The History of Procter & Gamble's Brand Strategy
Brand management seems like it always has been around, but a look into the history of Procter & Gamble proves otherwise. Market research has its roots in the American business institution billed as the largest manufacturer of branded products for households. Moreover, some market research practices that are fundamental to consumer product companies began with Procter & Gamble.
One Executive and Two Soaps
Two early products of Procter & Gamble were Ivory soap and Crisco. In fact, it could be said that Ivory soap was the slippery slope on which brand management got its start. Brand management was the brainchild of Neil McElroy, an employee of Procter & Gamble who worked on the Camay soap campaigns.
McElroy graduated from Harvard in 1925 and landed a position with Procter & Gamble. Camay soap became his focus. Procter & Gamble’s flagship product, Ivory soap, was doing so well against competing soaps from Palmolive and Lever Brothers that McElroy found that his Camay campaign was directly competing with Ivory in the marketplace.
McElroy drafted a memo explaining his ideas about how Procter & Gamble brands could be built more effectively. He argued for a system that would target more resources and attention at Camay and other Procter & Gamble products, as well.
A hallmark of McElroy’s plan was that one person should be in charge of each brand. Further, McElroy proposed that a substantial and dedicated team should be engaged in every aspect of promoting each of the brands and that the teams should be focused only on their particular brands.
The idea was so complete in McElroy’s mind that he suggested the team should include a brand manager, a brand assistant, people who tracked the brand, and a handful of other positions focused on specific activities and tasks.
The ideas in the memo followed a line of progress resembling a pinball trajectory up and through the corporate hierarchy until they were enthusiastically endorsed by Procter & Gamble President Richard Deupree, to whom McElroy’s ideas made sense. Using McElroy’s ideas as a platform, and hot on the heels of the success of Ivory soap and Crisco, Procter & Gamble developed a new approach to managing brands. The new business technique was product-centered and not centered on a business function.
Market Segmentation & Product Differentiation Roots
The structure created through this brand-centered approach resulted in decentralized decision-making, almost to the degree that the brand was managed as a discrete business. This segregated marketing enabled a brand’s personality to be definitively different from the other brands in a company’s brand portfolio.
This process—now commonly referred to as market segmentation—enabled targeting distinguishable consumer groups. From Procter & Gamble’s perspective, this meant that Ivory soap and Camay soap would not compete so much in the market because different markets were targeted for each brand.
Consumers viewed Ivory soap and Camay soap differently, preferring one over the other based on the products attributes or an assumed connection to their desired lifestyles. Product differentiation became a key approach to successful marketing and advertising. Naturally, it took market research to discover just what attributes appealed to which markets.
McElroy’s plan for brand management was widely copied, and versions of it can be found throughout the global consumer product industries today. McElroy went on to head Procter & Gamble when Deupree retired in 1948, and then later became President Dwight Eisenhower’s Secretary of Defense.
As marketing in America developed during the 20th century, brand management signaled emerging innovations in the post-war business boom. Many of these innovations created tension between centralized authority and decentralized decision-making.
This decentralized structure found its way into many other corporations across America. One notable example is the structure at General Motors developed by Alfred Sloan. General Motors' multiple divisions exhibited the same decentralization for making brand-critical decisions.
American Business, 1920-2000: How It Worked - P&G: Changing the Face of Consumer Marketing(2000, May 2) Working Knowledge for Business Leaders. Cambridge, MA: Harvard Business Review.
Gray, Paula (2010, August 8). Business Anthropology and the Culture of Product Manager [White paper for the Association of International Product Marketing & Management (AIPMM)]
McCraw, Thoms K. (2000). American Business, 1920-2000: How It Worked Wheeling, IL: Harlan Davidson. ISBN: 0-88295-985-9 (The book is part of Harlan Davidson’s American History Series).