Staying ahead in the market place:

Analysis of marketing strategies of

Procter and Gamble

A Brief Synopsis submitted to

Prof. U. M. Amin
(Mentor, Comprehensive project report)

BY: Mukhtaar Abbas (08-MBA-30)

Title:
Staying ahead in the market place: Analysis of marketing strategies of Procter and Gamble.

Abstract:
This study seeks to understand the growth of Procter and Gamble through the in-depth
analysis of marketing strategies it has adopted over a long period of time to stay ahead in the
market place. This study explains how P&G has maintained its position by exploring its
strategies. The study also explains how P&G became the world leader billion dollar brand
from a local candle and soap maker. Further it seeks how CSR and Advertising help P&G to
create and brand image for quality and innovation.

Introduction:
William Procter, a candlemaker, and James Gamble, a soapmaker, formed this global and
Fortune 500 Corporation in 1837 (corporate profile). Procter and Gamble (P&G) is
headquartered in Cincinnati, Ohio. These two entrepreneurs and inventors were immigrants
from England and Ireland respectively; who have chosen for some reason to settle in the
Cincinnati area. The company manufactures a wide variety of consumer goods including
beauty, household, health and wellness products. According to CNNMoney.com “in the early
parts of 2007, P&G was the 25th largest U.S Company by revenue, 18th largest by profit, and
10th in Fortune’s Most Admired Companies list”. “Touching Lives, Improving Life” is the
corporate motto which is exemplified in their 138,000 employees and loyal customers
worldwide. The worldwide demand for P&G’s products and services has forced management
to focus on global marketing and innovation. This worldwide marketing and innovation
success was achieved by making sure that what they produce is of highest quality and most
importantly is what customers need. P&G is very adaptable to changing customer demands by
carefully and clearly defining its innovative strategies; however, it almost lost its market
dominance to competition in the mid 80’s had it not been its aggressive play-to-win strategy.
(Davila, Epstein, & Shelton, 2006, p.73). “Senior P&G management admitted that they had
not had a breakthrough innovation since 1985, and the company’s continued market
dominance in the years ahead was in question” (Davila et al., 2006 p.73)
One strategic management tool that P&G uses to stay ahead of its competition is the effective
and efficient utilization of SWOT analysis. This involves specifying the goals and objectives
of the business as well as identifying the internal and external factors that are favourable and
unfavourable in achieving the goals and objectives. These analyses are based on the
company’s case study as well as the industry trend. Because of the segmentation and size of
the company, P&G faces a lot of domestic and foreign regulatory threats and distribution
systems where foreign competition tries to imitate P&G’s brand names for the seek of
misleading consumers for self profit. This threat of foreign brand imitation is due to weak
foreign business laws and regulations.
 P&G has grown into the world’s largest consumer goods product company that today market
brand in more than 180 countries, with on the ground operation in more than 80 countries.

The company's strengths lie in its commitment to:

 Provide products of superior quality and value that improve the lives of the world's
consumers.
 Be a world leader in relevant scientific research and technology.
 Maintain economic success based on P&G 's experience in managing the business with
excellence and training, and developing people to build it.
P&G has grown sales from $39 billion to $83 billion in the past seven years. It has more than
doubled the number of brands that generate $1 billion or more in annual sales and more than
quadrupled the number of brands that generate at least $500 million.

The Company reported net earnings of $12.1 billion for the fiscal year ended June 30, 2008,
an increase of 17 percent compared to $10.3 billion in 2007. Diluted net earnings per share
were $3.64 in 2008, compared to $3.04 in 2007. Net sales were $83.5 billion in 2008, up 9
percent from last year. First discretionary use of cash is dividend payments. Common
share dividends grew 13 percent to $1.45 per share in 2008, representing the 52nd consecutive
fi scal year of increased common share dividends. Total dividend payments, to both common
and preferred shareholders, were $4.7 billion, $4.2 billion and $3.7 billion
in fiscal 2008, 2007 and 2006, respectively.

The reconciliation of reported sales growth to organic sales for the 2009 fiscal year is as
follows:

Net Foreign Acquisition/ Organic

Sales Exchange Divestiture Sales
FY 2009 Growth Impact Impact Growth
------- ------ -------- ------------ -------
Total P&G -3% 4% 1% 2%

FY 2008 FY 2009
------- -------
Diluted Net Earnings Per Share - Continuing Operations $3.56 $3.58
Significant Adjustments to Tax Reserves ($0.14) -
Incremental Folgers-related Restructuring Charges - $0.09
For FY2009 Net Free
Earnings Cash
Excluding Flow
Operating Capital Free Net Folgers Folgers Product
Cash Flow Spending Cash Flow Earnings Gain Gain -ivity
--------- -------- --------- -------- ------- --------- -------
 $14,919 ($3,238) $11,681 $13,436 $2,011 $11,425 102%

(SOURCE: Procter & Gamble official websites annual report)

Year wise financial information of P&G,

(Amounts in millions, except per share amounts) (Source: www.pg.com/annual report/investors)

2009 2008 2007 2006 2005 2004

1) Net Sales $ 79,029 $81,748 $74,832 $66,724 $55,292 $50,128
2) Gross Margin 40,131 42,212 39,173 34,549 28,213 25,709
3) Operating Income 16,123 16,637 15,003 12,916 10,026 9,019
4) Net Earnings 13,436 12,075 10,340 8,684 6,923 6,156
5) Net Earnings from
Continuing Operations 11,293 11,798 10,063 8,478 6,648 5,930
6) Net Earnings Margin
from Continuing-
-Operations 14.3% 14.4% 13.4% 12.7% 12.0% 11.8%
7) Diluted Net Earnings
per Common Share $ 4.26 $ 3.64 $ 3.04 $ 2.64 $ 2.53 $ 2.20
8) Diluted Net Earnings
per Common Share from
Continuing Operations 3.58 3.56 2.96 2.58 2.43 2.12
9) Dividends per
Common Share 1.64 1.45 1.28 1.15 1.03 0.93
10) Total Assets $134,833 $143,992 $138,014 $135,695 $61,527 $57,048
11) Long-Term Debt 20,652 23,581 23,375 35,976 12,887 12,554
12) Shareholders’ Equity 63,099 69,494 66,760 62,908 18,475 18,190
13) Employees (est.) 135,000 138,000 138,000 138,000 110,000 110,000

Major Expenditures:
2009 2008 2007 2006 2005 20041
1) Capital Expenditures $ 3,238 $ 3,046 $ 2,945 $ 2,667 $ 2,181 $ 2,024
2) Dividends to Shareholders 5,044 4,655 4,209 3,703 2,731 2,539
3) Advertising Expense 7,579 8,583 7,850 7,045 5,850 5,401
4) Research and Development
Expense 2,044 2,212 2,100 2,060 1,926 1,782
(Amounts in millions)

P&G is recognized as a leading global company, including a #6 ranking on Fortune’s

“World’s Most Admired Companies,” the #2 ranking on Fortune’s “Top Companies for
Leaders” survey, the #3 ranking on Barron’s “World’s Most Respected Companies List,”
a #12 ranking on Business Week’s list of “World’s Most Innovative Companies,” named to
Chief Executive magazine’s worldwide survey of the Top 20 Best Companies for Leaders, top
rankings on the Dow Jones Sustainability Index from 2000 to 2009, being named to the list of
the Global 100 Most Sustainable Corporations in the World, and a consistent #1 ranking
within our industry on Fortune’s Most Admired list for 24 of 25 total years and for 12 years in
a row.
P&G’s commitment to creating a diverse workplace has been recognized by the National
Association for Female Executives (Top 10 Companies for Executive Women), Working
Mother magazine (100 Best Companies for Working Mothers and Top 20 Best Companies for
Multicultural Women), Black Enterprise magazine (40 Best Companies for Diversity), and
Diversity Inc. (Top 50 Companies for Diversity and #3 ranking on the Top 10 Companies for
Global Diversity).
Supplier diversity is a fundamental business strategy at P&G. In 2009, P&G spent more than
$2 billion with minority- and women-owned businesses. Since 2005, P&G has been a member
of the Billion Dollar Roundtable, a forum of 16 corporations that spend more than
$1 billion annually with diverse suppliers.

Literature Review:
Procter & Gamble is strongly committed to the concept of sustainable development, and
continues to lead its industry in that regard. The company views sustainability as an
opportunity to innovate in products that improve the lives of the world's consumers. P&G
largely centers its sustainability efforts on its core activities, in particular on two key themes
that are significant to a number of P&G's businesses: water purification technology &
products and sanitation & hygiene. In that context, P&G emphasizes innovation in products
that serve basic needs of consumers in least developed countries. The company's high scores
in the criteria of product impact and strategies for emerging economies is a reflection of that
fact. In developed markets, P&G focuses on environmental excellence, innovating in products
such as cold-water cleaning technologies that provide good performance as well as energy
savings and eco-efficiency. The company's best-of-class scores in environmental performance
and reporting illustrate its success in these areas. P&G is also an above-average performer in
the social dimension, a position which is underlined by high scores in reporting, human capital
development, and talent attraction & retention. (Analyst: Gabriela Grab Hartmann, SAM
group, sept 5, 2006)
Much research has focused on how consumers and competitors respond to short-term changes
in advertising and promotion. In contrast, the authors use Procter & Gamble's (P&G's) value
pricing strategy as an opportunity to study consumer and competitor response to a major,
sustained change in marketing-mix strategy. They compile data across 24 categories in which
P&G has a significant market share, covering the period from 1990 to 1996, during which
P&G instituted major cuts in deals and coupons and substantial increases in advertising. The
authors estimate an econometric model to trace how consumers and competitors react to such
changes. For the average brand, the authors find that deals and coupons increase market
penetration and surprisingly have little impact on customer retention as measured by share-of-
category requirements and category usage. For the average brand, advertising works primarily
by increasing penetration, but its effect is weaker than that of promotion. The authors find that
competitor response is related to how strongly the competitor's market share is affected by the
change in marketing mix and the competitor's own response and to structural factors such as
market share position and multimarket contact. The net impact of these consumer and
competitor responses is a decrease in market share for the company that institutes sustained
decreases in promotion coupled with increases in advertising. (Kusum L. Ailawadi, Donald
R. Lehmann, Scott A. Neslin)
Procter and Gamble has capitalized on innovation and creativity to lead the consumer and
household product industry. This paper will explore some strengths and weaknesses, as well as
opportunities and threats that Procter and Gamble had utilized to sustain its success and
competitiveness. This case study will also explore some characteristics of innovative
organizations and why they have chosen to be innovative.
Innovative play-to-win strategy that P&G management had adopted was the acquisition of its
domestic and foreign competitors. P&G acquired a number of other companies that helped
diversified its product line and increased profits significantly. In order to foster this aggressive
strategy, management had integrated and reorganized all the manufacturing processes of the
companies they acquired. Manufacturing processes of companies like Folgers Coffee,
Norwich Eaton Pharmaceuticals, Richardson-Vicks, Noxell, Shulton’s Old Spice, and many
others. “Innovation must be encouraged, carefully implemented within an organization at all
times” (Hesselbein, Goldsmith, & Somerville, 2002, p. 82).
Dividend History
P&G has paid dividends without interruption since its incorporation in 1890 and has increased
dividends each year for the past 53 fiscal years. P&G’s compound annual dividend growth rate
is 9.5% over the last 53 years.

(in dollars, split adjusted) 1956 1970 1984 1998 2009

Dividends per Share $0.01 $0.04 $0.15 $0.51 $1.64

Coming out of one of the toughest years P&G has faced in more than 50 years, Mr. McDonald
said the company today served about four billion of the world's seven billion consumers but
aimed to reach five billion over the next five years.
Mr. McDonald said: "Our choices are a natural evolution of the strategies that have been
working for nearly a decade. We will grow leading, global brands and core categories. We
will build our business with under-served and un-served consumers and we will continue to
develop faster growing, structurally attractive businesses with global leadership potential."
"More than at any time in our company's 170-plus year history, we have the brands,
capabilities, strategies and financial flexibility necessary to expand our product portfolio into
more parts of the world."
Geographic and portfolio expansion coupled with a focus on simplifying business structure
and processes, leveraging scale and enhancing execution will all be elements of P&G's long
term growth success, he added.
Earlier, Mr. McDonald paid tribute to former President and Chief Executive and current
Chairman of the Board, A.G. Lafley, calling out the transformation he had led over the last 9
years.
"As P&G shareholders, we've all benefited substantially from A.G.'s leadership. When he took
over the helm, P&G's market capitalization was about $74 billion - 35th highest among the
Fortune 500. P&G stock has appreciated approximately 100 percent since then and today the
company's market capitalization is about $170 billion making P&G one of the most valuable
companies in the world," he said.
P&G's net sales for the fiscal year ended June 30, 2009, were $79 billion, with organic sales
up two percent. Core earnings per share increased 8 percent to $3.67 while P&G continued to
deliver strong free cash flow at more than 100 percent of earnings excluding the gain on the
Folgers sale.
On average, P&G sales have nearly doubled for each of the past three decades - from $10
billion in 1980 to approximately $80 billion today with earnings increasing from $643 million
to $12 billion over the same period. The company's dividends have also increased every year -
more than 9 percent a year on average, over the past 53 years, and have been paid without
interruption since the company was incorporated 119 years ago.
(Bob McDonald, oct 13, 2009)

For many years, consumers who wanted whiter teeth had to use weak over-the-counter polish
products, or go to the dentist for bleaching. The over-the-counter products were generally not
able to produce dramatic results, as dentist offices could, but the in-office procedure was
expensive and inconvenient. In addition, many consumers associate dental visits with
unpleasant experiences and are not eager to visit the dentist for more than just a regular check-
up and cleaning. Recently, advances in whitening technology have made it possible for
consumers to whiten their own teeth at home. Procter & Gamble, one of the largest consumer
products companies in the world, undertook market research before launching its own product
in this category, and used the research to make decisions about the marketing mix as well as
its marketing strategy and tactics. This research considers the effect of the marketing research
on the launch of Crest Whitestrips.
Procter & Gamble used market research to determine whether there was a need for a
whitening product for in-home use, what type of product would be appropriate, and whether
that product would fit with Procter & Gamble's overall marketing strategy. Initial research
confirmed that there was, indeed, an unmet need in the market. Research also revealed that
consumers would accept a product that required up to 30 minutes of use, and that women were
considerably more interested in the product than men. I
So indicated that the product would do better under the Crest brand. This is a significant shift,
in that Crest denotes hygiene and tooth care while Cover Girl would indicate cosmetics and
would definitely limit the number of male consumers who would purchase--and possibly use,
if purchased by someone else--the whitening product. Market research thus helped the
company determine its market strategy by shaping the brand name and the product
identification (dental hygiene rather than mere cosmetics) that the product would carry.
Knowing that women would be the primary target market for the product also shaped the
tactics that Procter & Gamble used in its promotional strategy. Celebrity endorsements can be
effective, but using the right celebrity is critical to that effectiveness. By using Rosie
O'Donnell to endorse the product, and by placing the product on her show, Procter & Gamble
was able to reach the target demographic that research showed would be critical to the
product's success. Subsequent research has shown that consumers have approached their
dentists regarding other cosmetic dental procedures; this helps maintain the relationship
between Procter & Gamble and dentists. Perhaps the strongest support for the research
(Proctor and Gamble marketing Strategy, HBR)

Today, P&G estimates that its products already can be found in more than 90 percent of all
U.S. homes, and more than 20 percent of all homes in the world. The company's list of soap
and laundry products includes: Bold, Dreft, Bounce, Cheer, Era, Tide, Downy, and Gain
laundry products; Dawn, Ivory, Joy and Cascade dish soaps; and Mr. Clean, Comet, and Spic
& Span cleansers. P&G's paper products division peddles such mainstays as Charmin toilet
tissue and Pampers diapers. The health care division be deciding product range. 1. CASH
FLOW ISSUES -- Extending commercial credit is risky enough in a stable economy, but in
one where the value of a currency changes throughout the day, credit presented some major
transaction and translation exposures. 2. REPUTATION ISSUES -- P & G was known to have
good products -- its detergent Ace Lemon for instance, was a market leader -- but situations
beyond its control were threatening P & G's good name. Alternatives The P & G strategy team
had four main alternatives. 1. SHUT DOWN STRATEGY -- This would involve sacrificing
market share, losing customers and causing ill-will. However, it would cut the losses from the
operation and have a minor (at the time) impact on P & G's profits. 2. GENGHIS KHAN
STRATEGY -- This strategy, attributed to a Harvard Professor, refers to the technique of the
"home office warriors" invading a "settlement," and setting up new and alien rule. This is a
dangerous strategy since it alienates many management levels and governments (Hoffman,
1994, 69). 3. HOME RULE STRATEGY -- Defer all decisions to the home office. One
management consultant for P&G explains it like this. "P&G must guard against losing its grip
as it expands overseas. (Marketing in Adverse economic climate, the Harward Business
Review)
"Design thinking" may seem like just another new buzzword in the lexicon of innovation, but
Procter & Gamble is using the approach to change its culture. Leadership is listening, learning,
and deploying; cross functional teams are cracking vexing problems across its business
landscape; and visualization, prototyping, and iteration are facilitating communication
internally and with customers like never before. Here's a look inside one of the most intriguing
change management efforts going on in Corporate America today.
"It has been transformative for our leadership teams," says Cindy Tripp, marketing director at
P&G Global Design, as she describes her work rolling out the company's Design Thinking
Initiative. With a cadre of 100 internal facilitators, more than 40 design thinking workshops
have been held in P&G business units across the globe during the past year. The design
thinking facilitation team comes from every function at P&G [such as marketing, research and
development, info tech, and product supply as well as design]. Perhaps most important, half of
the workshops focused on something other than new product initiatives to include other types
of pressing business issues such as strategy, retail relationship building, and matters of
operational excellence. "We want people to use these techniques daily in their work using
broad insights; learning faster; failing faster. Design thinking can be applied
everywhere, every day," says Tripp. This attitude signifies an extreme shift for the $81.5
billion global consumerproduct giant, whose longtenured design managers describe P&G's
former attitude about design as "the last decoration station on the way to market." (By
Jeneanne Rae, July 30, 2008 7:25AM)

2009 NET SALES

(% of total business segments)

33%
($26.3b)
46%
($37.3b)

21%
($16.7b
)

Objectives:

The purpose of the study is descriptive and diagnostic in context of strategies adopted by
Procter and Gamble.
  To identify the factors that has led to the success of P&G over a long period of time to
stay ahead in the market place.

 To analyze the marketing and positioning strategies adopted by P&G.

 To analyze the advertisement and corporate social responsibility budgets of P&G to

make (sustain) brand image.

 To compare the strategies adopted by P&G to its closer competitor like HUL.

Research Methodology:

The research will be diagnostic in nature with some qualitative research and some input from
quantitative technique. And data will be primary and secondry.

Sampling:

Non probability sampling with a mix of

 Judgement sampling

 Convenience sampling

 Purposive sampling

Time frame: 3 months

Data collection Tools:

 Texts (Research papers, Websites and articles published on P&G)

 Media (advertisements and promotion)

 Events

 P&G annual report for investors

 People (interviews)

Sample size:

 100 (consumer of P&G)

 50 (P&G officials)

Target population: consumers and officials of P&G

Hypothesis:

Hypothesis to be checked in the study are:

 Pricing model of P&G is delivering value to the consumers

 Advertising and corporate social responsibility expenses are direct related to the
revenue of the company.

 CSR creates brand image in the minds of consumers.

 P&G has a brand image of quality and innovation in reasonable price in the minds of
consumers.
  P&G has maintained its growth rate in terms of revenue, sales, profit dividends over a
long period of time.

Various statistical tools like t-test, correlation, chi-square test will be used to check the
hypothesis.

Tentative chapter plan:

Chapter 1: Introduction of P&G, (History, products, SBUs, etc)

Chapter 2: Evaluation of various factors and marketing and positioning strategies adopted by
P&G

Chapter 3: comparison of P&G to its closer competitors.

Chapter 4: Determination of Advertising and CSR.

Chapter 5: Data analysis and interpretation

Chapter 6: findings and conclusions.

Bibliography:
 www.pg.com

 Best of HBR 1992 onwards

 Journal of marketing, vol-65, 2001

 www.knol.google.com

 Anthony, S.D., Eyring, M., Gibson, L. (2006). Mapping your innovation strategy.
Harvard Business Review.
 http://www.businessinnovationinsider.com/2007/01/the_5_principles_of_innovation.p
hp
 Remarks by the corporate director of innovation capability, procter & gamble (2006).
Retrieved June 4, 2008 from www.serve.com/athenaalliance/pdf/JWL%20remarks.pdf
 www.newscom.com/cgi-bin/prnh/20090115/CLTH035LOGO-a )