Proctor & Gamble is the leading consumer products company in the world. Nonetheless, there are two particular issues with which it must deal: (1) Many of its most popular brands are mature, especially in industrialized countries, with the resultant slowdown in sales growth. (2) Since the onset of the recent Great Recession, even more consumers have become price conscious and turned to less expensive manufacturer and private (store) brands.
As a result, P&G has embarked on a two-pronged product strategy. It has introduced “budget” versions of some brands and it has raised its profit margins on its premium product versions.
According to Serena Na, writing for the Wall Street Journal, this is the approach P&G is undertaking with its Tide detergent:
“To compensate for the introduction of a lower-end version of its big-selling Tide detergent, P&G is raising prices on some fancier Tide varieties by as much as 25%. The goal is to preserve margins while heading off competition from lower-cost rivals. The detergent, in its signature reddish-orange containers, brings in around $2.8 billion in annual sales and holds a commanding 38% share of the North American laundry soap business, according to Nielsen data. But Tide has come under pressure in recent years as more shoppers have reached for bargain brands such as Arm & Hammer, made by Church & Dwight. In response, P&G recently began rolling out a lower-priced liquid, called Tide Simply Clean & Fresh, that is around 35% cheaper than regular Tide detergent, which currently retails for about $12 for a 100-ounce bottle.”
What do YOU think of this approach?
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