P&G’s Lafley Shows How Loyalty Begins at Home
By John Hennessy
“The simple principle in life is to find out what she wants and give it to her. It’s worked in my marriage for 35 years and it works in laundry.”
That quote is attributed to A. G. Lafley, CEO Of Procter & Gamble, from a Wall Street Journal article on the turnaround at the consumer products giant. Mr. Lafley
delivered the quote to laundry executives at P&G’s South American headquarters in Caracas, Venezuela. The response from the executives was laughter. The response from P&G’s
shoppers has been to buy more P&G products.
The attention to what women want reflects a philosophical shift Mr. Lafley is urging: to look outside the company for solutions to problems, instead of insisting P&G knows
best. Mr. Lafley has succeeded where his predecessors failed by being an insider, but making the changes of an outsider. He has eliminated more jobs than any CEO in the company’s
168-year history and inked its largest-ever deals, including the recent $55 billion purchase of Gillette Co.
But perhaps most significantly, he’s changing the way the company thinks about the women who buy its products. P&G has always aimed its marketing at women. But it used to
develop consumer goods in its labs and market them based on the product’s best technical feature. Its market research tended to be about the pros and cons of specific products.
These days, employees spend hours with women, watching them do laundry, cleaning the floor, applying makeup and diapering their children. They look for problem nuisances that
a new product might solve. Then, they return to the labs determined to address the feature women care about most.
“We discovered that women don’t care about our technology and they couldn’t care less what machine a product is made on,” Mr. Lafley told P&G executives in Caracas, during
a recent tour of Latin America. “They want to hear that we understand them.” Since Mr. Lafley took over, P&G’s stock has more than doubled. The company’s earnings have increased,
on average, 17% a year since he became CEO, to $6.5 billion in the most recent fiscal year, which ended June 30, 2004.
Moderator’s Comment: Which retailers and CPG manufacturers do you think do the best job of listening to their customers? How is this demonstrated in
their products, services, etc.?
Loyalty is all about being faithful. For most large companies that’s a big challenge. Their customers are diverse, distributed and disconnected from headquarters.
Communication is typically directed at customers. There are not a lot of channels for collecting, evaluating or disseminating customer feedback.
Not actively seeking, listening to and acting based on customer input makes it very difficult to understand enough about your customers to faithfully fulfill
their needs.
You can either wait for your customers to tell you how you’re doing – too often on the way to a competitor – or you can take a proactive approach such as
the one P&G has adopted. It calls for understanding both what your customers like and dislike about what you are providing… and what they need that you could be providing.
Give customers more of what they want and they’ll give you more of what you want. That’s what loyalty is all about. –
John Hennessy – Moderator
I’m impressed with what Unilever’s Dove brand is doing. Their Campaign for Real Beauty (campaignforrealbeauty.com) attempts to expand on the typical definition of beauty to a greater range of ages and body types. I particularly love looking at some of the gorgeous women in their 70s and 80s that are posted on the site. I think Dove is speaking to women’s desire to see people in advertising that they identify with — rather than the typical 16-year-old models in make-up ads.
I think more and more companies are seeking to understand consumers in more meaningful ways than in the past – but successful brands then take the defined white space and carve out some piece of it that is truly ownable for that brand. The Dove example above is a wonderful example of understanding the many dimensions of beauty and not trying to play where the equity isn’t an asset.
The U.K.’s Tesco supermarket chain does a superb job of engaging their customers in an ongoing dialogue that benefits both parties. Listening is just a part of this dialogue, the other parts being questioning, observation, feedback, investigation, trial, testing, refinement, and consistency. As a result, Tesco’s genuinely successful loyalty program seems as if it were designed by customers.
The platitude of “we listen to our customers” is usually just fodder for convention speakers. If P&G is really listening (and all the other stuff involved in true dialogue) to their customers, and have gained a competitive advantage because of it, why would they reveal their secrets of success to their competitors at a convention? There isn’t a single CPG manufacturer on the planet that doesn’t claim to listen to their customers. What makes P&G so different, and can the doubling of their stock price really be attributed to this supposed difference?
What impressed me most about Mr. Lafley in this article (full disclosure: P&G is a RetailWire sponsor) is the amount of time he seemingly spends on the road trying to understand shoppers/consumers better. The temptation once one reaches the top rung of the corporate ladder is to stay there and see everything only from that viewpoint. The fact that he regularly climbs down to talk with different types of consumers speaks well of the organization. And, yes, some companies’ execs engage with shoppers better than others.