Using Case Study: Tide Basic in this course is ” Marketing Strategy”, please answer according to the content
- Identifying the pros and cons of decision options in the mini-case.
- Do some quantitative analysis, such as a breakeven analysis pertaining to the decision options.
Case Study: Tide Basic
In May 2009, Procter & Gamble Co., under assault by penny-pinching consumers, is considering rolling out a version of Tide detergent that the company freely admits isn’t “new and improved.” The proposed product, Tide Basic, lacks some of the cleaning capabilities of the iconic brand — and costs about 20% less. Its very existence is one of the most telling signs to date of how the sour U.S. economy in 2009 is forcing mass marketers to shift course. On Wednesday, the company reported an 18% plunge in fiscal fourth-quarter profits as sales of its premium-priced brands shrank amid tightened consumer budgets.
The decision to develop Tide Basic didn’t come easily. For decades, P&G had held fast to a strategy of promoting new features to convince shoppers to pay a premium for detergent, shampoo and other household staples. Then, as cheaper store brands gained traction in the aisles, P&G began offering lower-priced versions of some products — Charmin toilet paper, Bounty paper towels — to suit leaner budgets. P&G agonized over whether to go down a similar path with Tide, its top-selling brand in the U.S. A more “basic” version would balance Tide’s premium prices. It could also help expand its market share, which while dominant, has been slipping. For the four weeks ended July 12, Tide held 41.4% of the liquid laundry- detergent category and 44% of the powder detergent category, both down from a year ago, according to estimates by Information Resources Inc. Figures don’t include data from Wal-Mart Stores Inc.
Executives feared that a cheaper version might cannibalize sales of regular Tide, which accounts for more than $3 billion of P&G’s $79 billion in annual revenues. Marketers at the company have been so loath to sully their prized soap brand that they’ve wrestled with the matter at least eight times in the past three decades. Last November, two managers at P&G’s Cincinnati headquarters walked into a roomful of executives to gently suggest another try. “Just listen and keep an open mind,” Suzanne Watson, an associate marketing director, told them. There was good reason to pay attention. Many people for the first time are clipping coupons, trying cheaper brands and buckling down in ways they never had to before. Economists aren’t sure how long the trend will last. But a recent report from IRI identified a new class of fiscally cautious consumers. Some 52% of respondents said that in the coming year they plan to buy store brands to save money; 47% plan to eat at restaurants less frequently; and 48% plan to use home beauty treatments rather than visit a salon.
In Houston, Jaime Ball, a marketing director for a local apparel maker, says she hasn’t really felt the effects of the recession but has started trimming her spending anyway, cutting down on trips to the mall and resisting impulse buys.
After years of spending $17 on bottles of Matrix shampoo and conditioner, 28-year-old Ms. Ball recently bought $5 Pantene instead. “Buying the more expensive stuff just isn’t as exciting to me — it’s not as important,” she says. “I don’t know that you can even tell the difference.” Her quandary cuts to the heart of P&G’s current dilemma. The 172-year-old company built its fortunes after World War II on Americans’ growing affluence and inclination to equate “better” with a higher price. P&G flooded radio and television with ads promising its products delivered superior performance in everything from teeth cleaning to floor shining. In return, P&G got a superior price. The approach made household staples out of Mr. Clean cleaning liquid, Crest toothpaste and Tide laundry detergent. P&G sold lower-end brands but gave them scant advertising. Now P&G’s model is under attack as retailers like Wal-Mart, Target Corp. and supermarket chains nationwide improve the quality and selection of their own brands, tempting penny-pinching consumers to forgo P&G’s pricier products and eroding the giant’s dominant market-share positions
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