Proctor & Gamble Company (p&g) Case Study

Case: Tide Dry Cleaners

Executive Summary 

In a search for growth opportunity, Proctor & Gamble Company (P&G) decided to take on a huge challenge by switching from a consumer products centric company and step foot in the services arena by introducing Tide Dry Cleaners in 2008. Having experienced global success with over 65 brands, it chose to branch out using a leading market signature brand- Tide. Tide has a strong relationship with its customers, and has been used since 1947 which has led to a strong brand loyalty passed through family generations. With the service sector making up around 75% of the U.S. economy, this seems like the right move, not only to create company growth and expansion, but to reinvent and reignite the innovation fire. So why dry cleaning? It’s a highly fragmented 9-billion-dollar industry, that ultimately has highly dissatisfied consumers, which means there’s a job-to-be-done! With a successful dry cleaner franchising model in 52 locations across 20 states, P&G executives are now considering deviating from its current strategy and restructuring to a large central plant with smaller surrounding drop stores. Will this accomplish the goal of expansion, or will it compromise the unique customer promise and the “wow” experience that has made P&G so successful? As a bottom line upfront, I recommend a blend of both the old and newly proposed model, however we will analyze and discuss further.

Strategy and Analysis

Through extensive market research the FutureWorks development team discovered that customers are generally unhappy with the standard dry-cleaning experience. Complaints of inconvenient store hours for busy lives, parking for drop off and pick up, long in waiting lines, outdated décor and technology in establishments, poor air-conditioning and lighting, limited transparency of product and handling care, damaged/lost items, and inconsistent pricing are just to list a few. With this information P&G clearly identified a “jobs-to-be-done” (Exhibit 1). To address these deficiencies, they entered the industry with the end customers, or “guests,” in mind and created a dry-cleaning experience the customers have been craving.  They created “A Unique Customer Promise” to provide Convenience, Quality and Customer Service. Since every customer is different, and therefore what they value varies, P&G promised “to help our guests be at their best so they’re ready to take on the world.”

While using strategic middle of the road pricing, it may seem they are trying to capture both the high-end and price-sensitive customers, since it was an industry gap that needed to be bridged. For example, for a specific garment the industry pricing would range from $1.95-$5.75, Tide Dry Cleaners would fall at $2.59 for the same garment. However, the true Tide Dry Cleaners customers were the ones that saw value in the Tide brand, quality of product and handling of their garments, and are willing to spend a little more for the extra provided services. Why take your clothes somewhere else to pay roughly the same price, but miss out on all the bonus “perks?” Typically, the customers that see the value in these extra services are above average income households and are against sacrificing quality and service for the cheapest deal. To give itself the competitive advantage and clearly standout, P&G focused on four main pillars: exceptional cleaning quality, outstanding convenience, superior customer service and an attractive rewards program.

P&G could have gone the M&A route to enter the service sector, but they decided to leverage one of their blockbuster brands to maintain the customer loyalty and stay in line with company core values and value proposition. The decision to enter the market place using a franchising model was an attractive way to reduce the required capital. While overall, it has made financial sense in this instance, it is worth mentioning that there are some glaring issues within the franchise model^[1]. P&G as the franchiser, and the individual franchisee may not be entirely aligned or may have conflicting interests. Sure, the franchisees have skin in the game financially, but often their motives for business can be driven by green or other personal gains. They do not have to worry about brand image, core competencies, etc. on the same level as P&G does, because at the end of the day “Tide” is in the name so it is the company’s reputation at stake. Of course, it’s in the franchisees’ best interest to value customer satisfaction to drive reoccurring business, but it’s primarily motivated by sales. Without the larger company picture in mind, it is easy to get sucked into the micro level and have goal misalignment.  (See Exhibit 2 for current proposal.)

What Are Some Options? 

I will discuss three options here, along with the pros and cons for each. (Please see Exhibit 3 for a table comparison of all options against the four main pillars.)

Option #1: Leave the model as is Already a deviation from original plan of standardizing the customer experience by creating identical plant stores and drive-thru valet service. Eventually there was the addition of drop stores and non-trads.

Pros-

• Supports value proposition (specifically transparency) and all four pillars.
• Provides an in-person experience.

Cons-

• Growth and expansion are potentially slower.

Option #2: New proposal/model One larger centralized plant with 20-40 drop stores.

Pros-

• Meets goal for growth and expansion, by providing greater coverage.
• Greater coverage could potentially lead to more traffic or revenue.
• Helps franchisees keep investment and lease costs down.

Cons-

• Deviation from fundamentals and customer proposition.
• More trust, responsibility and oversight are transferred from franchiser to franchisee. This can be dangerous, turning the plants into “mom and pop” stores with a Tide name.  

Option #3: Hybrid/Combination A combination of option #1 and #2.  With significant market analysis, P&G could use the proposed method in areas where customers value transparency, face-to-face interactions with employees significantly less, and are more focused on convenience and quality. Perhaps this group of customers doesn’t need the “wow” experience or ancillary bells and whistles. They may just want a reliable, high-quality dry-cleaning service, that uses products they trust for an affordable price. Meanwhile, P&G would continue to use a version of the original model in locations where customers value attributes such as transparency and the in-person customer service experience.