Marketing plan financial projections example

Running head: P&G MARKETING PLAN

47

P&G MARKETING PLAN

CMP Final Draft:

Procter & Gamble’s Downy Magic! Five-Year Marketing Plan

Captain Kangaroo, Mr. Green Jeans, Dancing Bear, Bunny Rabbit, and Mr. Moose

BUSI 330_B02 Liberty University Online

14

Running head: DOWNY MAGIC! MARKETING PLAN

DOWNY MAGIC! MARKETING PLAN 40

October 31, 2012

Table of Contents

Executive Summary (Mr. Moose) 5

Company Description (Mr. Moose) 7

Strategic Focus and Plan 8

Mission (Bunny Rabbit) 8

Vision (Bunny Rabbit) 8

Goals (Mr. Green Jeans) 8

Nonfinancial Goals 9

Financial Goals 10

Core Competency (Dancing Bear) 11

Sustainable Competitive Advantage (Captain Kangaroo) 12

Situation Analysis 13

SWOT Analysis (Bunny Rabbit) 14

Industry Analysis (Mr. Moose) 17

Competitor Analysis (Mr. Green Jeans) 19

Company Analysis (Captain Kangaroo) 20

Customer Analysis (Dancing Bear) 22

Consumer Characteristics 23

Environmental and Health Concerns 24

Market-Product Focus 25

Marketing Objectives (Captain Kangaroo) 24

Current Markets 24

Prospective Markets 25

Product Objective (Bunny Rabbit) 26

Target Markets (Mr. Moose) 27

Points of Difference (Dancing Bear) 30

Positioning (Mr. Green Jeans) …………………………………………………….31

Marketing Program 32

Product Strategy (Bunny Rabbit) 32

Unique Product Line 32

Unique Product Quality 32

Unique Packaging 33

Price Strategy (Captain Kangaroo) 34

Promotion Strategy (Dancing Bear) 35

Point of Purchase Display 35

Samples 35

Cents-Off Coupons 35

Place/Distribution Strategy (Captain Kangaroo) 36

Financial Data & Projections (Mr. Green Jeans) 37

Past Sales Revenue 38

Break-Even Analysis 38

Five Year Projections 39

References 42

Procter & Gamble’s Downy Magic! Five-Year Marketing Plan

Executive Summary (Mr. Moose)

For the past 174 years, Procter & Gamble has enjoyed a well-earned reputation for innovation: improving, expanding and continually touching the lives of more people with greater frequency and in a more environmentally responsible manner. P&G’s research facilities conduct over 20,000 research studies in nearly 100 countries per year (P&G, 2011), resulting in P&G’s consistent delivery of products desired by consumers.

P&G, generally considered the industry leader in the fabric care market (P&G, 2010), already provides numerous laundry care products as part of their fabric and home care segment, which had an annual revenue of $23,805 million in 2010 (P&G, 2010). One of P&G’s long-term objectives is to apply environmentally-sensitive principles in new-product development strategies. Therefore, as an addition to their well-established group of laundry care products, P&G desires to provide consumers with a 100% organic, dissolvable dryer sheet.

P&G has shown an unwavering conviction to provide continual improvement in their products and business methods and improve the lives of both present consumers and consumers to come by using its earnings to steward the protection of the planet’s resources (P&G, 2010). P&G’s mission with the introduction of an organic, eco-friendly, dissolvable dryer sheet is to achieve 48% of the market share in the fabric care and home care segments.

Two main categories comprise P&G’s keys to success with this new product introduction: internal factors and external (business environment) factors.

Procter and Gamble’s emphasis on quality leadership has resulted in its reputation for possessing a highly experienced management, staff, global leadership council, and board of directors (P&G, 2010). This reputation is bolstered by strong financial markers, including its 2010 organic growth of 3% (P&G, 2010), which is 1-2% above global market growth rates. Overall growth, management expertise and free cash flow are all strong internal factors that will support the success of the Downy Magic! product launch as an extension of the Downy line, a product line already familiar to consumers.

As a leader in the retail industry, Procter and Gamble’s brand is repeatedly ranked as “most important to retailers” (P&G, 2011, para 4). This preferred supplier status is a strong external factor that will support this new product launch, as well as P&G’s approximate 56% share in the U.S. market. Many other home care companies have made attempts at various “green products” in this market (Shannon, 2008). However, no other dryer sheet on the market displays the product features of Downy Magic!

Procter & Gamble, with a well-earned reputation for bringing quality products to the market, will utilize research and development capabilities to produce, market, and sell the Downy Magic! product. This is with the intent of providing consumers with an organic and environmentally-friendly choice in dryer sheets and with the goal of achieving a return on investment on the new Downy Magic! product within a five-year period. Unique product quality and packaging, and considerable benefits from P&G’s ability to mount an aggressive ad and product giveaway campaign, will all contribute to the success of Downy Magic!.

Company Description (Mr. Moose)

Competing with other soap and candle makers in the midst of a financial crisis in the United States may not seem an auspicious beginning, but in 1837 this is how William Procter and James Gamble founded Procter & Gamble (P&G). From these humble beginnings in Cincinnati, Ohio an international powerhouse was born, fulfilling today’s company objective to better the lives of present and future generations (Procter & Gamble, 2010).

During the year 2000, P&G experienced one of the greatest challenges in its history after missing its earnings commitments (P&G, 2010): P&G stock declined, resulting in a loss of almost $50 billion in market capital. A. G. Lafley, the CEO hired in June 2000, helped refocus the company to its mission (P&G, 2010). In the ensuing years, this refocus and much hard work has resulted in P&G having established itself as one of the ten most valuable companies in the world. Overall net sales have increased each year since 2006, with 2010 net sales of $78.9 billion (P&G, 2010).

Two main tenants of P&G’s success have been innovation and a focus on leadership brands. P&G has a strong global innovation program; in 2010 they invested nearly $2 billion in research and development (P&G, 2010). P&G’s dedication to innovation is driven by the desire to continue improving, expanding and therefore touching and improving more lives, with greater frequency. P&G’s focus on sales of its 50 leadership brands has resulted in 90% of its sales and profits from these same leadership brands (P&G, 2010). The company believes this approach allows them to continue to create future opportunities, as well as continue their growth.

Strategic Focus and Plan

This section includes: (1) the mission, (2) the vision, (3) goals, (4) core competency, and (5) sustainable competitive advantage of Procter & Gamble. These aspects assist P&G in attaining strategic direction and desired success in market-planning pursuits.

Mission (Bunny Rabbit)

P&G’s convictions to safeguard the preservation and growth of consumers, products, values, services, employees, shareholders, profits, and the global community will forever remain unwavering. P&G may improve the lives of both present consumers and consumers to come by using its earnings to steward the protection of the planet’s resources (P&G, 2010).

Vision (Bunny Rabbit)

P&G will lead the consumer products industry in developing and manufacturing environmentally safe products by using advanced technologies to decrease global pollution (P&G, 2010).

Goals (Mr. Green Jeans)

Procter & Gamble’s organizational purpose or goal is to reach people and make lives better through innovative products and by providing value to stakeholders by recognizing and meeting needs. In the fabric care and home care segment, comprised of a variety of products that enhance lives and utilize the latest technologies, P&G implements values one household at a time. These products range from soaps, including laundry detergents and cloth enhancers to home care products, including dishwashing liquids and detergents, surface cleaners and air fresheners to batteries. In fabric care, P&G is generally the industry leader in the markets in which they compete and have excellent name recognition and product awareness amongst consumers (P&G, 2010). With the introduction of new eco-friendly dissolvable dryer sheets later this year, P&G’s goal over five years is a 48.3% market share in the fabric care and home care segments. A 10% growth rate per year is quite feasible given this revolutionary step forward in not only product development, but also responsiveness to an increase in consumer environmental awareness.

Procter and Gamble will measure company performance by reflecting on the following goals over the next five years (P&G, 2010):

Nonfinancial goals (Mr. Green Jeans)

1. To improve customer base through technology that people appreciate and utilize.

2. To increase unit volume 6% over the coming 5 years.

3. To cut down on waste, both tangible and intangible.

4. To create an environment that acknowledges and respects customers, employees, vendors, suppliers and the world.

5. To shape the future with those having a stake in P&G in a manner that recognizes P&G’s values in the long run.

6. To research and develop innovative and intuitive products which exceed customer expectations.

7. To reduce energy costs and emissions by 13% over the next five years.

8. To enable 3 million children to receive vaccinations and needed medicine to love, work, and play.

9. P&G’s after-school programs in developing countries will continue to teach families skills needed to develop the potential of the next generation.

Financial goals (Mr. Green Jeans)

1. To increase net sales from $78.9 billion by 6% per year to over $100.70 billion in 2016.

a. To increase organic sales by 12% per year over the next 5 years.

2. To increase net earnings by 3% to $14.64 billion in 2016.

a. Net earnings will increase from continuing operations by 2% to $11.118 billion behind sales growth and operating margin expansion.

b. With the introduction of the new product, organic dissolvable dryer sheets, P&G’s fabric care and home care segment will experience growth of 10%.

c. P&G’s net sales last year were $23,805 million and net earnings were $3,339 million. Research indicates the introduction of P&G’s newest product could increase sales in P&G’s organic product division by 12% (Trefis, 2010). This will increase net sales in this segment to $41,953 million and net earnings to $7,061 million (Trefis, 2010).

Figure 1. P&G Fabric Care and Home Care Net Sales in Millions. Adapted from “What P&G could look like in 5 years” as cited in 2010 by the Trefis website: https://www.trefis.com/company?hm=PG.trefis&from=widget:slideshow&ovd_urlid=490925#/PG/n-0557/0278?from=rhs&article=57176&c=top

3. To increase diluted net earnings per share by at least 2% per year over the next five years.

4. To increase core earnings per share by at least 4% per year over 5 years.

5. To increase free cash flow from $13.0 billion to $17.5 billion and to raise overall cash flow from operating activities from $16.1 billion to $20.8 billion over 5 years.

Core Competency (Dancing Bear)

In terms of competency, Procter & Gamble seeks to provide a new, innovative eco-friendly dissolvable dryer sheet to the existing family of products. This distinctly different product translates consumer desires for environmental protection and adheres to P&G’s willingness to sustain the environment (P&G, 2010). The investment of time and financial resources into the desires of the consumer assists in pinpointing the focus of opportunities for innovation (P&G, 2011).

Figure 2. To achieve national recognition, P&G introduces this ad that will be featured with a coupon both online and in Sunday papers.

Using a “global network” of external research and innovation partners, P&G is able to direct the use of advanced technologies toward the creation of a high-quality consumer and environmentally friendly product (P&G, 2010, p. 5): This market-leading product will then be globally distributed using existing resources and global distribution practices.

The efficiency and effectiveness of current resources enables P&G to drive the cost down while exceeding the expectation of value to our customer. As a trusted leader in the household care industry, P&G has the brand recognition and consumer loyalty to successfully launch the revolutionary concept of a dissolvable dryer sheet (P&G, 2011).

As discussed in further depth below, Procter & Gamble’s core competencies will be translated into sustainable competitive advantages by continuing to work closely with the same trusted supply and distribution lines that have enabled P&G to nourish a key leadership position within the household care industry.

Sustainable Competitive Advantage (Captain Kangaroo)

Procter & Gamble is able to positively affect the firm’s competitive advantage by presenting its wide array of household brands as one company, rather than as individual products (P&G, 2011). This, in turn, helps firmly hold P&G’s present market saturation and current financial position if ever the market growth rate of any one particular product is either low or uncertain (Kerin, et al., 2011, p. 31). P&G acting as one company, with its wide assortment of brands, also allows for the allocation of P&G resources to be both strategic and resourceful (P&G, 2011).

As leader in the retail industry, Procter and Gamble is repeatedly categorized as “preferred supplier” (P&G, 2011, para 4). P&G brands have also consistently been ranked “most important to retailers” (P&G, 2011, para 4). P&G has been classified as having the clearest and strongest business strategies, fundamentals, and innovative marketing programs in the consumer packaged goods industry (P&G, 2011). In fact, no other company has invested more into market research than has P&G (P&G, 2011). Conducting over 20,000 research studies in nearly 100 countries per year helps P&G better understand and serve consumer needs (P&G, 2011).

P&G’s dedication to intentionally acting upon the discovery of local consumer and market desires has indeed leveraged P&G’s abovementioned core strengths (P&G, 2011). In addition, Procter and Gamble’s emphasis on brand-building and quality leadership has resulted in a future-focused organization that makes possible P&G’s company objective to better the lives of present and future generations (P&G, 2010). Using such strategies has rewarded P&G with customer satisfaction and consumer loyalty – a competitive advantage that can scarcely be measured (P&G, 2010; Kerin, et al., 2011, p. 11).

P&G once again acts in response to the beckoning of consumer voices: For this century it is said that business and conservation have become allies (Underhill, 2008, p. 98). Across the globe, increased consumer environmental and health awareness has led to such business efforts as compostable packaging; reduction in industrial waste; and environmental sustainability of manufacturing and research and development facilities (DuPont, n.d.; European Environment Agency, n.d.; Johnson & Johnson, n.d.; P&G, 2010; Sun Chips, n.d.; Williams, 2010). The introduction of P&G’s newest product, 100% organic dissolvable dryer sheets:

…meets the needs of the consumer and [also adheres to P&G’s goal] to manufacture "green" solutions to protect the [world’s resources] for [the sake of] generations to come. The new product will dissipate via the [dryer sheet’s] molecular formula reacting to the heat exchange produced by the dryer. The dryer sheet will not stick to fabric, internal dryer parts, nor will it pollute the earth. It [softens fabrics] then dissolves like cotton candy – It's Magic! (Lynch, W., personal communication, May 10, 2011).

Situation Analysis

Procter and Gamble’s (P&G) situation analysis first provides a SWOT (internal strengths and weaknesses, and external opportunities and threats) analysis that is the basis for P&G’s management strategies. Following the SWOT overview, discussions laden in intricate research will appraise and assess trends in the fabric and home care industry, amongst competitors, in the company itself, and in present and prospective consumers.

SWOT Analysis (Bunny Rabbit)

Positive

Negative

Internal

Strengths

· Technology innovation (P&G, 2010)

· Enhancing brand names (90% of sales and profits come from established brand name products) (P&G, 2010)

· Market Research (20,000 research projects every year) (P&G, 2011)

· Strong Management/Company (operating since 1837) (P&G, 2010)

· Responds to customer needs via new and extended product lines) (P&G, 2010)

· Year-to-year Return On Investment and shareholder equity (P&G, 2010)

· Renewable energy to power plants (solar, wind, biomass, tides, geothermal) (P&G, 2010)

· Free cash flow (102% in 2010) (P&G, 2010)

Weaknesses

· No private labeling of products to retail companies (Retail Daily, 2010)

· Legal issues affecting profits and consumer confidence (Jacobson, 2011)

· Commodity pricing and suppliers (P&G, 2010)

· Organic sales growth (pet products, grooming) flat or negative growth (P&G, 2010)

· Animal testing (P&G, 2010)

· Local foreign management (learning P&G culture) (P&G, 2010)

· Slow to invest in the male organic grooming market (However, P&G did acquire Zirh in 2009) (Wong 2009)

External

Opportunities

· High recognition for diversity (e.g. Black Enterprise, National Association of Females) excellent for marketing and advertising (P&G, 2010)

· Conservation conscience (Life Cycle Assessment – LCA & zero waste to landfills) meets consumer concerns (P&G, 2010)

· Consumer name brand recognition – makes easier to sell new products or enhance existing products (Kerin, et al., 2011, pp. 11, 105-106)

· Global market expansion (P&G, 2010)

· New products (P&G, 2010)

· Green products (P&G, 2010)

Threats

· Competition from Unilever, Johnson & Johnson, Colgate-Palmolive, etc. for share of global markets (Hoovers, 2011)

· Generic products (Hoovers, 2011)

· Economic changes (Kerin, et al., 2011).

· Fluctuating exchange rates (P&G, 2010)

· Retail competition using private labels (e.g. Wal-Mart) (Trefis Team, 2011)

· Environmental regulations (U. S. Environmental Protection Agency, n.d.; European Environment Agency, n.d.)

· Legal or union issues (P&G, 2010)

· Civil Strife (Bloomberg, 2011)

Figure 3. P&G SWOT analysis. This figure illustrates internal strengths and weaknesses as well as external opportunities and threats affecting P&G market opportunities in the varying markets within which P&G operates.

With regard to internal strengths, Procter and Gamble remains a global leader in a variety of markets, perhaps as a direct result of strong management teams and research facilities (P&G, 2011). Procter and Gamble has been able to remain number one in several market industries based on a variety of key internal factors. These factors include: 1) technology innovation; 2) amount and diversity of products; 3) market research; 5) advanced technologies; 6) an unwavering focus on sustainability; 7) increased dividends per share; and 8) increased free cash flow (P&G, 2011). Procter and Gamble is an organization that plans to continue as a global leader in the market based upon its goals, ability, and focus on understanding the consumer; adapting to change; and forever “Touching & Improving Lives” (P&G, 2011).

Debatably among unfavorable internal weaknesses, Procter and Gamble (P&G) resists marketing private label or generic brand products. Meanwhile, it is popularly thought that the private label market is a pure opportunity for Procter and Gamble and its shareholders (Trend Updates, 2009). It is reported that in 2009 the private label market grew 21.9% and several of P&G’s main competitors (e.g. Unilver and L’Oreal) have jumped at the opportunity and have increased sales revenue as a result (Trend Updates, 2009; Retail Daily, 2010). Other internal weaknesses may include: 1) animal testing and legal issues affecting profits and consumer preference and confidence (Jacobson, 2011); 2) commodity pricing and suppliers (P&G, 2010); 3) flat or negative sales growth in pet grooming products (P&G, 2010); 4) slow to invest in the male organic grooming market (Wong, 2009); and 5) local foreign management may, at times, be slow to learn P&G culture (P&G, 2010).

Favorable external opportunities include an increasing consumer importance placed on diversity in products and advertising as well as on conservation and environmental sensitivity (Kerin, Hartley, & Rudelius, 2011). P&G is arguably more equipped to deal with such uncontrollable environmental changes than are many other organizations (P&G, 2010). In addition, with trade regulations moving in favor of market globalization, P&G is granted opportunities to expand its business and sales globally (Bloomberg, 2011; Kerin, et al., 2011).

External points of contention (threats) for P&G may include dealing with international trade regulations, tariffs, and fluctuating monetary exchange rates (Kerin, et al., 2011). However, P&G is well staffed to manage such international business details (P&G, 2010). Another issue all global organizations face is being able to ensure products and business operations adhere to local environmental and pollution regulations (U. S. Environmental Protection Agency, n.d.; European Environment Agency, n.d.). One other factor that needs to be constantly and carefully monitored is civil attitudes toward United States citizens and civil unrest that could stop or temporarily halt distribution or production of products (Dutton, 2005). Supply chain management is also a key factor in the future for all organizations due to the rapid growth and consumption of raw materials that are needed to produce final products (Gwartney, Stroup, Sobel, & Macpherson, 2011). It is essential to have strong alliances with global suppliers (Kerin, et al., 2011). Unforeseen legal, political, or union issues could also present as negative external forces (P&G, 2010). Perhaps most importantly, P&G competes directly with companies such as Unilever, Johnson & Johnson, Colgate-Palmolive, generic brands, and private labels for share in global and domestic markets (Hoovers, 2011).

P&G boasts a wide range of products in varying markets. Thus, the above SWOT analysis highlights and appraises internal and external factors that affect P&G’s market opportunities in the varying markets within which P&G operates. As shown in the paragraphs to follow, management may then translate the SWOT analysis to help better define necessary actions and marketing strategies, in this case, specifically in the fabric and home care market (Kerin, et al., 2011, p. 35).

Industry Analysis: Trends in Fabric and Home Care (Mr. Moose)

Consumers undoubtedly place value in laundry detergents and its related products such as fabric softeners: value of shipments of this category of products increased 24% between 2002 and 2007, based on the 2007 polish and other sanitation goods manufacturing category (U.S. Census Bureau, 2007). P&G is an already-established force in the fabric and home care industry, with annual revenues in its fabric and home care segment reaching $23,805 million in 2010 (P&G, 2010). In 2010, annual revenues for the global household and personal products industry, of which P&G plays a major role, showed total revenues of $717.7 billion, with a forecast of reaching 3.5% growth and $853.1 billion by the end of 2015 (PR-Inside, 2011).

It is thought that there is an increasing desire on the part of consumers to purchase items that are either made from recycled products, are organic in nature, or are environmentally sound, even if this means paying more to do so (Milmo, 2006; Gupta, 2007). This is particularly so when a product is considered to function superiorly to its existing counterparts (Kerin, et al., 2011). Albeit, it is duly noted that – thanks in part to scientific advances – eco-friendly fabric care products are not only comparable to traditional fabric care products in price, but also in utility (Shannon, 2008). This is beneficial for the fabric care industry in times of macroeconomic recession (affecting not only the fabric care industry, but all industries) when discretionary and disposable incomes decline and consumers are compelled to be especially price conscious (Kerin, et al., 2011, pp. 66-67).

Consequently, for each industry and product, “going green” occurs in its own way and at its own rate, however, “going green” is undoubtedly a huge opportunity in the fabric and home care industries (Bloomberg, 2006). The same consumers who are expected to expand the organic foods section of marketplaces by 20% annually are the consumers who are also purchasing items such as dryer sheets (Bloomberg, 2006). As consumers become more aware of organic options (such as in groceries) they tend to desire organic options in other product areas as well (Milmo, 2006).

About 2% of the fabric softener market in Europe is made up of dryer sheets, compared with greater than 30% in the U.S (Neff, 2010). However, considering the world population is expected to expand to 9.35 billion by 2050, population growth will, in general, drive increased demand for home care products at a significant rate (Kerin, et al., 2011, p. 61). This population increase will positively affect general home care product sales both within the U.S. and in many other nations outside the U.S. (Gupta, 2007). For P&G specifically, increased sales will be a direct reflection of the changing dynamics of world trade and global consumerism in the home care industry (Kerin, et al., pp. 138-141).

Population growth will also drive increased demand for organic, eco-friendly and green products within the home care industry. As it is, many consumers are currently using eco-friendly laundry detergents and additives (Shannon, 2008). The eco-sustainability movement in home care products is now deeply entrenched and P&G has tapped into this market by extending product lines to meet the preferences of eco-sensitive consumers (P&G, 2010; Kerin, et al., 2011, p. 190). In addition, organic consumers will likely increase as Generation Y becomes a larger spending force in these categories. Upcoming generations such as Generation Y have an undeniable passion for the environment; in addition, Generation Y already has considerable spending influence over their parents’ income (Kerin, et al., 2011, p. 63).

Competitor Analysis (Mr. Green Jeans)

The worldwide fabric care market represents about $48.5 billion dollars as of 2010 (Global Industry Analysts, 2008, Introduction). Procter and Gamble (P&G) has an approximate 30% worldwide market share with about 250 brands in six main categories (Trefis Team, 2011, p. 1). The U. S. market share represents about $5 billion as of 2007. Procter and Gamble has an approximate 56% share in the U.S. market (De Guzman, 2007).

Competitors to Procter and Gamble (30%) specifically in the worldwide fabric care market share include Unilever (16%), Colgate-Palmolive (2.7% and sells detergents to Phoenix Brands), Henkel (6%), Oxi-Clean, Phoenix Brands, private labels and domestic brands, and consumer-designed alternatives (Trefis Team, 2011). A more intricate look at the competitive field reveals only one main competitor in the dryer sheet portion of the fabric and home care market – the Purex Complete 3-in-1 laundry dryer sheet made by Henkel. By combining “detergent and fabric softener for the washer with a fabric softener sheet for the dryer,” Purex Complete boasted over $100 million in sales from 2009-2010 (Neff, 2010).

Although many other home care companies have responded to consumer environmental sustainability concerns with a variety of “green products” (Shannon, 2008) – from its eco-friendly packaging, to a 100% natural composition that completely dissolves – there is presently no other dryer sheet on the market that displays the environmental benefits of the Downy Magic! dryer sheet. Also, although organic and “green” fabric care products may have once proved to be more expensive than their traditional counterparts, eco-friendly fabric care products are now not only comparable in price, but also in effectiveness (Shannon, 2008).

Another major disadvantage competitors face is that of consumer name-brand recognition (Kerin, et al., 2011). In addition, brand-name loyal consumers who have thus far experienced consistently superior products from P&G’s Downy product line represent a large number of potential consumers in the dryer sheet portion of the fabric and home care market (Kerin, et al., 2011, pp. 11, 30, 105-106; P&G, 2010). Thus, generic products, private labels, and other less well-known product brands will find it difficult to compete with P&G’s already established and successful name-brand products (P&G, 2010). For these combined reasons, for the past 15 years P&G has produced more successful new products than its top competitors combined (P&G, 2010, p. 12).

Company Analysis (Captain Kangaroo)

Providing leadership brands since 1837, Procter and Gamble is known for its highly experienced management, staff, global leadership council, and board of directors (P&G, 2010). Over these 174 years, Procter and Gamble’s emphasis on quality leadership has resulted in an overall extensive understanding of sustainability, advanced accounting techniques, efficiency, inventory valuation, and productivity. In this way, P&G is able to supplement its growth by minimizing general production and operating expenses (P&G, 2010).

This steady decrease in the cost of goods sold compels P&G to seek ever-greater ingenuity, technological innovation, and environmental sustainability. Thus, P&G’s strategic goals and choices not only grant P&G the opportunity to create future prospects in the way of company growth but also in areas of social responsibility (P&G, 2010, p. 3). Most recently, P&G has been able to actively respond to an increasing consumer demand for eco-friendly products, operations, and services (P&G, 2010, p. 3; Kerin, et al., 2011, p. 63).

Procter & Gamble’s already established and successful brand name products account for over 90% of P&G profits (P&G, 2010). The success of these brand products has allowed for 102% of P&G’s 2010 net earnings to be made available for factors such as shareholder equity and “discretionary investment” (P&G, 2010, p. 46). For investors valuing P&G’s stocks, increased earnings per share make stocks more attractive to investors since growing dividend per share is thought to signify that the company’s management can sustain P&G growth (The Motley Fool, n.d.; Gitman, 2009, p. 14). For 54 consecutive years, P&G has increased shareholder dividends by approximately 9.5% annually (P&G, 2010, p. 78). Meanwhile, free cash flow and increases in outside investment allow P&G to devote funds to new innovations such as the soon-to-be-launched organic, dissolvable Downy Magic! dryer sheet (Kerin, et al., 2011, p. 31; P&G, 2010).

As it stands, the fabric and home care segment of P&G makes up approximately 30% of the global market share, 28% of P&G net sales, and 30% of P&G net earnings (P&G, 2010, pp. 34-35). P&G is able to sustain growth and develop future growth by increasing sales and consumer base. P&G does so by actively engaging in market development, product development, diversification, and market penetration (Kerin, et al., 2011, p. 33). Specifically:

· Market Development – From Africa to India, China, Mexico, and beyond, P&G continues to expand its business into new markets worldwide (P&G, 2010, p. 33). P&G’s disaster relief programs and partnerships with local education and health organizations around the globe not only help improve lives but also help facilitate P&G’s presence and brand names in new geographies. P&G currently sells products in more than 180 countries and 34% of P&G’s 2010 net sales are the direct result of global operations (P&G, 2010, pp. 35-37 & 57).

· Product Development – By using innovative technology and responding to market research and consumer demands, P&G is able to successfully market and sell new products in existing markets (P&G, 2010). Advancing the positive experience consumers have with existing brands also lends to brand-name loyalty (Kerin, et al., 2011, pp. 11, 105-106) and, thereby, increased earnings (P&G, 2010). Conducting over 20,000 research studies in nearly 100 countries per year, P&G is able to boast of enhanced product performance and consumer value (P&G, 2010). For 15 years, P&G has annually produced more successful new products than its top competitors combined (P&G, 2010, p. 12).

· Diversification – Introducing and selling new products in new markets around the world helps drive P&G’s profit growth. P&G is able to successfully develop such a strategy for brands via market research that helps pinpoint consumer needs in a given region. For example, to meet the needs of the 80% of fabric care consumers that wash laundry by hand in India, P&G launched Tide Naturals, a mild detergent in the low price range that is gentle on the hands, containing a unique scent and natural oils adapted to the Indian consumer’s favorability (P&G, 2010, p. 16). Since its introduction in 2009, the product has been made available in over 600,000 stores in India (P&G, 2010, p. 16).

· Market Penetration – Through improved promotion and distribution strategies, P&G is able to increase sales of existing brand name products in existing markets. Despite global macroeconomic recessionary trends, between 2009-2010 continued operations increased P&G’s net sales by 3% and increased sales by 5% in the fabric and home care segment (P&G, 2010, pp. 35 & 51).

Customer Analysis (Dancing Bear)

In terms of customer analysis, this section will describe (1) the consumer characteristics of those expected to purchase Downy Magic! dissolvable dryer sheets and (2) environmental and health concerns regarding the product today:

Consumer Characteristics .

In terms of demographics in U.S. markets, consumers representing a diverse socioeconomic range and broad geographic locations purchase fabric care products. Downy Magic! will be purchased mainly by households with a high-school education or higher and whose income averages $55,974 annually (U.S. Census Bureau, 2009). The households purchasing dryer sheets generally consist of two to four people. Households containing more than the national average of 2.6 people purchase dryer sheets more often (U.S. Census Bureau, 2009). Married women with children will represent the largest consumer share. Though women are the majority buyers of dryer sheets, both married and single men will sustain a sizeable portion of the market (U.S. Census Bureau, 2009).

Downy Magic! dissolvable dryer sheets offer a faster and simpler laundry experience. Its users will range from the environmentally savvy consumer concerned with chemical use and effects on the environment to those searching for a fast, easy-to-use solution to issues involving laundry softening, wrinkle-resistance, static control, and fabric freshening. Affordable pricing will also allow for a broader range of consumers. Potential buyers range from 23 to 58 years of age and are scattered around the USA, but tend to be more abundant in colder climates where fabrics are more likely to be dried using electronic heat dryers (U.S. Census Bureau, 2009).

In addition, although P&G’s marketing intent will first take advantage of dryer sheet consumers in U.S. markets, potential consumers might later be found in existing non-US markets. Such markets may include developing countries where "ecological" and/or "organic” ingredients are popularly used in place of chemicals (Milmo, 2006, p. 24); in markets displaying increased environmental awareness (Gupta, 2007); and where heat-drying mechanisms are becoming more prevalent (Neff, 2010). This is to be discussed in greater detail under P&G’s “Market-Product Focus” section to follow.

Environmental and Health Concerns .

Environmentally conscious consumers are concerned with the impacts humans are having on the environment in regards to sustainability and preservation. Additionally, the next up-coming generation to impact spending habits worldwide is Generation Y; a generation that has a real passion for the environment (Kerin, et al., 2011, p. 63). The Downy Magic! dryer sheet leaves no environmental debris due to its ability to completely dissolve in the laundry drying cycle. The use of low environmental impact packaging made with 100% recyclable/compostable packaging and 35% post-consumer waste will also add to the appeal of environmental protection, and fit well with Procter & Gamble’s social responsibility goals in waste reduction and environmental sustainability.

The consumer’s appeal has trended toward natural products as shown in P&G’s 3% growth in organic products (P&G, 2010) and will be fulfilled by using chemical-free anti-cling techniques to control buildup of electric potential – the cause of static electricity. The Downy Magic! dryer sheet will also augment the chemical-sensitive consumer’s appeal for chemical-free products by replacing highly allergenic fragrances, chemicals, and petroleum products with natural oils from fruit and nut extracts. This will also expand into the market of fabric care for young children by satisfying the need for a chemical-free product. As the dryer sheet avoids the use of petroleum-based products, it will also allow flame-retardant fabrics to retain their fire protection capabilities, allowing for use on children’s clothing and military uniforms, also greatly expanding the consumer base. Using natural products to control static, soften material, encourage wrinkle resistance, and add fragrance for fabric freshness will allow Downy Magic! to be extremely competitive in pricing while dominating the dryer sheet area in the fabric and home care market with additional features desirable to consumers.

Market-Product Focus

This section of P&G’s five-year marketing plan explains P&G’s marketing intent for its Downy Magic! product line. These objectives are detailed in the areas of marketing objectives, product objectives, target markets, points of difference, and positioning below:

Marketing Objectives (Captain Kangaroo)

Current Markets.

In promoting the Downy Magic! line, during the first five years P&G will focus its aggressive marketing and promotion programs to target U.S. consumers and current U.S. retail distribution modalities. This direct focus will help minimize the possibility of profit loss in the event of new-product failure and also assist in maximizing distribution efficiency (Kerin, Hartley, & Rudelius, 2011, pp. 234-256). A U.S. market focus will also help P&G to elicit the proper consumer response to the new product line for maximization of U.S. market share prior to competitor attempts to launch similar products (Kerin, et al., 2011, pp. 235-241).

P&G will also utilize the newly launched P&G eStore to grow its online shopping markets. In this fashion, P&G is able to utilize its own warehouse(s) as distribution channels, offering lower prices with “direct-to-consumer sales” and minimal shipping costs that range between $0-$5 (Silverstein, 2010, para 4). The P&G e-commerce store also offers consumer amenities aside from lower prices: These conveniences include tools that recommend products that the shopper may be interested in based on consumer purchasing patterns (Silverstein, 2010); customized applications for assistance in product selection; integrations with social media websites; and an upcoming mobile phone app that will allow consumers to explore P&G product information and make purchases using mobile phones (Wauters, 2010).

E-commerce opportunities not only provide easy access for consumers, but also expand selling and promotion opportunities for P&G. Perhaps more importantly, features offered on P&G’s eStore website give P&G direct access to consumer purchasing patterns and consumer product surveys and ratings (The Procter and Gamble Company, 2011). This provides insight into which product categories consumers value, like, want, and need (Silverstein, 2010) – a priceless tool during P&G’s Downy Magic! launch. In order that the benefits of the site may expand to P&G distribution partners in a similar way, P&G also plans to communicate with distributors all research findings gained from eStore consumer purchases (Wauters, 2010).

Prospective Markets.

By the end of year five P&G will utilize its ongoing buyer/supplier relationships with existing retailers around the globe (PGSupplier, 2009). For example, Brazil, Russia, India, and China (BRIC) are dynamic markets that make up over 36% of the world’s population and are notably increasing in middle class consumer purchasing power (Fijol, 2009). Expansive P&G penetrated markets such as these will provide great opportunity with respect to potential consumer base for the Downy Magic! dryer sheet line (P&G, 2010; PGSupplier, 2009). As previously stated, from the introduction of the Downy Magic! eco-friendly, dissolvable dryer sheet, P&G expects an increase in general home care product sales from non-US developing markets where "ecological" and/or "organic” ingredients are popularly used in place of chemicals (Milmo, 2006, p. 24); in markets displaying increased environmental awareness (Gupta, 2007); and where heat drying mechanisms have become more prevalent (Neff, 2010).

Being that more developed locations such as Western Europe and Canada also boast of advanced laundry technologies and environmental awareness, P&G will expand its Downy Magic! line using existing distribution channels (e.g. mass merchandisers, grocery stores, drug stores and pharmacies, neighborhood stores, department stores, etc.) in more developed non-US areas as well (Neff, 2010).

Additionally, P&G’s products are offered within over 180 nations, with on-the-ground operations in excess of 80 countries (P&G, 2010, p. 33); P&G expects that its e-commerce / online shopping center will have been expanded into locations outside of the U.S. by year five (The Procter and Gamble Company, 2011). E-commerce and internet users in the developing countries of Argentina, Chile, Costa Rica, Colombia, and Brazil are said to be key for organizations looking to expand internet-based operations (GoECart, 2011).

Product Objective (Bunny Rabbit)

As previously stated, P&G’s five-year marketing goals place a unique focus on re-engineering and marketing a new line of Downy dissolvable dryer sheets. P&G’s long-term objective is to apply environmentally-sensitive principles in new-product development strategies; and Downy Magic! dissolvable dryer sheets help achieve this goal. P&G’s distribution channels are firmly established in the market place and include retail and grocery chain outlets worldwide (P&G, 2010). Further,

· Procter & Gamble is the world leader in the fabric and home care market (P&G, 2010) and brand name equity provides P&G the leverage to entice current distribution channels to carry its new line of dissolvable dryer sheets, thereby, organically increasing revenue (Kerin, et al., 2011).

· P&G’s marketing program aims to increase consumer awareness within the target market by 30 percent during the first year of product market introduction.

· Communicating and advertising the “go green commitment” as an integral part of P&G’s strategic focus amongst the United States population demonstrates P&G’s go green decree and helps create additional consumer sensitivity to social responsibility (P&G, 2010).

· P&G expects to increase net sales by 6% per year during the next five years, with a net sales projection totaling 100/7 billion by 2017. During this same period, the fabric and home care segment is projected to add over $28,820 million in net sales (based on 12% growth), inclusive of the Downy Magic! product introduction. P&G projects an estimated $16,831 million of this growth being attributable to Downy Magic! over this five-year period.

· P&G expects to continue to test market new product concepts using the Downy Magic! dryer sheet line. New potential products may be brought to market in the growth and maturity stage of the product’s life cycle – projected to be year 3 and 4 for the Downy Magic! product (Kerin, et al., 2011, pp. 234-239). Product modifications (Kerin, et al., 2011, pp. 242-243) might include imprinting cartoon characters and/or various college mascots on dryer sheets.

Target Markets (Mr. Moose)

The primary target market for Downy Magic! includes mothers whose households consists of two to four people and who live in one of the top ten environmentally conscious states (Wingfield & Marcus, 2007). This primary target market for Downy Magic! has been determined based on both demographic and psychographic market segmentation. A secondary market based on behavioral market segmentation will also be targeted. Market research has been used to determine the best demographic region (household size); psychographic segment (lifestyle); and behavioral marketing segment (product features) (Kerin, et al., 2011, p. 193). Each of these categories has been evaluated based on market size, expected growth and cost of reaching the segment.

In demographic terms, the main market segment to target will be households with two to four people. The national average of people per household is 2.6 people (U.S. Census Bureau, 2009). Households consisting of more than 2.6 people tend to purchase more dryer sheets than those with fewer than 2.6 people. Within the demographic market of household size, another smaller group of individuals exists who are environmentally savvy and are concerned with environmental concerns, health concerns, and chemical usage in household products. Target marketing focused on this “green” consumer market segment will be accomplished by using data showing which areas within the country tend to be most environmentally conscious, such as the top 10 “green states” within the United States shown in Figure 1 below. As data and major indicators change, with green-related policy activity on the rise (Lombardi, 2011), P&G research teams will gain from similar, regularly updated secondary U.S. data (Kerin et al., 2011, p. 167).

Top 10 Green States in the U.S.

Rank

State

1

Vermont

2

Oregon

3

Washington

4

Hawaii

5

Maryland

6

Connecticut

7

New Jersey

8

Rhode Island

9

New York

10

Arizona

Figure 4. Top 10 Green States in the U.S. Adapted from “America’s Greenest States,” by Wingfield & Marcus as cited in Forbes website: http://www.forbes.com/2007/10/16/environment-energy-vermont-biz-beltway-cx_bw_mm_1017greenstates.html

Psychographic market segmentation for this product indicates the need to target market the main purchasers of dryer sheets – women with children. Buyers ranging from the age of 23 to 58 years of age are scattered throughout the 10 state regions indicated by the demographic marketing (U.S. Census Bureau, 2009). However, the psychographic segmentation can be further divided into a smaller category, based on further market research. A group of women labeled “alpha moms” has come to the attention of marketers nationwide (Palmer, 2007). This group includes mothers who are inventive, technologically savvy, rely on husbands who are hands-on, often work and have flexible work schedules and are often environmentally conscious – in short, mothers who effectively manage both career and motherhood (Palmer, 2007). Marketing to this group of mothers will be a key component of the target market.

Upon examining behavioral segmentation, P&G also discovers that a secondary target market exists. Behavioral segmentation, including determining what features are important to different consumers (Kerin, et al., 2011, p. 193), leads P&G to market Downy Magic! to those who utilize fire-resistant fabrics, such as firefighters, the military, flight nurses, industrial workers, amongst other professionals. The fire-retardant clothing needs of these individuals lead to a consumer laundry challenge of being unable to use dryer sheets to reduce static cling and help deodorize uniforms. Specifically, laundry additives can create a coating on fabrics that reduces the flame-resistant properties of the fabric (Sullivan Uniforms, n.d.). Therefore, this market segment would be open to the Downy Magic! product.

Each of these target markets would be simple and cost-effective to target. There is increased potential for profit within each of these target markets, and each group of buyers within each target market has similar needs that can be targeted using the Downy Magic! product.

Points of Difference (Dancing Bear)

The unique characteristics that set Downy Magic! apart from its competitors, or “points of difference,” fall into five categories:

· Unique concept – Downy Magic! is the first dissolvable dryer sheet that completely eradicates waste. The elimination of waste adds to its convenience and lessens the environmental impact, building upon the Environmental Protection Agency’s stated benefits of reduction (U. S. Environmental Protection Agency, 2011).

· All natural and eco-friendly ingredients – Inspired by nature, Downy Magic! uses only natural oils to incorporate fragrance into its fabric softener sheets. A combination of baking soda and vegetable-derived agents are used to incorporate softness into clothing. Static cling is also reduced using natural vinegar that leaves no residual odor (Halverson, n.d.; Lion, n.d.; Alleman, 2006). By using natural oils for fragrance, and by also offering an alternative fragrance-free product, Downy Magic! benefits the 30.5 percent of the U.S. population with chemical fragrance sensitivities (Caress & Steinemann, 2009, pp. 46-50).

· Safe – By avoiding the use of harsh chemicals, Downy Magic! does not leave behind toxic residue, nor does it reduce flame resistance on firefighter protective clothing, military uniforms or children’s sleepwear. When tested, all competitors failed in this category by neglecting to omit “at least one chemical classified as toxic or hazardous” (Business News, 2010, p. 327).

· Premium “green” packaging – The use of simply designed packaging that incorporates vegetable dyes helps communicate the natural purity of the overall product. Downy Magic! is packaged in 35 percent post-consumer waste packaging that is also completely recyclable/compostable. This coincides with Procter and Gamble’s commitment, along with other members of the Grocery Manufacturers Association, to “reduce four billion pounds of packaging by 2020” (Grocery Manufacturers Association, 2011, p. 2).

· Multibranding strategy – As market leaders in the fabric care industry, and with excellent shelf positioning in retail and grocery stores, P&G is able to use strategies that lead to the success of Downy and extending the product line. This product line extension allows the transfer of the consumers’ favorable attitude toward existing product (Kerin, et al., 2011, p. 249).

Positioning (Mr. Green Jeans)

Downy Magic! dissolvable dryer sheets are an opportunity to mainstream a niche market product. Mainstream consumers will be drawn by the brand strength, affordability, and convenience of P&G’s Downy Magic!, while the niche eco-friendly and health-aware consumers will find the 100% natural and carbon-neutral product irresistible to solving laundry needs. Routine Downy brand-name consumers will take pride in the disposable features of Downy Magic! dryer sheets and the comfort that a brand name backed by Procter & Gamble implies (Kerin, et al., 2011, pp. 142 & 248). Designed to be carbon-neutral, Downy Magic! non-toxic, dissolvable dryer sheets will also satisfy the niche of demanding health-conscious and eco-sensitive consumers by eliminating a generally toxic, household hazardous waste byproduct (Adams, 2004) and replacing it with an 100% natural, biodegradable product (Holistic Interior Designs, n.d.).

Being a global brand that markets the same name in several countries (Kerin, et al., 2011), Procter and Gamble Downy is a market leader with excellent shelf positioning in retail and grocery stores (P&G, 2010). In addition, as U.S. consumers increasingly equate organic options with well-being, the overall trend amongst consumers is progressively toward products composed of natural ingredients (Milmo, 2006, p. 24). The following positioning statement for Downy Magic!’s U.S. markets will help synchronize and align the efforts of P&G’s internal and external marketing departments, research and development teams, and/or advertising agencies over the next five years (Kerin, et al., 2011, p. 203): For the price-savvy consumer who desires a hassle-free, health-conscious, and environmentally-sensitive laundry experience, Downy Magic! is an affordably-priced dryer sheet that offers an organic, eco-friendly solution to laundry issues involving fabric softening, wrinkle-resistance, static control, and fabric freshening.

Marketing Program

Procter and Gamble’s (P&G) marketing program is detailed by the 1) product, 2) price, 3) promotion, and 4) place marketing mix activities below:

Product Strategy (Bunny Rabbit)

This section summarizes Downy Magic!’s unique product line, quality, and packaging.

Unique Product Line.

Procter & Gamble’s (P&G) Downy Magic! is an adaptation or extension of the Downy product line (Kerin, et al., 2011, p. 153), yet based upon new technology. Inspired by nature, Downy Magic! uses only natural oils to incorporate fragrance into its fabric softener sheets. In the first five years, the dissolving dryer sheet will include existing Downy natural scents: Lavender Serenity, Orchid Allure, Spice Blossom Dare, Citrus Spice Glow, and Sage Jasmine Thrill (Downy, 2011). The Downy Magic! product will also be available as an alternative fragrance free product, Downy Magic! Free and Sensitive (Downy, 2011). P&G will emphasize the same great freshness and fabric softening that Downy is known to add to clothing.

Unique Product Quality.

As aforementioned under “Points of Difference,” by avoiding the use of harsh chemicals, Downy Magic! does not leave behind toxic residue, nor does it reduce flame resistance in clothing. Downy Magic! uses only natural oils to incorporate fragrance into its dryer sheets. A combination of baking soda and vegetable-derived agents are used to incorporate softness into clothing. Static cling is also reduced using natural vinegar that leaves no residual odor (Halverson, n.d.; Lion, n.d.; Alleman, 2006).

Downy Magic!’s real marketing flair is that no other disappearing/dissolving dryer sheet product is currently available in the consumer market. The new product will dissipate via the dryer sheet’s molecular formula reacting to the heat exchange produced by the dryer. The magic of this product is that it will appeal to consumers that share the same values in using products that will lessen environmental impact. It will burn deep in consumer’s hearts that using Downy Magic! satisfies a basic need or desire while also helping to preserve the environment for the sake of future generations. Nothing within these dryer sheets will have a pollutant effect on the environment.

Unique Packaging.

The use of simply-designed packaging that incorporates vegetable dyes helps to communicate the overall natural purity of the product. Downy Magic! is packaged in 25 percent post-consumer waste packaging that is also 100 percent recyclable/compostable.

The package itself incorporates a lithographic design of a dryer sheet as displayed in figure 5 below. Because of the lithographic design, when the package moves, the dryer sheet disappears. The package shape is as a three dimensional pyramid, designed to be able to be stacked one on the other in retail outlet store shelves, end-caps, and aisle displays. Therefore, the image in Figure 5 will be displayed proportionately on each dimension. The particular fragrance is displayed by a unique color and design to the upper right of the word “Downy” seen in Figure 5. Printed inside the perforated package closure are different magic tricks that parents can learn to have fun with children (or other adults) while waiting for laundry to dry.

Figure 5. Downy Magic! Packaging. This figure illustrates two dimensions of Downy Magic!’s three-dimensional, lithographic, pyramid packaging.

Price Strategy (Captain Kangaroo)

Using both the demand-oriented “skimming” and “odd-even” pricing approaches (Kerin, et al., 2011, p. 264), over the next five years P&G will price Downy Magic! at $4.99 in U.S. dollars (USD) for a package of 10 dryer sheets. This list price is approximately $.09 USD higher than Downy Magic!’s previously identified leading competitor, Purex Complete 3-in-1 laundry sheets (drugstore.com, 2011; Amazon.com, 2011). In comparison to P&G’s many other dryer sheet offerings, Downy Magic! is priced approximately $0.45 USD higher (The Procter & Gamble Company, 2011). However, a price above customary market pricing – and slightly higher, yet closely comparable to the leading competitor – is justified by Downy Magic!’s novel performance, premium quality, and superior ability to satisfy consumer’s environmental and health concerns (Kerin, et al., 2011, pp. 263-269; OnlyGreen4Me, 2008).

Promotion Strategy (Dancing Bear)

Procter & Gamble’s key promotion programs for Downy Magic! will feature point-of-purchase displays, free samples and cents-off coupons.

Point of Purchase Display (POP).

The Point of Purchase Display (POP) feature for product display will be located in retail stores in key high-traffic areas. The clean, minimal design will allow maximum consumer attention toward the product. The POP display will also provide storage for the product in the high-traffic areas allowing for the additional product placement in the fabric care aisle to maximize exposure.

Samples.

Samples will be provided in two ways:

· Samples will be provided in key urban and suburban metropolitan areas through Valpak. Valpak (2011) is a national in-home direct mail marketing provider that allows the opportunity to zero in on the target market. One sample will be included and attached to a 35-cents off coupon encouraging trial and repurchase.

· Samples will also be included in the P&GbrandSampler® packages through the PGEverydaySolutions.com website (P&G, 2011b). This will be a 3-pack sample of Downy Magic! that includes a 35-cent coupon.

Cents Off Coupons.

With 89 percent of consumers using coupons (Kerin et al, 2011), offering coupons in various forms will allow opportunity to introduce the revolutionary Downy Magic! to the consumer taking advantage of wide distribution through various sources. Coupons initiating trial use and repeat use will be offered in the following ways:

· In Sunday Newspaper Inserts. Downy Magic! will hold a front page feature in the P&GbrandSaver® insert in Sunday papers. This national distribution will include a 35-cents off coupon and offer opportunity for a brief product introduction (P&G, 2011a).

· Valpak. This direct in-home marketing campaign will feature a 35-cent off coupon along with a free sample.

· In packaging. A coupon will be included on the inside packaging to promote future use. This will be a larger 50-cents off coupon encouraging continual repurchase.

· Text coupons. P&G will team with Target stores and include a cents-off coupon to subscribers of the Target Mobile text coupon program for use in Target stores nationwide (Target, 2010).

Figure 6. Downy Magic! Sunday Newspaper Insert includes a 35-cents off coupon and a brief product introduction.

Place/Distribution Strategy (Captain Kangaroo)

P&G manufactures and warehouses its consumer-packaged goods and thereafter distributes, displays, promotes, and prices its products using retail cooperative network relationships (Gartner, 2002; Kerin, et al., 2011, p. 296). P&G products are presently distributed in domestic and global markets via in-store and non-store retail intermediaries (P&G, 2010; Kerin, et al., 2011, pp. 313-320). Expanding from corner stores, to mega supermarkets, to online retailers such as amazon.com (2011) and drugstore.com (2011); each retailer plays a role in successfully distributing P&G products into existing markets (Kerin, et al., 2011, pp. 313-320).

With access to P&G’s web-based order management services, retailers are able to promptly meet consumer demand for P&G products (Cisco Systems, 2002). Smart-chip tracking technology also helps ensure on-time product deliveries (Cisco Systems, 2002). Such cooperative logistics assist P&G in optimizing production response to consumer demand; allows for retailers to stock increasingly differentiated P&G products; and minimizes delivery and transport expenses for P&G and P&G retailers (Gartner, 2002; Kerin, et al., 2011, p. 301).

Meanwhile, P&G also assumes direct-to-consumer wholesale functions through its U.S., newly operating e-commerce store (The Procter and Gamble Company, 2011; Kerin, et al., 2011, p. 328). With full-service manufacturing, warehousing, customer service, promotion, and sales performed directly by P&G, P&G’s eStore transactions require no distribution intermediary. As aforementioned in the Marketing Objectives section above, features offered on P&G’s eStore website give P&G direct access to consumer purchasing patterns and consumer product surveys and ratings (The Procter and Gamble Company, 2011). This provides insight into which product categories consumers value, like, want, and need (Silverstein, 2010). As P&G communicates research findings gained from eStore consumer purchases with distributors (Wauters, 2010), a shift to increasing P&G eStore sales has the potential of further improving not only P&G online distributions but also the distribution efficiency of P&G retailers.

Financial Data and Projections (Mr. Green Jeans)

The following sections summarize the revenue and expense effects of P&G’s marketing program described above. This section will first review P&G’s past sales revenue and thereafter delve into the revenue and expense projections of Downy Magic! for the next five years. Afterward, the break-even analysis chart displays an approximation of when the Downy Magic! product will begin to make a profit.

Past Sales Revenue for P&G Fabric and Home Care Sector

Historically, P&G’s fabric and home care sector has experienced solid growth from 2004-2010 with 7.87% averaged growth in the past five years (P & G, 2010; P & G, 2009; P & G, 2008; P & G, 2007; P & G, 2006; P & G, 2005; P & G, 2004). In the financial meltdown during 2009, growth plummeted to negative 2.78%, but rebounded in 2010 to positive growth. 2011 data is ongoing.

Figure 7. Procter & Gamble (P&G) fabric and home care net sales from 2004-2010. This figure illustrates the yearly percent in growth over the past 5 years. Adapted from P&G 2004-2010 annual reports.

Break-Even Analysis

The breakeven analysis chart in Figure 7 displays an approximation of when (in terms of units sold per year) the Downy Magic! product will no longer incur an operating loss for P&G. The labeled breakeven point shows that, when Downy Magic! is priced at $4.99 per box of 10 dryer sheets, operating profit for the Downy Magic! product reaches exactly $0 when P&G sells approximately 11,411,068 units of Downy Magic in any given year. At the proposed price of $4.99, when cost of goods sold and operating expenses are considered, all per-year sales below this breakeven point do not earn profit for P&G, while per-year sales above this breakeven point do earn profit (Kerin, et al., 2011, pp. 273-274).

Figure 7. Downy Magic! Break-Even Analysis. This figure illustrates the impact of Downy Magic! sales volume on P&G’s Downy Magic! profits. The break-even point is where per-year expenses associated with product production exactly meet per-year revenue from sales.

To summarize, if annual Downy Magic! sales are greater than approximately 11,411,068 units, P&G will make a profit from the Downy Magic! product in that given year (Kerin, et al., 2011, p. 274). All per-year revenue that is generated from Downy Magic! sales before this point are only enough to go toward P&G’s additional yearly expenses from investing in the Downy Magic! project. The discussion on Downy Magic!’s five year financial projections below further explains reasons the Downy Magic! product will not be able to expand sales enough to reach the breakeven point, and therefore not incur profit, until year four (2015) and after.

Five Year Projections

Five year financial projections for Downy Magic! appear below. These projections are based on 1) target households that are earning over $50,000 in the U.S., being 57,754,627 households as of 2009 (U.S. Census Bureau, 2009); 2) established rates of growth in terms of penetration being 2.5% for Innovators, 13.5% for early adopters, and 34.0% for the early majority per year directed to this customer base (Kerin, et al., 2011, p. 240); and 3) repeat customer buying per year placed at 20%, 25%, 30%, 35%, and 40% respectively.

Operating profit is the measure of dollars remaining from Downy Magic! sales once all costs and expenses have been paid (excluding interest and taxes) (Gitman, 2009, p. 451). As displayed in Figure 8 below, operating profit for Downy Magic! is not achieved until year four (2015). This is due in part to extensive research and development efforts, an aggressive ad campaign, and an overwhelming number (approximately 25,000,000) of Downy Magic! product giveaways. At year four (2015) P&G is projected to sell approximately 18,517,575 units of Downy Magic! and thereby earn an operating profit of $18,494,738 USD. In year five (2016) P&G is projected to sell approximately 27,491,200 units of Downy Magic! and earn an operating profit of $41,779,498.

Figure 8. Downy Magic! Five-year Financial Projections. This figure illustrates that Downy Magic! begins to penetrate the market enough (increases in per year product output or sales enough) to begin incurring a profit for P&G at year four (2015).

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