Inside P&G

For marketers wondering how long it would take for a gargantuan, old-fashioned firm to reinvent itself as a nimble marketing powerhouse - never mind whether it's even possible - the answer is five years.

For marketers wondering how long it would take for a gargantuan, old-fashioned firm to reinvent itself as a nimble marketing powerhouse – never mind whether it’s even possible – the answer is five years.

At least, that’s how long it took Procter & Gamble chairman/president/CEO A.G. Lafley and his senior management team, including global marketing officer Jim Stengel, to turn things around, taking the CPG firm from one which industry watchers said had ‘lost its way,’ to its current leading-edge state.

And it’s been a successful transition

sales-wise too. The CPG giant, which is based in Cincinnati and has nearly 98,000 people working in almost 80 countries worldwide, has increased sales more than 40%, doubled profits, augmented its billion-dollar brand portfolio to 17 from 10 and delivered four consecutive years of double-digit earnings per share growth. That’s not including the addition of the Gillette business. Oh yeah, and its stock price and market share have doubled.

Stengel, who was in Toronto on April 11, says it’s all due to an ‘undercurrent of transformation’ that has occurred internally. The bespectacled marketer delivered a speech, entitled ‘Marketing Unleashed: Empowering People to Drive Innovation and Results,’ to a packed house at the University of Toronto’s Rotman School of Management Marketing Guru Lecture. He shared how the organization has laboured to put people – consumers, retailers, agency partners, and staff – at the centre of everything P&G does. It all started with the simple notion that the consumer is boss, he says. Then, the firm focused on what the 23-year vet of P&G, who was appointed to his post in 2001, calls ‘the first and second moments of truth’ – being when the consumer chooses the product, and when he/she uses it.

To get there though, Lafley had to first ensure he had the right people in place. ‘It started with [him] setting the tone and culture,’ explains Stengel. ‘People shared that, but half the senior management changed. He put people in who got it.’

Next up was an overhaul of the firm’s operational structure and processes. Walls were torn down and customer teams were created, so that marketing-trained folks could work side by side with sales, IT, and so on. For example, there are currently 200 marketing staff on retail teams at P&G offices globally, says Stengel, whereas there were less than 20 dedicated to those groups six years ago.

Also during this internal revolution, P&G’s research methodologies were re-examined. Gone is the clinical environment that positioned marketers as ‘observers;’ in its place are programs that bring marketers much closer to consumers. Such ‘consumer immersion experiences,’ as Stengel calls them, for instance, include marketers in Mexico toiling at small shops in low-income areas for a week-long period, in order to get a first-hand look at how customers shop.

And in the U.S., Iams SVP research and development Diane Hirakawa has her staff conduct in-home use studies, where they can see how owners interact with their pets. What they discovered is that often owners will supplement meals (although they haven’t mentioned that in more traditional research settings), and that children often impact feeding habits. The Iams marketing team also volunteers at an animal rescue shelter to understand the challenges of caretakers.

To better engage consumers, P&G has also looked beyond its traditional agencies, like Leo Burnett, Wieden + Kennedy and Saatchi & Saatchi, to experts such as Leo Burnett’s ARC Worldwide, Saatchi X and G2, for in-store, interactive, influencer marketing and design work. A new focus on the latter in the past few years can be seen in such celebrated launches as Mr. Clean Magic Eraser, Autowash and Magic Reach, says Stengel, and of course, the popular Swiffer series, which revolutionized how people clean floors.

And the firm’s working with more external partners that are ‘trusted by consumers,’ like the Pakistan Medical Association and the Ministry of Health in Saudi Arabia, where P&G runs a Pampers’ Read Aloud program.

All of this has led to more innovation and creativity in marketing efforts. ‘Our consumer wants more engaging communications, and we worked with our communications planning agencies to discover new ways to reach our consumer,’ says Stengel. He points to the Canadian Cover Girl Outlast Lipstick campaign, for which The Media Company set up ads in the form of motion-sensitive mirrors in bars and restaurants across Toronto (the campaign won a Media Lion at Cannes last year), and the Red Zone After Hours effort for Old Spice, which included dance events in bars, an online contest, OOH and a televised competition. (Montreal-based NewAd was behind that initiative.) Other instances of innovation he cites include selling diapers through the Internet in Korea, a Head & Shoulders talent show in Latin America called Camino a la Fama, and the upcoming U.S.-based Pantene Beautiful Lengths program, which will donate hair to cancer patients.

On the topic of innovation, while Stengel has been impressed by the work of communication planning agencies to get with the times, he hopes to see more effort on this from traditional ad partners. He adds: ‘Bob Greenberg of [NYC interactive agency] R/GA [says] it’s the idea of universal planning. It involves the development of new tools and processes that enable agencies to be, as Bob puts it, ‘truly [about] engagement and to be…holistic problem solvers.”

Specifically, Stengel is asking agencies to collaborate across agency/client boundaries, adopt a media-neutral approach, and become more flexible. So how does Canada, P&G’s seventh-largest market, figure into all these changes? Strategy sat down with P&G Canada president Tim Penner to find out.

How has P&G’s organizational restructuring impacted Canada?

We have clearly tried to tear down functional walls, and that’s not just true of marketing, it’s true across the board. As I tell the organization, business problems don’t show up as one-function problems, they show up as multi-functional problems. So we really need multi-talented people on multi-functional teams working on many of the things we’re trying to tackle. We have marketing people who are part of our sales team, and we have a variety of people involved in marketing relations to a greater extent than they used to be. What marketing is today is much different than it was even 10 years ago.

Can you give an example of how these multi-functional teams work together?

Working on any individual brand would be a team of people with marketing, finance, marketing research, manufacturing logistics backgrounds, and together, they’re trying to figure out how to take a program that is being launched around the world and tailor it to the needs of Canadian consumers and the Canadian marketplace.

Tide Cold Water would be an example. It’s a formula that was being launched in many countries at a similar time. In Canada, it’s an even bigger opportunity than many other countries, certainly than in the U.S. And that’s because more people wash in cold [here], and the water is really, really cold in the wintertime. We saw extra opportunities to do unique things. So, the PR campaign that was developed was completely Canadian, the advertising was completely Canadian.

We talked more about dollar savings, because Canadians are very frugal people. If you could talk about it in dollars and cents, that was a very powerful way of communicating. We had mailings that went out in conjunction with people’s energy bills. That was a really clever, completely local idea. We still have advertising running today, at Esso [Pump Topper screens]. When you’re thinking about energy, that’s a great place to advertise Tide Cold Water.

We got great PR coverage and great in-store coverage because we did a lot more in-store demonstrations and dialogue with consumers – person-to-person selling. So that’s an example of a formula that was a global initiative, but the marketing to make it really resonate with the Canadian consumer took a whole lot of local knowledge and creativity.

How do you decide whether a local approach is needed?

We take the global concept, which would just be a statement as in, the way we’re positioning this initiative, and we expose it to Canadians, and based on the research, they either say: ‘Yes this is for me,’ or ‘I don’t get it,’ ‘It’s not that interesting,’ or ‘It’s less appealing.’ Then we start to tinker with it to see how we can make it better and how we might appeal to Canadian consumers. Canadians are skeptical and frugal and that makes for significant differences in how we position our products.

How much of your advertising is mass versus non-traditional?

We don’t do that much local original TV creative any longer, because we’re finding that we can very often find a campaign from somewhere else that, with some minor modifications, works very well here. Marketing is no longer about just a TV campaign, so when you decide to adopt a broad campaign from somewhere else, and you adjust it for Canada, it frees up time and energy to explore a whole range of other communications vehicles that can make a campaign come alive. And I think that’s what we’re doing well. It’s not an ‘either/or’ thing, it’s an ‘and.’ We take a global campaign, we adjust it and then we add additional ideas, creativity, and communication tools. It helps take an advertising idea and turn it into a ubiquitous campaign, and that’s what you need these days because any individual TV campaign doesn’t do it by itself.

Are you working with new partners to achieve that?

The communication planning agencies play a much greater role – Carat and Starcom MediaVest. They’re not doing original creative, they’re only deciding on a plan and we’re paying them to develop a plan that supercedes all the ‘who does what.’ It’s just: ‘What’s the best way of reaching the consumer with this message?’ We’re doing a lot more with PR firms such as [Manning Selvage & Lee, Hill & Knowlton, Palette PR and Optimum PR, all of Toronto,] and a lot more with in-store agencies [such as Mississauga, Ont.-based Mosaic] that are much better at defining the retail space – what we call the first moment of truth.

Can you give an example of a forward-thinking in-store effort created in Canada?

I would encourage you to go to a Wal-Mart store and look at the fixture where they sell Swiffer products. I think it’s one of the cleverest pieces of in-store work we have done. [Displays were produced by Bradford, Ont.-based Array Marketing.] We sell a lot of different implements now, from basic Swiffer to CarpetFlick to Sweep+Vac, to WetJet. So the implements are on the top, and it’s shelved down below to make it logical – ‘That’s the implement I have at home, and here down below are the replacement products that I’m looking for.’ It organizes things. It makes it logical for the consumer. That is a category that has faced tons of innovation; most of it we’ve created. In research we found consumers were confused and often frustrated by the category, because they couldn’t find the right replacement sheet for the product they have at home.

Jim Stengel was talking about the in-home research that P&G does. Is that something that’s happening in Canada too?

We do some of that. We do more in-store than we do in-home. We have our own research facility in Toronto (and a larger facility at our headquarters in Cincinnati) that looks like a store, feels like a store. We bring people in and have them shop like they normally would. Then we reset it as a different category, and bring different people in. That way we have quantitative research on how people shop an individual section of a store.

One of the Canadian programs that he said impressed him were your cross-brand campaigns in the beauty category. Can you share some of those details?

One initiative would be Rouge magazine which is unique to Canada. It’s about explaining our new products and in some cases, bundling them together to see how you can use them in combination with one another to create a look or get an end benefit. We did one last fall that talked about brown being the [colour] people were looking for, and we carried that through hair colour, makeup, and shampoo and conditioner. So we used Pantene plus Colour Expressions, plus some of our hair colour brands, plus the Cover Girl business to create a look and show people how they can get that result at home.

We’ve done some great work with media marketing programs, where we sponsor a show and use several ad pods throughout the show to tell stories. We’re in the process of doing it now [May] with the Gilmore Girls. We bring in a mother-daughter pair, because it’s around Mother’s Day, and we do a makeover. We have a hairstylist, cosmetician and we use all P&G products to wash their hair, style their hair, apply makeup, treat their skin, whiten their teeth. Through two, three or four, depending on the week, pods, we do a makeover of this consumer, which you see the results of at the end. We love it because it involves many of our products and shows them in action on real people. It also holds the audience, because when you see these people at the beginning, you know you’re going to see them transformed at the end. It’s an added degree of entertainment, not just selling a generic spot.

How do you measure something like that?

We really measure it in research terms relative to traditional advertising, and we’ve found it to be much more powerful. Measuring it in-market frankly is difficult, but measuring any advertising in market is much more difficult.

How much of your budget goes to non-traditional marketing?

At this point our budget is still very TV focused. We’re trying very hard to find new ways of getting more product integration into the shows, to make it more interesting. The growth in our marketing budgets is coming in non-traditional areas. We’re essentially holding our TV, which last year was down in a marginal way, but the growth is coming in new and innovative approaches.

With in-store being so important, how are you addressing your retail customers’ needs?

[Both of our needs] are financial, so we’re looking to find products that make money for [both of] us. Our pace of innovation is our

best-selling feature. They want new products and they want to catch the marketing wave that comes out, and encourage customers to buy the product from them first. So the partnership is very strong with retailers, and it’s strengthening.

Will P&G continue with that pace of innovation?

Absolutely. That’s our competitive advantage.

How do you avoid customer confusion and brand clutter?

The products have to fulfil a unique benefit, and they have to fit into people’s lives. There are a lot of non-brands on the shelf that are no longer advertised, and that aren’t innovating, and they don’t deserve to be there any longer. I don’t mean private label, I mean the secondary and tertiary brands that aren’t doing sufficient new work to deserve the space they have on the shelf.

So, to be completely frank, we’re going to keep finding new products that will resonate with consumers, and I expect to squeeze my non-brand competition out.

One on one with Jim Stengel

It was barely possible to steal one-on-one time with P&G’s Jim Stengel following his hour-long speech, plus 30-minute question and answer period, at the Rotman School of Management in April.

The company’s global marketing officer had a long queue of marketers waiting to bend his ear. Fortunately, an empty classroom served as the perfect hiding place for strategy to find out more about how the company went from ‘stuck in the past’ to the forward-thinking marketing org it is today.

How has brand building changed at P&G?

We’ve realized that brand building today requires a lot of different competencies. A great brand manager is working with external relations…R&D, design – they have to be really good at pulling out what’s special about different groups. [Berkeley prof] Peter Sealey uses this phrase – ‘the great marketers of yesterday were about command and control, the great marketers of today are maestros.’ It’s a little bit corny, but it’s true. I find our best businesses are run by those people who are able to pull the right people together, set a strategy, set a plan, inspire and bring out the best.

Do marketers have the skill set to do that?

Part of our training is how to lead a multifunctional team, work in a diversified environment, and bring out the best in external partners. People don’t move forward if they’re not good at that.

What is the role of the agency?

To stimulate us, help us. Marketing’s become so much more customized and diverse, you need to have someone in the company who’s responsible for that brand’s franchise, and then you need the partners that are right for that brand’s challenge. Our partners have become very diversified, and depending on the business, you may have anywhere from three to 10 partners. And we’ve elevated the importance of communication planning, design and external relations – whether it’s a program in Pakistan for health and hygiene, or a Saudi program with the Ministry of Health. These have to be authentic, honest, and real efforts to try to make a positive difference in the consumer’s mind.

What large societal trends will impact your business going forward?

In a lot of the developed world, it’s certainly the aging. Also, the emergence of very important developing markets – India and China are the ones most talked about. Vietnam is growing well, so is South Africa. It’s [also] the way consumers are interacting with technology. That’s why design agencies and communication/planning agencies are more important for us.

Is there a lot of interplay between the different regions?

It’s one of the strengths of our company. Most of our senior management has worked outside their home country, at least on one or two assignments. When we meet as a management team, we always spend time with ‘what’s hot.’ We go around the table and share for two or three minutes, and if someone wants to go deeper, they can do that outside the meeting. It’s one reason our structure works as well as it does – we have global business units which have regional teams, and they’re always sharing information back and forth.

How do you decide if something will work in another market?

We want to go in with the assumption ‘assume there will be something here that will work in your market. Prove it wrong.’ But it’s not going to be a direct reapplication either. One example of that is Febreze in Japan. They experimented with what are all the different ways consumers might want to use it, and they found out it really exploded consumption. And that program was brought to Canada and then it was brought to the U.S., and with the same results. The execution was different in Japan versus Canada, but the thinking behind it was the same.

How does P&G view the Canadian market?

We have a strong marketing organization and strong agencies in Canada. In fact, we do a lot of creative work up here that gets exported to the U.S. What I’ve been impressed with in Canada is the multi-brand work we’re doing. We’re in the content business, so how do you take our brand assets and find different ways to engage the consumer? The [Canadian group] shared at least five or six programs with me today that are very powerful.

What stood out the most?

I think beauty across brands – working on solutions to help consumers with their beauty aspirations and beauty needs. We’re doing original makeover programming and seeing great impact. And we’ve done it through partnerships with media companies, agencies and production companies, so we’ve leveraged different kinds of partners. LD