Archive for the ‘Dry Cleaning’ Tag

Will P&G clean up with two new businesses?

Having worked in P&G brand management on some of their biggest brands (Tide, Cascade, Ivory Snow), I must admit to being an admirer of almost everything the firm does. Well almost everything.  I was not a big fan of the Tide Basic introduction.  And, lending their reputation and strong brands to some consumer service industries may turn out to be another misstep. 

Over the past three years, P&G has been refining plans to enter two new markets – dry cleaning and car washes – by leveraging two of their strongest brands. In effect, P&G is applying the considerable technology and brand equity of Tide and Mr. Clean to launch two new franchised consumer services.  In particular, a pilot program of Tide Dry Cleaners is about to be introduced in selected markets across the United States.  Secondly, P&G is continuing to roll out Mr. Clean car washes in partnership with franchisers ready to fork over a $5 million initial investment. 

I am skeptical as to whether these initiatives will succeed: 

One would assume that years of testing and refinement were behind the concept development and delivery model.  Was this effort of value?  Thorough thinking and ample investment can not make up for a weak consumer proposition or bad timing.  During my tenure in the late 1980s, P&G Canada launched a family of Enviro-Paks – cleaning, detergent and dishwashing liquids – packaged in large Tetra Pak containers – based on European learnings.  The roll out flopped, not necessarily because of poor execution but because the timing was about 15 years too early (environmental awareness was very low at the time) and there was no compelling consumer benefit in switching to the new format.

My concerns with P&G’s new franchising strategy centers on the following areas:

The attainable market may be too small

The dry cleaning and car wash markets are fragmented, often driven by price and location considerations.  On the other hand, P&G has traditionally focused on share leadership in large and defined market segments with premium-performing products.  I am not sure the dry cleaning and car wash sectors contain segments large enough to support P&G’s premium business model and generate sufficient financial returns.  Furthermore, at $5 million per store, a Mr. Clean franchise will not appeal to any but the deepest pocket franchisers.

Challenges with the customer experience

Financial returns will depend heavily on the quality of the customer experience delivered every day.  Service businesses rise and fall on front line staff interactions with customers and delivering consistent quality.  Ensuring a fruitful and consistent customer experience is a challenge in consumer services given the heterogeneous nature of employees who are often unskilled and transient.  While having a bullet-proof set of policies and procedures will help, P&G will lack the control and immediacy to ensure day-to-day execution excellence on a national scale.

Franchising cheapens P&G brands

Given the above challenges, P&G runs a significant risk that an unsuccessful franchise strategy could hurt Mr. Clean and Tide’s strong brand equity and subsequently damage their market shares.  Together, these brands represent over a billion dollars in profit in the US alone.

Without analyzing the business case, its hard to really know whether the above issues are problematic.  However, one must wonder why P&G chose to expand to new markets with completely new business models that are well beyond their core consumer and customer franchise.  Time will tell.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Follow

Get every new post delivered to your Inbox.

Join 243 other followers