P&G seeks "compelling ads"

NEW YORK: Procter & Gamble, the consumer goods group, is enhancing its focus on shopper insights, disruptive innovation and making "compelling advertising" in a bid to drive future growth.

The owner of Tide, Pampers and Febreze has come under pressure as sales slowed, but Bob McDonald, its CEO, told analysts its core model was unchanged, as organic revenues rose 3% in the last quarter.

"Our business model ... is centred on consumer insights, superior products and compelling advertising. It is a time-tested model in both good times and bad," he said. "The model, when executed, works.

"It involves the five strengths of the company: branding, go-to market, scale, innovation, consumer knowledge. We think those are enduring just like we think the purpose of the company is enduring. What we're doing now is we're becoming more focused and more fit to win in this current environment."

In areas such as the US and Western Europe, where economic conditions are somewhat austere, P&G will increase its adspend, having chosen to "prioritise" growth over securing "efficiencies in advertising".

More specifically, the firm intends to give precedence to its 40 most profitable businesses, 20 largest innovations and ten leading emerging markets, like Brazil, China, India and Russia.

"We have to make certain that we have offerings that provide superior performance and value, that our pricing is right. That our innovation is strong. And that the marketing effectively communicates a superiority of our offerings and there is sufficient marketing support," McDonald said.

He cited P&G's Olympics sponsorship as an example of its "scale brought to life". Covering 34 brands and 4m stores over six months, this umbrella campaign should yield $500m in incremental sales, and a payback 50% higher than single brand efforts.

P&G's corporate brand has been the "glue" in this process. "We ... have seen a tremendous advantage when our brands are linked back to our company," said McDonald. "We've researched this in many countries around the world and this is a positive connection."

Having invested over $2bn in R&D last year, 45% more than its nearest rival, the company is also pushing "discontinuous innovation", building on the success of lines like the Swiffer and Tide PODS.

McDonald defined this type of innovation as that which "obsoletes current offerings and creates new categories and new brands", and P&G has taken various steps to strengthen its capabilities.

These include establishing a "new business creation organisation" working on technologies benefitting all of its businesses but without clearly belonging to any single division, and receiving guidance from Clayton Christensen, of the Harvard Business School.

Data sourced from Seeking Alpha; additional content by Warc staff, 7 August 2012

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