P&G finance chief: ‘Immediate wow’ and ‘habit formation’ key to evolving superiority offerings

In August this year, Procter & Gamble (P&G) reported a 3% net profit rise and 5% net sales rise for the full fiscal 2022 year.​ And whilst these results represented another strong year for the company, Jon Moeller, chairman, president and CEO of P&G warned that challenges remained ahead. The company, therefore, remained sharply focused on supply, environmental sustainability, digital acumen, and employee value, he said – building on from its superiority strategy that the company had been pushing for a number of years now​. Superior products now represented 80% of P&G’s total global portfolio.

At this month’s Morgan Stanley Global Consumer and Retail Conference, company chief financial officer (CFO) Andre Schulten, detailed how P&G’s superiority strategy was set to evolve in the coming years.

Creating the ‘immediate wow’​

Schulten said P&G wanted to “reset superiority”​ across its portfolio and that, importantly, the company would no longer be talking about 80% of superior products, but lower levels, though he couldn’t disclose what this percentage would be.

This echoed comments from Schulten in P&G’s Q1 2023 earnings call this October​ around the need to offer European consumers value tier offerings, given inflation and the cost-of-living crisis.

However, the CFO told Morgan Stanley conference attendees that whilst a reset was taking place, investments in superiority would also firmly continue.

“Look, superiority, in the way we define it, is, by default, a dynamic concept. We can’t stand still because superiority will evolve. It will evolve with the consumer preferences changing, it will evolve with retailer requirements changing. So, by default, the concept of what we call ‘superiority’ isn’t static; it is dynamic,”​ he said.

Pushing ahead, therefore, P&G was focused on satisfying consumer expectations and was therefore invested in creating instant great first impressions with its superior offerings.

“With product and packaging, the concept there needs to evolve in the sense that we believe instant gratification will become a significantly bigger component of how consumers perceive our products,”​ he said. “We call it the ‘immediate wow’ or the ‘first-use wow’.”​

The idea, Schulten said, was that these superior beauty, personal care and home care products had to be so good that when a consumer used it for the first time it was “obvious to them that they’ve bought the best possible proposition, in terms of efficacy and user experience, that they could possible get in the market”.​

Examples of this, he said, included P&G’s Olay moisturisers that offered a great texture and perfume that evolved, and its fabric enhancers that offered an overwhelmingly fresh scent post-wash.

“Those types of ‘immediate wows’ are something we want to focus on,”​ the CFO said. “It’s also relevant because that’s the way consumers share their experience of our products on social media, which becomes a bigger and bigger part of the social influence of marketing.”​

Habit formation, core innovation and sustainability​

Beyond creating the ‘immediate wow’ factor, continuing to drive success in superiority across P&G’s portfolio also relied on three additional focuses, Schulten said.

The company was, for example, equally dedicated to driving and shaping user routines or “habit formation”,​ he said – a “very important component in driving market growth”.​

And this concept of habit formation, he said, relied heavily on brand communication and education. “Many of our products still require education for the consumer on how to get the best efficacy out of the product,”​ he said.

Taking the example of hair conditioners, he said consumers still needed to be educated on correct doses which, once achieved, offered delight and improved overall experience. Similarly, education around the scalp health benefits of using a product like Head & Shoulders daily created “another big increase in usage”,​ he said.

Schulten said all of these ‘immediate wow’ and ‘habit formation’ goals were being achieved by a balance of core product innovation and new concept development – “innovating on the core while innovating on more”.​

And behind every innovation in P&G’s portfolio, he said environmental sustainability remained a “critical component”.​

“We believe consumers will demand higher sustainability solutions, but they won’t be willing to compromise on product performance as they look for sustainability.” ​

Superiority shifts and premiumisation​

P&G hadn’t been the only beauty and personal care major to spotlight the benefit of shifting towards superiority in recent years.

Colgate-Palmolive’s CEO Noel Wallace said recently during the company’s H1 2022 earnings​ that it would continue to bring in price changes to offset headwinds whilst maintaining its focus on premium innovation. L’Oréal had also continued to drive growth and sales​ across its more premium portfolio segments, including active cosmetics and luxe divisions.

In retail, UK beauty major Superdrug had also shifted efforts towards premiumisation​ with the onboarding of a number of prestige fragrance products in September this year,