Last week Procter & Gamble announced the purchase of the retail chain the Art of Shaving. Stepping into retail might seem like a peculiar move for the consumer products company, but it follows a pattern of increasing innovation for the organization.
Back in 2005 P&G made a lot of noise when it bought Gillette. At the time, I was interviewed by BusinessWeek, which picked up on the innovative shift signaled by the $57 billion deal. [The article is available here: Branding: Five New Lessons.]
The deal made a lot of sense for P&G. Gillette was a master at marketing a cohesive family of products under one brand. P&G is growing in this area, extending brands like Crest into broad families of related products. Gillette also benefitted from the combination of innovative hardware paired with consumables — the razor and the blades. P&G has expanded greatly in this area with electric toothbrushes, Febreze air cleaners, Mr. Clean car wash kits and Swiffer wet mops.
So if putting hardware and consumables together and building product families can boost your brands, why not control even more of the consumer experience? The Art of Shaving deal could teach P&G some important lessons, but only if they do it right. Back in the 1980s, P&G picked up the Vidal Sassoon product line, but left the high-end hair salons alone. The brand languished, and Sassoon and P&G found themselves on opposite ends of a heated lawsuit. In retrospect, P&G might have missed an opportunity to explore the connection between product and service. A connection the folks at Starbucks exploited when they expanded from selling bags of coffee beans to serving the coffee in upscale bistros. When brands mix product and service, the resulting experience can increase customer loyalty, reduce price sensitivity and boost differentiation.
Given its position as the leading consumer products manufacturing company, P&G could content itself with sticking to the existing formulas and leaving the innovation to smaller, nimbler players. But with this entry into retail experiences, it looks like the company that invented brand management might just be on its way to reinventing it.
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June 12, 2009 at 1:43 pm
mantic59
I’m a little cynical when I consider the P&G/AOS deal. I get the feeling that P&G is really after AOS’s internet marketing experience than their retail experience. Look at P&G’s statement: ” Bergh cited immediate growth potential in Art of Shaving’s store business, as well as an opportunity to tap knowledge from its burgeoning Internet business (it accounts for 10 percent of overall sales). “On the P&G side [Internet] is tiny, so we can learn a lot there,” said Bergh….”. The cynic in me thinks AOS will simply be integrated into Gillette’s stable as a mid-tier line (“Art of Shaving by Gillette”) of “software” (creams/soaps) while jettisoning the hardware (razors/ brushes) and spinning off the stores into another brand name after sucking their intellectual property dry….
June 12, 2009 at 3:34 pm
Kelly
A valid concern, but I’ve gotten to know some of the P&G folks and I think they’re more thoughtful about the brands they’ve assembled. They’ve done a great job with Gillette, let’s hope they hold onto the Art of Shaving magic.
June 14, 2009 at 10:48 am
Ted Hurlbut
This strikes me as both a retail and an internet play, but most importantly, it reflects a calculation that vertical distribution, right on through to the retail channel, can be brought to CPG. It’s a venture that certainly bears watching.
June 14, 2009 at 2:08 pm
Kelly
Thanks Ted,
I think you’re right, it’s a reflection of an increasingly multi-channel retail world combined with the rise of manufacturers testing the retail waters as Apple has done so successfully. It should be interesting to watch for additional moves along these lines by P&G and their competitors.
For other readers, you’ll find Ted’s site informative. You can find it here: http://www.hurlbutassociates.com/