Why Unilever, General Mills And
Procter & Gamble Aren't Good At Marketing In The Modern Economy
I recently attended an MMA (mobile marketing
association) meeting and found myself in an intense discussion with Dave
Morgan, CEO/founder of Simulmedia and former founder of Tacoda, Inc., which he
sold to AOL for $275 million. As a successful entrepreneur, he launched an
attack on executives who climbed the ranks in blue-chip marketing
companies (think Unilever, Kellogg’s, General Mills, Procter & Gamble,
etc.). While I have a very different take on blue-chip marketing experience I'm
always fascinated to hear different perspectives. Consequently, I followed up
with Morgan to learn more about the deficiencies in today’s blue-chip marketing
companies. As you will see below, Morgan holds a very strong belief that
the traditional stalwarts aren't keeping pace with younger, perhaps
scrappier competitors, despite what their reputation suggests.
Kimberly Whitler: Can you
describe why you believe that the blue-chip marketers aren’t actually good
marketers?
Dave Morgan: First
of all, the big companies that have been perceived as great marketers aren’t
actually B2C firms, they are really B2B firms. The Unilever’s and Procter
& Gamble’s of the world have been operating in a single-channel,
constrained distribution model which gave them tremendous power because of
their size. Their programs were designed to keep their customers—the channel
partners—happy. In the new world, we have actually witnessed the creation of a
lot of direct to consumer brand companies. It started with services firms like
Zillow and now we are seeing a number of DTC product-based companies created
(i.e., Casper, Peloton, Hubble Contacts, Dollar Shave Club, Blue Apron, Mack
Weldon Underwear). These are companies that are selling tangible goods. And
these new brands are eroding the share of the companies that focus on the
retailer to the detriment of the consumer.
Let me give you an example. Think about DTC
razors. Dollar Shave Club, Harry’s, and 18 other brands control about 14% of
the men’s razor market up from 0% 5 years ago. All of that share growth came
out of Gillette (a P&G brand). The Direct Brand Economy is the most
important issue in marketing, and the big companies, who had the advantage
because of limited access through retailers to consumers now don’t know how to
compete in this new world. And we are seeing significant market share erosion
from these so-called great marketing companies as they are getting nibbled to
death.
So these blue-chips are actually B2B companies
trying to figure out how to operate in a B2C world. I was talking with a
McKinsey employee and I asked him the following question: If I give you $1
billion would you invest it in P&G or in the 50 brands that are nipping at
P&G? He said something different. He said that he would invest $500 million
in the 50 small brands and would short P&G with the other $500 million.
If the razor category can be so quickly eroded
by a new brand, what do you think will happen to the big blue-chips over the
next 5-10 years? The consumer brand companies are not prepared for the
disruption. As another example, I watched the creation of Bare Naked Granola in
a kitchen by a 22-year old. Five years later she and her partner sold it for
$122 million. How can a 22-year old do this and Kellogg’s or General Mills
can’t? If they understand the consumer so well and have such strong R&D
groups, why can’t they create a granola brand that consumers will love?
I contend that they are so focused on innovating
for a channel – which by the way isn’t working anymore – that they can’t
actually think about creating solutions for consumers. The whole supply chain
is now open to everybody. Fifteen years ago, I wouldn’t have had access to
packaging, the raw materials, and production in small batches. Now you can. I
recently shared a dinner table with the founder of Hubble Contacts. And he
already has 1% of the DTC daily wear contract lens business. This is the
fundamental issue—know your customer. People in Cincinnati and Battle Creek and
Minneapolis don’t know their consumers. Ford makes cars for the dealers – not
for the consumers.
So what does this all mean? I would argue that
most people who carry a marketing title are marketing inside their institutions
and are not marketers. A lot of people don’t realize that they rose to the top
because they had monopoly distribution and channel power… they lost touch with
their product and they are optimizers of the channels.
Kimberly A.
Whitler
https://www.forbes.com/sites/kimberlywhitler/2018/04/26/why-unilever-general-mills-and-procter-and-gamble-arent-good-at-marketing-in-the-modern-economy/#31d7611816a4
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