolio of brands? Elaborate. P&G's 'brand management system' of the 1930s had gradually evolved into a 'category management system' by the 1980s. Briefly describe the category management concept and its significance. How did it differ from the earlier brand management System in practice at P&G? In the initial years of the new millennium, P&G started bundling brands around consumer groups, also known as 'cohort management' strategy. Comment on the efficacy of this strategy in maximizing the potential of individual brands of a vast brand portfolio ofP&G. According to Rubin, "Consumer packaged goods (CPG) manufacturers will abandon .brand and category management and discover new marketing efficiencies as they learn to use Internet technology to focus on cohorts of consumers." In the light of this statement, comment on the future of cohort management strategy. Do you think CPG manufacturers will abandon brand and category management and adopt cohort management?

2.

3.

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© ICFAl Center/or Management Research. All rights reserved.

no

P&G's Brand Management System

Exhibit

I

P&G's Competitive

Advantage

s core strenkl1h is its,abiIity to build big,leadership brands. The coitWauy,'sgqal is to continue that better and morcconsistently than any other company in the.world. ItS,'sl;lccess in building is based on three factors: .
,"IJ.Q.4[lCl·StllQ.{IUIg

cori.sumeYneeds: P&G.t<tlkswith more thanS.S ~niniQn~rtsllnters worldwide . year.. . company.uses.a .varfetyotapproaches, from jll~hQme .vifiits toCotlcept~nd prqciuct testing via,' the.·Interrtet. In "this . way; ·.it is able to. discover. new; ·unrnet.,·and····.often unarticulated consumer needs. .

Invcllting new prQ~Qct tccnnolQgie.s;Tmsis what P&G calls "connectin.g,vhat's. needed with ."rt'hat's possib1f?" TheYPlllP~Y has tl1an 2 7,000 patented-techno1qgi(!s an(:t(ls a re~uJt, can
",.''''h'''' f1nd.lh6tel~oVaiivewayst(r better.

tn0re

tu'fu ;iis-'bestideas

into

jmprov~ 'prodl,icts that: meet
.

Exhibit II P & G's Business Segments

131

Brand Management

Health Care

Toothpastes, mouthwa~hf;l~? remedy, stcullacll

Source: www.pg.com Exhibit III P&G's Brand Management Memo (1931)

Adaptedfrom www.pg.com

132

P&G's Brand Management

System

Exhibit Organization The new organization Market Development Functions. Structure

IV 2005'

under 'Organization

structure has four pillars including Global Business Units; Organizations, Global Business Services, and Corporate Organizations

Global Business Units and Market Development

Global Business Services and Corporate

Functions

l33

Brand Management

Source: www.pg.com

Exhibit V Ranking of Top Ten FMCG Marketers

& Lifestyle Magazine Sit~s (February 2002)

Sourcet Comscore Networks

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