Wednesday, August 06, 2014

Want To Be A P&G Brand? (Placeholders Need Not Apply!)

Procter & Gamble announced it’s cleaning house. It plans to dump, er, divest 70 to 80 brands so, according CEO A.G. Lafley, P&G can “create a faster growing, more profitable company that is simpler to operate.” Well, fewer brands should certainly help make it simpler. As to more profitable, Mr. Lafley said P&G will focus on core business and popular consumer brands like Tide, Charmin, Pampers, Gillette, Crest, and Bounty. We don’t think you’d be surprised to learn that it’s those brands that account for the lion’s share of P&G’s sales and profits.

Those brands also tend to be engagement leaders in the categories we measure in our annual Customer Loyalty Engagement Index, meaning that they do a better job meeting customers’ category expectations than competitors. So good for Mr. Lafley, although this really was a long time coming. It turns out that many P&G products in many of the categories they’re looking to dump, er, divest, have remained not so much brands, as much as having turned into category “placeholders.”

“Placeholders” is the nomenclature we came up for categories that have more products in them than consumers really care about, and describes something people have heard of, provides perfectly acceptable degrees of primacy of product, usually have ubiquitous distribution, similar pricing models, and are, well, to be candid, exactly the same as one another. Yes, yes, different names and packaging, but in no other meaningfully way different. Most importantly, including the degree to which one product is seen to meet customer expectations they hold for the Ideal in the category, versus another similar product. So basically commodities with names attached. But not quite a “brand.” A “placeholder.”

Every January we measure between 65 and 90 categories and 500 to 1,000 brands in the Customer Loyalty Engagement Index we referred to above. Every year (and more-and-more often) we find we have to dump certain categories too. Oh, our metrics, which fuse emotional and rational consumer decision-making and engagement values, are as sensitive as ever. And for real brands, à la independent validations of the resultant brand rankings and loyalty measures, they continue to correlate very highly with positive consumer behavior toward a brand which, axiomatically (gross mismarketing notwithstanding), usually results in higher sales and profits. Sometimes categories just go away. Like “Movie Rentals,” “Answering Machines,” and “35mm Film.” But for placeholders, we just don’t see any significant differences in the assessments for one offering versus another, and, apparently, neither do the consumers. They are seen to be interchangeable.

So just to be clear placeholders are the same. Undifferentiated equivalents, mutual, and/or fungible. To paraphrase one of the funniest Monty Python bits ever, Dead Parrot, the brand has ceased to be. It’s expired and gone to that great supermarket in the sky. It’s bereft of meaning and differentiation, has kicked the category bucket, shuffled off this mortal coil. Which is pretty funny as a TV sketch but calamitous for something that used to be a brand. The placeholder is, indeed there, but “there” is pretty much just occupying place on the shelf, usually selling on some low-lower-lowest price strategy, neither of which helps a company’s bottom line. Which is why P&G is dumping all those products.

It was reported that for the full fiscal year, P&G’s income rose 3% to $11.6 billion. Mr. Lafley said although P&G delivered on its financial commitments, it "should have and could have done better.”

When you’ve got a real brand to work with, you usually do.

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