P&G targets new customers

13 September 2011

CINCINNATI: Procter & Gamble, the consumer goods giant, is responding to continuing economic uncertainty in the US by seeking to reach "high-end and lower-end" shoppers.

The company sells products to an estimated 98% of US households and enjoys per capita spending of around $96 in the country, which yielded 37% of sales in its latest fiscal year.

However, the downturn fuelled the evolution of what Citigroup, the financial services provider, called an "hourglass" society, with a narrowing middle class, alongside expanding affluent and poorer audiences.

"It's required us to think differently about our product portfolio and how to please the high-end and lower-end markets," Melanie Healey, P&G's group president, North America, told the Wall Street Journal. "That's frankly where a lot of the growth is happening."

As part of the planning process, Procter & Gamble uses the Gini coefficient, a statistical measure tracking income inequality which climbed by 20%, to 0.468, in America in 2009, the last such data available.

"We now have a Gini index similar to the Philippines and Mexico - you'd never have imagined that," Phyllis Jackson, P&G's VP, consumer market knowledge, North America, said. "I don't think we've typically thought about America as a country with big income gaps to this extent."

More specifically, P&G divides shoppers into "ones", who are relatively affluent, "twos", the lower-income group attracting greater attention, and "threes", the poorest customers, and not an explicit target.

The firm's new approach has seen it develop goods like Gain dish washing liquid, aimed further down the value chain than normal, and thus requiring market research into different demographics.

"This has been the most humbling aspect of our jobs," said Jackson. "The numbers of Middle America have been shrinking because people have been getting hurt so badly economically that they've been falling into lower income."

Innovation models are also changing as P&G aims to manufacture cheaper products at a cost affordable to customers facing a squeeze on their finances.

Delivering high-end lines like Olay Pro-X poses alternative obstacles, as they are made in more limited amounts than the mass market brands FMCG companies traditionally specialise in.

"We do big volumes of things really well," Bruce Brown, Procter & Gamble's chief technology officer, said. "Things that are smaller quantities, with high appeal, we're learning how to do that."

Data sourced from Wall Street Journal; additional content by Warc staff