MARKETING ASSINGMENT

P&G Case Study

QUESTIONS AND ANSWERS

PARAS JATANA
SAP ID- 80401190022 | PGDM-1
Question 1-Could he undertake more than one option?
Solution: - Yes, he could undertake two options
a. He could launch a new product.
b. He could implement a product improvement on the existing brand.

 If P&G were to go ahead with the launch of a new brand

P&G has an option to launch a brand in performance/mildness/price segments. The following
factors would need to be evaluated while identifying the segment in which the brand is launched
a) Based on the experience from Dawn’s introduction, iat is estimated that the new brand can
capture at least 60% of its share from the competitive brands. The remainders of the 40% sales are
expected to be a resultant of the cannibalization effect. These numbers however are pure estimates
and can vary based on the choice of segment.
b) The capital investment required to cover the additional production capacity and bottle moulds
would be $20 million
c) The marketing expenditure for the launch of the new brand will be $60 million ($18 million for
media support, $37 million for consumer and trade promotion support & $5 million for marketing
expenses)
d) A national wide launch of a new brand will need at least 3 years which would include one year
of implementation in a test market.
Based on a company research into the attributes which most users find important in their preferred
LDL, the six-point scale survey threw the top attributes as
a) Does a good job on pots and pans
b) Cuts Grease
c) Does not spot or streak glasses or dishes
d) Is low priced
e) Makes long lasting suds
Recommendation for the Target Segment
Based on the inputs received on all the three segments and the positioning of P&G, my
recommendation would be to launch the brand in the price segment. This recommendation has been
discounting the fact that the segment clocks the lowest volumes in the LDL market and that the
brand loyalty from the consumers is very miniscule. The below justifications are the primary
reasons to support the decision
a) User Demographics & Macro Economic Environment: The current economy is going through
a rough spot and with lower disposable income the budgets in the houses are likely to be tight. This
would mean that in times to come, the importance of price sensitive LDL’s will grow and the
consumers would demand efficient quality at a cost-effective price. This coupled with the fact that
46% heavy users of LDL’s fall under the $15,000 and the unemployment rate at 52% (for
households with female head) make it a viable proposition to target the price segment of the
market. The other factor to be kept in mind is the increasing penetration of the ADW’s in the US
market. ADW households are projected to use half the volume of LDL’s as compared to the non
ADW households and the ADW penetration is projected to be close to 44% by 1990. All this
results in the shrinking of the growth volumes for the LDL market (projected to grow at a 1% rate
for the next 5 years). As per Exhibit 8, the % of consumers who have not used ADW’s in the past 7
days is the highest in the price segment (53%) making it the most viable segment to target.
b) P&G’s current positioning: P&G has 3 brands in the mildness and performance segment
which help them capture 42% of the LDL market. Based on research and the impact of a previous
brand launch (Dawn), it is estimated that the new brand launched would be able to capture 60% of
its share from the existing brands. This effect of cannibalization will negate the positive impact of a
brand launch in the mildness and performance segments as it would most likely eat into P&G’s
share of existing brands. However, in the price segment which is dominated by private labels and
hold 28% of the market, the effect of the launch would be a positive factor. P&G would be able to
establish a new market (price sensitive customers) which is forecasted to grow at a stable rate in the
forthcoming years.
c) Quality of Competition: The price segment is dominated by generic and private label brands.
The companies are offering low quality products offering very little value (besides low pricing) to
the consumers. Most of the companies do not have a strong marketing capability due to which they
have not been able to establish any brand loyalty amongst the consumers. Based on the inference
drawn from exhibit 4 that the fact that marketing expenditures and promotion typically represent
20% of the sales of an established brand and the fact that P&G accounts for half of the $150 million
advertising budget, it is very likely that if market well a new brand in the price segment from the
P&G stable can polarize the consumer volume in this fragmented segment. The other segments
(mildness and performance) are dominated by 7 established brands from the leading three
companies which would make it tough for a new brand to attract consumer interest. Considering the
dwindling LDL market, the road to success seems easier in the less cluttered price market (where
consumers exhibit no brand loyalty)
d) Brand Superiority: With P&G’s brand supremacy, it would be easy for the company to attract
first time consumers in the price segment. At the moment the consumers in the segment are able to
derive only a price benefit from their brand. However, with P&G’s manufacturing department
committing to the ability to produce a brand with benefits of a performance brand at the price
matching the existing price labels, it makes a very strong case for the choice of a price segment
brand to be introduced. This parity would also reduce the sales to marketing expenditure (and
profit) % from the existing 32% to 14%, thereby leading to better benefits for the company. The
launch will complete the bouquet of segments of the LDL market and will give consumers from
each segment a choice of their preferred P&G brand. A majority of the top preferences from
consumers (listed above in page 3) will thereby be met with this new price segment entry offering
the benefits of superior performance and far greater value for the money paid.

 If P&G were to go ahead with the product improvement on the existing brand

A product improvement on the current brand represented considerably less investment than a new
brand, and since they have already developed a new formula (H-80).The formula combined
suspended nonabrasive scrubbers with a highly effective detergent system to provide superior
cleaning versus other LDLs when used full strength on tough, baked-on foods and parity cleaning
compared with other LDLs when diluted with water for general dishwashing. Such a product could
fulfil a clear consumer need, based on consumer research. Since market research indicated that 80%
of U.S. households scour and scrub their dishes at least once a week, with an average household
scouring four times a week, this product would be valued by a significant percentage of consumers
so it would be wiser to introduce it with a brand which has the lowest sales and the brand which
could benefit most from the relaunch was Joy brand it desperately needed a change in its policy or
innovation was required in the existing formula.

Conclusion
To conclude, Wright can go with any of the two he wants but it what I recommended is that P&G
should go with the first option i.e. to launch a new brand in the price segment because the company
have already have a goodwill in the market and going with the launch of an existing product it
would take away the innovation from their side because the consumers have already have made up
their mind about the existing products and to change their perception about the existing brand
would require more time and effort so it’s better to launch a new product than an existing one. This
will help P&G gain more market share through increase in volumes from an untapped market
whilst retaining the consumer confidence and brand image.
Question 2-What effect would each option have on each of the existing LDL
brand?
Solution: - The effect on other brands would be as follows
 Ivory Liquid (mildness)- Since this brand targets different segment of the market i.e. its USP is
more on the care for the hand, the effect on its market share would be minimal since the
consumers who like to care for their hands wouldn’t shift to the new brand since its target its
totally different and the demand of the consumers from this product is totally different as
compared to what the new brand would deliver.
 Dawn (Grease Cutting)- The demand for this product might face some jitters as the new product
also targets the same segment of the market i.e. the USP of this brand and the new launch is
same of removing hard stains easily. But the consumers who are loyal to this brand might not
shift so easily because this is product which is tried and tested by the consumers but with time
and the success of the new product could make hard for this brand to maintain its market share.
 Joy (Performance)- The brand which would be mostly affected by the new launch of the
product would be this brand because this is the brand which was launched by P&G the first but
with time it has lost its potential and it has the lowest recorded sales of all the 3 brands so the
company might think of discontinuing this brand and replacing this brand with the new one.
Question 3-What competitive response could he expect?
Solution: - If the company comes up with a new brand then the competitors in the short run can try
to increase their marketing expenditure because then the company would try to beat the competition
in the market by not allowing the company to promote its product and reducing its visibility in the
market and till that time they can analysing their rival products and come up with their own product
in the meantime but with a differentiating factor.
Question 4-What were the long and short-term profits and volume implication on
each of the options?
Solution: - The effect of each of the options in the short term on the profits and volume implication
would be that its effect on the sales of Ivory would be minimal because it caters a different segment
that is the mildness segment and the survey also indicates that the consumer wanted this feature
most in their products. So, the effect on this product would be minimal. Secondly the effect on the
Dawn would be more because the new brand would cater this segment only and there would be a
competition among the brand only and the company has to look that the new brand should have
some differentiating factor among these two so that the risk brand cannibalization is minimised.