Primary Advertising Methods

Soaps & DetergentsMegan Eisenbrown, Juliet Levine, Hillary Pond and Rachel Woloszynski1AgendaAnalysis & RecommendationsWhy Soaps & Detergents?3Industry StructureSoap & Cleaning Compound Manufacturing in the United StatesIndustry OverviewDefinition: Substances that loosen and remove soil from a surface for personal hygiene, sanitization or cleaning clothes, linens, and furnishings.Major products:Soaps and detergents, polishes and other sanitation goods, surfactants and finishing agents Major functions: Prepare, manufacture, and package cleaning compounds

Soaps & Detergents OverviewSoaps & Detergents OverviewProductProducer CostConsumer Cost: Average Retail PriceLaundry DetergentIngredient costs are 35-40% of wholesale price

Labor costs absorb 20% of total costs

High initial capital expenditures for plants and technology $5Soap$2.50Dishwashing Detergent$2

7Demand DriversWorld Price of Crude OilPer Capita Disposable IncomeDrive/stifle industry growthDemand Drivers

FY13: The increase in per capita disposable income is expected to drive growth in the industry in 2013. International TradeIndustry exports generate $8.6B annually, or 15.4% of industry revenue. Core MarketExpansion OpportunityInternational Trade

Market Segmentation Commercial SalesFood Service EstablishmentsHealthcare ProvidersLodging EstablishmentsHousehold SalesSupermarkets and Mass MerchandisersConvenience StoresIndependent RetailersSoaps and detergents are sold directly from the wholesaler to commercial businesses and through retail outlets for the everyday, average consumerMarket Segmentation 13Barriers to EntryFactors affecting entryMature Life CycleGovernment RegulationHigh CompetitionHigh Marketing CostsHigh Capital CostsMedium ConcentrationOverall difficulty of entry: Medium14Competitive LandscapeCompanies: 1,964Major Players: 4HHI: 541.71

The top 50 companies hold about 90% of the market. -FirstResearchMajor PlayersEcolabMarket Share: 5.9%FY12 Profits: $3.2B5-Year Growth Rate: 6.7%Brands: EcolabS.C. JohnsonMarket Share: 9.5%FY12 Profits: $15.2B5-Year Growth Rate: 2.9%Brands: Pledge, Glade, Windex, ZiploxColgate-PalmoliveMarket Share: 5.7%FY12 Profits: $3.1B5-Year Growth Rate: 2.4%Brands: Colgate Toothpaste, Irish Spring, PalmoliveProcter & GambleMarket Share: 19.6%FY12 Profits: $10.7B5-Year Growth Rate: 3.4%Brands: Tide, Cascade, Charmin, Crest16Industry TrendsEmploymentFewer workers due to increased automationDecrease in production costsEmerging MarketsThe U.S. market is stagnantIncreased of acceptance of products and per capita income in undeveloped nationsIncreasing RegulationFurther the green movement within the industry17AdvertisingStrategies and Analysis18Product Differentiation

(Circle this on the detergent bottle)

Megan: In an industry that may appear homogenous, major laundry detergent players are advertising characteristics of their products which will differentiate them in the eyes of the consumer. For example, with the introduction of their ALL free & clear, Vestar Capital Partners Inc. really tries to highlight their product as the safest one on sensitive skin. This is an interesting and different approach to laundry detergent advertising that has not been done much before. Because this characteristic of the product is a credence attribute, the advertisement includes professional recommendations by dermatologists, allergists, and pediatricians. 19Differentiated Packaging

Megan: Another way laundry detergent companies have differentiated their product is through their innovative new way of packaging. One of our group members came across an interesting article in Barrons, titled, Is Innovation Killing the Soap Business?, which talks about how the new pod packaging keeps consumers from overdosing on detergent which has led to a reduction in sales. -According to Nielsen, the total U.S Sales of laundry detergents fell 2.1% in the 12 months to March following the launch of the unit dose product.-Compared with the pre-pod age three years ago, detergent sales are down 5.1% in dollar terms.-For P&G (which has about 75% of the unit-dose market and is drawing customers from rivals), says that its sales of unit dose and higher-priced detergents are growing. -trick of marketers: oversize laundry jug. 20Cross Promotion

Talk about the Tide and Downey detergent commercial I saw.Usually done for products where the elasticity of demand differ.

21Online Advertising & Social MediaAdd pictures

This is a new phenomenon for the laundry detergent industry. After watching several Gain commercial is became clear that the company is using target online advertising. Sorry for the poor quality of the photos. The three laundry detergent companies we chose to investigate further all had Facebook pages that they used to interact with their target market. They also use this platform to post pictures, provide informative about the product, and advertise sweepstakes that are occurring. 22Informative

Megan: Means through which they may convey information to consumers. Usually has to do with the number of characteristics mentioned in an advertisement. The more characteristics mentioned the more information. We discovered this to be true by ad coding. 23Ad Characteristics ObservationsMegan: Explain Ad Coding Tide, All, Gain

More characteristics means more informative.Tide is the leader and therefore markets the brand rather than informative advertising (characteristics)24Sales Promotion

Sales promotions are still as a way to educe buyers. Interestingly the market leader, P&G appeared to advertising the most with sales promotions. For the paper I plan to dig further into why this occurs but I would hypothesize that this has to do with the companys ability to markup their product. 25YouTube

YouTube channels is where we found several of our commercials. It is a space where companies can provide access to their commercials. Having access and management of this platform is probably the most important when a company creates an advertisement that they want to be shared. While it is more common for other industries, occasionally a laundry detergent commercial that is particularly humorous may go viral online.

For example, Tide launched an unplanned media campaign in response to a joke The Onion made about them. 26Celebrity Endorsementhttp://www.youtube.com/watch?v=fxVUPe2nQj8Tide has a youtube channel that is really chalk full of commercials and videos for viewers to watch. In many of its posted videos, tide uses celebrity endorsement as a technique to increase memorability of the product. Tide is really the only company that takes advantage of this advertising opportunity and has really capitalized with its Betty White clips.

Tide plays off the actresss name and shows various segments of breaking the rules of white with Betty White In her segments she demonstrates her brand loyalty and confidence in Tide in a witty and entertaining way.

27Humor Advertising

Humor advertising is also used predominantly by Tide. As you saw the Breaking the rules of white with Betty White segments are pretty humorous. In addition, Tide uses its funny shaped stains commercials to elicit laughter from the audience.

How many of you recall this years Tide Super Bowl Commercial

Tide has made an appearance in many Super Bowl ads and this year its Tide Miracle Stain commercial was a real hit. Nielsen ranked P&Gs Tide commercial at #5 in the Most Memorable Commercials of Super Bowl XLVII with a high General Recall Index and it also ranked Tide at #7 in the Top 10 Most Liked Commercials of this years Super Bowl. This strategy gave P&G and the Tide brand an edge on competitors as the Super Bowl is among one of the most watched television events in the United States and generated new users, followers and increased the buzz on social media websites for the company.

28Comparative Advertising

Since laundry detergents are similar on various grounds, it is often necessary for companies to use comparative advertising in order to differentiate itself from competitor and demonstrate a products superior qualities.

The purpose of this type of advertising technique is to steal consumers from competitors and increase the companys market share. It is interesting to note that comparative advertising in the laundry detergent market focuses primarily on the characteristics of the detergent formula. When comparing ones detergent to a competitors, companies in the industry discuss the concentration of the liquid, the whiteness, brightness, and color enhancement that the detergent creates, and cost comparison.

The companies use an indirect comparative advertising strategy refer to competitors as the leading brand, average detergent, that other stuff, ordinary detergent, some detergents, or regular detergent. The companies refrain from explicitly stating the competitor they are referring too, and instead use these generalized names. This may give consumers a better perception of the brand using comparative advertising in that they are not targeting another company in a destructive manner although a specific brand may be implied.

29

Sustainability Initiative

A commitment to Go Green, and reduce water and energy consumption is a key focus for many of the companies in the laundry detergent industry.

Sustainability initiatives not only benefit the overall environment, but are also perceived by consumers as responsible, environmentally friendly parent companies. Reckitt Benckises Woolite instituted its Trees for Change project. The company has worked to plant two million trees through this initiative and prove to consumers that they are environmentally conscious. This eco-friendly aspect of laundry detergent is extremely important to some consumers and can really differentiate one product from another.

30Social Responsibility

Social responsibility efforts are another advertising technique companies in the laundry detergent industry use in order to differentiate themselves and attract consumers. This demonstrates to the community the companys commitment to the community and its products sustainability efforts. Tides Loads of Hope Campaign is an initiative P&G has developed to help people in times of need. The program provides relief to victims of natural disaster by providing a mobile Laundromat. The Tide team washes, dries and folds clothes for families who have been affected by disasters for free with their vans. One truck and a fleet of vans house over 32 energy-efficient washers and dryers that are capable of cleaning over 300 loads of laundry every day. P&G gives back to the communities that have become their loyal customers and realizes that this small effort can make a big difference for these families. This initiative reminds consumers that the brand and the company has the public interest and communities they serve in mind and proves to non-loyal customers that they are acting with socially responsible intent.

31Sponsorships

Sponsorships have also played a large role in some companys community outreach efforts. For example, The London 2012 Olympics were sponsored by Procter & Gamble. P&G, Worldwide Partner and Proud Sponsor of Moms, created great brand awareness through this campaign and received global recognition for their part in sponsoring the 2012 Olympic Games. This tactic increased awareness of the P&G brand and its part in the community where other companies were not able to compete on such a scale.

32Brand Loyalty Brand loyalty is an important aspect of a companys success. Customers who are brand loyal are unlikely to switch from their trusted brand because of the risk involved in trying something new. In order to build brand loyalty, companies must increase the perceived value, commitment, and satisfaction of consumers and entice them to make repeat purchases of the trusted brand. Customers who are brand loyal are less sensitive to price increases. Strong brand loyalty is essential for companies in the laundry detergent industry to remain competitive and retain demand for its products.

33Brand EquityGoodwill (2012)In Billions

Procter & Gamble53.773Colgate-Palmolive Co.2.5Johnson & Johnson22.424Brand equity or a companys goodwill is an indication of a strong brand name, good customer relations, and good employee relations (Investopedia). Taking a closer look at Procter & Gambles Goodwill over the past 5 years shows a fluctuation in perceived quality. On average, the goodwill of the company has declined; however, it still remains far above that of competitors Colgate-Palmolive and Johnson & Johnson.

34Industry RatiosComparing the Top 3 Companies in the Industry35Total Advertising Expenditure by CompanyIn order to gain a greater understanding of the advertising strategies in the laundry detergent industry, we analyzed the advertising expenditures on television advertising; a medium which acts as the primary advertising source for these companies.

First, in looking at the total advertising expenditure of top competitors Procter & Gamble, Colgate-Palmolive and Johnson & Johnson, we can see that the leader in the industry, Procter & Gamble, continues to increase total dollars spent on advertising while competitors remain relatively stable in their spending (Appendix 1). 36Advertising-to-Sales Ratio10% is high indicating the advertising techniques they are investing in are not effective

Taking a closer look at the specific Advertising-to-Sales ratios of these companies reveals the effectiveness of their advertising campaigns. With Advertising-to-Sales ratios relatively high, this suggests that high advertising expenses have resulted in low revenues for Procter & Gamble and Colgate-Palmolive.

37Television AdvertisementsAnalyzing Raw Data38Spending per Media Type Focusing on spending per media type, we see that Proctor & Gamble primarily advertises on cable television while still spending on network and SLN television. Vestar Capital on the other hand, spends mostly on network television with no investment on SLN television.39Spending per NetworkLooking at spending per network we see that Vestar Capital again does not advertise on Univision or MTV, while Procter & Gamble more evenly distributes its advertising expenditures across the board. This could be attributed to the target demographic the companies are looking to market to.40Spending per Program TypeLastly, by observing program type as percent of overall spending, we can see that Procter & Gamble more evenly distributes its spending across program types while Vestar Capital tends to focus more heavily on Slice-of-Life and significantly less on Soap Operas.

Wisk- deep clean (more for heavy dirt, drim focuses on gym and is more masculine as compared to tide and gain which focus primarily on freshness and scent

Slice-of-life : everyday realism 41Advertising Expenditure by ProductMegan: This graph just illustrates that the market leader, Procter & Gamble, spends the dollars on advertising. What interests me the most about this graph is just the pure amount at which Procter & Gamble spends compared to one of their biggest competitors, ALL.All $19,878,160 Gain $8,898,499 Tide $67,277,102 (Over 3X as much as ALL).

42Spending per NetworkINCREASE AXIS AND LABELS-Most popular network for spending (All): CBS-Most popular network for spending (Gain): Univision Later will discuss their target of the Spanish demographic. -Most popular network for spending (Tide): Also CBS. Shows that competitors are advertising on similar channels such as CBS and ABC but not -competing as much on NBC.-ALL spent nothing on the Spanish Channel nor MTV. Two demographics they are not aiming for. 43Spending per Program TypeOnce again this shows how All is more selective on which programs they advertise. This could be because they dont have as large as an advertising budget as P&G and therefore cannot advertise on all outlets.

Another curious observation is that while P&G gambles spending per network varied for Tide and Gain, their spending on program type on those specific networks is more similar. Possible that they have done extensive research on the networks their viewers are watching but not specifically what shows.

44Spending per Week DayEntire Industry (COULD DELETE)Thought it was curious that there is very minimal changes in advertising expenditure by the day of the week. 45Spending by Day PartWhile this graph does not reveal anything extremely new it does illustrate the huge difference between spending on morning and afternoons versus prime time. I was actually surprised by this result because I thought Saturday and Sunday morning shows where the entire family is more likely to be watching would have a higher amount of laundry detergent ads. 46ProductSpending on Prime DaypartTotal Ad SpendingPercent of Total Spending on PrimeAll$8,228,173$19,878,16041%Gain$3,719,908$8,898,49942%Tide$29,486,556$67,277,10244%Ad Spending on PrimetimeLastly, because of the huge amount of spending on prime time advertisements I thought it would be interesting to look more closely at exactly how much of their total advertising budget is spent on prime time. Interestingly for all three products, two of which owned by P&G the total spending on prime time television made up about 40% of their total advertising budget. 47Ad Observations: Key FindingsAll48Ad Observation: Spanish Demographic

All- no Spanish ads (consistent with other findings in data)Gain & Tide- Many Spanish Advertisements49RecommendationIndustry and Advertising Analysis50Investment

Barrons

BarronsInvestors are always looking for companies with good growth prospects selling at attractive prices.

Procter & Gamble Co, a large-cap growth company in the consumer non-durables sector, is expected to outperform the market over the next six months with very low risk. 10 is the best possible rating.51Procter & Gamble Co

Although P&G is the brand leader, it is important to note its competition as well.P&G over the year has outperformed consumer non-durable, but Colgate-Palmolive nas been outperforming P&GColgates organic sales growth during the past two years has averaged just under 5 per cent, against P&Gs 3.5 per cent. Colgates operating margins are consistently higher than its larger rivals, it has a deeper presence in emerging markets, and its returns on invested capital are well higher.From a financial perspective, P&G does face significant rivals which makes its advertising strategy in the coming years increasingly important52Advertising StrategyNYT: Our challenge is getting consumers to rethink how they do laundry, he added,on a small budget compared with those of Tide and other traditionaldetergent brands.

(NYT Ivory Soaps) Genderization of the category, soaps specifically for men or women53Questions?