Friday, February 24, 2012

Deepening your competitive position - P&G tries Tide Pods

P&G has announced the launch of new Tide laundry detergent pods - single-dose, dissolvable packets of detergent, stain fighters and brighteners. The launch comes after a significant delay, as well as some uncertainty regarding the extent to which US consumers will embrace this premium-priced product.

We don't know if P&G will succeed with this particular innovation, but it illustrates the right kind of approach to competitive strategy. As many firms face slowing growth in a mature category, they diversify and turn their attention to new areas. However, that often accelerates the decline of their core business because they stop innovating with the seemingly mature product. Then someone does innovate and hurts the company badly. P&G is choosing to try to deepen their competitive position in household products rather than simply diversifying to new areas in search of growth. They have identified two possible consumer needs that pods may fulfill: convenience and better cleaning. Why better cleaning? Many consumers do not use the right amount of detergent - they just pour some liquid in the machine. These pods will provide just the right amount for a load. Naturally, the pods also provide convenience and less mess. Will consumers pay a premium? That's the key question. Still, the attempt to innovate and deepen the firm's competitive position in a mature market should be lauded.


russconte said...

Very good post. To a certain extent, it does not matter if this individual product is a success or not. The larger strategy is correct. Every company has products and/or services that don't sell, and they are removed from the marketplace. As long as P&G maintains the correct big picture by focusing on their strengths while keeping their eye on the smaller picture (such as this product), they'll be fine. It is possible for a company to enter a new market and do well - the iPhone is the classic example where a computer company entered the highly competitive cell phone business - but that is also the type of an event that is rarely successful. P&G would do well to continue to innovate and deepen their already very enviable competitive position, and not jump to something totally new and outside of their expertise.

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