Wednesday, August 23, 2006

Pot Calls Kettle Black

Consumer giant Procter & Gamble, the world's largest advertiser, who has long dominated retailers with its strong brands, is now taking it up the ass from Costco The August 21 issue of Advertising Age reports that to earn the right to sell Tide (the detergent category's #1 brand) at Costco, Procter & Gamble must specially formulate the product for distribution to Costco's standards. This is like the child telling the parent what to do and P&G Chairman & CEO A.G. Lafley must be fuming. When did he loose the strategic high ground to retailers?

When young, Costco, like any other retailer, would have cow-towed to P&G just to earn the right to sell its covetted brands. Now the shoe is on the other foot. With nearly equal sales (P&G $57 billion & Costco $52 billion) P&G has lost the advantage. The eye of the tiger that enabled P&G to dominate mass marketing (a core competency) with the invention of soap operas to sell its products has given way to an era wherein it will not be long before other retailers demand P&G make the same concession across other categories. Are Board and C-level executives across the packaged goods industry loosing sleep? If not, you'd better sell your stock.

The tail is wagging the dog and Procter & Gamble must innovate new forms of distribution; new product delivery systems to regain the advantage. Chasing consumer ears and eyeballs wherever they can be found, especially on the internet. will not resolve this prickly marketing issue.

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