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Market Research History - Brand Management at P&G

Neil McElroy's Famous Memo Changed Brand Strategy

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downtown clock

In the space age, man will be able to go around the world in two hours—one for flying and the other to get to the airport. --Neil H. McElroy

Courtesy Lars Brinkman, Photographer. Copyright November 14, 2007.

Market research has its roots in an American business institution – Procter & Gamble. The company is billed as the largest manufacturer of branded products for households. Brand management is the sort of concept that seems like it has always been around. But a look into the history of Procter & Gamble proves otherwise. Moreover, a number of market research practices that are fundamental to consumer product companies began with Procter & Gamble.

Brand Management Began with One Executive and Two Soaps

Two early products of Procter & Gamble were Ivory soap and Crisco. In fact, it could be said that Ivory soap was the slippery slope on which brand management got its start. Brand management was the brain child of Neil McElroy, an employee of Procter & Gamble who worked on the Camay soap campaigns.

In 1925, Neil McElroy graduated from Harvard College and landed a position with Procter & Gamble. Camay soap became his focus and the advertising campaign became his game. Procter & Gamble’s flagship product, Ivory soap, was doing very well against the competing soaps from Palmolive and Lever Brothers. So well, in fact, that McElroy found that his Camay campaign was directly competing with Ivory in the marketplace.

Under the model established by Procter & Gamble’s President Deupree, the company had an admirable and reasonable policy of containing memorandums to one page or less. The one-page memo was held up as a model for internal communication in corporate management circles. Having had a bit of time to think about the situation, McElroy drafted a three-page memo explaining his ideas about how Procter & Gamble brands could be promoted more effectively. He argued for a system that would target more resources and attention at Camay and other Proctor and Gamble products, as well.

A hallmark of McElroy’s plan was that one person should be in charge of each brand. Further, McElroy proposed that a substantial and dedicated team should be engaged in every aspect of promoting each of the brands, and that the teams should be focused on only their own particular brands. The idea was so complete in McElroy’s mind that he suggested the team should include a brand manager, a brand assistant, people who tracked the brand, and a handful of other positions focused on specific activities and tasks.

The ideas in the memo followed a line of progress resembling a pin-ball trajectory up and through the corporate hierarchy, until they were enthusiastically endorsed by President Deupree, to whom McElroy’s ideas made sense. Using McElroy’s ideas as a platform, and hot on the heels of the success of Ivory soap and Crisco, Procter & Gamble developed a new approach to managing brands. The new business technique was product-centered and not centered on a business function.

P&G Practices - Market Segmentation & Product Differentiation Roots

The structure created through this brand-centered approach resulted in decentralized decision-making, almost to the degree that the brand was managed as a discrete business. This segregated marketing enabled a brand’s personality to be definitively different from the other brands in a company’s brand portfolio. This process (now commonly referred to as market segmentation) enabled targeting distinguishable consumer groups. From Procter & Gamble’s perspective, this meant that Ivory soap and Camay soap would not compete so much in the market because the different markets were targeted for each brand. Consumers viewed Ivory soap and Camay soap differently, preferring one over the other based on the products attributes or assumed connection to their desired lifestyles. Product differentiation became a key approach to successful marketing and advertising. Naturally, it took market research to discover just what attributes appealed to which markets.

McElroy’s plan for brand management was widely copied and versions of it can be found throughout the global consumer product industries today. Neil McElroy went on to head Procter & Gamble when Deupree retired in 1948, and then later became President Eisenhower’s Secretary of Defense.

As marketing in America developed during the 20th century, brand management signaled emerging innovations in the post-war business boom. Many of these innovations created a tension between centralized authority and decentralized decision-making. Typically, the balance was tipped on the basis of how to best inform the decision, rather on corporate hierarchical authority. This decentralized structure found its way into many other corporations across America. One notable example is the structure at General Motors developed by Alfred Sloan. General Motor’s multiple divisions exhibited the same decentralization for making brand-critical decisions.

Sources:

American Business, 1920-2000: How It Worked - P&G: Changing the Face of Consumer Marketing(2000, May 2) Working Knowledge for Business Leaders. Cambridge, MA: Harvard Business Review.

Gray, Paula (2010, August 8). Business Anthropology and the Culture of Product Manager [White paper for the Association of International Product Marketing & Management (AIPMM)]

McCraw, Thoms K. (2000). American Business, 1920-2000: How It Worked Wheeling, IL: Harlan Davidson. ISBN: 0-88295-985-9 (The book is part of Harlan Davidson’s American History Series).

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