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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10 Replies to “How P&G Plans to Profit in Today’s Economy”
Lowering prices in a slow economy can be a good business strategy. Obviously cheaper competition would draw sales from P and G, so they had to respond to this market by lowering the prices of some of their products. Many consumers will go for the name brands, especially if they’ve become less expensive, since people tend to associate brands with quality. Businesses should pay attention not only to what their competitors do, but also to how consumers respond to new competitor measures. Keeping prices within the range of competitor prices would keep more customers.
Joel – as you have always taught – and I continue to teach my classes – even in a tough as nails economy for the middle and working class – my of these families seek out a higher quality brand like Tide because 1) it is hands down the best detergent, and 2) it makes your clothing wardrobe not only have a longer useful life, but the clothes look better.
Cheapening the high quality Tide brand is a big mistake.
I am a self confessed clean freak – Tide is the BEST laundry detergent and worth every penny.
To introduce Tide Simply Clean & Fresh is not a good choice for P&G. Actually, it makes P&G lose its loyal customers. As we known, Tide promotes itself as a high quality and super performance detergent and charges about three dollars more for each 92oz liquid than other brand. To use the brand name Tide is a good promotion only if the new product has a similar brand positioning. The Lower price product, such as Tide Simply Clean & Fresh, will downgrade the brand image in customers’ mind then decrease sales of Tide in long term.
Defining questions is the first step to take up. Mature products and economic recession are the issues they figuring out that need to deal with. Detergent is a necessarily of life so that people won’t stop purchasing because of recession, however, they will become more price conscious. Therefore, where to buy and buy which kind of brands, consumers will re-think about it. Tide is an established brand that everyone knows it and trusts it; much less Tide is the leading brand among detergent products! And customers tend to associate with upgrade brands. Lower-end version with 35% cheaper doesn’t poor quality! But customers can get it much less than before! I think this is a good approach to increase revenues under today’s economy!
I think this a good idea. I think when people switch from Tide to another brand for economic reasons, they take a psychological hit (like they have failed). This way, even though it’s not the same strength, it’s still Tide. This may help people feel better about their current situation and thus create a successful product.
I personally think this is a great idea especially during these tough economic times. I know that my family switches household products due to rising prices and with Tide providing a lower priced detergent, would make many consumers happy. Many families want to stay with certain brands because they feel loyal to them and its definitely difficult to switch brands when prices rise. By providing a lower cost for the same Tide brand, I believe this would make many consumers pleased knowing they can get the same quality detergent but for a cheaper price.
I think it is a good enough move to keep people from moving to other cheaper brands. For most part, people who have been using Tide for years will not bother switching to another brand. However, they may switch to the cheaper Tide, rather than pay extra for the Tide they used to buy at a cheaper price. So P&G might end up forcing people to switch to the lower-priced Tide, who were happy paying the old price on the better price. Hopefully this doesn’t adversely affect Tide in the long run.
I can’t remember a time that my money conscious parents have ever purchased tide with out it being on discount. I think so much of brand vs. price is how you are raised. I will ALWAYS reach for the store brand if it is cheaper because I was taught (and through my own personal experience have learned) that the differences are minimal to none or ones that I am unable to notice. I do understand brand loyalty though and I think that it is admirable in a way when it comes to smaller businesses but regarding a mega-corp’s products like P&G its the cheaper route for me.