Thursday, April 04, 2013

Innovation in Laundry Detergents

The Wall Street Journal reports today about how innovation is actually hurting laundry detergent sales.  Well, that's not quite what is happening.  Let's explore. P&G launched "pods" last year.  The product offered just the right amount of detergent for a load of laundry.  The product has been popular with customers.  However,  it appears that industry revenues are falling.  Has innovation been a bad thing?  I don't think so.  While revenues may be declining, margins for P&G are rising.  Their margins for pods are better than for jugs of laundry detergent.  Customers clearly like the pods.  Moreover, P&G seems to be gaining an upper hand on rivals, who are busy trying to copy them.

The bigger issue here is the obsession with revenues.  In the end, industry executives should be focused on profits rather than the top line.  Moreover, if customers prefer pods, then executives should be focused on delivering what customers want, rather than blaming P&G for "hurting" industry revenues.

One final thing... If P&G were escalating price rivalry in the industry, that could be problematic.  They would be damaging industry structure, making it less attractive.  However, that is not what they are doing.  They are actually bringing a differentiated product to a market which had experienced a great deal of price competition.  That's enhancing industry attractiveness.  Other firms should be seeking similar ways to innovate so that they are not just competing on price.

2 comments:

city said...

thanks for share.........

Christina willams said...

I like your thoughts about laundry detergents. keep sharing.

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