| Case 5: P&G | | ————————————————- Company Background Porter and Gamble (P&G), founded in 1837, is one of the biggest consumer goods company over the world. P&G sells shampoos, baby care products, medicine and food etc. It not only diversified the product range but also the product width. Therefore, P&G has several brands under one single category but aimed with different customer segments. P&G is also famous for its innovative and customer-oriented approaches. For example, it designed one kind of shampoo which is suitable for Japanese.
With the competitive advantages above, P&G was developing with an appealing growth rate and became one of the top 500 companies around the world. ————————————————- Why entered “$2 a day” market segment? In the past, P&G concentrated on medium and premium market segments. From the case, it was mentioned that P&G was too big to maintain a considerable growth rate within its existing target markets. It had to enter the bottom of pyramid, the 70% untouchable potential customers.
Therefore, P&G targeted Chinese low end markets. In other words, P&G wanted to absorb Chinese living in countryside or second tier cities who earned around $2 per day. ————————————————- Marketing issues Following P&G customer-oriented traditions, the worldwide organization also put many efforts on the new target customers. It developed a series of marketing strategies as summarized. * Customer-oriented research P&G send employees to live in the rural areas in order to learn about the actual living style of the residents.
After that, P&G found that Chinese living in countryside concerned more about the functions and the price level of the products. Besides, P&G still had more challenges to face. Firstly, the distribution channels were dispersed and small in size. Secondly, most people in the rural areas even did not know how to use shampoo correctly since they did not have chance to access those modern consumer goods. Moreover, P&G had to spend time on building mutual trust relationship with Chinese local parties as Chinese culture highly emphasized the importance of “Guanxi”.
To attack all these challenges, P&G changed the method of packaging and developed “road shows” instead of its traditions TV advertisements to promote. * Packaging and prices of the products Since the new target customers only earned around $2 a day, they could not afford the normal price of its consumer goods. To solve this problem, P&G modified the packages to be used only for once in order to make the price of the products affordable for the new potential customers. * Road Shows P&G used its own promotion teams to penetrate the rural areas.
It had its own transportation team which decorated with its posters so that people could see the advertisements whenever the cars passed by the villages. Besides, P&G held many activities which attract people to know more about the products. In the activities, the promoters showed how to use the products to the residents. In addition, free samples would be distributed in order to attract the residents to try the products. It seemed that the marketing strategies were simple to implement but indeed, it spent P&G several years before it gained significant market shares in the new market segments. ———————————————— ————————————————- Strengths of the marketing strategies P&G was successfully using the localized strategies as well as customer-oriented approach. In my opinion, as the purchasing power of the bottom of pyramid was low, what they need was purely the basic functions of the products. Therefore, the company must learn the new target customers very well. The company hired many local employees who definitely understand the environment and living styles.
Moreover, such strategies could make its promotion going deeper in the markets. Thought the number of audiences of every road show is limited, those who actual attended would get free samples. Then, they would tell their friends or relativities about how useful the products are. The effect of word-of-mouth would occur. ————————————————- Problems of the marketing strategies Everything has its down side. The marketing strategies P&G used were largely required time and resources. Such high investment was at risk.
On the other hand, since P&G had a well-known image of premium class targeted, entering the low-end markets may lead confusion to its existing customers. In other words, there may lead some losses on original area of business. ————————————————- Recommendations Although in the rural area, residents earned just around $2 a day. P&G should not continue on the same strategy to them. The economy of China is growing with a high rate. Therefore, people living in countryside are expected to earn much more than current situation.
The purchasing power of these customers should increase considerably in the near future. With the help of R&D center in Beijing, I suggest that P&G should start to invent some products which can fit for the change of the targeted customers. On the other hand, to avoid the confusion of brand image, I suggest P&G to launch another sub-brand names which include all the product categories aimed at this market segments. (People earned $2 a day) Differentiated positioning product should have different brand names so that