Procter and Gamble Gets on Its Horse

Well timing is everything in life.  Two days after my last post on the increasing success of store brands and their importance in retain cash-strapped customers, Procter and Gamble announced that they will boost their offerings of lower end products. As reported in The Wall Street Journal, CEO A.G. Laffley said “that every business at P&G is working to reach more consumers by widening the price range of its products. He cited the recent success of the company’s bargain-priced Gain detergent and Luvs diapers. In recent quarters, both products have outpaced the sales gains of their premium-priced sister brands, Tide and Pampers.”

Laffley went on to say: “You have to see reality as it is.  In every recession there are hosts of compensating consumer behaviors as they manage a more modest budget. We have to expand our portfolios to serve the needs of those consumers. I think a lot of that is going to last…The whole game for us is to manage the premium and super-premium segments in a way so we can deliver affordable entry offerings…in a way that grows revenue and [profit] margins.”

He said the magic phrase – “increase revenues and profits.”  This is the only purpose for price.  To achieve this purpose requires strong product management, marketing strategy, and field level execution.  You innovate for growth (even at the low end of the line) and price for profits.  As these moves show, P&G understands this.  As a result, they will be able to grind out lower, but still healthy profits this year.