Building awareness of brands and making sure prospective consumers can easily find them on store shelves are among the foundational needs of a successful consumer goods business. These are relatively straightforward activities in most markets, subject to a company’s ability to invest in advertising or social media campaigns, and the strength and reach of its sales efforts.
The basic task of brand awareness building, however, takes on additional complexity in emerging markets, such as Pakistan. Before effective brand advertising could be launched, the company had to invest heavily in educating consumers about the benefits of a category, such as shampoos. When P&G entered this market in the early 1990s, consumer research revealed that two-thirds of men, and about half of all women, washed their hair regularly with bar soap – a product not suited for hair washing. And it wasn’t a matter of affordability. Large segments of consumers believed use of shampoo would be harmful to their hair. Surprisingly, many also believed soap was gentler to hair and scalp.
There were similar challenges when it came to laundry washing habits. In Pakistan in the 1990s, the vast majority of consum
ers used laundry bar soap for washing clothes. Even when doing laundry in washing machines, consumers would add laundry bar soap shavings instead of powdered detergent. There appeared to be a belief that bar soap was more effective in getting clothes clean, perhaps a result of the very poor quality of detergents that had been available in the market.
As a result of these habits, total market sizes for both shampoos and laundry detergents in Pakistan were too small for Procter & Gamble to try to carve out a meaningful place for its brands. However, given the population of the country, we believed that, with the right marketing and education effort, it could be a sizable market.
So we got to work on marketing programs that would help expand the market – a massive undertaking to influence consumer beliefs and habits by educating them about the benefits of shampoo for washing hair and the efficacy of powder detergent for cleaning clothes. This effort was undergirded by a massive sampling program – distributing millions of free product samples coupled with endorsements from hairstylists.
As a result, total shampoo market size in Pakistan grew tenfold over a period of 20 years, between the mid-1990s and 2006. During the same period, about 90% of laundry products consumption shifted from laundry bar soaps to powder detergents.
Another challenge in these emerging markets – both Pakistan and Ukraine – was getting distribution of P&G brands in a large number of small stores. Pakistan in the 1990s was a market of 500,000 tiny mom-and-pop stores. It was estimated that getting P&G brands into 125,000 of these would be critical to the company’s success. Importantly, given the small purchasing power of each store, we had to devise very efficient distribution methods so each sales call could be viable. In Pakistan we developed a cascading system of distribution – one national distributor with nine major regional offices and another 50 or so smaller branches. This was augmented with over 100 “sub distributors”. Each of these links in the distribution chain was set up with just the right level of resources so the cost of selling would be commensurate with the sales potential of the market.
In 1996, Ukraine was a newly emerging post-Soviet independent country. Almost overnight, the entire economic system had been upended. Many of the Communist-era government-owned retail stores were gone or inadequate, and in their place thousands of open-air markets were popping up. In these open-air markets across the country were tens of thousands of vendors selling consumer brands displayed on tabletops. Each time a couple of packs of product were sold, a young man or woman would run over to a nearby storage depot to grab more packs to replenish the tabletop display. It was impossible to have any kind of reliable read on these tabletop vendors in the hundreds of bazaars across the country.
Our best bet was to create a system of local distributors who would each know their respective markets well. So we divided the country into five regions each with a population of roughly 10 million, and set up one distributor in each of these five regions. P&G sold to these distributors, and they in turn would sell to retailers in bazaars. Bazaars would pop up overnight and just as quickly be shut down by authorities, only to pop up elsewhere.
One almost surreal scene that has remained with me is a walk through the largest wholesale market in Odessa, Ukraine. It was close to midnight, and in a well-lit open ground wholesalers had set up tabletop displays of products, with a small transport container nearby,
where large stocks were stored. It was the middle of December, and temperatures were below freezing. As we approached one of the vendors, we saw some bottles of Pantene shampoo on display. I picked up a bottle. It was frozen rock solid. You could have pounded a nail with it. For a second I wondered if P&G R&D folks would approve of such storage conditions, but I very quickly realized the futility of such standards in a country newly emerging from three generations of Communist rule.
While success models from developed markets may not be directly applicable to emerging, frontier markets, a methodical approach to conducting business clearly contributed importantly to our success. Between the emerging markets of Pakistan and Ukraine, I estimate Procter & Gamble today has sales of several hundred million dollars – maybe even close to $1 billion.
August 14, 2017