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
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