An uncertain economy hasn’t prompted Procter & Gamble to stop emphasizing innovation over price. Recent introductions including Crest 3D White (with an improved formula that promises whiter teeth) and Gillette Fusion ProGlide (which has been redesigned to give a smoother shave) show the company is committed to using R&D to grow and defend its market share. In an e-mail interview, Procter & Gamble North American group president Melanie Healey discussed the strategy. Excerpts below.
Brandweek: One of your responsibilities at P&G includes leading new product launches. How has the recession affected P&G’s long-term innovation goals?
Melanie Healey: Our commitment to innovation and our willingness to invest behind it has not diminished at all through this economic cycle. We invest nearly $2 billion in R&D and more than $350 million each year in consumer/shopper research to deeply understand our consumers’ needs, so we can innovate in ways that deliver value most relevant for each consumer segment—increasing performance for performance seekers—and reducing cost and price points for price seekers.
BW: Where are opportunities for innovation?
MH: We innovate in everything we do. We define innovation broadly, starting with product and packaging, but also including work process, manufacturing, etc. We are focused on accelerating the pace of innovation, particularly big, disruptive innovations as well as multibranded commercial innovations like P&G’s [new online] eStore and [our sustainability platform] Future Friendly. The simple way to look at how we are leveraging our innovation is how we expand our portfolio vertically, horizontally and into whitespace.
BW: As in?
MH: We’re expanding our categories vertically into the premium end of our markets for consumers who value the superior benefits that premium products provide. Examples include Olay Pro-X, Always Infinity and Tide Total Care. We’re also expanding our portfolio deeper into the value-priced segment, with more value-tier offerings and categories. We’ve done this with several key brands like Era, Bounty and Charmin Basic. [And], we’re expanding our core brands horizontally into adjacent product segments and expanded product regimens. Our Olay and Febreze Brands are excellent examples.
BW: P&G’s mantra is that the consumer is boss. How has that consumer changed following the downturn and how has the company responded to that?
MH: Consumers are de-manding more value every year, especially in those areas they consider to be important in their lives. Value is not just about price. It is about benefit and how the brand’s purpose fits into our consumer’s life. In tough economic times, you have to be even closer to your consumer and understand what they want and need from the brand. We are changing how we communicate with our consumers. Our objective is to serve our consumers with our brands so that their lives are better. Consumers have high expectations of companies and brands. They want to know what the company stands for. They also have complete freedom and access to information. Brands must be transparent about what they stand for and how they are a force for good in the world.
BW: P&G has built its portfolio on leading brands. Given consumer trade down, are brands as powerful coming out of the downturn?
MH: P&G is a company of leading brands, with 22 brands that each generate more than $1 billion in sales each year. We believe our results indicate that consumers still see P&G’s brands as an excellent value. P&G is profitably growing market share in the U.S. and globally, and in [the January to March period], it delivered 7 percent volume growth— the fastest rate in 18 quarters.