Essay, Pages 4 (900 words)
The Procter & Gamble Company, incorporated in 1890, has continued to be one of the leading manufacturers in the consumer home goods industry. A large portion of their success is attributed to the sales of their light-duty liquid detergents (LDLs) in the Packaged Soap & Detergent Division (PS&D). Procter & Gamble’s three main LDLs, Ivory, Dawn, and Joy, maintain a 42% market share in the industry. As consultants, we will explore new growth opportunities to increase profits and consumer satisfaction through product improvements on an existing brand.
LDL market segmentation
The LDL market segmentation for Procter & Gamble is based on three main product attributes. Performance describes the product’s primary cleaning benefit, mildness describes the gentleness on hands, and price provides the benefit of low cost. P&G positioned its three LDL brands very differently. Ivory is positioned to appeal to females, primarily middle-class mothers, who enjoy the benefit of younger looking hands. Advertisements depict a mother/daughter comparison to illustrate this youthful appeal.
Its creamy-white color and light scent relates this LDL to the Ivory bar soap, which consumers recognize for its mildness.
Dawn is positioned purely as a performance LDL for those who seek superior grease-cutting abilities. By allocating most of the marketing budget towards coupons, this brand seeks early-adoption by new customers in hopes of promoting brand loyalty among households. Joy is the original LDL manufactured by P&G, and is positioned as a reliable and recognizable option due to its unique yellow color and fresh lemon scent.
Average LDL users consume one bottle every three to four weeks, amounting to roughly one case per year.
The top three attributes
On average, these consumers had one and a half LDL brands in their household at any given time. Consumers are fairly loyal to LDL brands, with 60-80% of total brand volume attributed to usual brand users. Usual brand users consistently rate their respective brand more favorably than users not loyal to that brand. For example, 89% of usual Ivory users rated it best for mildness, while only 51% of non-loyal users rated it the best for this attribute. The top three attributes that consumers want most in LDLs are, in order, grease-cutting, long-lasting suds, and doing a good job on pots and pans.
The consumer-rated importance of these attributes, on a 6-point scale, is 5.8, 5.6, and 5.5 correspondingly. After reviewing company and industry information, we propose that Procter & Gamble should implement product improvements on an existing brand. As a successful, established performance brand primarily recognized for its grease-cutting abilities, Dawn is the preferred brand for performance improvements. The improvement of an existing brand will require roughly $20 million in capital costs, similar to those required to introduce a new brand.
However, while a new brand would need more than $60 million in marketing expenditures, a product improvement needs only $10 million. Additionally, a new brand introduction would require two years, plus another year in a test market, while a product improvement requires at most two years. Though this is longer than the time required to gain approval for increased marketing expenditures, it will likely result in substantially larger growth. We recognize that projected trends show the performance segment will continue increasing in category volume, while the mildness and price segments will either decrease or remain consistent.
Dawn will be reformulated with H-80 components to improve its performance, expectantly taking advantage of the growing performance segment. The H-80 has proved especially effective for grease-cutting and tough, baked on foods, two of the most desirable consumer-rated attributes. Adding this ingredient to the Dawn brand will increase its favorability among consumers seeking such performance attributes. Furthermore, for general dishwashing, H-80 performs as well as other LDLs when diluted with water, allowing the consumer to use less of the product under normal circumstances.
This improves overall product value, especially relevant for economically-minded consumers. The nonabrasive scrubbers in the H-80 formula are made from biodegradable shells of microscopic sea organisms, a natural ingredient that could be perceived safer and more environmentally friendly than competitors’ harsh chemicals. This could be especially desirable for mothers worried about the health and welfare of their families. With the new addition of H-80, increases in performance, value, and consumer safety will allow the Dawn brand to improve its market penetration.
Any major product improvement will encounter organizational constraints within a company. Within the Procter & Gamble Company, each brand has a dedicated manager, with an associate advertising manager overseeing the entire category. Increased expenditures of $30 million for one brand can cause tension with the other brand managers whose brands will receive no additional funding. Additionally, the associate advertising manager will be devoting substantial time to the Dawn brand during its improvement phase. This could result in reduced focus on the other brands within the category such as Ivory and Joy.
As a whole, the overall performance of P&G’s LDL category could decrease compared to that of its competitors. Our evaluation of the Procter & Gamble Company confirms its status as the market share leader in the LDL industry. Though various options are available to increase market growth, implementing a product improvement proves to be the most logical choice after weighing both costs and benefits. The company may face many organizational constraints throughout the process, however we believe the improved customer satisfaction and increased profits will outweigh any negative attributes associated with the improvement.