P&G has a portfolio of brands that resonate with consumers spanning five main units and it focuses on their growth, while also innovating by the creation of new products. P&G generated over $80 billion across these brands. Its strength stands by implementing a growthstrategy focused on five pillars: portfolio, superiority, productivity, constructive disruption and organizational design.
To understand P&G business model, its critical to grasp the fact it moves in two opposite directions:
On the one hand it focuses on the growth and success of existing brands and products which have become successful categories in the minds’ of consumers.
On the other hand, it focuses on innovating, by creating new products, brands, and focusing on making them into new categories
How does Procter & Gamble selects its portfolio of products?
It looks for “what’s needed?” and “what’s possible” and it combines that to build its products’ portfolio:
Superiority
Source: P&G
How does P&G measure superiority?
Through five elements:
Products that needs to be so good to be differentiated in the minds of consumers.
Packaging that needs to attract consumers, convey brand equity (demand generation via packaging).
Brand communication that amplifies product and packaging through advertising that is meant to make consumers think, talk, laugh, cry, smile, act and buy (advertising serves to amplify the brand to create a differentiated category in consumers’ minds).
Retail execution via store coverage, product forms, sizes, prices points, shelving and merchandising. While the online is driven by content, assortment, reviews, search and subscription revenues.
Consumer & customer value presented in a clear and shoppable way at a compelling price.
“A Constructive Disruption Mindset“
A consumer brand company like Procter & Gamble (P&G) defines “Constructive Disruption” as: a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future. According to P&G, it moves around four pillars: lean innovation, brand building, supply chain, and digitalization & data analytics.
A willingness to change, adapt and create new trends and technologies that will shape our industry for the future.
Dawn Powerwash Dish Spray Case Study
Dawn Powerwash Dish Spray as an example of constructive innovation, where P&G addresses changing consumer needs with a lean innovation approach, combined with data about these changing needs, translated into the products.
One example that P&G mentions is the Dawn Powerwash Dish Spray addressed a changing consumer need.
As consumers look for products that help them clean dishes as they go (instead of waiting until the end of the meal), this product enables direct application, which enables consumers to clean as they go, speeding up the process, and saving also water.
Pampers Rewards app Case Study
Another example, that P&G mentions as constructive disruption is Pampers Rewards app, which helps parents receive helpful information.
Here the challenge is to reach parents, at different stages of their journey, through smart audiences built over the app in order to enable these parents to find useful information.
Smart audiences help P&G reach a niche audience, like that of parents at various stages of growth of the baby (newborn, crawling, potty training), so that they can also receive very targeted advertising.
The company has six divisions, with each headed by a President:
North America.
Europe.
Asia Pacific.
Greater China.
India, Middle East and Africa (IMEA).
Latin America.
Various Presidents and Chief Officers head functional groups related to:
Research, Development and Innovation.
Human Resources.
Equality & Inclusion.
Product Supply.
Ethics & Compliance.
Analytics & Insight.
Global Walmart.
Branding.
Legal and Secretariat.
Sustainability.
Communications.
Finance.
Various Presidents and Chief Officers head functional groups related to:
Research, Development and Innovation.
Human Resources.
Equality & Inclusion.
Product Supply.
Ethics & Compliance.
Analytics & Insight.
Global Walmart.
Branding.
Legal and Secretariat.
Sustainability.
Communications.
P&G Key Growth Driver? Its Acquisition Strategy!
P&G sweet spot stands in the ability to acquire products, and further enhance their distribution, by enhancing the supply chain (availability of that product) and its demand generation (via ad hoc branding campaign, both off and online).
Thus, P&G finds brands that are compelling for consumers and it further scales them up through a distribution playbook that it has built over the decades.
For the same token, P&G also moves quickly in divestitures of brands and products that might not resonate anymore with its business strategy.
Value Proposition:
Quality and Trusted Products: Procter & Gamble (P&G) offers a wide range of consumer goods known for their quality, reliability, and efficacy. With brands like Tide, Pampers, Gillette, and Crest, P&G provides products that consumers trust to deliver consistent performance and meet their needs.
Innovation and Research: P&G invests heavily in research and development to innovate and create new products that address evolving consumer preferences and market trends. By constantly introducing new formulations, features, and technologies, P&G demonstrates a commitment to innovation and staying ahead of the competition.
Brand Portfolio: P&G boasts a diverse portfolio of brands across multiple product categories, catering to various consumer segments and lifestyles. This broad assortment allows P&G to reach a wide audience and maintain relevance in different markets worldwide.
Customer-Centric Solutions: P&G focuses on understanding consumer needs and preferences to develop products that offer meaningful solutions and benefits. Whether it’s household cleaning, personal care, or baby products, P&G aims to enhance consumers’ lives by addressing their everyday challenges and concerns.
Revenue Model:
Product Sales: The primary revenue source for P&G is the sale of its consumer goods products. P&G distributes its products through various retail channels, including supermarkets, drugstores, convenience stores, and e-commerce platforms. Revenue is generated through the sale of individual units or bulk shipments to retailers and distributors.
Brand Licensing: P&G may generate additional revenue through brand licensing agreements, allowing other companies to use its brand names and trademarks on complementary products. By licensing its brands, P&G can extend its brand presence into new product categories and markets while earning licensing fees or royalties.
Subscription Services: In some product categories, such as personal care and grooming, P&G offers subscription services where consumers can sign up for recurring deliveries of their favorite products. Subscription models provide a recurring revenue stream for P&G while offering convenience and value to consumers.
Joint Ventures and Partnerships: P&G may engage in joint ventures or strategic partnerships with other companies to expand its product offerings or enter new markets. These collaborations can generate revenue through profit-sharing agreements, royalties, or equity stakes in joint ventures.
Distribution Strategy:
Business Units:
P&G operates across five main business units, each responsible for specific categories:
Baby, Feminine & Family Care
Beauty
Health Care
Grooming
Fabric & Home Care
These business units manage the distribution and marketing of products within their respective categories.
Revenue Streams:
P&G generated over $80 billion in revenue in a single year, with each business unit contributing to this total.
The revenue breakdown by business unit includes Fabric & Home Care, Feminine and Family Care, Beauty, Health Care, and Grooming.
Marketing Strategy:
Nostalgia Marketing:
P&G’s marketingstrategy leverages nostalgia to connect with consumers emotionally.
Nostalgia marketing aims to evoke feelings of connection, safety, hope, and joy in customers, strengthening their bond with P&G brands.
Storytelling and Superiority:
P&G’s marketing emphasizes the importance of product superiority and storytelling.
Superiority is measured through product quality, packaging attractiveness, effective brand communication, and a compelling value proposition.
Storytelling in advertising aims to engage consumers on emotional levels, making them think, talk, laugh, cry, smile, act, and buy.
Broad Demographic Appeal:
P&G’s marketing efforts target a wide demographic range, appealing to both children and adults.
The company’s brands and stories have a cross-generational appeal, creating lasting emotional connections with consumers of all ages.
Organizational Structure:
Three Pillars:
P&G’s organizational structure is built on three key pillars: Empowered, Agile, and Accountable.
It enables speed, adaptability, and effective management in response to changing consumer needs and market dynamics.
Product-Based Structure:
P&G follows a product-based organizational structure, where each product line management can make decisions autonomously.
This structure allows for quick iterations in product designs and adaptations to evolving consumer needs.
Divisional Leadership:
The company has six divisions, each led by a President, responsible for specific regions, including North America, Europe, Asia Pacific, Greater China, India, Middle East and Africa (IMEA), and Latin America.
Functional Leadership:
P&G also has functional leaders overseeing key areas such as Research, Development, and Innovation, Human Resources, Product Supply, Ethics & Compliance, Analytics & Insight, Global Walmart, Branding, Legal and Secretariat, Sustainability, Communications, and Finance.
Agile: Allows quick adaptations to product designs and changing consumer needs.
Accountable: Each management line has its own core metrics for success.
Acquisition Strategy:
P&G’s strength lies in acquiring compelling brands and enhancing their distribution.
Focuses on supply chain enhancement and demand generation through branding campaigns.
Quickly divests brands that no longer align with the business strategy.
Element
Description
Value Proposition
P&G offers a compelling value proposition for its customers, including: – Brand Trust: Providing well-established and trusted brands in various product categories. – Quality and Innovation: Delivering high-quality products with ongoing innovation. – Consumer-Centric Approach: Focusing on consumer needs and preferences. – Diversity of Offerings: Offering a broad range of products for daily life. – Global Reach: Being a globally recognized consumer goods company. – Sustainability Commitment: Demonstrating a commitment to sustainability and responsible business practices. – Customer Loyalty: Building customer loyalty through rewards programs and promotions. – Health and Hygiene: Offering products that contribute to health, hygiene, and well-being.
Core Products/Services
P&G’s core products and services encompass: – Consumer Goods: Producing a wide range of consumer goods, including cleaning products, personal care items, baby care products, and more. – Brand Portfolio: Managing a portfolio of well-known brands such as Tide, Pampers, Gillette, and Crest. – Innovation Centers: Investing in research and development to drive product innovation. – Marketing and Advertising: Promoting products through marketing campaigns and advertisements. – E-commerce: Selling products through online channels and direct-to-consumer platforms. – Customer Engagement: Building customer engagement through loyalty programs and customer feedback. – Sustainability Initiatives: Incorporating sustainability into product design and sourcing. – Health and Safety: Prioritizing health and safety in product development and marketing.
Customer Segments
P&G serves a diverse range of customer segments, including: – Households: Providing products for everyday household needs. – Parents and Families: Offering baby care and family-oriented products. – Individuals: Catering to personal care and grooming needs. – Healthcare Professionals: Providing healthcare and hygiene products for professionals and institutions. – Retailers: Supplying consumer goods to supermarkets, pharmacies, and retailers worldwide. – Businesses and Institutions: Offering products for commercial and institutional use. – Global Reach: Extending products to consumers and businesses worldwide. – Consumers Seeking Quality: Attracting consumers who prioritize product quality and reliability.
Revenue Streams
P&G generates revenue through various revenue streams: – Product Sales: Earnings from the sale of consumer goods across brands and product categories. – Brand Licensing: Income from licensing its brands for use in various product lines. – Advertising and Marketing: Revenue from advertising and marketing campaigns. – E-commerce Sales: Income from online sales channels and direct-to-consumer platforms. – Global Presence: Earnings from sales in diverse global markets. – Product Innovation: Potential income from new product launches and innovations. – Sustainability Initiatives: Reputation and brand value enhancement through sustainability efforts. – Supply Chain Efficiency: Cost savings and efficiency improvements in supply chain operations.
Distribution Strategy
P&G employs a strategic distribution strategy to reach customers: – Retail Distribution: Partnering with retailers and supermarkets for widespread product availability. – E-commerce Channels: Utilizing online channels for direct-to-consumer sales. – Supply Chain Efficiency: Ensuring efficient supply chain operations for timely deliveries. – Marketing and Branding: Implementing marketing campaigns to create brand awareness. – Product Innovation: Focusing on continuous product innovation and development. – Global Supply Network: Maintaining a global network of manufacturing and distribution facilities. – Sustainability Commitment: Incorporating sustainability practices into the supply chain and distribution processes. – Customer Engagement: Engaging with customers through loyalty programs and promotions.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
