The new Streamlined '97 program is primarily aimed at simplifying promotion and adding flexibility for retailers, said a P&G executive, describing the effort as "more evolutionary than revolutionary."
P&G's overall trade spending won't be affected, a company spokeswoman said.
LESS SUPPORT FOR SOME BRANDS
Retailers no longer will be required to use trade dollars to promote brands the executive characterized as lower-volume items that don't respond to traditional trade promotion practices, such as Comet cleanser and Gleem toothpaste. Such brands respond better to "putting them out at the right price and the right place on the shelf," he said.
But retailers still are free to use promotion dollars on the brands if they want, the spokeswoman said. As an example, "A retailer may have had success in the past by promoting Dreft [a laundry detergent for infant clothes among those cut from the contracts] along with diapers, and they can still do that."
Under Streamlined '97, P&G also will consolidate three trade promotion contracts into one, incorporating brand development funds and co-equity programs, through which P&G funds co-branded advertising and promotion with retailers.
The new system permits integrated planning of in-store merchandising and co-equity programs, the P&G executive said.
P&G also will move to annual budgeting for co-equity, he said.
Annual planning clears the way for P&G to move media buying for co-equity programs to brand agencies of record from J. Brown/LMC Group, Chicago, which currently handles buying, said an industry source, adding that P&G has not moved to do so yet.
P&G had no comment on plans for changing co-equity media buying.
To encourage "efficient product introductions," P&G also is changing the way it discontinues old products, the P&G executive said.
THREE MONTHS' NOTICE
Besides getting three months' notice of discontinuations, which in the past sometimes came with as little as one month's warning, retailers will get incentive payments to mark down or otherwise sell stocks of discontinued items rather than return them.
By the second year of the program, P&G brands will be charged for those payments, providing a new incentive to only launch products most likely to succeed, the executive said.
The main thrust of Streamlined '97 is to attack the source of costs for such things as "unsalable" damaged goods and other returns from consumers and retailers. P&G will continue working to reduce damage in manufacturing and shipping, eliminate claims for less than $175 from retailers and charge retailers $5 for every case they return that was shipped as ordered.
Retailers will automatically receive a "Logistics Development Incentive" for all products, averaging between 0.5% and 1% of their total orders from P&G, which is more than the average retailer receives now for unsalables, order-fulfillment problems and discontinued items, P&G said.
Payments to retailers will vary based on the types of P&G*products they sell.
A lump sum payment will encourage efficiency, the executive said, adding that P&G will provide retailers with technical assistance in eliminating inefficient practices.
For the first time, P&G's Streamlined '97 and two other pre-existing streamlined-logistics programs are being applied to cosmetics, where discontinued items present special problems because of frequent changes in shades of lipstick or makeup, the executive said.
SELLING DISCONTINUED ITEMS
P&G will move to a 12-month planning process for discontinued cosmetics. Instead of returning cosmetics to P&G, retailers will get incentives to sell them.
Dean Witter Reynolds analyst William Steele called the program another positive step toward more efficient trade spending for P&G. But he cautioned that providing three months' notice on discontinued items could create "a jump-ball atmosphere for shelf space" with competitors, unless P&G can fill the gap with new products.