proctor and gamble case analysis

8/10/2019 Proctor and Gamble Case Analysis

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Proctor & Gamble Inc. Case Analysis

Problem Statement

In what ways can Gwen Hearst develop a strategy to ensure continued profitability of Scope, the

mouthwash brand of P&G, under the threat posed by the new competition in the Canadian market.

Introduction

P&G is one of the most successful consumer goods company in the world. In 1990, its Canadian

subsidiary was a major business unit and contributed $1.4 billion in the sales and $100 million in net

earnings. The case here discusses the scenario in 1990 when one of its key products, Scope, the

mouthwash brand was exposed to a competitive threat due to the unique market positioning by its

competitor brand Plax. Since its introduction in 1988, Plax had gained a 10% share in the category

and was a cause of concern to the management. The brand manager, Hearst, was responsible for

maximising the market share, volume and profitability of the brand and was expected to come up with

a strategy to ensure the same.

After analysing the situation of the market she had three alternatives in her mind.

1) Introducing a new line of product

2) Repositioning existing brand in lines with the competitors

3) Maintaining status-quo

Scope:

Scope was introduced in 1967 by P&G. Prior to Scope the market was dominated by Listerine, the

first mouthwash developed by Warner-Lambert which had a medicinal taste. P&G saw an opportunity

here and came up with the brand Scope that was positioned as a great-tasting mouth-refreshing brand

that provided bad breath protection. It was the first brand that offered better taste than other

mouthwashes in addition to the bad breath protection. Scope was a market leader with 32.3% with therest of the brands nowhere close to this number. The market was further divided into food stores and

drug store outlets wherein its market share in food store accounted for 42% and that in Drug Stores

accounted for a 27%. As mentioned in the case, Scope had not been targeting the drug store category

as the brand was positioned as more of a cosmetic product rather than a drug product. The spending

on the advertising and media plans were comparatively higher than the rest of the brands but had

resulted in lower GRPs indicating a revision in the plans. The retail indices also showed the product to

be pocket friendly.

The Entry of Plax:

Plax was introduced in 1988 by Pfizer Inc. with a different platform altogether. It was promoted as apre-brushing rinse formula that claimed to remove up to three times more plaque than brushing alone.

The company invested $4 million in extensive advertising and sales promotion campaign during the

launch which resulted in a 10% market share by 1990. There was a flawed advertisement mentioned

in the case that highlights the exaggeration made by the brand about the plaque protection. However

due to the brand new segmentation of the product and addressing to the fact that a major chunk of

Canadian population suffered from the plaque and gingivitis problems, Plax penetrated into the

market in no time. Plax was priced at a higher level in food store while at a premium in drug store

signifying its medicinal value.


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Assessment of available alternatives:

1. Introducing new line of product

This involved several steps and heavy investment in the form of R&D and promotions. To compete

with Plax, the company has an option of launching a new product line in drug category instead of the

present cosmetic category in which Scope was selling. This would involve additional approval by

regulatory authority and also advertisement scrutiny henceforth.

Also it was estimated to cannibalise 2 to 9percent of Scopes sales. In the discussion with various

departments various data were put forth. The product development department (PDD) were of the

opinion that a product test of $20,000 would be required which might not be justifiable as the product

they could offer was only equal to that of Plax if not higher with only different being that it would

provide a better taste.

Various costs including capital cost, marketing cost, delivery cost, inventory cost, ingredients cost and

other important costs which create concern and would also require effective strategic management.

There was also a concern on number of units sold as it might lead to additional listing fee by the

retailers. The market research conducted by P&G had shown no significant increase in market share

with the introduction of the new product.

Another problem that was anticipated was with respect to the name of the new product. They had to

decide whether the new product will be launched under the name of Scope or with a different name.

Introducing the product in the same name may lead to loyal customers getting confused because of the

new brand image and stopping to use Scope.

2. Re-positioning the present brand

The brand Scope already enjoyed a loyal customer base. If this was changed then the customercurrently buying the product to get rid of bad breath (40% of the total consumer) might switch to

some other product leading to a decrease in sales. To avoid this if there was an ad campaign done to

cater the product as serving both the purposes it would be difficult to be projected with equal

importance putting consumers in a fix.

Further, the product will change from the category of Cosmetics to Drug. This will lead to increase in

scrutiny of advertisement with guidelines that may be stringent but at the same time it will prevent the

current consumers from switching to other brands although it will not lead to an increase in the

product growth. Further, there would be significant cost involved in promoting the revised product

along with an increase in its ingredients costs and re-packaging costs.

3. Maintaining the Status-quo

A few departments were of the view that there was actually no real threat existing as Plax was

positioned very differently in comparison to Scope. However, the sales people had different view.

They had seen the inroads Plax had been making in the marketplace and were of the view that Scope

should respond quickly.


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Our Recommendation

We recommend the company to go for re-positioning of its brand and not start a separate line

of extension or maintain a status quo. The various reasons supporting it are as follows:

a. The brand is being positioned as a cosmetic product which helps to fight bad breath

but as per Exhibit 3, only the consumers are able to find the product to perform above

average in that attribute whereas other users does not find the advertisements or

promotions that impactful in its positioning and even rated it below average in other

attributes. Thus, the brand needs a lot of improvement in its advertising and

promotion campaign to help it build its brand image better.

b. Since 65 percent of the sale of all mouthwash happens in drug store, the company

needs to ensure that it targets the drug store more than the food store. Another reason

for the same being that the 42 percent of the sale of Scope is already from food store

and therefore it does not need to anything in case of food store.

c. The case also points out that even if the company launches a new product, it is not

sure if it will be a success since the new product that is proposed to be launched

launch will be no different from that of Plax and will be not accepted well with theretailers and can lead to extra costs to put the stock with them and also might lead to

loss to its own brand Scope due to lesser exposure.

d. Product Development Department of Scope is of the view that Scope reduces Plaque

as well. However, they do not have any clinical evidence to extend this claim. The

company, therefore, should try to get its claim tested by the respective agency and

extend the same. This will be an added advantage to them. It although may not

generate additional sales but it can definitely prevent current users from switching

over to other brand.

e.

We find that the advertising agency is not very much in favour of making any newclaims for Scope as it may create a confusion among the customers. Moreover, it will

be difficult for them to send out two different ideas in the same commercial. However

this should not be a hindrance as there are several products in the market that perhaps

states multiple claims and still does well. It basically all depends on effective

advertising. Moreover the market research carried out had already stated that the

current consumer will not switch over to other brand if any additional claim is made.

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Prepared and Submitted by

Group AC2

proctor and gamble case analysis

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