วันศุกร์ที่ 5 มิถุนายน พ.ศ. 2552

Lesson No 1: consumer is king

Published on May 25, 2009

Medhee Jarumaneeroj, a renowned marketer with consumer-product giant Procter & Gamble, offers some insights into how to ensure marketing activities succeed in an economic downturn. Pichaya Changsorn reports.

Speaking at the Good Morning Guru event held by the Thailand Management Association last week, Medhee Jarumaneeroj, senior marketing/corporate communications manager of Procter & Gamble Trading (Thailand), spoke of the many illusions created by marketing. One is the equating of business success with market share. Marketers rarely fail to meet their annual market-share targets, he said, as this goal can be achieved through giveaways, big promotion launches and many other tactics used to boost sales figures. Knowing this, it is important to re-evaluate your business goal: Are you giving more importance to market share than to your company's profitability?

Take the case of P&G. The consumer-goods giant has more than 300 brands, but only 23 or 24 generate sales of more than US$1 billion (Bt34.5 billion). Many of its brands do not perform very well. This is a familiar situation for many businesses. Often, management will push to expand sales of every product without evaluating whether the promotion costs are worthwhile.

"You must first find the 'big rock' of your businesses…the one that, when you throw it into the water, creates a strong ripple effect," he said.

In the case of P&G, the company's "big rock" is beauty products, and it has reduced the importance it once gave to the paper business, for which it foresees slower growth.

Medhee said the growth strategy laid out by P&G chief executive AG Lafley focuses on core businesses, big markets (which means finding big markets for each brand and avoiding small markets), and top customers (such as major retailers, which can provide support and cooperation).

Choosing the right brands and markets can help companies grow faster, even in a downturn. Although the Thai economy is expected to shrink in the first quarter, sales of P&G's moisturiser products here increased by 6 per cent during the first three months of the year, Medhee said.

Worldwide, the growth strategy of focusing on leading brands and beauty-care products helped P&G grow by more than 60 per cent from US$51 billion (Bt1.7 trillion) in 2004 to $83 billion last year.

Often, managers think they are devising business strategies when in fact they are adopting "tactics", to which they become beholden, limiting their options.

"In this game, we have to make choices. Strategy is derived from the choices we make as to where we will play - and [this determines] how we will win," he said.

"But what often happens with management in Thailand is that they can't choose, or sometimes they think they are making a choice [when in fact they're not]."

focus on consumer

A purpose-driven and customer-centric culture is also very important, Medhee said. Everyone in the organisation - not only the marketing staff - must be clear on what he or she is doing, and must always remember that the consumer is the boss. P&G Thailand's decision to overhaul its pricing and packaging sizes to bring them more in line with consumers' preferences, Medhee said, was a result of the realisation by people in its manufacturing and financial departments that the customers were their true bosses.

Another case study demonstrating the truth of the "consumer is boss" maxim is P&G's 2005 purchase of Colgate-Palmolive's detergent business, bringing with it the Fab and Pek brands. Poor marketing had seen the market share of Fab, which once commanded a dominant place in the local detergent market, fall from 24 per cent to only 4 per cent in a 10-year period. Pek's share was only 0.6 per cent.

To rejuvenate the Fab brand, Medhee went all over the country, talking to consumers and observing how they washed their clothes.

"Ninety-nine per cent said they used Fab, but in fact everyone was using competitors' products. I asked why they didn't use Fab. [We found that] Thais did not seek [solely] the basic benefit of a detergent, which is to whiten the clothes; they looked for both whitening and a clean-smelling odour. The odour in Fab didn't last long," he said.

During the trip, Medhee had also found that northeastern Thais would store their clothes in a wardrobe with flowers such as jasmine or white jampaka. Taking this as a consumer insight, P&G developed a new Fab with a jasmine scent.

Thanks to this customer-centric approach, P&G quickly boosted Fab's market share to about 5 or 6 per cent, he said.

Under the current economic circumstances, marketers should always remind themselves that they are doing their marketing on the basis of consumers' needs, not because they want to take "revenge" on their competitors, he said.

"If we throw ourselves into head-to-head competition all the time, we as marketers are forgetting our roots," he said. In this regard, Medhee gives credit to P&G's competitor Unilever, which he said was also focused on consumers, which helped to expand market share, instead of engaging in eye-for-an eye competition that neither party can win. An example is the anti-dandruff shampoo market, in which Unilever, instead of launching a copycat product to compete with P&G's Head & Shoulders, "thought outside the box" and introduced Clinic Clear, which users found prevented dandruff in the same way as Head & Shoulders, but also had beauty-enhancement features.

Eno's case study

Medhee said marketers should know how to "create an 'opportunity to boost scale'." A case in point is Eno, which has long been known as an antacid and reliever of bloating. But consumers found it much easier to take tablets than to take Eno, which requires mixing with water. Thus in Singapore and Malaysia, Eno has been rebranded for use as a heat reliever, a product that has no competitor.

Innovation is another very important ingredient in a business' ability to escape economic volatility. Innovation is at the heart of P&G's business model, a primary tool for pleasing consumers, creating new business and to sustain existing business objectives. Medhee said he used to believe that innovation was only concerned with products, but a global conference call with chief executive Lafley changed his mind. Now, he says, he is fully aware that innovation must be adopted in every part of a business. And companies that can change their games fast, taking consumers as their core, will benefit, he said.

'Open up' culture

Marketing is not a pure science. There is not always a correct answer. Sometimes, a marketing idea is initiated by a gut feeling or from talking with consumers. Hence, it is crucial that firms create a culture of "openness" within the organisation. P&G designed a free-form office in which everyone, including the president, sits in the same room where they can see and hear each other.

Among the first things Lafley did when he assumed his leadership position at P&G in 2000 was to order every manager to go out to visit stores and talk with consumers. As related by Medhee, Lafley said the reason P&G had lost its status prior to 2000 was that, "We were out of touch with the consumers." Thus, P&G has encouraged openness, Medhee said, realising that conducting "focus-group" research does not ensure firms receive correct information, especially in Thailand where "krengjai" - often defined as "deference" - is a dominant culture.

"We also conduct home visits, or 'shop-alongs', following consumers while they're shopping, going with them as they push their carts, looking to see why they turn this way, not the other way; what they see, what they don't see," Medhee said.

"I even went into their bathrooms to see which shampoos they use. Now I know that some of the shampoos are not even used - they just keep them around because they like the packaging."

Another reason for P&G's decline prior to 2000, he said, was its neglect of organic growth.

"Any business that forgets its basic foundation - what led to its success in the first place - and focuses only on creating flashy new things [will fail]. It's important to get back to building sustainability in core businesses before going on to build incremental businesses."

A case in point is the One Tambon One Product scheme, when villagers followed a fad of producing sato (rice wine) and ceased to produce their villages' traditional fabrics and other products based on the heritage bequeathed to them by their ancestors, Medhee said.