Soaps and Other Detergents

Brian AmatoDaniel FroatsEileen Min Byul Kim

Maegan Nevins

Agenda

IntroductionIndustry AnalysisAdvertising StrategiesRecommendations

Ad-to-Sales Ratio Highly Saturated Market

Overall Spending

Why the Industry?

Industry Analysis

Industry DefinitionIndustry that produces substances that loosen and remove soil from a surface for personal hygiene, sanitation or cleaning clothes, linens and furnishings

Major Products

Primary ActivitiesManufacturing & packaging soapPreparing, manufacturing, and packaging cleaning compounds

Industry StructureHHI = 562.7

Calculated using top-5 companiesSlightly skewed by “Others” of 54.6% of small other firms

C4= 40.5%

20%9%

6%6

%5%

55%

Market ShareP&GS.C. Johnson & SonEcolabColgate-PalmoliveUnilever PLCOthers

Top - 3 Players

P&G S.C. Johnson & Son

Colgate-Palmolive

Industry StructureThe US soap and detergent manufacturing industry includes about 650 companies with combined annual revenue of about $27 billion

The industry is highly concentrated: the top 50 companies generate about 90% of revenue

Industry Structure:Barriers to Entry – Medium

High

Low

Capital IntensityCompetitionConcentrationLife Cycle Stage (Mature)Regulation and Policy

Technology ChangeIndustry Assistance

Industry Analysis: Key Success Factors

Marketing expertise

Appropriate pricing

strategy

Economies of scale

Brand loyalty

Development of

new/innovative products

Supply contracts for commodity

inputs

Industry’s Products• Line extensions that serve multiple needs• Cross-selling strategies to take advantage of

existing brand equityMulti-Purpose

Products

• Specialized products to generate growth in mature market

Specialized Products

• Offer help in safety and environmental regulation compliance

• Provide maintenance services

Superior Customer Service

Industry AnalysisCustomer Segment

Supermarket chains, mass merchandisers, drug stores, and warehouse clubs

Commercial Segment

Industrial and commercial laundries, hotels, restaurants, and healthcare providers

CostsProducer

Ingredient costs 35-40% of the wholesale price

The price of surfactants and related chemicals can fluctuate and affect profitability

Consumer

Product Avg. Retail Price

Laundry Detergent $5

Dishwashing Detergent $2

Soap $2.50

ProducerProductionCost

ConsumerConsumptionCost

EmploymentDue to the high level of automation at many manufacturing facilities, most production jobs require few skillsAverage hourly wages are slightly lower than the national average

IndustryEmploymentGrowth

Average Hourly Earnings & Annual Wage Increase

Industry TrendsLow growth in market volume and wholesale pricing drives manufacturers to increase productivity to cut costs

High levels of automation and improved manufacturing technology have allowed soap and detergent manufacturers to increase output with fewer workers

Imports and ExportsThe US is a net exporter of soaps and detergents; the value of exports is about twice that of imports.

Main exports nations: Canada, Mexico, Japan, South Korea, the UKMost large companies have plants throughout the world.

US soap and detergent exports increased more than 70% between 2005 and 2010.

Role of GovernmentFederal, state, local, and foreign environmental and safety laws regulate hazardous materials used or producedSome large companies are actively involved in cleaning contaminated sites due to past operationsSome companies are reformulating products to meet demand for “green” products

Advertising Strategies

Why focus on P&G?

Advertising Expenditure

Highest Industry Market Share

Diverse Product Offerings

P&G Ad-Sales Ratio

2007 2008 2009 2010 20117.5

8

8.5

9

9.5

10

10.5

11

11.5

P&GPeer Avg.Pe

rcen

t P&G’s ad-sales ratio has continuously increased

Except for 2009 when it decreased by 0.79%

This probably seems to be related to the financial crisis that happened late 2008

However, the ad-sales ratio soon recovered and P&G’s ad-sales ratio is higher than ever, being 11.28% in 2011

Primary Advertising MethodsInformative“Slice of Life”ComedyComparative

Advertising Mediums TelevisionPrint

MagazineSocial Media

Facebook, Google, Youtube, etcSocial Campaigns

Advertising Mediums and Effectiveness

Newspa

pers

Magazi

nes

Pamph

lets

Direct

Mails

Outdoo

r

Brochu

res TVRad

io

Cinema

Cyberm

alls

Window

Exhib

ition

0

40

80

Effect of ad on product awareness

Perc

ent

Newspa

pers

Magazi

nes

Pamph

lets

Direct

Mails

Display

s

Brochu

res TVRad

io

Cinema

Cyberm

alls

Window

Exhib

ition

0

40

80

Effect of ad on knowledge

Perc

ent

Effective Medium? Audio-visual media: TV, Exhibition, Window

Display Print media: Newspapers, Magazine

Television Advertising

Advertised Products

Advertised Products

Tide: Liquid Laundry Detergent• Count: 6,516 times• Total: $15 million• Average: $2,341

Tide Plus Bleach: Liquid Laundry Detergent• Count: 5,318 times• Total: $12 million• Average: $5,413

Ad Spending by Day of Week

SUN MON TUE WED THU FRI SAT $-

$2,000,000 $4,000,000 $6,000,000 $8,000,000

$10,000,000 $12,000,000 $14,000,000

Sum of DOLS

This seems to show a sign of Pulsing strategy While P&G airs TV ads continuously throughout the

week, the most is spent on Tuesdays and Thursdays.

Ad Spending by Day Part

Prime

Overnight

Afternoo

n Daytim

e 2

Morning D

aytim

e 2

Early

Morn

ing 2

Late F

ringe

02000400060008000

Number of Products Ad-vertised

Most products were aired: Prime time > overnight > Afternoon Daytime 2 Most spent on Prime time (both total & average) While total advertising expenditure of overnight time was high, the average cost of overnight time was relatively

low For afternoon daytime 2, it was rather consistent; all relatively high

Aftern

oon D

aytim

e 2

Early

Morning

2

Late F

ringe

Morning

Daytim

e 2

Overni

ghtPri

me $-

$5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000

$- $1,000 $2,000 $3,000 $4,000 $5,000

Ad Expenditure (Sum/Avg)

Sum of DOLSAverage of DOLS

Ad Spending by Network

Total advertising expenditure highest for Cable TV However, on average, Network TV is the most

expensive, then SLN TV, and Cable TV is the cheapest

Cable TV Network TV

SLN TV $-

$5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000

$- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000

Sum of DOLSAverage of DOLS2

Ad Spending by Program Types

SLICE-O

F-LIFE

FEATU

RE FIL

M

SITUAT

ION COMEDY

DOCUMEN

TARY

INSTRUCTIO

N/ADVICE

DRAMA/AD

VENTU

RE

VARIET

Y - MUSIC

ALTA

LK

NEWSC

AST

SOAP O

PERA

AWARD

/CELEBRAT

ION0

10002000300040005000600070008000

Number of Products Advertised

Focus mostly on Slice-of-Life, Soap Opera, Feature Film, and Situation Comedy

Award/Celebration? Average is highest; count and sum is very low

$-

$4,000,000

$8,000,000

$12,000,000

$- $2,000 $4,000 $6,000 $8,000 $10,000

Ad Expenditure (Sum/Avg)

Sum of DOLSAverage of DOLS

AdImpact by Program Type

High Performance? Detergent: feature film,

general drama, and news

Specialty soaps: popular music, instruction/advice offerings

TV Ad Content Analysis83% 83% 83%

50%11%1

Sustainability

“My Tide” Campaign“Tide Dad” “Dad’s Designer Jean

s”

Informative adHighlighted attributes: preserves the original color of fabric, good on delicate fabric and high quality clothing

Informative adHighlighted attributes: good on children’s clothing, tough on stains and preserves the original look & feel of clothing

How is P&G Different? Proctor & Gamble’s strategy of targeting several strategic niche markets

The power of storytelling

Strong brand value & brand equity

Print Advertising

Print AdvertisingMedium With Reliable Metrics

Innovative Ad Campaigns

Shift in Spending Toward Magazine Ads

Benefits of Targeted Media

Coupons/Promotions

Social Campaigns

“Loads of Hope”Disaster Strikes

“A disaster occurs making relief necessary for the families affected”

Help is Sent“We send our mobile laundromat fleet to the location”

Laundry is Provided“We spend multiple days at the disaster site washing, drying and folding clothes for the families affected”

Social Media

Social Media

“As we’ve said historically, the 9% to 11% range [for advertising as a percentage of sales] has been what we have spent. Actually, I believe that over time, we will see the increase in the cost of advertising moderate. There are just so many different media available today and we’re quickly moving more and more of our businesses into digital. And in that space, there are lots of different avenues available. In the digital space, with things like Facebook and Google and others, we find that the

return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient. One example is our Old Spice campaign,

where we had 1.8 billion free impressions and there are many other examples I can cite from all over the world.”

–Robert McDonald, CEO

“Future Friendly” Program/Sweepstakes

Facebook Based Sweepstakes

Celebrity Endorsement

Interactive Campaign

Special Events

Recommended

Advertising Strategies

Recommendations Target Growing Hispanic PopulationFocus on More Targeted MediaInnovative Use of Social Media

Investment Strategy

P&G: Great Long-term Investment

P&G has an aggressive global growth plan for the emerging markets in the years to comeCompany Goal: 1 billion new customers by 2014-15New Manufacturing facilities in Brazil, Eastern Europe, India, and China

P&G: How to Accomplish Future Growth

New plant in Luogang ChinaUp and running by 2013$490 million in product revenue

Reducing Costs: phase out non-manufacturing jobs in the U.S

5700 layoffs helping the company reach its goal of 10 Billion in cost cutting measures by 2016

P&G: How to Accomplish Future Growth

The Market for the poor is not highly-saturatedAfrica: To capture the market in Africa, P&G is selling “no frills”(non-essential features removed) versions of its products in smaller sizes that eventually will add upPersuade people who live on $5 or less a day to buy P&G itemsBy locking up 10-20% of sales in "the company's top 30 emerging markets would add $5.9 billion in new sales in five years

Thank YouQ&A