Procter & Gamble Co.

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In 1837, Cincinnati brothers-in-law William Procter and James Gamble opened Procter & Gamble Co., making soap and candles from the animal fats and wood ashes that were abundant by-products of the area's industrial and hog-slaughtering businesses.

Starting in 1838, the company advertised its Town Talk, Mottled German, Princess Queen and Duchess brands in small newspaper ads. By 1870, P&G's annual advertising budget was $1,500. The company launched its first magazine advertising in 1881.

It also adopted a trademark-style symbol early on. In the 1850s, because many freight handlers were illiterate, dockworkers began marking P&G's candle crates with a cross. The symbol evolved into a star to identify the contents as P&G's star candles, while another version showed the stars surrounded by a circle with a crescent moon. P&G registered its trademark with the U.S. Patent Office in 1882, when federal legislation began protecting trademarks.

But the company's advertising did not begin in earnest until it had what would one day be known as a unique selling proposition. One day, a worker accidentally mixed too much air into his batch of White soap, which P&G launched in 1878. Within weeks, P&G began getting orders for more of the "floating soap." By July 18, 1879, the soap had been renamed Ivory, becoming P&G's first major national brand.

In 1882, the company allocated the then-massive media budget of $11,000 to advertise Ivory nationally. The first Ivory ad appeared in a religious weekly, The Independent, on Dec. 21, 1882, and focused on consumers at a time when most ads targeted dealers or retailers: "The Ivory is a laundry soap, with all the fine qualities of a choice toilet soap, and it is 99 and 44-100% pure."

In 1900, the company contracted with Procter & Collier Co., a Cincinnati printer, to handle its advertising.

When P&G's growing demand for cottonseed oil for its soaps became harder to meet, the company decided to process its own oil. As a result, P&G developed an all-vegetable shortening using a process called hydrogenation and introduced Crisco in 1910. J. Walter Thompson Co. created color ads for Crisco in P&G's first move outside Procter & Collier.

In 1923, P&G made its first entry into radio advertising, touting Crisco on New York's WEAF. At first, P&G advertised on product-oriented shows that wove the brand into the programming. Then, in 1933, the company began investing in daytime serial dramas, which were dubbed "soap operas" after their sponsorship by P&G and later its competitors. "Oxydol's Own Ma Perkins" was P&G's first soap opera and was produced by the Blackett-Sample-Hummert agency.

Oxydol also ushered in what would become a staple of advertising by P&G and other advertisers for decades: the slice-of-life ad. A typical spot had a husband and wife conversing at the dinner table. "A big meal like this on wash day?" the husband asks, "And we're going to the movies? Say, where's that old backache?" His wife responds, "I've found a new soap called Oxydol, dear. No more backaches for me."

During the Great Depression in the 1930s, P&G President Richard Deupree resisted pressure to cut back on ad spending, reasoning that people would still need to buy such staples as soap. By 1939, P&G had 21 radio programs on the air and spent $8.8 million on network radio, with $4.8 million going to magazines and newspapers. That year, the company advertised on the first commercial TV broadcast, as sportscaster Red Barber pitched Ivory during a broadcast of a baseball game between the Cincinnati Reds and the Brooklyn Dodgers.

New developments

In 1923, P&G began its first formal consumer research, distributing product samples and talking to consumers about them. That early work led to the company's economic research department, which performed in-depth studies of consumer habits. By the 1930s, P&G had also begun test marketing new products regionally before rolling them out nationally.

Meanwhile, the company moved ahead with its soap research, studying "surface active agents," or surfactants, in the 1920s. In 1933, P&G introduced Dreft, the first synthetic detergent based on surfactants for all-around household use, although it couldn't handle heavy dirt. Another offshoot of synthetic detergent research was the development of liquid shampoo to replace soap. Drene, P&G's first shampoo, was launched in 1934.

Mr. Deupree's term as president of P&G, which began in 1930, also ushered in the beginning of the brand management system, the brainchild of the man who would ultimately succeed him—Neil McElroy. In 1931, Mr. McElroy proposed a one-person, one-brand idea, in which a brand manager would oversee an assistant brand manager for each of P&G's brands.

The basic principle of brand management-to operate each brand as a separate business-became fundamental to P&G's operations for decades. Not until the mid-1980s, when P&G appointed executives to oversee categories of brands, was the concept of "one-manager, one-brand" significantly modified.

The brand management system became the organizing principle for most of P&G's competitors around the world and found its way into other industries.

Washday miracles

By 1946, P&G had developed a heavy-duty synthetic laundry detergent, Tide. After test marketing the new brand in six cities, P&G backed the 1947 national rollout with $21 million in ad and promotional support. Ads via Benton & Bowles touted Tide as "a modern washday miracle." By 1949, Tide was the leading detergent in the U.S., outselling P&G's Oxydol and Duz.

With Lever Brothers and Colgate-Palmolive Co. gunning for the top spot, P&G decided its best defense was to grab the No. 2 position as well. So P&G launched Cheer in test markets in 1950 in a campaign from Young & Rubicam. Sales were sluggish until P&G added bluing, which was valued by homemakers. "It's new! It's blue!" became the tagline for Cheer in TV advertising in the mid-1950s.

P&G also worked to expand the boundaries of laundry care. The company launched Downy fabric softener in 1960, inventing a new category as well as creating what would became a $1 billion-a-year brand.

Its growing constellation of brands made P&G the leader in laundry care, which remained the company's largest business. By 2000, global sales of Tide and its sibling brand, Ariel, topped $3 billion. Tide remained P&G's flagship laundry detergent and flagship brand, getting most of P&G's improvements in laundry technology first.

Health and beauty products

As P&G expanded its laundry detergent business, it also began building its health and beauty business. P&G followed up its 1934 introduction of Drene with the launch of Prell shampoo in 1946. The marketer's health and beauty unit soon delved into home permanents with Lilt, then toothpastes with Gleem in 1953. Backed by ads from Compton Advertising, Gleem quickly gained on category leader Colgate, getting 20% of the $135 million category to Colgate's 37%.

Not content to be second, P&G began working on a toothpaste that would prevent cavities. With its development of Fluoristan, a trade name for stannous fluoride with a polishing agent, P&G debuted Crest in test market in 1955, but it got off to a slow start. In 1954, the marketer began working for an endorsement for Crest from the American Dental Association.

In1960, the ADA allowed its name to be used in consumer product advertising for the first time. Crest highlighted the endorsement in TV and print ads from Benton & Bowles, which stressed "25 to 49% fewer cavities with Crest." Crest sales nearly tripled to more than $380 million, overtaking Colgate within a year. Technological advances continued, and in 1985, a Tartar Control Crest helped the brand fend off a surge by Colgate in the early 1980s.

Following in the health and beauty businesses in the 1960s were the introduction of Sure and Secret deodorants, Scope mouthwash and Head & Shoulders dandruff-control shampoo.

Those successes prompted P&G to move deeper into over-the-counter drugs, with the 1982 acquisition of Norwich-Eaton Pharmaceuticals, marketer of Chloraseptic and Pepto-Bismol, as well as the 1985 acquisitions of Richardson-Vicks, marketer of Vicks cold and cough remedies and a little-known shampoo brand called Pantene, and the Metamucil and Dramamine brands from Monsanto Co.

The "disposables" business

Another acquisition, the 1957 purchase of Charmin Paper Mills, moved P&G into another major category. It followed up with White Cloud toilet tissue and Puffs facial tissue, followed by Bounty paper towels in the 1960s.

By 1961, P&G had moved into the disposable diaper market, but Pampers, handled by Benton & Bowles, was slow to catch on. Like other disposable diaper brands, Pampers suffered from an image problem. Mothers felt they were shortchanging their children by putting paper diapers on them, while some also balked at paying 10¢ a diaper. Thus, one of the real innovations behind Pampers was the marketing. Ads focused on the closeness of the mother-child bond in addition to benefit-oriented copy discussing diapers that were "flushable through modern plumbing facilities" and "a highly sanitary diapering method." By 1985, 98% of U.S. households with infants were using disposables, up from less than 1% when Pampers was launched.

Not every venture into paper products was as successful. Rely superabsorbent tampons, launched in 1974, quickly became a leading brand. However the tampons were linked to a rare but potentially fatal disease, toxic shock syndrome, and P&G pulled the product.

P&G re-entered the feminine hygiene market with the launch of Always sanitary pads in 1983, capturing category leadership from Kimberly-Clark Corp.'s longtime leader Kotex by 1996. A year later, P&G acquired Tambrands and its Tampax line.

More acquisitions

By the late 1950s, acquisitions had become a major source of growth for P&G. Through the early '60s, it acquired the peanut-processing business that spawned Jif Peanut Butter as well as Duncan Hines, Folgers coffee and Clorox Chemical's bleach.

P&G's buying binge, however, attracted the notice of antitrust regulators. The Clorox deal was challenged almost immediately, and after 10 years of legal wrangling that ended in the U.S. Supreme Court, P&G was forced to spin off Clorox in 1967. P&G was allowed to keep Folgers following a review, though it was forced to clear any additional acquisitions with the Federal Trade Commission through most of the 1970s, essentially putting a halt to new deals.

With two newly acquired brands, however, the 1960s would became the decade of icons for P&G. Actor Dick Wilson, starring as Mr. Whipple, admonished wayward shoppers, "Please don't squeeze the Charmin" in an effort from Benton & Bowles. Folgers became the cornerstone of P&G's food and beverage business, backed by the memorable if oft-parodied slice-of-life dramas from Cunningham & Walsh that always ended with actress Virginia Christine's Mrs. Olson declaring, "Mountain-grown Folgers. It's the richest kind." Nancy Walker as Rosie the waitress joined the triumvirate in the 1970s in ads for Bounty, "the quicker picker upper," from Benton & Bowles.

In the 1980s, unfettered by the stricter antitrust enforcement of the 1970s, P&G again turned to aggressive acquisitions. In addition to the Norwich-Eaton Pharmaceuticals and Richardson-Vicks deals in 1982 and 1985, P&G entered the cosmetics business with the 1989 acquisition of Noxell and its Cover Girl and Noxzema brands. The company continued to round out its brand portfolio with the acquisition of Sunny Delight in 1989, Old Spice in 1990 and Max Factor cosmetics in 1991.


Globalization became another priority. P&G launched a joint venture in China in 1988, sowing the seeds of what became a $1 billion business by the late 1990s. By 1993, more than half the company's sales ($30 million) came from outside the U.S.

As P&G concentrated on acquiring and consolidating new brands and making old brands global, the company stopped launching new brands of its own. The marketer did not launch a single new consumer brand into national distribution from 1983, when it introduced Always, to 1998, when it launched Febreze fabric refresher.

Indeed, P&G went in the opposite direction. Between 1993 and 2000, P&G discontinued White Cloud and sold such brands as Duncan Hines, Fisher Nuts, Hawaiian Punch, Attends, Lava, Oxydol, Biz, Clearasil, Prell and Coast.

But perhaps a bigger change for P&G came in 1987, when P&G restructured its management, giving executives broad control over product categories and, in some cases, diminishing the role of brand managers. The fierce competition among P&G brands was over. P&G undertook another dramatic restructuring in 1993. Layers of management were eliminated, including ad managers, whose roles were subsumed under the new title of marketing director. P&G reduced the number of its employees by thousands.

Having already gravitated toward global management of its categories and brands since the late 1980s, P&G in 1999 took the final step of naming division presidents, category VPs and even marketing directors and brand managers with global profit-and-loss responsibilities.

Through it all, P&G continued to be the world's biggest advertiser by far, spending more than $3 billion annually during the 1990s. In a 1994 speech to the American Association of Advertising Agencies, Chairman Ed Artzt created a major commotion in the ad community when he warned that ad-supported TV, and indeed advertising itself, was in peril if advertisers and agencies did not take the development of interactive media seriously. Although the speech was delivered before Netscape had launched the first Web browser, it became a sort of clarion call marking a new era of interactive marketing.

New CEO Durk Jager also moved to end P&G's new-brand drought. The launch of Febreze in 1998 was followed by the Dryel home dry cleaning and Swiffer electrostatic duster brands in 1999. P&G introduced more than a dozen other new brands into test or limited distribution and massively expanded of its newly acquired Iams pet food brand from pet specialty stores to supermarkets and mass merchandisers. In November 2001, it completed a $5 billion purchase of Clairol

Targeted marketing and new media

The combination of a massive global restructuring and a frenetic new brand development cycle, however, proved too much for P&G. Its marketing spending rose 15% in fiscal year 2000, though media advertising was up only around 4%, as P&G invested heavily in sampling and other promotions. Hit by outside factors as well, P&G missed Wall Street earnings forecasts for two consecutive quarters in early 2000, and Mr. Jager stepped down after only 18 months as CEO.

John Pepper, who had been chairman and CEO before Mr. Jager, returned as chairman, and A.G. Lafley became president-CEO in June 2000 and chairman in 2002. Mr. Lafley, with his "Consumer Is Boss" slogan, focused research and development and marketing more squarely on consumer-relevant and often consumer-generated ideas rather than the more technological bent of Mr. Jager. He also presided over a major emphasis on developing markets and beauty care, engineering the acquisition of the Clairol business from Bristol-Myers Squibb in 2001 and Wella in 2003.

P&G changed its agency structure in 2000 from paying commissions on media to commissions on brand sales, paving the way for the movement away from higher-priced mass media. The company also began using a host of interactive and off-line direct marketing approaches. In 2002, the company consolidated almost all creative, media planning and buying duties globally with Publicis Groupe and Grey Global Group.

In 2003, P&G was the No. 2 advertiser in the U.S., trailing General Motors Corp. The company spent $3.3 billion on advertising that year, up 24.3% from 2002, according to Advertising Age.

In July 2004, the company awarded its $4 billion communications planning business, including media planning, to Publicis Groupe's Starcom MediaVest Group and Aegis Group's Carat. The new account expanded the role of media planning at P&G to encompass broader communication planning duties—including areas such as promotion and public relations—similar to an approach rival Unilever adopted in 2001.

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