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Market Research History: Brand Management at


Procter & Gamble
Neil McElroy's Famous Memo Changed Brand Strategy
Updated February 27, 2017

Market research has its roots in an American business institution Procter & Gamble. The
company is billed as the largest manufacturer of branded products for households. Brand
management is the sort of concept that seems like it has always been around. But a look into
the history of Procter & Gamble proves otherwise. Moreover, a number of market research
practices that are fundamental to consumer product companies began with Procter & Gamble.

Brand Management Began with One Executive and Two Soaps

Two early products of Procter & Gamble were Ivory soap and Crisco. In fact, it could be said
that Ivory soap was the slippery slope on which brand management got its start. Brand
management was the brain child of Neil McElroy, an employee of Procter & Gamble who
worked on the Camay soap campaigns.

In 1925, Neil McElroy graduated from Harvard College and landed a position with Procter &
Gamble. Camay soap became his focus and the advertising campaign became his game.
Procter & Gambles flagship product, Ivory soap, was doing very well against the competing
soaps from Palmolive and Lever Brothers. So well, in fact, that McElroy found that his
Camay campaign was directly competing with Ivory in the marketplace.

Under the model established by Procter & Gambles President Deupree, the company had an
admirable and reasonable policy of containing memorandums to one page or less.

The one-page memo was held up as a model for internal communication in corporate
management circles. Having had a bit of time to think about the situation, McElroy drafted a
three-page memo explaining his ideas about how Procter & Gamble brands could be
promoted more effectively. He argued for a system that would target more resources and
attention at Camay and other Procter & Gamble products, as well.
A hallmark of McElroys plan was that one person should be in charge of each brand.
Further, McElroy proposed that a substantial and dedicated team should be engaged in every
aspect of promoting each of the brands and that the teams should be focused on only their
own particular brands. The idea was so complete in McElroys mind that he suggested the
team should include a brand manager, a brand assistant, people who tracked the brand, and a
handful of other positions focused on specific activities and tasks.

The ideas in the memo followed a line of progress resembling a pin-ball trajectory up and
through the corporate hierarchy until they were enthusiastically endorsed by President
Deupree, to whom McElroys ideas made sense. Using McElroys ideas as a platform, and
hot on the heels of the success of Ivory soap and Crisco, Procter & Gamble developed a new
approach to managing brands. The new business technique was product-centered and not
centered on a business function.

P&G Practices: Market Segmentation & Product Differentiation Roots

The structure created through this brand-centered approach resulted in decentralized


decision-making, almost to the degree that the brand was managed as a discrete business.

This segregated marketing enabled a brands personality to be definitively different from the
other brands in a companys brand portfolio. This process (now commonly referred to
as market segmentation) enabled targeting distinguishable consumer groups. From Procter &
Gambles perspective, this meant that Ivory soap and Camay soap would not compete so
much in the market because the different markets were targeted for each brand. Consumers
viewed Ivory soap and Camay soap differently, preferring one over the other based on the
products attributes or assumed a connection to their desired lifestyles. Product differentiation
became a key approach to successful marketing and advertising. Naturally, it took market
research to discover just what attributes appealed to which markets.

McElroys plan for brand management was widely copied and versions of it can be found
throughout the global consumer product industries today.

Neil McElroy went on to head Procter & Gamble when Deupree retired in 1948, and then
later became President Eisenhowers Secretary of Defense.
As marketing in America developed during the 20th century, brand management signaled
emerging innovations in the post-war business boom. Many of these innovations created a
tension between centralized authority and decentralized decision-making. Typically, the
balance was tipped on the basis of how to best inform the decision, rather on corporate
hierarchical authority. This decentralized structure found its way into many other
corporations across America. One notable example is the structure at General Motors
developed by Alfred Sloan. General Motors multiple divisions exhibited the same
decentralization for making brand-critical decisions.

Sources

American Business, 1920-2000: How It Worked - P&G: Changing the Face of Consumer
Marketing(2000, May 2) Working Knowledge for Business Leaders. Cambridge, MA:
Harvard Business Review.

Gray, Paula (2010, August 8). Business Anthropology and the Culture of Product Manager
[White paper for the Association of International Product Marketing & Management
(AIPMM)]

McCraw, Thoms K. (2000). American Business, 1920-2000: How It WorkedWheeling, IL:


Harlan Davidson. ISBN: 0-88295-985-9 (The book is part of Harlan Davidsons American
History Series).