What's Up, Doc?

(continued from Marketing 101, see 8/2 below)

Neil McElroy's formula for P&G's success was find out what the consumers want and give it to them. Proctor & Gamble went to extreme lengths to do both. It hired hundreds of women to bake, wash dishes, and do laundry in their own homes, and then report the results. This kind of market research became the hallmark of P&G's approach to the development of new products and the continuous effort to improve existing ones.

For many years, the leader of the market-research effort was D. Paul "Doc" Smelser, a small, feisty, serious man who often came to work dressed in sporty suits and ties. The cerebral Smelser had earned a Ph.D. in economics from Johns Hopkins (hence the nickname "Doc"). He started at P&G in a new unit that had been organized in 1923 for the purpose of analyzing the markets for cottonseed oil and other commodities. Doc was fond of walking up to senior executives and asking them, out of the blue, questions such as "What percentage of Ivory soap is used for face and hands and what percentage for dishwashing?" Often nobody knew the answer. Thus Smelser was able to conclude that P&G, as a company, remained ignorant of some basic elements of how its products were being used, and therefore how they should be marketed.

Doc Smelser's embarrassing questions raised big issues, and the company responded quickly. In 1925 it created a formal Market Research Department and put Doc himself in charge of it. For the next 34 years, until his retirement in 1959, Doc built this group into perhaps the most sophisticated unit of its kind in the world. He and his staff of researchers (ultimately several hundred strong) asked a variety of audiences a series of detailed questions. In tabulating the answers, they discovered almost everything that could be learned about how the company's products and competing items were being used, how they might be used, and what consumers liked or disliked about them. Doc was especially well informed about the reach of advertising media. He liked to surprise managers of radio stations by giving them precise statistics about the size of their audience, statistics they themselves did not possess.

One of Doc's best-known innovations was Procter & Gamble's corps of door-to-door interviewers. This group consisted mostly of young women who had graduated from college and therefore possessed "the maturity to travel alone," as one of their supervisors put it. A criterion for the successful applicant was that she be attractive but not inordinately so. Doc wanted members of his force to project a wholesome and nonthreatening image, so as to inspire confidence and elicit candid answers.

Doc's interviewers infiltrated neighborhoods all over the country, going from house to house armed with an imposing array of questions: about laundry, cooking, dishwashing, and every other activity for which P&G marketed a product or was thinking of introducing one. Female interviewers were instructed to wear a conservative dress, high heels, gloves, and a hat. As they knocked on doors and talked with consumers, they were to carry no lists, forms, or writing materials. The visits could then seem more casual, even though all conversations were designed to extract copious and specific data. Interviewers were expected to have total recall, and often would hurry back to their cars to record what they had learned.

In the 1960s, the company began to phase out this group. Cheap long-distance telephone rates had made it possible to conduct mass surveys more cost efficiently. By the 1970s, Market Research at P&G was doing about a million and a half telephone or mail-in interviews each year. When the company became a heavy television advertiser, it instituted its "DAR" (Day after Recall) method for measuring the impact and memorability of TV commercials. With the help of its many advertising agencies, P&G used focus groups and many other kinds of opinion-sampling techniques to adapt its products to changing needs and tastes and sharpen its commercial messages.

In time, nearly every consumer-products company had to conduct market research in order to prosper. But Procter & Gamble was the leader, and it remained so into the twenty-first century. The biggest changes at P&G after Doc Smelser's time were in the growing number of the company's brands and the broadening of its markets.

In 2002, P&G celebrated its 165th anniversary. It had 12 billion-dollar brands in its portfolio. These brands included Pampers, Tide, Ariel, Always, Pantene, Charmin, Bounty, Iams, Crest, Folgers, Pringles, and Downy. In 2004, Actonel became another billion-dollar brand, and the first pharmaceutical brand to reach this important milestone. And in 2005, P&G and Gillette merged into one company and added five more billion-dollar brands to their product portfolio, including Gillette and Braun's shaving and grooming products, the Oral-B dental care line and Duracell batteries.

Today, Procter & Gamble operates in five segments: P&G Beauty, Health Care, Baby Care and Family Care, Fabric Care and Home Care, and Snacks and Coffee. The P&G Beauty segment offers antiperspirants or deodorants, colognes, cosmetics, feminine protection, hair care, hair color, personal cleansing, and skin care. The Health Care segment offers health care, oral care, and various drugs. The Baby Care and Family Care segment offers kids' personal care products, diapers, pampers, detergents, toilet tissues, paper towels, and tissues. The Fabric Care and Home Care segment offers dish care, laundry, and special fabric care products, as well as household cleaners. The Snacks and Coffee segment offers snacks and beverages. The Company markets approximately 300 branded products in approximately 160 countries.

Now, what do you think Doc Smelser would say of Agency.com’s approach to research?

(to be continued….)

Sources and additional reading:

Harvard Business School, Working Knowledge for Business Leaders, “American Business, 1920-2000: How It Worked - P&G: Changing the Face of Consumer Marketing”

http://hbswk.hbs.edu/archive/1476.html

PG.com, “Our History”
http://www.pg.com/company/who_we_are/ourhistory.jhtml

Yahoo Finance, “Profile”
http://finance.yahoo.com/q/pr?s=PG