Procter & Gamble: Segmentation Analysis (detergents)

1) What are the costs and benefits to P&G of spreading its marketing effort across so many brands rather than concentrating on one? Consider the different criteria for effective segmentation.

The benefit for the company is obviously the increase in sales, as, according to Kotler, "a stronger position within several segments creates more total sales than undifferentiated marketing across all segments". By designing detergents with different sets of benefits for customers, P&G creates a product range, that suites every possible combination of customer needs. Additionally this very broad range can lead to people buying different types of detergents being complementary to one another and thus increasing P&G's profit. Also, by positioning different brands in various pricing segments the company can assign different mark-ups which is also a good opportunity to increase margins.

The major disadvantage of this strategy is an increase in costs (Developing separate marketing plans for the separate segments requires extra marketing research, forecasting, sales analysis, promotion planning, and channel, while trying to reach different market segments with different advertising increases promotion costs).

2) What are the pros and cons to customers of this strategy?

A wide choice of detergent's characteristics is the major customer benefit (e.g. Tide alone has five umbrella brands with slightly different attributes). The other is that each customer can pick out a product at a suitable price in a suitable place. The drawback might be, that for some types of consumers (e.g. old people, or young consumers without any experience of choosing a detergent) buying this product doesn't require that much consideration. They simply don't analyze the whole range of characteristics and it might be really hard to make the difference between brands.

3) Which form(s) of segmentation does Procter & Gamble apply?

P&G mainly involves behavioral segmentation based on how, when and how often people make use of the detergent, what attributes they would need to cope with cleaning issues. Secondly, P&G probably applies some demographic variables to define the segments (income).

4) The title of this case asks "how many is too many"? What should Procter & Gamble do to answer this question? In your opinion, is there ever a question of "too many"? How would you evaluate the current strategy?

One of the possible ways to answer this question is simple comparing ROIs resulting from the different number of segments. Calculated as a ratio

(Gross Profit - Marketing Investment)/Marketing Investment,

this allows us to assess whether more segmented strategy is profitable compared to a lower number of segments. Since P&G is an FMCG company tracking all kinds of sales figures is not a problem (retail audit). Then this output is compared to a marketing input (mentioned in question 1).

Of course another option is carrying out a profound survey, testing the company's hypothesis about potential segments. After getting the data certain techniques can be applied, for example market mapping.

Since P&G is a market leader aligning its brand portfolio with competitors is not recommended.

My personal opinion is that for FMCG markets segmentation certainly has its limits. The main reason is that there's a finite number of ways people use this products, and certain number of characteristics which will not change substantially but can only be improved and refined. Of course a company may create and fiercely communicate a new segment, but