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鈥檚 products on a daily basis. 聽Industry titan, Procter & Gamble (P&G) has made it their mission to become 鈥渙ne of the most digitally connected businesses in the world鈥� 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. 聽Brands have looked to analytics to gain a competitive advantage to better understand their consumer鈥檚 needs and behaviors and then use those insights to form stronger connections with consumers. 聽[2] 聽
Former CEO Robert McDonald recognized the importance that P&G invest heavily in digitization and connectivity. 聽In an interview he stated, 鈥淥ur purpose at P&G is to touch and improve lives; everything we do is in that context. With digital technology, it鈥檚 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.鈥� [1]
P&G鈥檚 primary digitization efforts have been focused on connectivity with the consumer. 聽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] 聽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鈥檚 home with a tap of one鈥檚 smartphone. [5]
What do all these products have in common? 聽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. 聽The products, while creating this value for consumers, have lacked an integrated approach. 聽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 鈥渟mart home.鈥� 聽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 鈥渃onsumer understanding鈥� 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. 聽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] 聽Although this is part of P&G鈥檚 digital mission, it is unclear how much progress they鈥檝e made in reaping the benefits of the digital infrastructure they鈥檝e begun to create. 聽
Deep analytic capabilities and integrated digital connectivity with consumers will likely be key differentiators for CPG companies in the future. 聽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. 聽Consumers will need to see how P&G鈥檚 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. 聽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. 聽Many consumers are still wary of companies having 鈥渢oo much information鈥� on them as well as cyber security risks. 聽P&G must invest appropriately in security measures and put the correct safeguards in place to establish and maintain consumers鈥� trust.
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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 鈥渞ight鈥� 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.
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.
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?
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.