Pampers Develops a Rash – A Rash of Market Share (case adapted from “Marketing Research”, Naresh Malhotra, 3rd edition)

The $3.5-billion disposable diaper industry had always seemed to belong to one brand, Pampers. Procter & Gamble had dominated the market through the 1970s and into the 1980s with Pampers as its flagship offering. In the late 1970s, Luvs was added as a secondary offering to compete with Kimberly-Clark's Huggies brand. By 1985, Huggies controlled 32.6 percent of the market and was a major threat to Procter & Gamble's industry leadership.

Beginning in 1994 and 1995, Huggies began to lead both Procter & Gamble brands in market share of the $3.6-billion diaper industry. In 1996, Pampers and Luvs gave Procter & Gamble a combined 36.9 percent share of the market, whereas Huggies took 39.7 percent. Although Huggies grabbed share in 1995, analysts state that this margin came at the expense of Pampers market stake. Meanwhile, Procter & Gamble undertook efforts to regain the top spot, by spending more promotional dollars and introducing new innovations. For 1996, Procter & Gamble spent $48 million on diaper promotion. The company spent $8 million to add breathable side panels to its Pampers Premium brand. The panels’ strips allow air to flow into the diaper without any leakage, and is supposed to lower the humidity in the diaper, thus reducing diaper rash.

In 1996, Procter & Gamble began to phase out gender-specific diapers. The company stated that with a new super-absorbent core to the diapers, gender-specific diapers were unnecessary. Many retai1ers, who were already 1oath to allocate extra shelf space to boy and girl diapers, we1comed this move. Kimberly-Clark's research, however, showed that 70 percent of consumers preferred boy/girl diapers so the company kept selling both types. Procter & Gamble a1so introduced extra large packages, called jumbo or mega, that holds four times the number of diapers held in regular packaging.

Procter & Gamble followed Kimberly-C1ark's Huggies Supreme, a top-of-the- line diaper with its own Pampers Premium brand, unveiled in 1995. By 1997, Pampers premium held a "virtual tie" in market share with Huggies Supreme in the lucrative super premium segment. Procter & Gamble also added a stretch feature to the Luvs brand in 1996, showing a revived interest in positioning the brand as a premium performer brand with a value brand price. This move makes the Luvs brand more of a competitor against private brand diapers makers. In 1997, Luvs was Procter & Gamble's fastest-growing mature brand.

In 1997, Huggies continued to lead the market. In 1997, Huggies' Pull-Up Training Pants held 10 percent of the market and were responsible for much of Kimberly-Clark's lead over Procter & Gamble. Kimberly-Clark's strategy is to segment the market with new niche products, and the strategy has worked very well. Huggies Overnites, diapers for overnight use, and Huggies Pull-Ups Goodnites, diapers for older children who wet the bed, were new introductions that catered to specific segments of the market. The company was testing Huggies Little Swimmers Swim-pants, diapers designed to withstand swimming, and was considering nationwide marketing of the product in 1998.

In 1997, Procter & Gamble preceded its rival in introducing a product that addressed a new concern among consumers-skin care. Procter & Gamble rolled out another innovation in diapers - a diaper lining that was actually good for the baby's skin with Pampers' Gentle Touch lining, backed by a $25-million promotional campaign. The lining contained a special blend of three skin-soothing chemicals that transfer to the baby's skin evenly. While the innovation gave Procter & Gamble a distinctive selling point, having the lone skin-caring diaper on the market is destined to be a short- lived advantage, especially in an industry in which innovations do not remain unique for very long.

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To remain on the cutting edge of customer needs, Proctor & Gamble needs to continue to seek out and address exactly what consumers are searching for in a diaper before any rival, as the firm did by introducing the Pampers' Gentle Touch lining. This use for marketing research may be the key to enabling Procter & Gamble to regain leadership in the diaper market.

In this increasingly competitive diaper market, Procter & Gamble's marketing department desired to formulate new approaches to the construction and marketing of Pampers to position them effectively against Huggies without cannibalizing Luvs. To do so, 300 mothers of infants were surveyed. Each was given a randomly selected brand of diaper (either Pampers, Luvs, or Huggies) and asked to rate that diaper on nine attributes and to give her overall preference for the brand. These ratings were obtained on seven-point scales. The study was designed so that each of the three brands appeared 100 times. The goal of the study was to learn which attributes of diapers were most important in influencing purchase preference (Y). The nine attributes used in the study were:

VARIABLE ATTRIBUTE MARKETING OPTIONS

X1 Count per box Desire large counts per box? X2 Price Pay a premium price? X3 Value Promote high value X4 Unisex Unisex versus separate-sex diapers X5 Style Prints/colors versus plain diapers X6 Absorbency Regular versus super absorbency X7 Leakage Narrow/tapered versus form-fitting gathers X8 Comfort/Size Extra padding and form-fitting gathers X9 Taping Resealable tape versus regular tape

Data were collected at a suburban mall using the mall- intercept technique. The first variable represents brand preference (Y). The next nine variables represent the ratings of the brands on the nine attributes in the order listed in the case (X1 to X9).

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Questions

You must analyze the data and prepare a report for the marketing department. The one-page memo you received suggested that you use the following procedures:

1. Show bar graphs of all variables.

2. Find a regression equation for brand preference that includes all independent variables for the model and describe how meaningful the model is. Interpret the results for management.

3. Determine any underlying factors inherent in the data by running a factor analysis using principle components extraction with varimax rotation. Print all available statistics. Save the factor scores and regress these on brand preference. Interpret these results for management.

4. Use a nonhierarchical procedure to cluster the respondents, based on the independent variables, into two, three, four and five clusters. Interpret all these results for management.

Interpret the results of the survey and make recommendations based on your findings to the marketing department. They want your opinion about which of the nine attributes mothers value most highly, as well as your ideas for specific actions that can increase market share for Pampers in today’s market. The marketing department is counting on your recommendations to provide then with ways to improve Pampers’ image and cure the rash of market share loss.

Part II 5. Assume now that the last column of the data set indicates which particular brand was

evaluated by each respondent. Test the following hypothesis:

i) The mean rating of Pampers on brand preference is equal to 4; ii) The mean rating of Pampers on brand preference is not larger than 4; iii) The mean ratings of Pampers and Hughies on brand preference are equal; iv) The mean ratings of the all brands on brand preference are equal; v) The mean ratings of all brands on count per box, unisex, abosorbency and leakage are

equal. vi) The mean ratings of all brands on each factor are equal.

6. By using the results of the factor analysis, analyze the positioning of the three brands. Interpret the results for management.

References

Sean Mehegan, "Pampers Premium with Gentle TouchLiner/Luvs Ultra Thick," Mediaweek 7 (29) (JI: 1997): 28.

Jack Neff, "Diaper Wars Heat Up as Kimberly-Clark, P&G Ready Fall Plans," Advertising Age 67 (31 29, 1996): 6.

Raju Narisetti, "P&G's New Diaper Promises to Baby Skin", Wall Street Joumal (July 21,1997): B7.