A recent article in the Wall Street Journal (7 August 2009) offers us a remarkable analysis of how P&G is facing up to the economic crisis. Procter's strategy has always been to build its brands by highlighting the added value they bring to consumers: We see many examples in Pampers (diapers for boys and girls, Velcro, pull-ups, unisex diapers, the Kandoo "spin off"...) and in the realm of detergents. It consists of persuading consumers, each time, that they should have access to an innovation (technical and / or functional), … and pay for it.
However, in times of crisis, when private labels are increasing in the USA ("More than 30% of consumers polled are now 'buying more store brand products' compared to a year ago, according to research conducted by the Private Label Manufacturers Association"), is this strategy still tenable?
P&G had opened a new strategic trail in 2005, in low implication categories such as toilet paper and paper towels, where competition from private labels is the strongest: the Charmin and Bounty brands introduced entry level products. The question then asked was: Did Tide, the emblematic brand of the "added value" strategy of P&G, have to do the same? Remember that Tide accounts for more than 40% of market share in the USA.
Tide marketers asked the same questions that all their colleagues ask in such situations: Will an entry-level product not feed off the conventional Tide products (3 billion $ of the 79 billion P&G )? Would it not lower the value of the brand? Why change a strategy that has made us the undisputed market leader? Will consumers not say, "Why have I been spending so much during all this time?"
The response was equal to the challenge: Tide decided to launch Tide Basic, "Big Value. Basic Clean". This new entry-level product - costing 20% less than Tide Classic - is going through a test run in a hundred Walmart and Kroger stores in southern USA. To distinguish it from Tide Classic, the brand has decided not to use the traditional orange Tide colour, but to introduce a yellow pack, highly visible on the shelves ... where the word "Basic" is more evident than the name of the brand!
Procter thus demonstrated its ability to reinvent its strategic models to cope with what is more than just a simple economic crisis: a profound reorientation of consumer behaviour. It's our bet that this example will be followed by other brands and that we will witness the emergence of new business models suited to the new consumer patterns of the 21st century that are taking shape before our eyes.
