Marketing 18th Edition by William Pride,Ferrell

Exercise 1

Procter Gamble Tunes Up Channels and Transportation
From Duracell to Dawn, Pampers to Prilosec, Procter Gamble markets some of the world's best-known brands for household needs, health care, personal care, and baby care. Its portfolio includes 25 brands that bring in more than $1 billion each every year, plus another 15 that bring in at least $500 million every year. In all, Procter Gamble rings up $84 billion in sales through traditional stores and online retailers in 180 countries.
Because nearly all of Procter Gamble's products are convenience goods, the company uses intensive distribution market coverage. Among the retailers that carry its products are supermarkets, drug stores, convenience stores, discount stores, and warehouse clubs. Shelf space is valuable, so not all stores carry the entire product line in any given category. In many stores, Procter Gamble's branded items compete for shelf space not only with other manufacturers' brands, but also with store brands. This isn't always the case, however. For example, Procter Gamble recently signed an exclusive distribution arrangement with Sam's Club, making Duracell the only national brand of batteries sold in those warehouse stores. And, knowing that warehouse stores have limited back-room storage space, Procter Gamble makes more frequent deliveries to ensure that its products are always in stock for club members.
Eyeing long-term growth in emerging markets, which already account for 40 percent of its sales, Procter Gamble is always looking for a distribution edge that will put its products on more shelves. When the company acquired Gillette in 2005, it also obtained access to the marketing channels Gillette had established for its razors, blades, and other accessories. This helped Procter Gamble gain additional distribution for a wider range of products in India and Brazil, among other nations.
Procter Gamble is testing new Internet and mobile channels for some of its everyday products. In one Toronto experiment, it teamed with the online retailer Well.ca to create posters of frequentlypurchased products like Crest toothpaste and Pampers disposable diapers, along with QR (quick response) codes that can be scanned by consumers with QR apps on their smartphones. The posters were positioned in a busy downtown building adjacent to the subway, where time-pressured commuters could take a minute or two to scan the items they wanted to purchase and arrange delivery from Well.ca at a convenient hour. In another Toronto experiment, Procter Gamble teamed with Walmart Canada to create virtual stores inside 50 bus shelters. As consumers waited for a bus, they used their smartphones to scan QR codes for baby products, beauty products, and other merchandise, and set a time for later delivery. Tests such as these help both the manufacturer and retailers to refine future marketing efforts as technology evolves.
In addition, the Internet retailing pioneer Amazon.com has asked Procter Gamble to help it speed up delivery of products sold online. At Amazon's request, Procter Gamble has roped off a small, separate area inside seven of its distribution centers, reserving this space just for the use of Amazon. These centers in the United States, Japan, and Germany hold cartons and cartons of bulky products like Pampers disposable diapers and Bounty paper towels while they await delivery to retailers. Instead of trucking these goods to Amazon's distribution centers when needed, Procter Gamble simply shifts them to the separate Amazon section of the building. There, Amazon employees select individual items to fulfill customer orders and ship the boxes directly from the distribution center to consumers. Not only does this save time, but it also saves money for both Procter Gamble and Amazon.
Efficiency is vital when a marketer like Procter Gamble distributes products in such massive quantities. In North America alone, the company prepares 800,000 shipments annually for delivery to retailers' warehouses and distribution centers. Shaving even a few dollars per shipment adds up to a significant savings over time. Greener transportation is also helping Procter Gamble save money while it helps protect the planet. Although the company maintains a small fleet of trucks, most of its products are transported by 80 outside trucking companies. Procter Gamble is working with the truckers to significantly increase the percentage of shipments transported by vehicles that run on compressed natural gas, making physical distribution greener in environmental and financial terms.
Questions for Discussion
Do you think Procter Gamble should use a direct channel to sell to consumers? Identify one or more arguments for and against using a direct channel for disposable diapers and paper towels.