The insight: Procter & Gamble’s strategy of delivering innovation over discounts is helping it navigate economic uncertainty better than many of its peers. While other companies lose sales to private labels, P&G’s US market share is rising as shoppers opt to pay more for products they perceive to be higher quality.
Why it matters: P&G is well aware that shoppers are looking to stretch their dollars further. Households living paycheck to paycheck are using every last drop of their detergent and shampoo and depleting their pantry stores before restocking, CFO Andre Schulten told reporters. Even those with fewer financial constraints are looking to save money by buying bigger pack sizes from warehouse clubs and ecommerce channels.
But rather than follow competitors by discounting heavily, P&G is focused on delivering superior products—in addition to messaging that emphasizes the potential cost-savings of using them. That strategy allows it to offer more value to customers (and raise prices) without losing loyalty.
- That approach—along with a tiered product selection—has been effective at reversing private label encroachment.
- Private label share is now below the “historical threshold” of 16%, having declined 50 basis points, Schulten said on the company’s earnings call.
The takeaway: P&G’s success is rooted in its understanding that value means more than having the lowest price on the market. While shoppers are increasingly price sensitive, they are also focused on performance, and willing to spend more on a product if it saves money in the long-term.
Brands seeking to stay relevant at a time of diminishing brand loyalty need to consistently invest in innovation and product upgrades.
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