Professor John Kennedy prepared this case solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to protect confidentiality. Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization.

We will write a custom essay sample
on Pantene or any similar
topic specifically for you

Hire Writer

To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Services, c/o Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey. uwo. ca. Copyright © 1999, Ivey Management Services Version: (A) 2010-01-13 We are working to do a more effective job in globalizing our products. Currently, this involves five kinds of activities. First, while it is not always possible, we are focusing on the development of products that have global potential.

Second, when a product is first introduced in a specific country market, we ask the people developing the marketing strategy to incorporate whenever possible into their strategy development the concept that it should ‘travel well’ to other countries. Third, when we take a product that is successful in one country and begin to introduce it in other countries, we push our people to avoid the ‘not invented here syndrome. ’ Fourth, you can lose competitive advantage if you are slow in getting a successful product into all the markets you serve.

Therefore, we are taking steps to shorten the time period in which a successful product gets introduced across our operations. The final activity is an area that has become increasingly important to us. It is the development of a communication network that enables brand people in one country to learn quickly about successful marketing innovations in other countries. – John E. Pepper, president of the Procter & Gamble Co. THE PROCTER & GAMBLE CO. In 1990, the Procter & Gamble Co. was a century and a half old organization headquartered in Cincinnati, Ohio.

The company sales for the fiscal year ending June 30, 1990 were $24. 1 billion, up 13 per cent over the previous year. Earnings were $1,602 million, up 33 per cent. This document is authorized for use only in GMBASG/Brand Management by Prof. Vivek Bali at SP Jain School of Global Management from February 2014 to June 2014. Page 2 9A99A038 THE HISTORY OF THE PANTENE BRAND Hoffman-LaRoche The Pantene brand grew out of research efforts in the early 1940s by Swiss scientists working for the pharmaceutical firm Hoffman-LaRoche.

As part of their research, they discovered that a material with the name Panthenol actually penetrated the hair cuticle (outer layer) to improve the strength, elasticity and moisturization of hair. Pantene Hair Tonic, the first of what would become a narrow line of hair-care products, was introduced into the European consumer market in 1946. They were positioned as high-priced “treatment” products for both men and women, and were available only in a limited number of upscale outlets. The line quickly gained a reputation for excellence.

Demand by Americans who had discovered the products while travelling in Europe led to the importation of the line to the United States in the early 1960s. The first retailer to carry the line was the pharmacy in New York’s Waldorf-Astoria hotel. This was quickly followed by distribution in upscale department stores such as Saks Fifth Avenue and Neiman Marcus. During the 1960s and 1970s, the product line was extended. Rather interestingly, shampoo, the product with the largest market potential, was not added to the product line until 1971.

Distribution of the Pantene line was expanded geographically as Hoffman-LaRoche extended its operations to additional countries. However, the vast majority of sales continued to come from Europe and North America. In the 1960s a professional line1 was developed and sold in several European countries. The line was successful initially, but strong competitive pressures led to its discontinuation in the late 1970s. In 1976, Hoffman-LaRoche shortened the product line, repackaged it, and launched a print campaign. In the United States, this resulted in Pantene becoming the number one brand in department stores.

Late in the 1970s, distribution was broadened by adding selective mass market drug chains: Walgreen’s, Long’s and Osco, where premium prices of $6. 00 to $17. 50 (per eight ounce/240 millilitre) per item were maintained. Richardson-Vicks Inc. Richardson-Vicks Inc. , a U. S. -based packaged goods firm, acquired Pantene from Hoffman-LaRoche in January 1983. Following an extensive review of the line, the decision was made by Richardson-Vicks to test the viability of moving the line from a high price, selective distribution one, to a lower priced mass market one.

The concept of a Pantene line with lower retail prices, broadened distribution, and support from increased media spending was tested with shampoo and conditioner in two western U. S. states in 1984/1985. The test was very successful, and a national launch plan was in the process of development when the company was purchased by Procter & Gamble in September 1985. Procter & Gamble Inc. Procter & Gamble continued with the development of the planning for Pantene and, in January 1986, began shipping to the U. S. trade improved formulas of the shampoo and conditioner as part of a new line called “Pantene Prestige. ” These products were phased into all major drug chains, mass merchandisers and selected food stores during the spring of 1986. At the same time, the Pantene line was phased out of department stores. Good distribution was obtained in the drug trade. There was much less success in 1 A line sold to and through beauty salons. This document is authorized for use only in GMBASG/Brand Management by Prof. Vivek Bali at SP Jain School of Global Management from February 2014 to June 2014.

At the same time, many drug retailers in the United States priced Pantene Prestige at a premium, taking higher margins as a tradeoff for lower volume. This left North American pricing consistent with Pantene pricing in most other parts of the world. TAIWAN The island of Taiwan, 395 kilometres long and 142 kilometres wide, is by far the largest of the 86 islands that make up the country of Taiwan. Sixty per cent of the island is mountainous, and only about one quarter of the land is considered arable.

The estimated 1990 country population of 20. 6 million people was almost entirely Chinese by origin, and was concentrated in the western and northern coastal fringes. Exhibit 1 provides information on the Taiwanese population by age group and gender. Taipei, the capital city, had a 1990 population of about 2. 6 million people, with an estimated further three million in adjacent communities. The next three largest cities, Kaohsiung, Taichung and Tainan, had a combined population of approximately 2. 8 million people. Ninety-three per cent of the population was literate.

The country had enjoyed very high levels of economic growth over a period of many years. Unemployment figures were low at 1. 5 to 1. 7 per cent. The projected real year change in gross domestic product for 1990 was 5. 3 per cent. GNP per head for the same year was projected at US$7,990. Exhibit 2 shows that there had been substantial equity in the distribution of the large economic gains made in the country in the previous two decades. PROCTER & GAMBLE IN TAIWAN Procter & Gamble Taiwan started out in 1985 as a joint venture between P&G and a local company, the Namchow Chemical Company.

The joint venture was known as Modern Home Products. Namchow gave P&G access to factories, an established sales and distribution network, and market knowledge and local contacts vital to doing business in a new market. Brands introduced during the first four years of operation included Pampers, Safe & Free, Camay, Ivory and Joy. While sales volume grew significantly over these four years, the operation was not a profitable one. Towards the end of that time period, the P&G American parent was shifting from a local focus to an increasingly global strategy.

At the same time, Namchow had developed a new interest in other markets. Subsequently, the joint venture was dissolved in early 1990 with P&G’s purchase of Namchow’s 50 per cent holding, and Procter & Gamble Taiwan Ltd. was born. THE TAIWAN HAIR CARE MARKET The Taiwan hair care market in 1990 was a large one, with a shampoo market size of an estimated 10 million litres, and a conditioner market estimated at 1. 25 million litres. Market growth was forecast at three per cent per annum for the next few years, then tapering off to two per cent per annum.

An early 1990 Habits and Practices study had determined that the previous three months usage of shampoo was 96 per cent — almost everyone used shampoo to wash their hair. This was twice the 47 per cent of people who had used a conditioner in the same time period. The average wash frequency was about 3. 5 times a week, with 89 per cent of respondents reporting an evening wash habit. Like the hair care markets in many other countries, there was frequent brand switching, especially among younger females. This document is authorized for use only in GMBASG/Brand Management by Prof.

Vivek Bali at SP Jain School of Global Management from February 2014 to June 2014. Page 4 9A99A038 In terms of purchase habits, 43 per cent of consumers bought their shampoos in supermarkets, and 23 per cent in discount stores which were, for the most part, single-unit medium-sized operations. It was expected that the supermarket share would increase with the completion of a number of announced hypermarches, and that share of the discount stores would drop. Twenty-nine per cent of retail sales were made in government-related PX channels.

There were three of these channels: military, federal government, and city government-based operations which were run like cooperatives and which sold only to members. This part of the market carried a limited number of brands and sizes, and used bargaining power to enable them to command price cuts of 20 to 25 per cent relative to other forms of distribution, which were called the “open” market. Retail margins were 18 to 19 per cent in the open market, compared to approximately two per cent in the PX market.

A relatively small proportion of the market was serviced by wholesalers, who worked on margins of nine per cent, including a one per cent cash discount. The market differed from many other markets, including the North American one, in that there was no consumer or trade promotional activity. The shampoo market was very fragmented, with only four brands having more than a five per cent market share in early 1990. Based on Usage data, only Head & Shoulders with seven per cent and Pert with 11 per cent had more than five per cent “Most Often Used Brand” levels.

The leading firm in the shampoo market was Kao, a subsidiary of a Japanese firm, with a 25 per cent share of the market, made up of one of the four market share leaders and a multitude of other brands. Kao was also the leading firm in the conditioner market. Procter & Gamble had first entered the hair-care market in 1986, with the introduction of Head & Shoulders, which was positioned as an anti-dandruff shampoo. This was followed in 1987 with the introduction of Pert, the first two-in-one shampoo in the market, and positioned as providing soft smooth hair.

Both Colgate Palmolive and Lever entered the Taiwan market through joint ventures about this time, and Lux’s first hair-care brand came on the market in 1988. Following the introduction of Pert, the two-inone shampoo segment grew rapidly, spurred by the entry of several new two-in-one brands, including Kao Sifone with a “soft & smooth hair” positioning, and the very recent two-in-one line extension for Lux shampoo with a “shiny hair” positioning communicated via a celebrity endorsement. By early 1990, the two-in-one segment represented 25 per cent of the market.

At the same time, Procter & Gamble had grown to second position in the market with an overall company share of 18 per cent. While product sizes were not standardized, the most popular sizes were quite closely grouped around 200 millilitre and 400 millilitre sizes. THE DEVELOPMENT OF THE PANTENE CONCEPT IN TAIWAN John Lee, marketing manager for hair care products in 1989, commented, While we were pleased with our early success in the market place, we were looking for products, particularly in the two-in-one segment, that could grow us into number one in hair care.

A Taiwan Habits & Practices study (see Exhibit 3) showed that shiny hair and healthy hair (gives nutrition to hair, protects hair from split ends) were top hair-care attributes. Given that other key attributes — anti-dandruff and softeners/smoothness — were already addressed by Head & Shoulders and Pert, we concluded that a positioning using shiny and healthy attributes, combined with two-in-one technology, could be a unique one. This document is authorized for use only in GMBASG/Brand Management by Prof. Vivek Bali at SP Jain School of Global Management from February 2014 to June 2014. Page 5 9A99A038

Some time earlier, the brand group had learned that there was a small brand called Pantene that P&G had acquired from Richardson-Vicks. They now began to study it closely for its potential for reapplication in Taiwan. They learned that, in the United States, the brand had a “beauty through health” positioning, while in France the same product had “shine outside/strength inside” positioning. Qualitative research was designed and carried out on the three positioning concepts. The results showed that the “shine through health” positioning was perceived as more specific than the “beauty through health” positioning of the regular formula of the U.S. shampoo, and simpler than the “shine outside/strength inside” positioning of recently introduced French Pantene, which used an “Algrave” formula. We concluded that ‘shine through health’ positioning, combined with two-in-one technology, would provide a good market entry point because the two-in-one technology was in the growth segment of our hair-care category. From this base, the marketing strategy for Pantene was built. In conjunction with the positioning decision, the determination was made that the Pantene introduction would be for the shampoo only. There were several reasons underlying this decision.

The most important was the continuing growth of the two-in-one market and the belief in the need for P&G to capitalize on its current product technology superiority over its competitors. “As competitive technology catches up with us,” said Mr. Lee, “performance advantages will be reduced. The name of the game will then be back to who has the better positioning and marketing — and who got there first with it! ” The second reason was that the conditioner market was small relative to the shampoo market, and that a market entry with both products would blur the focus the firm wanted to put on the two-in-one market.

Finally, the conditioner could be used as the lead product in a treatment line introduction for which planning was just starting. THE STRATEGY FOR THE PANTENE INTRODUCTION Brand Name: “Pantene Pro-V” in English; “Pan-Ting Pro-V” in Chinese Target Audience: Women, aged 18 to 35, who care most about the health of their hair. Positioning: Shine through health Product • Full-strength “Algrave” formula with Provitamin B5 (Panthenol), in ivory colour. Perfume is “X2Y. ” The “Algrave” formula had been a success in a number of countries in the Far East.

This success was attributed to the fact that Oriental hair is coarser than Caucasian hair and needs more conditioning effect. Further, product testing in Italy had confirmed the better acceptance in that country of the full-strength “Algrave” formula versus a diluted “Algrave” used in some other European countries. The Concept & Usage test had confirmed that the “X2Y” fragrance at . 45 per cent had strong acceptance by local consumers. • Four versions: normal, oily, dry, permed This document is authorized for use only in GMBASG/Brand Management by Prof. Vivek Bali at SP Jain School of Global Management from February 2014 to June 2014.

This decision was based on a 1989 Versioning study. Packaging • Shape as shown in Exhibit 4. • Colours in pearlescent pastel shades similar to the U. S. Pantene colour scheme: ivory for the oily version, yellow for normal, pink for dry, and lavender for permed. • Graphics modelled after the U. S. Pantene pack and shown in Exhibit 4 as well. These decisions followed “Package Show” tests in Taiwan and Japan (see Exhibit 5) that confirmed that Taiwan graphics were “right” for the Far East and rated significantly higher than the latest Euro-Pantene design.

Sizing: Two sizes; 200 millilitres, 400 millilitres Pert currently was offered in three sizes: 200 millilitres, 400 millilitres, and a 750 millilitre Pump. The two smaller sizes accounted for 90 per cent of the volume. Pricing: Eight per cent premium over Pert Concept & Usage test data are in Exhibit 6. The data were collected in the context that the Taiwanese respondents were asked to respond to the questions after being provided with price information showing the retail price of Pantene to be 14 per cent higher than the (current market) price for Pert.

The 14 per cent was very similar to the product manufacturing cost differences between Pantene and Pert. Purchase intent among Pert non-users was almost triple after using the product (19 per cent versus seven per cent), while comparable figures for Pert users were (13 per cent versus 12 per cent). Based on the C&U test data, the projections were made that: • the brand would generate 275,000 litres in Year 1 (excluding 25,000 litres in pipeline volume) and 665,000 litres in ongoing volume, which represented a three per cent and six per cent share, respectively; and • the cannibalization of Pert would be only five per cent.

The final decision was to set the Pantene retail price at an eight per cent premium to Pert, and equal to a planned Head & Shoulders two-in-one product. This price represented a 30-plus per cent premium on Kao Sifone on a per millilitre basis, and an 18-plus per cent premium on a per bottle basis (see Exhibit 7). Advertising • Creative: Focus on the “shiny hair through health” benefit. Use Taiwanese celebrities to get higher awareness. This document is authorized for use only in GMBASG/Brand Management by Prof. Vivek Bali at SP Jain School of Global Management from February 2014 to June 2014. Page 7

The concept was that “Pantene is a combined shampoo/conditioner containing Provitamin B-5 which penetrates the hair to fortify it. ” Visualization of “two-in-one” was used to position Pantene in the growing two-in-one segment. Two 30-second commercials were created. The tone of these commercials was elegant, self-confident, aspirational and personal. Focus group tests of the advertising showed that consumers liked it because it clearly communicated the strategic benefit of shine-through-health. The visual transformation of the hair in the commercials communicated improving health of hair.

The use of consumer language — like someone sharing personal experience instead of manufacturer talk — without demos enhanced the credibility of this copy. • Media: a three-month media heavy-up with an estimated share of voice2 of 15 per cent, or 300 average four-week GRPs3 (80R/3. 8F) to achieve at least 60 per cent awareness after three months of advertising. These decisions and projections were in line with the introductory media level of Kao Sifone, which built 67 per cent awareness in three months. Year 1 media spending was budgeted at US$955,000.

This translated into a projected share of voice consistent with the media spending of Pert in Year 1. • Sampling: 2. 6 million 10 millilitre sachets4 in the first three months to reach 75 per cent of urban households (55 per cent of national households) to generate 25 per cent + trial. Sampling concentrated on door-to-door because face-to-face sampling at central locations is less efficient with high duplication in Taiwan. The budgeted cost was US$1 million. MARGINS The projected product costs for Pantene were 14 per cent higher than for Pert. Forty per cent of this increase was attributable to higher ingredient costs.

The other 60 per cent constituted higher packaging costs brought about by the choice of pearlescent package colours and the decision to have a silver stripe engraved around the bottom of the package cap. The projected margin structure relative to Pert is shown in Exhibit 8. RESULTS Pantene Pro-V was launched in April 1990. It soon became apparent that the launch was a major success. The marketing plan had forecast a three per cent share of the market over the first year in the market. Six months after the introduction, the brand had already grown to almost twice that share.

A post-six months Usage and Attitude Study showed that the media plan/copy plan had delivered brand awareness of 70 per cent and advertising awareness of 60 per cent. Cannibalization of Pert was limited, with Pert sales declining by only five per cent. Twenty-eight per cent of users who switched to Pantene stated that they did 2 Share of voice means P&G advertising spending as a percentage of total category advertising for a given period of time. GRP is the abbreviated form of gross rating point. One gross rating point means that one per cent of the target population is expected to have media exposure.

Gross rating points are measured over a time period, which is often a week. Further, they are composed of two parts. Reach, the “R” above, is the proportion of the target audience with an expected exposure of at least once. This number is divided into Total GRPs to give the average frequency, the “F” above, of expected media exposure. 4 A 10 millilitre sachet provided enough product to wash the hair twice. Research carried out in a number of countries had established that two hairwashings were sufficient to generate trial, whereas one was not. 3 This document is authorized for use only in GMBASG/Brand Management by Prof.

Vivek Bali at SP Jain School of Global Management from February 2014 to June 2014. Page 8 9A99A038 so due to advertising. Twenty-six per cent of users switched to Pantene because of sampling. Further, the Usage and Attitude Study data indicated that respondents who had been sampled had five times the rate of trial and two times the rate of purchase of non-sampled respondents. This document is authorized for use only in GMBASG/Brand Management by Prof. Vivek Bali at SP Jain School of Global Management from February 2014 to June 2014. Page 9 9A99A038 Exhibit 1 TAIWAN POPULATION BY SEX AND AGE

See More on

Related Posts

Tiffany from New York Essays

Hi there, would you like to get such a paper? How about receiving a customized one? Check it out