Will Changes at P&G Prove That the 4 Ps Matter After All?
Now that A.G. Lafley has returned to lead Procter & Gamble, it begs questions about what he did that was so "right" and, conversely, what was "wrong" with Bob McDonald's tenure. I get it that sales and profits were down lately, and both activist and retiree investors weren't happy. But there's a bigger, deeper story about how each leader handled marketing's 4 Ps. The company's future success may depend on coming to terms with it.
P&G didn't invent the 4 Ps, but it built a huge and profitable collection of brands that delivered on product, price, promotion and place. The company operated in a world wherein great leaps in product functionality were possible, previously unmet needs were worth lots of money, and the company closely controlled what and how it communicated to consumers.
That world was changing drastically during Lafley's first tenure at the helm (2000-2009) and, not surprisingly, the perceived utility of the 4 Ps changed, not just at P&G but in the marketing world overall.
The company chose to collect customers through acquisitions, buying Gillette for $57 billion in 2005. By the next year, more than a third of its product innovation had been outsourced. Pricing pressure emerged from upscale-looking private label brands, and P&G embraced a marketing theology that expected "meaning" could replace the benefits it used to deliver to captive eyeballs glued to ads. While store shelves got crowded and confusing, the company's marketing creative won awards at Cannes.
Outside the walls of its Cincinnati headquarters, pundits opined on the demise of the 4 Ps. Some created replacement acronyms, substituting words like "access," "education," solutions" and the one that really gets me, "engagement." Since consumers were no longer subjecting themselves to the ad messaging on mainstream media, the thinking was to give them stuff that had nothing to do with selling anything.
Not surprisingly, customers started buying lower-priced brands, and shopping in different ways. Then the global recession hit in 2009, whacking P&G's sales, margins, and profits. The future looked bleak, so the company replaced Lafley with Bob McDonald as its CEO.
McDonald's tasks were herculean, and many of them remain unfinished. Perhaps his greatest accomplishment was to recommit the company to product innovation. Tide Pods, for instance, was launched in 2011 and is on its way to changing the entire detergent category. Hopefully more breakthroughs are in the immediate pipeline. He also figured out how to plug lower-priced brands into the company's offering in a deft strategy to keep trade-down customers in the P&G brand family. But he left the other Ps on the course set by Lafley and his team.
The company is still wholly in the thrall of last decade's marketing buzz, celebrating the made-up metrics of social-media success as if they're a replacement for selling soap. They're not, despite the meaning of motherhood or the hilarity of online videos. Its distribution challenges are equally unresolved (think Dollar Shave Club, only applied to more product categories, for instance). For a company that built its future on big new ideas that drove promotion and place -- it invented opt-in for radio soap operas in the 1930s with something called a "mail-hook" that rewarded listeners with a gift in return for a product box top -- it's sad to see P&G stuck delivering old ideas from the last decade that have already proven ineffective.
My prediction is that the company's success won't hinge on rejecting the 4 Ps, but on how well and fully it embraces them. Great new products and functionality deserve great new ideas on how, where, and at what price they get to markets. The only way to accomplish that is to stop the pretense that the 4 Ps no longer exist or apply, and instead use them as the starting points for developing new ideas.
Bob McDonald laid the "right" groundwork. I hope A.G. Lafley doesn't get the 4 Ps wrong the second time around.