Marketing 101

(continued from The Ratings Game, see 7/19 below)

Other innovations during the “Air Raid” period we’ve been discussing (the period between 1922 and 1975) were the development of the brand management system and the practice of market research. Indeed, companies made the transition from being sellers of products to being disciplined marketers of products. Procter & Gamble led the way.

William Procter, who emigrated from England, was heading West when he stopped at Cincinnati to take care of his ailing wife, who soon died. James Gamble, who emigrated from Ireland, was also heading West when he, too, stopped at Cincinnati for medical care for himself. Both men ended up settling there.

William Procter established himself as a candlemaker, while James Gamble apprenticed himself to a soapmaker. The two might never have met had they not married sisters, Olivia and Elizabeth Norris, whose father convinced his new sons-in-law to become business partners. In 1837, as a result of Alexander Norris' suggestion, a bold new enterprise was born: Procter & Gamble.

Their business of selling soap and candles prospered, and by 1859, 22 years after they formed their partnership, the company’s sales reached $1 million and they employed 80 people.

During the Civil War, Procter & Gamble was awarded several contracts to supply soap and candles to the Union armies. These orders kept the factory busy day and night, building the Company's reputation as soldiers returned home with their P&G products.

In 1879, James Norris Gamble, son of the founder and a trained chemist, developed an inexpensive, high quality white soap. Inspiration for the soap's name—Ivory—came to Harley Procter, the founder's son, as he read the words "out of ivory palaces" in the Bible one Sunday in church. The name seemed a perfect match for the white soap's purity, mildness, and long-lasting qualities.

By 1890, P&G was selling more than 30 different types of soap, including Ivory. In that same year, after running the Company as a partnership for 53 years, the partners incorporated to raise additional capital for expansion. William Alexander Procter, son of the founder, was named first President. P&G set up an analytical lab at Ivorydale to study and improve the soap-making process. It was one of the earliest product research labs in American industry.

P&G continued to grow and prosper, expanding its manufacturing facilities outside of Cincinnati which increased capacity and improved distribution of products to its customers. In 1911, P&G introduced Crisco, the first all-vegetable shortening. Crisco provided a healthier alternative to cooking with animal fats and was more economical than butter.

In 1924, a market research department was created to study consumer preferences and buying habits—one of the first such organizations in history. And in 1926, in response to the growing popularity of perfumed beauty soaps, P&G introduced Camay.

Neil H. McElroy came to Procter & Gamble in 1925 after graduating from Harvard College. McElroy changed marketing forever when he wrote the classic “McElroy memo” on May 31, 1931, which lead to the creation of the discipline of brand management.

While working on the advertising campaign for Camay soap, McElroy became frustrated with having to compete not only with soaps from Lever and Palmolive, but also with Ivory, P&G's own flagship product. In his now-famous memo, he argued that more concentrated attention should be paid to Camay, and by extension to other P&G brands as well. In addition to having a person in charge of each brand, there should be a substantial team of people devoted to thinking about every aspect of marketing it. This dedicated group should attend to one brand and it alone. The new unit should include a brand assistant, several "check-up people," and others with very specific tasks.

The concern of these managers would be the brand, which would be marketed as if it were a separate business. In this way the qualities of every brand would be distinguished from those of every other. In ad campaigns, Camay and Ivory would be targeted to different consumer markets, and therefore would become less competitive with each other.

Thus was born the modern system of brand management.

(to be continued….)

Sources and additional reading:

PG.com, Our History

http://www.pg.com/company/who_we_are/ourhistory.jhtml

Wikipedia, Neil H. McElroy

http://en.wikipedia.org/wiki/Neil_H._McElroy