When the old one is rusty, it’s time for a new model

It’s telling that P&G unveiled its campaign to reinvent marketing at an event dedicated to innovation.

Five years ago, when he took over as chief executive of Procter & Gamble, AG Lafley declared: “In the past, it was mass marketing and it was push. Push the advertising on to the telly, turn it on as loud as you can, and keep it on as long as you can. Today we have to reinvent branding, reinvent marketing and reinvent marketing to the customer [retailer].”

Since then, P&G’s sales have grown by more than 25 per cent, from $39bn (&£21bn) to $51bn (&£27bn); profits have more than doubled, from $2.9bn (&£1.6bn) to $6.5bn (&£3.5bn); and the share price has responded accordingly (from a low of about $28 (&£15) to $56 (&£30)). Yet, on the surface, that’s not due to any great reinvention. Precisely the opposite in fact: success seems to have come from refocusing efforts on existing mega-brands, doing more of what P&G knows well (overall television ad spend is up, for instance) and acquiring new brands with unexploited potential, such as Clairol and Wella.

Yet, at the recent Flashpoint event – P&G’s biannual innovation-fest in Cincinnati – Lafley was off again. “The consumer is boss,” he said, yet “P&G’s current brand-building model is not really driven by a ‘consumer-is-boss’ approach. We need to reinvent the way we market to consumers and with customers. We need a new model. It does not exist. No one else has one yet. But we need to get going. Now.”

He continued: “We don’t know what the model looks like. But P&G should be the company that creates it.”

Five years on from that first speech, there’s a danger of sounding like a broken record, but P&G is certainly accelerating its quest for this new model. Chief marketing officer Jim Stengel has already instigated worldwide research projects in four crucial areas: marketing measures and returns on investment (ROIs); the “first moment of truth” (effective marketing within the retail context); how to accelerate and improve innovation; and how to connect better with consumers in a fragmented, multi-media, online world.

Now he’s setting up 30 to 40 “focused, stretching” experiments – at least one from each major global business unit (such as haircare) and local “market development organisation” (regional marketing unit) – to report back by April. The ultimate aim is to flesh out a range of new models because “there is no one model; no single way to win. The answer will be different for every brand.”

To bolster his troops in this quest for new model marketing, Lafley underlined P&G’s pioneering role in the past: how it helped to pioneer radio advertising in the Thirties and TV advertising in the Fifties. “P&G should be the pioneer as we have been so many times before,” he declared.

Perhaps it should. But this time it’s different. Because, looking back, both radio and TV were what innovation guru Clayton Christensen would call sustaining innovations. In other words, they helped to deepen, reinforce and extend the existing trajectory of advertiser push within a broadcast framework.

Most of today’s changes, however – including retailer power and the continuing media and IT revolution – are more “disruptive” than “sustaining”. Stengel put his finger on the difference. It’s not about media consumption habits, fragmentation, costs or ROI per se: it’s about a shift in control. Over the past 20 years, says Stengel, “consumers’ right to control everything has escalated: what they choose, what they use, what they listen to, what they ignore, where [and] how they shop… everything has changed.”

So when it comes to inventing new models of marketing, these models need to be built on the assumption of buyer, rather than seller, control. Hence the need for “new models that delight consumers with brand experiences they welcome into their lives”, as Lafley put it.

How far is P&G down this road of reinvention? Stengel identifies four early “consumer is boss principles”. The first is to go beyond broad-brush demographic classifications of consumers and define consumer segments in terms of particular need or occasion.

The second principle follows from the first: develop different propositions for different target groups, some of which will be quite narrow and some of which will be quite broad. It’s not that mass marketing is dead – some markets will remain mass markets. Rather, it’s that each consumer segment – the market – needs to determine the specifics of the marketing, rather than the other way round. That means that for some brands, such as P&G’s upmarket skincare product SKII, P&G is quite happy with a target market of five per cent – and it needs to develop go-to-market strategies that match.

Principle number three extends the acceptance of consumer control to communication. The challenge, Stengel says, is to reach people when and where they are receptive and tailor the marketing to the context. For some big traditional brands such as Crest toothpaste, TV advertising still seems to do the trick. For others, such as SKII, beauty therapists in department stores and database marketing look like the way forward.

That leads to principle number four: how to work with retailers to win that first moment of truth – when the shopper decides what to buy in store (the second moment of truth being when he or she actually uses the product). The big challenge here, says Stengel, is how to “co-create value by giving retailers reasons to want their shoppers to choose P&G brands” – a far cry from the days when P&G (“Push & Grunt”) couldn’t care less whether retailers lost money selling its brands. One agenda item: what about working with the retailer as the media or communication channel?

Just how far P&G’s experiments will go in the next six months remains to be seen. Stengel has already identified areas where he still hasn’t got robust answers. These include how to qualify integrated marketing plans; P&G’s continued dependence on 30-second TV spots (including “processes and partnerships” based on the 30-second TV ad); being able to measure effectiveness of “first moment of truth” initiatives; the fact that the company is still buying media on the basis of demographics when its marketers are defining target segments differently; and how to qualify and measure marketing effectiveness for relatively narrow target segments.

So it’s watch this space. What stands out, however, are three things. First, P&G’s recognition of the need to be open and inquisitive, and to learn (it’s no accident that these initiatives were announced at an innovation event, not a marketing one). Second, the need for innovation at a fundamental level: it’s not just learning how to apply the rules, but learning how to rewrite them. Third, the systematic, disciplined manner in which P&G is now addressing this challenge.

It is a challenge, no doubt. As Lafley admitted, compared to the introduction to radio and TV, this time round reinventing marketing “will be tougher”. The question is this: as P&G, a self-styled pioneer, formally accepts the need to rise to the challenge of reinvention, are its peers and competitors maintaining a similar pace?

Alan Mitchell, asmitchell@aol.com

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