MANAGEMENT /LEADERSHIP/CEO SPECIAL ,,,,Talking Shop With P & G

CEO SPECIAL Talking Shop With P &  G  

It should be smooth sailing for the world’s largest marketer, serving 4 billion consumers a day, worldwide. Except it isn’t. P&G’s global CEO, Robert McDonald holds forth on how purpose and profits need not be mutually exclusive and why he considers the Indian operations a success story

A stack of brands is a fairly commonplace prop during the visit of every global CXO; something to enliven the sterile tedium of most conference rooms where such meetings take place. Except in the case of P&G's chairman, president and CEO Bob McDonald, the backdrop is anything but a static display. He is almost constantly swivelling back and forth, picking products out to draw attention to an innovation or make a point.

And he has several points that he wishes to get across — for instance, why purpose inspired growth is good for P&G. Marc Pritchard, the chief marketing officer at P&G in a previous interview with Brand Equity had said purpose is "much more than a cause or a corporate responsibility. We define it as how brands improve everyday lives." McDonald who joined the company in 1980 after a five year stint with the armed forces is widely reckoned to be the champion of this approach to marketing. He however believes that "purpose" predates his tenure as CEO and is embedded in the very DNA of P&G. He says, "We have been around 175 years. During that time, we have had a purpose of providing superior products that improve people's lives."

    However, through McDonald's tenure as CEO which began in July 2009, P&G has been buffeted by a persistent global recession and rising commodity prices. The FMCG giant repeatedly lowered its earning forecasts. Many of McDonald's strategies have come under fire - from his focus on emerging countries to purpose driven marketing. A former employee was quoted in Forbes as saying "Purpose inspired growth is a wonderful slogan but it doesn't help allocate assets."

McDonald opts to address the critique by talking of P&G's water purifying solution, a sachet that can clean 10 litres in just 20 minutes. He says, "Over 2000 children die a day from drinking unsafe water; we have provided close to 6 billion litres of clean water. We give these packets away or provide them over the world at cost, working with different agencies." While ostensibly a pure play philanthropic exercise, McDonald points out that it helps P&G come in contact with the leaders of the country and brings goodwill for the brand. Another example is Pampers which is tied in with a programme from Unicef to vaccinate mothers and children against neo natal tetanus which kills 170,000 people a year. Says McDonald, "Because of the purchases made of Pampers, we have been able to eradicate this from nine countries. And at the rate it is selling we hope to be able to eliminate neo natal tetanus from the earth by 2015. And then we will find another disease." He adds, with a smile, "So buy more Pampers."

    He argues that while purpose sits at a high level, enough is being done across P&G to give the concept a more functional expression. Approaches like the 40/20/10: in which P&G focuses on the 40 of its top country and product category combinations, 20 innovations and 10 key emerging markets. India figures quite prominently in the last of these.



In fact, McDonald is full of praise both for the rate at which India has been growing — a billion dollar plus market clocking in at 20% for over a decade — and for the many innovations that have emerged. He dismisses the notion that India is perhaps not as integral to marketing and strategic brand building at P&G: "What we do is try to locate the activity of creation in a market that seems relevant. Gillette Guard (a budget razor priced at 15) was invented here, a country were 50% of the shaves are done by double edged blades." The brand is now travelling to China and Turkey among other countries. Tide Naturals too is an Indian creation. Says McDonald, "We realised it was important not only to get the clothes clean but to take care of the hands of the laundry user. It was expanded into Latin America and other parts of Asia."

Driving P&G's marketing is a mammoth budget which currently stands at about $10 billion, near 10% of sales. Over 20% of this is spent on digital media, though the exact proportion varies across countries. Its research budget is $450 million a year and $2 billion is spent on research and development. "That's 40% more than our next largest competitor," McDonald observes.

Over the last decade or so, P&G has added a more creative dimension to its longstanding financial heft. Speaking of the transformation, McDonald says a tad wryly, "When I joined, I could run a roadblock on Sunday night across NBC, CBS and ABC and reach 90% of the population. Today, with digital technology and the number of cable channels, you have to be more creative in reaching people." P&G's Super Bowl film for Tide featuring a "miracle stain" that resembles American football legend Joe Montana ranks among the most viewed and discussed TV spots this year. A lot of that was not just a spontaneous reaction to a good commercial but carefully choreographed. Says McDonald, "What you didn't see was the digital work we did engaging people on Facebook, Google, LinkedIn and other ways before the ad aired to create anticipation for it and to amplify it afterwards." P&G's film for the Olympics 'The hardest job in the world' a tribute to mothers ran unchanged across the world but was powered by a range of very different on ground activations from market to market. If P&G's Olympic strategy included traditional product endorsements, it also incorporated interviews with athletes and 'mom-umentaries'; films about the sacrifices made by their mothers. Says McDonald, "We use all the different media available in order to engage consumers in the product we are trying to get them to buy. And that leads to greater creativity."


This plethora of options has also been a cause of concern for many marketing and advertising driven firms, with the best talent opting to pursue slightly more atypical career graphs. At P&G, McDonald believes the commitment to purpose is one of the factors that has kept employees engaged. Apart from that, there are many challenging roles to slip into, a high degree of authority and accountability. Says McDonald, "We hire people as interns off college campuses and give them a piece of business to run. If you are a marketer it's great to be with the largest marketing company in the world."

P&G's ambition is to be larger yet — to grow the topline at 1% or 2% above the market, so it builds market share and to deliver high single digit to low double digit earnings per share growth, year on year. "That should get us in the top third of our peer group in total shareholder return," says McDonald. The other goal is to keep winning at the first and second moments of truth with consumers every day — the first is when they choose a product and the second when they actually use it. Says McDonald, "On any given day, over 4 billion people use our products around the world. They vote on us every day."

ravi.balakrishnan ETBE130306