A Smarter P&G

P&G is at the forefront of digitization among CPG companies with some of their “smart” product launches, however, will they be able to continue to innovate and win in this space?

Arguably nowhere is data more important than in Consumer Packaged Goods (CPG) where consumers often interact with a brand’s products on a daily basis.  Industry titan, Procter & Gamble (P&G) has made it their mission to become “one of the most digitally connected businesses in the world” by leveraging digital technology to gain superior consumer insights on which CPG companies rely heavily. [1]

CPG has traditionally been characterized by fierce competition between brands.  Brands have looked to analytics to gain a competitive advantage to better understand their consumer’s needs and behaviors and then use those insights to form stronger connections with consumers.  [2]  

Former CEO Robert McDonald recognized the importance that P&G invest heavily in digitization and connectivity.  In an interview he stated, “Our purpose at P&G is to touch and improve lives; everything we do is in that context. With digital technology, it’s now possible to have a one-on-one relationship with every consumer in the world…We want to be the company that creates those indispensable relationships with our brands, and digital technology enables this.” [1]

P&G’s primary digitization efforts have been focused on connectivity with the consumer.  In early 2014, they released their web-enabled Oral B toothbrush complete with smartphone app that keeps track of brushing habits and offers consumers oral care tips while feeding information back to P&G. [3]  Subsequently, when Amazon launched its Dash buttons in 2015, P&G became the leading partner on the push-button devices that would allow consumers to quickly order select P&G products from Amazon in a convenient location in their homes. [4] More recently, P&G launched a Febreeze plug that can release scents into a consumer’s home with a tap of one’s smartphone. [5]

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What do all these products have in common?  They all create value to the end consumer (convenience, information, efficiency), while providing P&G better consumer insights and an opportunity to strengthen their relationship with the consumer.

Product launches thus far from P&G, however, have been a bit disjointed.  The products, while creating this value for consumers, have lacked an integrated approach.  P&G hopes to move there with its investment in Thread, the underlying protocol used in many of these products that could be the basis of a “smart home.”  This protocol is also being utilized by other IoT (Internet of Things) companies including Nest, Freescale, and Silicon Labs. [6]

P&G started with the consumer as “consumer understanding” is the core strength that their other strengths, including productivity, innovation, go-to-market, brand building and scale, depend on. [7] They have then been moving towards leveraging digitization across every aspect of operations including R&D, relations with retailers, manufacturing, and brand building.  Digital capabilities allow for better communication, higher productivity with the ability to troubleshoot issues, lower costs, and the opportunity for higher growth with better relationships with both retailers and end consumers. [1]  Although this is part of P&G’s digital mission, it is unclear how much progress they’ve made in reaping the benefits of the digital infrastructure they’ve begun to create.  

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Deep analytic capabilities and integrated digital connectivity with consumers will likely be key differentiators for CPG companies in the future.  Although P&G is well positioned with their efforts so far, they will likely need to have a more integrated approach to really win with consumers.  Consumers will need to see how P&G’s digitally enabled products fit together in their lives to have the greatest impact.

P&G will also need to continue to be at the forefront of innovation to capitalize on this opportunity.  This will mean investing heavily in R&D with people resources and giving their employees runway to use design thinking to create the new products that can be part of an integrated system that resonates with consumers. They will also need to continue to explore partnerships with Amazon and other tech companies / retailers investing in digitization to ensure their approach evolves with how consumers are interacting with products.

Lastly, with the trend towards digitization, P&G must be wary of the potential threat that privacy concerns play in the proliferation of these new technologies.  Many consumers are still wary of companies having “too much information” on them as well as cyber security risks.  P&G must invest appropriately in security measures and put the correct safeguards in place to establish and maintain consumers’ trust.

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4 thoughts on “A Smarter P&G

  1. Thanks for sharing this. Fascinating to see how traditional brands see themselves as evolving beyond products, i.e. rather in their relationship with the customer.
    It would be interesting to examine the extent to which there is one “right” way to go about developing this relationship. Success with the Amazon seems varied, with claims that less than half of buyers of the Dash buttons are actually pressing them.
    https://www.yahoo.com/tech/amazon-claims-press-order-dash-065331570.html

  2. Very interesting take on CPG digitization! I didn’t know about the existence of ‘buttons’ until this week at Amazon’s company presentation, and it seemed like a great way to retain customers in the long run. However, I think that on their attempt to digitize and partner up, they fell short. Shouldn’t they partner with, for example, home appliances manufacturers? Instead of having the customer take the decision of purchasing an Amazon button, have them use it, etc., they should push companies such as Bosch, Whirlpool, etc. to integrate that technology in their machines, thus, eliminating one step in the consumer’s decision making process.

  3. Thanks for the post! It’s very exciting, that traditional CPG companies are also going to digital! Although, you mentioned that there is a privacy risk. I’m curious are there any other risks, which could stop them pursue digitalization?

  4. Great article. I am a little skeptical about digitizing the products P&G has. Does the consumer perceive additional value that would translate into increased prices of these goods. I worry that they maybe spending too much money in R&D without enough research as to whether the consumer is willing to pay more.

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