Industry Insights

Procter & Gamble: an Example of Strategy Done Right

Posted by Erna Alfred Liousas on Aug 18, 2014 6:00:00 AM

Let's start putting the pieces of this puzzle together. If we go back to 2013, online-only news source, Quartz magazine reported on P&G's campaign "to cut $10 billion in costs by 2016, reorganize its corporate structure, and focus on just 10 emerging markets.” Typically we think of headcount and physical facilities impacts with such announcements.  With what we now know, this wasn't a move affecting solely those items. It was the beginning of P&G's all encompassing approach to revamp their business to address the evolution of their customers' needs.  

Another piece of the puzzle emerged in June of this year. AdAge reported as of July marketing directors and associate marketing directors would become brand directors and associate brand directors. Note that the Marketing title has existed at P&G since 1993. Why should it change now? The same AdAge article shares thoughts from a P&G spokeswoman: “The marketing organization becomes "Brand Management" with "single-point responsibility for the strategies, plans and results for the brands...Eliminating marketing from the title and the organization doesn't really mean marketing is a thing of the past...It's meant to signify the broader purview of marketing directors and the organization they're part of now.” 

P&G’s new structure recognizes what the rest of the world is finally realizing. Marketing as we know it must change. Its importance in organizations has increased tremendously, therefore, its structure must mirror that. P&G has chosen a holistic organizational approach to maximize resources across all of its functions. This new organization sits within global business units instead of regional ones. No doubt, this makes it easier for cross-functional touchpoints to exist within the organization. As a result, there will probably be greater consistency in customer messaging and experience. P&G's new brand management organization is comprised of four functions: 

  • brand management (formerly known as marketing)
  • consumer and marketing knowledge (a.k.a. market research)
  • communications (known as public relations, formerly external relations at P&G)
  • and design (known as design/visual brand identity).

Now that we have the context of P&G’s $10 billion cost cutting goal and their new organizational structure, we see this puzzle shaping up to be a carefully planned strategy responding to the changing market environment. P&G has a myriad of brands. Lafley mentioned that consumers are now overwhelmed by choice. This new structure will be focused on keeping the most profitable, which adhere to the new areas of focus P&G has selected. This approach will also help P&G shore up its value proposition to customers and help strengthen customer loyalty. P&G intends to keep its star brands such Tide and Pampers. Though we don’t know exactly which brands will disappear, shares that P&G will be “divesting, discontinuing or merging about 100 of its existing brands over the next year or two.” These particular brands represent $8 billion+ in sales annually, but their sales and profits have declined. 

P&G's new brand organization and revamped portfolio positions it in a more competitive light. This new structure frees up resources so it can fully explore new product innovations to continue addressing changing customer needs.  

Stay tuned for our last post within this series which discusses aspects of building the strategic mindset.

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