Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Inflation is testing Americans' loyalty to Procter & Gamble Co.'s PG -0.15%decrease; red down pointing triangle biggest brands, but the maker of Tide detergent,

imageimage

Inflation is testing Americans' loyalty to Procter & Gamble Co.'s PG -0.15%decrease; red down pointing triangle biggest brands, but the maker of Tide detergent, Pampers diapers and Gillette razors is betting it can persuade shoppers to keep paying up. The world's biggest maker of consumer products is rolling out star-studded ad campaigns and new product features, from drip-proof soap bottles to extra-absorbent paper towels, hoping to keep cash- crunched consumers from switching to cheaper brands. P&G in recent months has underperformed rivals both broadly and in key categories such as razors, laundry detergent and paper towels, according Nielsen data. This comes after four years in which the company consistently expanded its share of the U.S. market despite price increases on products that are among the costliest on store shelves. "There are certain brands that have so much loyalty, but at some point people have to make sacrifices," said Arthur Ackles, vice president of merchandising and buying for the Roche Bros. Boston-area grocery chain. He says devotion to P&G brands remains high but he is seeing more consumers switch. "Tide is sitting there at $11.99 and another brand is $3 less. It's starting to not even be a decision for people anymore." Consumer spending has held up relatively well so far despite inflation, but experts say we're approaching an inflection point. WSJ's Sharon Terlep explains the role "elasticity" plays in a company's decision on whether to raise prices. Photo illustration: Adele Morgan U.S. consumer inflation excluding energy and food reached a new four-decade high in September, with grocery prices increasing 13% from a year ago. P&G Chief Executive Jon Moeller, speaking at last week's annual shareholders meeting, said the company has so far been relatively successful in maintaining sales and market share amid decades-high inflation. But he said P&G's ability to command premium prices hinges on many factors outside the company's control, namely the rate of inflation, consumer reaction to higher costs and the overall health of the economy. consumers that paying more for its products ultimately saves money. In one commercial, rappers Ice-T and Vanilla Ice and wrestler "Stone Cold" Steve Austin pitch a version of Tide that can be used in cold water, which is cheaper than running a load of laundry in a warm-water cycle. Another ad campaign says people use more water when they wash dishes by hand than they do in a dishwashing cycle. A new bottle for Dawn detergent promises to eliminate waste. It features an inverted design, a no-flip cap and a self-sealing valve to prevent drips or soap from getting stuck in the container. Gillette razors now come in cardboard rather than rigid plastic packaging that is marketed as more environmentally sustainable. And the company has launched more absorbent versions of Bounty paper towels and Charmin toilet paper, a spokeswoman said. P&G on Wednesday reports financial results for the first quarter ended Sept. 30. P&G executives say the company has yet to see significant erosion in market share or sales. They say shortages due to high demand amid the pandemic and other idiosyncrasies have led to temporary share losses in some categories, and that third-party data trackers often undercount P&G sales because their numbers exclude certain retail outlets. As the company invests in its high-end brands, executives say it is also prepared should consumers decide they need cheaper alternatives. P&G says it has more brand offerings in lower-price ranges and offers a wider variety of package sizes than it did more than a decade ago during the last economic downturn. Lois Miceli, 64 years old, of New Rochelle, N.Y., for decades was loyal to several P&G brands, including Tide detergent, Crest toothpaste, Dawn dish soap and Pampers diapers. She recently quit Tide for Costco's private-label detergent and switched from Pampers to Luvs, P&G's lower-priced brand. She buys diapers for her two grandchildren. But, no matter the cost, Ms. Miceli said, she is sticking with Dawn and Crest. "When it comes to health, I pay attention," she said, adding that Dawn is the only dish soap capable of clearing grease. "Clean clothes, I couldn't care less as long as it gets the stains out." Your Task: After reading the above article, please answer the following questions. Number your answers to correspond to the questions and use a few complete sentences for each answer. One-sentence answers are not enough so please develop your answer. Proofread and spell check before submission. Questions 1. Describe P&G's pricing strategy. 2. Why are some consumers willing to pay higher prices for P&G's brands? 3. How does inflation impact P&G's pricing strategy? Briefly explain. 4. What strategies has P&G deployed in an effort to maintain its growth in market share in the midst of inflation?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Answer 1 PGs pricing strategy involves maintaining premium prices for its brands despite inflation and increasing production costs The company focuses ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Karen W. Braun, Wendy M. Tietz

5th edition

134128524, 978-0134128528

More Books

Students also viewed these Marketing questions