Comparison of Unilever and P&g Marketing Strategies
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Unilever has experienced quite a rollercoaster of marketing success and failure over the last 5 years. Originally its new 5-year strategic plan entitled Path to Growth had special promise and forecast for success. The primary objective of this plan was to cull Unilevers tail brands and place extra emphasis on those which were market leaders. Niail Fitzgerald believes that too many brands often confuse the customer and thus lead to poor purchasing decisions. The paradox of choice between Unilevers products had to be addressed. This meant a dramatic reduction of over 1200 smaller brand names, the closure of 138 production facilities and the loss of 51,800 jobs. The key financial targets of this plan were to improve sales growth of the top line brands (which accounted for 90% of their annual turnover) by 5-6% each year, achieve an operating margin of more than 16% per annum and attain a double-digit figure in annual growth in earnings per share.
Unilever wanted to change its operations and follow a more differentiated and dynamic strategy of offering a service rather than a selection of products. This follows in line with PIMS which illustrates that growth in brand sales and market share is directly related to innovation and without a complete customer focus, market share and Return on Investment performance will suffer. Unilever also believe that by adopting an innovative approach to its brands, they will experience continued sales growth.
Unilever would also restructure its organisation and seek to cut out many of its suppliers in an effort to cut costs and simplify the supply chain. This tactic accompanied with the factory and job cuts would enable them to use the additional cash on top-line brand promotion and pass cost savings onto the consumers. Another tactic was to cease advertising expenditure on its smaller brands and switch its resources and capabilities away from them. Maintenance advertising is crucial to performance of both small and large brands, yet Unilever decided to go against this proven theory. This was a clear mistake as their smaller brands still had a large consumer base and ignoring them completely in terms of promotion and effective management led to problems further down the line despite the initial rewarding cost savings.
Their financially strong platform and extensive marketing budget also meant that they could promote their products with great backing. Past experience has indicated that their advertisements are extremely weak and dull though, with a focus purely on risk management which does nothing for the consumer. It was also too process orientated, bringing in few new sales at a heavy cost.
Unilever also wanted to create a greater focus and association with their consumers through their brands and their own name. Predominantly, Unilever has focused
on the food products market whereby it has promoted its products as ones which bring health and vitality to the buyers. Fitzgerald wanted to align their brand name with consumer expectations and develop an identifiable image for the company. The company invested Ј7m in a logo facelift which sought to bring the important facets and virtues of the business to the consumer. However, this cosmetic change has brought little credibility to Unilevers performance. It hasnt made a lasting impression on their customers and the company has suffered on its key financial target and overall brand image. It also seems that the rollout was not fully integrated.
Unilevers main problem is that it has focused
on a saturated market which offers little extra room for growth. The sales growth figures have continued to fall to around 3-4% growth, and they even had a negative sales decline quarter in 2004.They have also decided to cut the remaining 300 tail brands despite the previous tactic having a clear negative effect on performance. Other financial targets have all been met however, so the plan was not a failure in any sense, more a misdirected approach to the market with highly ambitious growth targets in what is a highly saturated marketplace.
The company also seems to have overlooked the consumers needs and in a market where innovation and differentiation is vital, they have done very little to address this point. Unilever hasnt really innovated at all. It may have introduced brand extensions for household names like Dove which used to only be soap, but they failed to proportion the advertising backing that these brands needed and innovate further. Magdalene Miller states that despite having a decent range of brands, they fail to produce products that the consumer really needs or desires.
Now investors in Unilever are worried about the decline of sales growth and poor advertising affecting the companys profitability and future reputation. The company also seems to have a lack of market awareness and fails to identify key trends. The Atkins diet had a devastating impact on the performance of its Slim-fast product lines, yet this could have been avoided if thorough research into the market conditions had been undertaken.
The company is also taking a lot of heat from its closest rivals. Both P&G and Reckitt Benckiser have experience formidable sales growth over the last few years and their organisational restructuring has proven to be of great success. The pressure is clearly on and Unilever has had to adopt a new strategy.
Unilever has recently had a shake-up and its 5-year Path to Growth plan has now been axed. Now Unilever will focus on more prominent corporate advertising and brand association with a new branding initiative which will use their logo more widely on their range of products and local businesses. They will continue to focus on their top-line brands with additional advertising and promotion spend in the hope of revitalising annual sales growth. They have also announced that they will need to seek out new recruits and hire dynamic individuals who are right for the task in hand. Directors will also have to be re-elected on an annual basis which means performance and strategic direction means everything.
Unilever has clearly learnt from previous mistakes and has restructured its approach accordingly. Now its priority is creating value