The Long Blue Line
A History of Selling at Procter & Gamble Davis Dyer
2010s
John Seaman
2000s
1990s
1980s
1970s
The Long Blue Line
A History of Selling at Procter & Gamble
Davis Dyer
John Seaman
The Long Blue Line A History of Selling at Procter & Gamble Š 2014 by the Procter & Gamble Company. All rights reserved. Unless otherwise noted, all photography courtesy of the Procter & Gamble Heritage and Archives Center.
Book design by Judy Kohn Chicago, Illinois Photo research by Greg McCoy, Senior Archivist Procter & Gamble, Cincinnati, Ohio Production management by Susan McNally Cambridge, Massachusetts Printed and bound in the U.S.A. by Puritan Capital Hollis, New Hampshire
Contents
8 Foreword by Bob Fregolle 12 Prologue Chapter 1:
14 Building a Strong Foundation
1837– early 1920s
17 Modest Beginnings and Abiding Principles
21 The Branding Revolution: From Push to Pull, from Region to Nation
24 Going Direct
Chapter 2: 30 Maturing at Home, Expanding Abroad early 1920s – mid-1980s
33 Selling Matures in the United States
36 First International Ventures
43 Penetrating Western Europe
44 Into Japan
Chapter 3: 48 Finding New Formulas mid-1980s – early 2000s
53 The Walmart Disruption and the Rise of Modern Trade
55 Pathfinders
61 A New Foundation for the Future
65 Spreading CBD to Europe
69 “The Wild East”: Into Central and Eastern Europe
77 Developing the ARM Model in China
85 “Distribution, Distribution, Distribution”: Into Emerging Markets
95 Diversity as a Competitive Advantage
Chapter 4: 98 Becoming One CBD since the early 2000s
102 A Commercial Strategy to Win at the First Moment of Truth
108 Implementing the Commercial Strategy I: Focusing on the Shopper
111 Implementing the Commercial Strategy II: Emerging Markets
115 Updating the Commercial Strategy
124 Epilogue: Winning Wherever People Shop 132 Afterword by Werner Geissler
136 Notes
140 Acknowledgments
8 The Long Blue Line
Bob Fregolle
Foreword When I joined P&G as a Sales Representative in 1979, I knew I was joining a winning team, a company with strong values and immense skill at getting great products in front of shoppers who valued them. I joined, like so many of us, because I was impressed with the Sales people I met and what I thought were great prospects for the future. Little did I know how much more vital selling would become to P&G’s ongoing and increasingly global success. “If I have seen farther it is because I am standing on the shoulders of giants,” Sir Isaac Newton famously acknowledged. So, too, for all of us in CBD. What we’re doing today is funda mentally what William Procter, Hastings French, R. R. Deupree, Mike Milligan, Mariano Martin, and countless other outstanding salespeople in our history taught us to do and what I know, under Carolyn Tastad’s leadership, you all will do moving forward. But as The Long Blue Line makes clear, how we carry out our work owes an incalculable debt to those who came before us. That said, another constant for us has been change and the imperative to adapt to it. When I started my career, most of P&G’s business was in the United States, although even then its horizons were expanding in nearly every region of the world. By far most of our sales occurred in the grocery channel. We were roughly a $9 billion company in 1979 and since then we’ve grown more than ninefold. Today, of course, we sell to customers across multiple selling streams, from specialty chemicals, to retailers of consumer packaged goods to professionals in health and dental care, pet
9
10 The Long Blue Line
stores and veterinarians, and luxury retailers of prestige brands and fragrances. We’re growing in nearly every market in the world. We serve customers of all sizes in multiple channels, from individual vendors in remote bazaars in emerging markets to huge hypermarket customers building their presence in their home markets and around the world. While our business is still overwhelmingly in ‘bricks and mortar’ outlets, a huge piece is rapidly moving to on-line. It’s no accident that we’ve continued to thrive amid such change—we’ve become good at anticipating, adapting to, and shaping new realities. How we do what we do has changed dramatically as well. Technology enables us to work faster and smarter, to accumulate and analyze vast quantities of information for insights into shopper behavior, and to visualize key trends and identify new opportunities. We’ve learned to go to market collaboratively, supporting our distributors, strengthening our partnerships with trade customers, and using our deep knowledge of shoppers to mutual benefit. Even who we are has changed remarkably during my career. White male Americans once dominated our ranks, and most of them began and all of them grew up in the P&G way from day one. Today CBD is represented by the talents of people from diverse backgrounds and from all over the world. We have gained thousands of exceptional salespeople from the nearly 180 countries in which our goods are available. Thousands more—a quarter of CBD staff in fact—have joined us from the companies we’ve acquired. My predecessor as Global CBD Officer was a Spanish man; my successor is a Canadian woman. P&G has led the industry, and CBD is helping lead the company, in the increasing diversity of its employees. And diversity has been a powerful competitive advantage, enhancing our capacity
to share ideas and perspectives and enabling us to sell to an ever more diverse array of customers and consumers. What you’re about to read is surely not an exhaustive account of Sales and CBD over the 175+ years of our history. To do that would require volumes. What we hope to share, however, during this, the 20th anniversary of the birth of the concept of Customer Business Development, are some of the highlights of our Sales journey and examples of CBD excellence from around the world, both on the business and organizational sides of what we lead. Given the breathtaking speed of change in our world and the many challenges (some known, some unknown) that lie ahead, we can take confidence from the examples recorded in The Long Blue Line that show just how much we’ve accomplished to date. We have a mighty foundation on which to build. Happy and productive selling and, as always, I’ll see you in the field. Bob Fregolle Global CBD Officer, Procter & Gamble
11
12
Prologue
Selling is vital to the success of any business enterprise. A company that offers intriguing products and services can only thrive if it can get these in front of customers willing to pay for them. Selling generates the cash that is the lifeblood of business. Yet selling is more than merely inducing a transaction. It is both science and art: science, because it entails solving hard problems of distribution and merchandising; art, because packaging and storytelling are key elements of success. This publication tells the story of the science and art of selling at Procter & Gamble, from its modest beginnings in Cincinnati, Ohio, USA, in 1837, to the potent function Customer Business Development (CBD) is today in the global powerhouse P&G has become. This story tells of dramatic changes— growing capability, expanding scope, and increasing sophistication, for example—yet also of fundamental continuities. Early on in its existence, P&G built a foundation for success in selling that endures today: Build trust with customers by doing the right thing and keeping your promises. Sell only quality products and make them available wherever people shop at a good value. Over time, the company added more core principles. Try to be first and best with new items. Understand where, why, and how shoppers make purchases. Find ever-more innovative ways to get products to market. Reduce costs relentlessly. Treat your trade customers as partners and recognize that your success is tied to their success. Pursue winning with passion. Lead the way forward. Compete externally, collaborate internally.
These principles have remained constant guideposts to P&G through the years and they’ve been reinforced by a corporate culture that demands and rewards high performance, ingenuity, and tenacity. Each principle is illustrated repeatedly in the story that follows. The title of this publication—The Long Blue Line—deliberately emphasizes the continuities in the story and is drawn from an image used by CBD leaders from Mike Milligan in the 1990s to Carolyn Tastad in 2014. This metaphor is adapted from the history of West Point, the elite training ground of American army officers, where “the long gray line” extends from and connects the heroes of the past with those carrying on the mission today. The metaphor is particularly apt for P&G, where sales constitutes the front lines of competition, where consumers are delighted or not, and money is made or not. The image of the long line can be a source of pride and hope, because it emphasizes tradition and heritage, as well as an abiding ability to rise to new challenges and achieve enduring success. Today, consumers of P&G products find them at retail outlets ranging from extremely small-scale carts and bodegas, to global mass merchandisers, to small-, medium-, and large-sized shops, convenience stores, grocery stores, drugstores, and other establishments in between, as well as online. How these goods arrive at the point of sale and are presented to shoppers often is, but should never be, overlooked. Sometimes, as in the advanced economies, P&G ships direct from its factories and warehouses to its retail customers. In other contexts, such as in many emerging markets,
the company works with intermediaries including wholesalers, distributors, and subdistributors to move its products into retail outlets. However the products come to the attention of shoppers, P&G’s sales force plays a critical role in encouraging, enabling, and facilitating the transaction. The Long Blue Line covers the history of selling at P&G in four chapters. The first chapter deals with the company’s first 85 years, when it built a highly successful consumer goods business based primarily in the United States. P&G initially sold to a fragmented base of retailers through wholesalers and distributors, but in 1920 took the bold step of selling direct to hundreds of thousands of retailers, mostly grocery stores, across the country. Chapter 2 begins with the aftermath of the “going direct” decision and carries the story forward to the mid-1980s. The chapter describes the maturing of the company’s go-to-market approach in the United States, where it perfected a geographical structure to serve a rapidly-growing and increasingly affluent consumer population, and covers the company’s early international ventures, including determined efforts after World War II to penetrate parts of Latin America, Western Europe, and Japan. Chapter 3 picks up with P&G’s encounter with two disruptions in the 1980s: the retailing revolution in the United States led by Walmart, which fundamentally challenged P&G’s traditional approach to working with retailers; and the sudden collapse of the centralized economies of Central and Eastern Europe and
China, which opened vast opportunities for P&G but also required it to figure out new ways to sell to consumers just beginning to engage in the contemporary market economy. The chapter describes how P&G creatively adapted to these disruptions aided by a major reorientation in selling and the formation of Customer Business Development (CBD), which transformed the way sales was conducted in the industry. CBD helped drive the company’s revenue growth by changing the focus of selling from simple win-lose transactions to win-win collaboration with customers through multifunctional teams. Chapter 4 opens with the formation of global CBD and the development of P&G’s initial commercial strategy. It portrays the company’s evolving partnerships with large, and sometimes global, retailers. The chapter covers P&G’s accelerating growth in emerging markets based on a remarkable ability to place products into outlets frequented by hundreds of millions of low-income shoppers. Finally, the chapter describes how the CBD organization continued to adapt to the dynamic trends of the new millennium. An Epilogue sums up P&G’s progress so far and considers the formidable challenges that lie ahead, including channel fragmentation, accelerating urbanization of the planet, and the rapid growth of e-commerce.
13
14 Building a Strong Foundation
Chapter 1 Building a Strong Foundation (1837– early 1920s)
Bartlett’s store, Chicago circa 1880
15
Founding Partners
William Procter
Englishman William
In 1837, following a
Procter (1801–1884)
banking crisis, father-
emigrated to the United
in-law Alexander
States in 1832, where
Norris (also a candle
he eventually settled
maker) encouraged
in Cincinnati and found
his sons-in-law to pool
work as a candle maker.
their resources and
He married Olivia
combine their power
Norris, whose sister
to purchase common
Elizabeth Ann, was the
raw materials. The new
wife of Ireland-born
partnership became a
James Gamble (1803–
thriving business, with
1891). A soap maker,
Procter focusing on
Gamble had come to
sales and distribution
Ohio in 1819 eventually
and Gamble on
settling in Cincinnati
manufacturing.
and launching his own business.
James Gamble
Building a Strong Foundation (1837– early 1920s)
Between the founding of P&G in 1837 and
time wore on, however, the company found
the company’s decision in 1920 to sell direct
itself constrained by its approach to the
to its trade customers lies a span of 83 years.
market and frustrated by lost opportunities to
The story of selling in these initial decades
work more closely with retailers and improve
divides into two distinct periods of growth
its understanding of consumer purchasing
punctuated by a critical turning point that
decisions. In 1920, P&G placed a big bet on
occurred at about the mid-point. The first
its future by deciding to sell direct to retailers.
period features the company’s founding and early years as a successful regional producer of candles and soap. The founders and their descendants built a thriving business by making excellent products and getting them to market through an expanding network of wholesalers and distributors. Along the way, P&G also built a strong reputation for quality, integrity, and treating employees and customers fairly and respectfully. The turning point came in the 1870s, when P&G faced a strategic dilemma in the form of the irreversible decline of the candle business. Resolving the dilemma involved the transformation of soap from a commodity to a branded packaged good—Ivory—a breakthrough that heralded a new period of impressive growth serving the rapidly developing national market. In the four decades following the introduction of Ivory in 1879, P&G prospered by making and selling brands that consumers wanted and retailers were eager to stock. The principal job of the Sales Department entailed working with wholesalers and distributors to satisfy soaring demand and raise the visibility of P&G brands in stores, especially in the grocery trade, across the United States. As
Modest Beginnings and Abiding Principles 1837–1875 In 1837 in Cincinnati, time and place favored the launch of a venture to make everyday essential items like candles and soap. People needed light and they valued cleanliness, and Cincinnati was well positioned to help with both. The city and its surrounding region were booming through industry, especially meatpacking, and trade. Lard and tallow, byproducts of meatpacking, constituted essential raw ingredients for candles and soap, and these ingredients were available in ample volume and at low cost. Cincinnati’s location along the Ohio River enabled merchants to ship goods downriver to St. Louis, New Orleans, and the Gulf of Mexico and beyond, while canals opened up additional markets via the Great Lakes network. Winter freezes made trade seasonal, though the imminent arrival of the railroads was about to ignite an economic revolution, enabling year-round commerce and underpinning the development of a national market for manufactured goods.
17
18 Building a Strong Foundation
When partners and brothers-in-law William
The partners lacked the capital to cultivate
Procter and James Gamble opened the doors
distant markets, and investing in a large,
of their new firm there were at least 17
proprietary sales force was out of the
candle and soap producers in Cincinnati. The
question. To get their products to distant
partners were determined that P&G would
locations, P&G formed relationships with a
not be just another firm, however. They
network of wholesalers serving thousands of
were already thinking big, planning to grow
small general stores, the typical retail outlets
the business beyond the city. They were
of the era. A single proprietor operated
ambitious and competitive, and they shared
most such stores, holding inventory behind
an important insight: theirs was not a
a counter or in a back room while expecting
boutique business, but one that could be
consumers to ask for what they wanted.
scaled. Early on, P&G built a factory, and early
Candles and soap were commodities, and
on, as a result, the firm faced an enduring
consumers did not know or care who
challenge to keep the factory running and
manufactured them. Via the wholesaler, a
its workers employed. Rising to the challenge
store proprietor might have some information
meant managing both sides of the market
about an item’s producer, product features,
equation, production and consumption. The
and suggested pricing, but whether this
partners did not explicitly divide responsibili
information was used shrewdly was another
ties but Gamble gravitated
matter. This was also still a barter economy.
toward manufacturing, while Procter tended to focus on selling—the latter emphasized nearly 175 years later, when P&G honored its most exceptional salespeople, designating them William Procter Sales Masters. Meanwhile, the partners agreed on
Consumers might trade produce from the farm for a bar of soap. Even wholesalers made do without cash; one, for example, exchanged a buggy for a series of shipments from P&G, an enterprising transaction on the part of both the wholesaler and the company.1
fundamental business principles, to establish the firm as a reliable and trustworthy source
During its first few decades, P&G added
of goods. As honest and hardworking men,
distributorships and increased its coverage
they also determined to make and sell only
across the Midwest and southern states,
high quality goods, offering them at a range
building a steady volume of business. In the
of price points to serve the needs of as many
early years, candles proved a bigger business
people as possible.
than soap, with P&G’s “Star Candles” particularly popular and the inspiration for the company’s first enduring logo. The company shipped its products in wooden
In its first year, P&G used descriptive advertising (lower right) to attract business. The company also cultivated a reputation for producing goods of high quality (lower left) that would remain an enduring hallmark. Although it sold vegetable glycerine to other businesses—a B2B selling
stream in chemicals that continues today— the company increasingly focused on consumer products sold primarily through the grocery trade. The Kroger Company (photo below), founded in Cincinnati in 1883, has been an important P&G customer ever since.
19
20 Building a Strong Foundation
boxes or crates (forerunner of today’s ubiquitous cases) mostly carried by water, though some by horse-drawn wagon, before the coming of the railroads. To help identify the contents quickly, some wharf hands marked the boxes with symbols, including a crude Moon-and-Stars for Star Candles. The symbol caught on, and after the 1850s, it would morph into a company logo that endured for more than 125 years. On the eve of the American Civil War (1861–1865), P&G recorded annual revenues between $150,000 and $200,000 per year. Much of it originated within a 200mile radius of Cincinnati, but the company also sought to penetrate the nation’s flourishing cities. While urban growth would explode later in the century and continue unabated into the next two, P&G early on sensed the looming opportunity. In the 1850s, George Procter, William’s son and one of the company’s first sales reps, called on customers in Chicago, New York, Philadelphia, and Baltimore with impressive results: back in Cincinnati, production soared from an average of about 150 boxes to as many as 2,000 boxes per day on the basis of the new orders.2
The sales function in this context consisted of ensuring product availability and providing price lists and a few sales aids that wholesalers could pass on to retailers if they were so inclined.
During its first 83 years in the U.S. market, P&G relied on distributors to get its goods into retail outlets. The company equipped distributors with price lists and sales aids to stimulate business.
top: Established in 1859, the Great Atlantic & Pacific Tea Company (A&P) became one of P&G’s first national customers. A&P—like P&G— initially moved products from factories and warehouses to stores via horse-drawn wagons.
P&G also placed factual, descriptive ads in local
new strategic challenge emerged. As a
newspapers and sent out circular letters indi-
consumer necessity, candles were coming
cating terms and suggesting ways to attract
to the end of their run, as oil and gas (and
customers. The key to success was to identify
soon electrical) lighting provided superior
capable and reliable wholesalers to serve the
alternatives. P&G had little time to adjust.
21
evolving market as the population grew and urbanized—which P&G evidently did.
The way forward would involve converting a commodity, soap, into a branded consumer good, with dramatic changes in the way P&G
The Branding Revolution:
conducted its business. By then the company
From Push to Pull, from Region to Nation
was in the hands of the second generation, with William A. Procter, Harley Procter, and James N. Gamble the key figures. Like
During the American Civil War, P&G lost
their fathers, they divided responsibilities,
business in states that seceded from the Union
with William A. Procter providing executive
but more than made up for it by securing big
leadership, Gamble focusing on research and
contracts to supply candles and soap to the
manufacturing, and Harley Procter in charge
Union Army on the Western front. Revenues
of sales and what today is called marketing.
climbed five-fold and necessitated expanding
A trained scientist and one of the first
production capacity and a rush to secure raw
industrial chemists in the United States,
materials. As it happens, two members of the
second generation, William A. Procter and
managed to lock up vast stores of key raw
materials and arranged to ship them upriver
Gamble’s disciplined approach to scientific
to Cincinnati. Without such resourcefulness,
experiments found a match in Harley
an early characteristic of the sales force, P&G’s
Procter’s approach to sales and advertising.
business might have suffered greatly during
As he surveyed the rapidly expanding and
the war.
evolving business environment of the late
James N. Gamble, were in New Orleans on a sales trip when the war broke out. They quickly
Gamble transformed soap making from an ancient craft into a modern science, developing rigorous standards and procedures to achieve consistent, high-quality production.
19th century, Procter sought new ways to At the end of hostilities, the company expected
reach consumers and hard evidence, even
sales volume to drop but hoped that it could
if based on trial and error, that innovations
still make use of its new capacity and human
would yield positive results.
resources to resume healthy growth. As it began to make headway, however, a daunting
A son of P&G co-founder
Three primary attributes
William Procter, Harley
distinguished Ivory:
Procter was the father
purity, which signaled
of marketing at the
high quality; mildness
company and one of
(“No chapping�), and
the great figures in
floating, which made
the history of modern
it easy for consumers
business. As director
to find in basins and
of sales, Harley
tubs. Behind national
Procter oversaw the
advertising, Ivory
transformation of soap
became a hot product
from a commodity to a
that retailers were eager
differentiated consumer
to stock.
product.
Harley Procter
The development of P&G’s first branded
national magazines such as The Saturday
product, Ivory soap, reflected the
Evening Post, Century Magazine, and Ladies
convergence of progress along lines the
Home Journal. As critical as the new media
young partners pursued. During the 1870s,
was new messaging, learned through a
Gamble corresponded with leading soap
process of rapid-cycle trials with different
makers and chemists around the world while
copy in monthly magazines. By the late
conducting careful experiments using new
1880s, P&G had a successful formula for
raw materials to replace tallow and lard. By
selling soap—not only on the basis of
1878, he had developed a pure white soap
cleaning power, but also of purity, reliability,
that cleaned both clothes and skin well,
convenience, and lifestyle. Ivory proved a
was mild to the touch, and could float, an
blockbuster and one of the seminal brands in
appealing feature since users could find it
the history of consumer packaged goods.
easily in a basin of water. It is hard to overstate the impact of Ivory Sold initially as White Soap, Harley Procter
on P&G. The scale of operations increased
gave it a new name, Ivory, as well as eye-
dramatically, prompting the construction of a
catching packaging. The name not only
vast new manufacturing complex, Ivorydale,
evoked the soap’s color but also signaled its
near Cincinnati. Employment surged, creating
more-than-ordinary value. The packaging
an imperative to upgrade and professionalize
was chosen to stand out on grocers’ shelves
personnel management, resulting in the
and inspire consumers to ask for it by name.
development of such distinctive employment
Finally, Harley Procter experimented with
practices as a regular work week, guaranteed
ways of advertising the product, more than
employment, and a profit-sharing program.
doubling the company’s advertising budget
The company intensified its commitment
to appeal directly to consumers. A terrific
to R&D and sought steadily to upgrade its
salesperson himself—he once journeyed
products and engineer features in them that
to San Francisco to book a single order for
consumers would value. Ivory validated and
17 rail cars of Ivory—Procter believed that
confirmed the partners’ disciplined approach
advertising amounted to “salesmanship in
to management based on research and
print” and that “only steady and persistent
experimentation and involving thorough
advertising would pay while hit-and-miss
analysis.
advertising would be sheer speculation.”
3
Although P&G continued to spend on news-
In the marketplace, Ivory was a hot consumer
paper advertising and circulars for local
product, one of the first in modern business
markets, it set itself apart from the competition
history, and wholesalers and retailers
by placing ads in the new media of the day,
clamored to get it. Consumers asked for Ivory
23
24 Building a Strong Foundation
by name and wanted their retailers to order
Although wholesalers benefited from the
it when it was not available. Before
enlarging pipeline of products and the
Ivory, P&G sales reps were pushing product into the retail pipeline; after Ivory, consumer demand was pulling P&G products through. In the 1880s, Harley Procter founded P&G’s Sales Department to meet the growing demand. The organization initially
new way of doing business, they also grew wary of P&G’s growing influence in the marketplace and frustrated by their own relative weakness. Some took to games manship in invoicing and stockpiling, and attempted to play off P&G against other suppliers. This was more than a
consisted of himself, his assistant Hastings
mere annoyance to P&G, as it could
French, who had joined the company at
trigger fluctuations in production, factory
age 16 in 1869, as well as three sales reps.
slowdowns, and even shutdowns, which
Procter took overall responsibilities while
threatened the company’s policy of
the others served defined regions. French
guaranteed employment.
handled New England, New York, and the mid-Atlantic states, while his colleagues
At the same time, retailers were not much
respectively focused on Ohio, the South,
happier as they wanted predictable
and the West. When Procter retired in 1890,
supplies to help respond to the rising power
French succeeded him as General Sales
of consumers knowledgeable about
Manager, remaining until 1911.
brands. In the 1870s and 1880s, several
4
retailers, including F. W. Woolworth, had
Going Direct
pioneered the concept of shopper selfservice, placing goods on tables and shelves
In the late nineteenth and early twentieth
where shoppers could browse, discover,
centuries P&G built on Ivory’s success to
compare, and ultimately choose the items
introduce other soap brands and, in 1911,
they wanted. Shoppers no longer had to
its first food product, Crisco shortening.
request items by name or heed the advice
The company backed all of its brands with
of retail proprietors or clerks. This was a
national advertising and a slew of increasingly
revolutionary change that empowered
sophisticated sales and promotional tactics to
shoppers, and it soon spread from
stimulate demand: samples, trials, premiums,
discount stores into department stores and
and inserts; exhibits and staged introductions;
eventually the grocery trade where P&G
wall signs, poster ads, and streamer ads;
increasingly sold its wares. Established in
educational pamphlets offering advice and
Memphis in 1916, Piggly Wiggly is generally
tips about maintaining a clean household and
credited as being the first self-service food
preparing meals.
25
In 1920, prompted by the need to improve the flow of goods to market and stabilize employment, P&G made the courageous decision to streamline distribution and sell direct to retailers across the United States.
As a consequence, the company hired and trained hundreds of sales reps to serve the growing grocery trade.
26 Building a Strong Foundation
store in the United States, featuring open shelves, shopping baskets, and checkout counters.5 From there, self-service shopping proceeded swiftly across the trade. It was clear that consumers loved self-service, although it posed challenges throughout the retail value chain. There was little direct contact between retailers and manufacturers of popular goods, and conducting trials and promotions or offering premiums through the intermediation of wholesalers proved inefficient and confusing. As the growing volume and complexity of its business and changing shopping behaviors strained the traditional system of distribution, In 1916, Memphisbased Piggly Wiggly ignited a revolution in the grocery trade by opening several stores using the concept of shopper self-service. Goods were arranged on shelves in aisles and shoppers could pick out what they wanted without having to ask for it.
The new format proved a boon to P&G. Its nationally advertised brands, attractive packaging, and merchandising and promotions helped draw shoppers into the stores.
P&G took a hard look at selling directly to retailers, a practice followed by only one other national consumer goods manufacturer at the time.6 Typically, P&G examined the question through experiments, data-gathering, and rigorous analysis. The company’s president, William Cooper Procter, grandson of the founder, tasked future president R. R. Deupree as General Sales Manager to investigate a direct-sales approach. In 1913, P&G began selling directly to retailers in New York City. Positive results—wholesaler protests notwithstanding—led to an expanded trial in New England in 1919. The verdict came in shortly thereafter, and P&G recognized the need to move fast: on June 28, 1920, the company announced that it would begin selling direct to retailers as of July 1—just two days later.
Teaching the Trade
“I Can’t Compete.”
In the early years,
How many times have you heard
Moonbeams frequently
a [grocer say]: “I can’t compete
included scripts for
with that other store. You sell
handling retailers’
him at a price that I can’t even
questions and concerns.
sell at. He’s a cut price man and
An example:
would like nothing better than to run me out of town ruined,” etc. When a [grocer] starts to wail about his competitors, it’s hard to get him off the subject. How do you switch him? One successful salesman’s way was: “Mr. Grocer, I read in a magazine the other day that only one grocer fails because of competition to every 25 who fail because of incompetence. So you see your chances are pretty good if you stick to the rules which make a store successful.
• Keep your store clean and
your stock neat and handy.
• Keep your prices at such a point that you have to turn over goods fast to make a profit.
• Buy such goods as are so well known that they will turn over fast.
• Have a ‘special’ or a leader once a week to show old customers real value and to attract new ones to your store. Stay close to cash business and take your discounts on what you buy.
• Use the most valuable space
in your store—your windows— for the purpose intended by having a new, fresh display of price-marked goods every Saturday for the week following.
• Sell your service and your
goods with a fund of optimism and a rule of square deal.
• Turn your money fast and
competition won’t worry you.”
27
28 Building a Strong Foundation
In a single bold and swift stroke, P&G completely changed the way it went to market. The number of accounts skyrocketed from 20,000 to nearly 400,000. The company
before P&G would realize the full benefits of direct contact with retailers, but the possibilities were immense. Meanwhile, the sales force had to take on
quickly hired and began training a full-time
new responsibilities, ensuring that P&G
sales force of 450 individuals. It established
brands received appropriate placement and
routes and calling patterns. It set up
attention. Reps visited stores with more than
150 warehouses around the country and
a sample case, arriving with hammers, tacks,
purchased or leased a thousand trucks.
and adhesive tape to mount signs. They
And it proved a bumpy ride.
brought “large and small posters, counter can and package holders, enamel signs for
The wholesalers resisted fiercely. Most
external signage, and framed embossed
disparaged P&G’s actions and some
cards for attaching to the grocer’s walls or
attempted to smear the reputation of the
chandeliers. P&G also supplied streamers and
company and its brands with retailers.
display cartons” for window displays.7 On
Some gave advantageous terms to P&G
Saturdays, then as now the busiest shopping
competitors. Some tried to get lawmakers to
day of the week in the United States, many
intervene on their behalf. And it was unlucky
sales reps turned up at the stores to help
timing. The move coincided with a national
sell the company’s brands.8 Always looking
recession and P&G’s revenues tumbled by
to contain costs, the Sales Department
nearly 40 percent. It would take six years to
pioneered off-shelf cut-box displays as an
recover the lost volume.
efficient, eye-catching technique to feature the company’s brands.
Going direct eventually worked for P&G, which clung tenaciously to the strategy. By
As P&G regained volume, it built on the
the late 1920s, not only was business back
strong foundation established in its initial
but the company also had improved its
decades. The company had made itself into
competitive position. It could better manage
a strong national competitor, with several
its costs of distribution while removing a layer
appealing consumer brands and nationwide
of complexity. The change also enabled P&G
market coverage. Looking forward, the
to work more closely with retailers for mutual
challenge for P&G was to keep the growth
benefit. It now became much simpler to run
engine humming, by adding more brands,
promotions and experiments and gather
increasing penetration in existing channels,
data about retailing and shopper behavior at
and expanding into new markets.
the point of sale. It would be many decades
A Glimpse of the Livelihoods of Sales Reps in the 1920s
The typical starting
In 1920, P&G launched
“your ordinary traveling
a version of its monthly
expenses to and from
magazine, Moonbeams,
your sales area. This
to support its sales force,
includes railroad fare,
filling it with useful
hotel, car fare, but
information, examples of
not your laundry. Any
sales best practices, and
livery costs could be
advice and tips.
covered but require your
wage for a sales rep was $100 a month. The company informed reps that it would pay
manager’s approval. Hotel costs were strictly limited to $2.00/day.”
29