Transcript Soaps and Other Detergents

Agenda
Introduction
Industry Analysis
Advertising Strategies
Recommendations
Why the Industry?
 Ad-to-Sales Ratio
 Highly Saturated Market
 Overall Spending
Industry Definition
Industry that produces
substances that loosen
and remove soil from a
surface for personal
hygiene, sanitation or
cleaning clothes, linens
and furnishings
Major Products
Primary Activities
Manufacturing & packaging
soap
Preparing, manufacturing,
and packaging cleaning
compounds
Industry Structure
Market Share
HHI = 562.7
P&G
Calculated using top-5
companies
Slightly skewed by
“Others” of 54.6% of
small other firms
20%
9%
55%
C4= 40.5%
5%
6%
5%
S.C. Johnson
& Son
Ecolab
ColgatePalmolive
Unilever PLC
Others
Top - 3 Players
P&G
S.C. Johnson
& Son
ColgatePalmolive
Industry Structure
The US soap and detergent manufacturing
industry includes about 650 companies with
combined annual revenue of about $27
billion
The industry is highly concentrated: the top
companies generate about 90%
50
of revenue
Industry Structure:
High
Barriers to Entry – Medium
Capital Intensity
Competition
Concentration
Life Cycle Stage (Mature)
Regulation and Policy
Technology Change
Industry Assistance
Low
Appropriate
pricing
strategy
Development
of
new/innovative
products
Economies of
scale
Brand loyalty
Industry Analysis:
Supply
contracts for
commodity
inputs
Key Success Factors
Marketing
expertise
Industry’s Products
Multi-Purpose
Products
• Line extensions that serve multiple needs
• Cross-selling strategies to take advantage
of existing brand equity
Specialized
Products
• Specialized products to generate growth in
mature market
Superior
Customer Service
• Offer help in safety and environmental
regulation compliance
• Provide maintenance services
Industry Analysis
Customer Segment
Supermarket chains, mass
merchandisers, drug stores,
and warehouse clubs
Commercial Segment
Industrial and commercial
laundries, hotels,
restaurants, and healthcare
providers
Costs
Producer
Ingredient costs 35-40% of
the wholesale price
The price of surfactants
and related chemicals can
fluctuate and affect
profitability
Consumer
Product
Avg. Retail
Price
Laundry Detergent
$5
Dishwashing Detergent
$2
Soap
$2.50
Producer
Production
Cost
Consumer
Consumption
Cost
Employment
Due to the high level of automation at many
manufacturing facilities, most production jobs
require few skills
Average hourly wages are slightly lower than the
national average
Industry
Employment
Growth
Average
Hourly
Earnings &
Annual Wage
Increase
Industry Trends
Low growth in market volume and wholesale
pricing drives manufacturers to increase
productivity to cut
costs
High levels of automation and improved
manufacturing technology have allowed soap
and detergent manufacturers to increase output
with fewer
workers
Imports and Exports
The US is a net exporter of soaps and detergents; the value of exports is
about twice that of imports.
Main exports nations: Canada, Mexico, Japan, South Korea, the UK
Most large companies have plants throughout the world.
US soap and detergent exports increased more than 70% between 2005
and 2010.
Role of Government
Federal, state, local, and foreign environmental and
safety laws regulate hazardous materials used
or produced
Some large companies are actively involved in
cleaning contaminated sites due to past
operations
Some companies are reformulating products to meet
demand for “green” products
Why focus on P&G?
Advertising Expenditure
Highest Industry Market
Share
Diverse Product
Offerings
11.5
11
P&G
Ad-Sales Ratio

Except for 2009 when it
decreased by 0.79%

This probably seems to be related
to the financial crisis that
happened late 2008
 However, the ad-sales ratio
soon recovered and P&G’s
ad-sales ratio is higher than
ever, being 11.28% in 2011
10
Percent
 P&G’s ad-sales ratio has
continuously increased
10.5
9.5
P&G
9
Peer Avg.
8.5
8
7.5
2007 2008 2009 2010 2011
Primary Advertising Methods
Informative
“Slice of Life”
Comedy
Comparative
Advertising Mediums
Television
Print
Magazine
Social Media
Facebook, Google, Youtube, etc
Social Campaigns
Advertising Mediums and
Effectiveness
Percent
Effect of ad on product awareness
100
80
60
40
20
0
Percent
Effect of ad on knowledge
100
80
60
40
20
0
Effective Medium?
 Audio-visual media: TV, Exhibition, Window Display
 Print media: Newspapers, Magazine
Advertised Products
Advertised Products
Tide: Liquid
Laundry
Detergent
Tide Plus Bleach:
Liquid Laundry
Detergent
• Count: 6,516 times
• Total: $15 million
• Average: $2,341
• Count: 5,318 times
• Total: $12 million
• Average: $5,413
Ad Spending by Day of Week
Millions
Sum of DOLS
$14
$12
$10
$8
$6
$4
$2
$SUN
MON
TUE
WED
THU
FRI
SAT
 This seems to show a sign of Pulsing strategy
 While P&G airs TV ads continuously throughout the
week, the most is spent on Tuesdays and Thursdays.
Ad Spending by Day Part




Millions
8000
7000
6000
5000
4000
3000
2000
1000
0
$35
$30
$25
$20
$15
$10
$5
$-
Sum of DOLS
Average of DOLS
Most products were aired: Prime time > overnight > Afternoon Daytime 2
Most spent on Prime time (both total & average)
While total advertising expenditure of overnight time was high, the average cost of overnight time was relatively low
For afternoon daytime 2, it was rather consistent; all relatively high
$5
$5
$4
$4
$3
$3
$2
$2
$1
$1
$-
Thousands
Ad Expenditure (Sum/Avg)
Number of Products Advertised
$45
$16
$40
$14
$35
$12
$30
Thousands
Millions
Ad Spending by Network
$10
$25
$8
$20
$6
$15
$10
$4
$5
$2
$-
$Cable TV
Network TV
Sum of DOLS
Average of DOLS2
SLN TV
 Total advertising expenditure highest for Cable TV
 However, on average, Network TV is the most expensive, then
SLN TV, and Cable TV is the cheapest
Ad Spending by Program
Types
Number of Products Advertised
8000
7000
6000
5000
4000
3000
2000
1000
0
$14
$12
$10
$8
$6
$4
$2
$-
$10
$9
$8
$7
$6
$5
$4
$3
$2
$1
$-
Thousands
Millions
Ad Expenditure (Sum/Avg)
Sum of DOLS
Average of DOLS
 Focus mostly on Slice-of-Life, Soap Opera, Feature
Film, and Situation Comedy
 Award/Celebration?
 Average is highest; count and sum is very low
AdImpact by Program Type
High Performance?
 Detergent: feature film,
general drama, and news
 Specialty soaps: popular
music, instruction/advice
offerings
TV Ad Content Analysis
83%
83%
83%
50%
1
Sustainability
11%
Informative
Contained
Elements of
Comedy
"Slice of
Life"
Advertised Comparative
Multiple Tide
Products
“My Tide” Campaign
“Tide Dad”
Informative ad
Highlighted attributes: good on
children’s clothing, tough on
stains and preserves the original
look & feel of clothing
“Dad’s Designer Jeans”
Informative ad
Highlighted attributes: preserves
the original color of fabric, good
on delicate fabric and high quality
clothing
How is P&G Different?
Proctor & Gamble’s
strategy of targeting
several strategic niche
markets
The power of storytelling
Strong brand value &
brand equity
Print Advertising
Medium With Reliable Metrics
Innovative Ad Campaigns
Shift in Spending Toward
Magazine Ads
Benefits of Targeted Media
Coupons/Promotions
“Loads of Hope”
Disaster Strikes
“A disaster occurs making relief
necessary for the families
affected”
Help is Sent
“We send our mobile laundromat
fleet to the location”
Laundry is Provided
“We spend multiple days at the
disaster site washing, drying
and folding clothes for the
families affected”
Social Media
“As we’ve said historically, the 9% to 11% range [for advertising as a percentage of
sales] has been what we have spent. Actually, I believe that over time, we will see the
increase in the cost of advertising moderate. There are just so many different media
available today and we’re quickly moving more and more of our businesses into digital.
And in that space, there are lots of different avenues available. In the digital space, with
things like Facebook and Google and others, we find that the return on investment of
the advertising, when properly designed, when the big idea is there, can be much more
efficient. One example is our Old Spice campaign, where we had 1.8 billion free
impressions and there are many other examples I can cite from all over the world.”
–Robert McDonald, CEO
“Future Friendly”
Program/Sweepstakes
Facebook Based
Sweepstakes
Celebrity Endorsement
Interactive Campaign
Special Events
Recommendations
Target Growing Hispanic Population
Focus on More Targeted Media
Innovative Use of Social Media
P&G: Great Long-term Investment
P&G has an aggressive global growth plan for
the emerging markets in the years to come
Company Goal: 1 billion new customers by 201415
New Manufacturing facilities in Brazil, Eastern
Europe, India, and China
P&G: How to Accomplish
Future Growth
New plant in Luogang China
Up and running by 2013
$490 million in product revenue
Reducing Costs: phase out non-manufacturing
jobs in the U.S
5700 layoffs helping the company reach its goal of
10 Billion in cost cutting measures by 2016
P&G: How to Accomplish
Future Growth
The Market for the poor is not highly-saturated
Africa: To capture the market in Africa, P&G is selling “no
frills”(non-essential features removed) versions of its
products in smaller sizes that eventually will add up
Persuade people who live on $5 or less a day to buy P&G
items
By locking up 10-20% of sales in "the company's top 30
emerging markets would add $5.9 billion in new sales in
five years