Clarification of Question by
pasof-ga
on
26 Apr 2004 16:31 PDT
Unilever: power?
?My God! THEY?RE REALLY GOING to use it! Nabil Sakkab Proeter &
Gamble?s European head of laundry products development, exclaimed to
colleagues as he looked closely at the myriad, tiny pink crystals
scattered among a heap of detergent he?d just poured on to his desk.
It was mid-March 1994 ? the beginning of a protracted nightmare for
Unilever, when arch rival P&G discovered the secret ingredient in its
super-concentrated Power, a new, revolutionary washing powder: Omo
Power in the Netherlands, Persil Power in the United Kingdom and
Skip Power in France. Power was the biggest advance in fabrie
detergents in 15 years, and sales of power were leaping in the three
European countries where it had been launched. It worried P&G not just
because the rivals were doing so well, but because Power contained a
manganese catalyst, known as the ?accelerator?, which is ?unkind? to
clothes ? it attacks fabrics! P&G had dropped the defective manganese
as a possible ingredient ten years ago for that reason.
The question P&G posed was ?WHY?? With that, the Great Soap War over
Unilever?s Power detergent began.
Power, the culmination of five years of developmental work, lay
behind Unilever?s strategy to salvage its market position in the ?10
billion European fabric detergent market in which P&G had long since
overtaken it. Power was the company?s second entry into the
concentrated fabric detergent market. It had to be the trailblazer in
the industry, a quantum leap in detergent effectiveness, to win back
the lead. Unilever planned to launch Power in 11 countries in short
order ? a marketing blitzkrieg without precedent in Europe. For Niall
Fitzgerald, Unilever?s global coordinator of detergents , much was
riding on Power?s success. Turning round Unilever?s ailing detergents
business could mean eventual ascent to the joint chairmanship of the
group.
A private warning
Ed Artzt, P&G?s chairman also nicknamed the Prince of Darkness, had a
well-earned reputation for responding rapidly and ruthlessly when he
felt P&G?s interests were threatened. Power?s success posed a
significant threat to the company?s current and imminent new products
? Ariel Future was due for launch in late 1994. the Power detergent
was claiming a technological lead based on what he knew was a
fundamentally flawed formula. Sakkab and his colleagues at P&G?s
European Technology Centre not only found that some dark dyes in
cotton and viscose fabrics reacted badly to the detergents, they also
discovered hoiles in clothes washed in Power.
On 31 March 1994 Artzt urged top executives at Unilever House,
London, to withdraw their new detergent. This was a private warning.
For all the aggression in the market, P&G and Unilever have been known
in private to alert one another to product flaws and work together to
solve problems. this time, however, Unilever executives ignored this
private warning, suspecting that Artzt was on a spoiling mission to
undermine Power. Fitzgerald saw no need to take the costly and
humiliating step of withdrawing Power, which had already been tested
by scientists and over 60.000 consumers for two years without
incident.
A story in the Dutch press on 27 April 1994 quoted a P&G spokesman
who alluded to fabric damage caused by Power. Unilever held a press
conference on 29 April denying P&G?s claims, while issuing two writs
for product defamation and trademark infringement, and seeking an
injunction to stop P&G using the term ?Power? for its own detergents.
Things were getting ?grubbier? by this time!
P&G not only hired the PR firm, The Rowland company (a Saatchi &
Saatchi subsidiary), to run its campaign of public vilification, but
also started a ruthlessly well-organised knocking-copy campaign ?
running around Europe to consumers associations, washing machine
manufacturers, retailers and anybody else who would listen, giving
them very extensive technical briefings with lots of pictures of
Power-damaged clothes.
Unilever on the defensive
Power sales fell after every P&G onslaught. Although Unilever was able
to rebuild them with advertising and special offers, this defence
could not hold out for long. Leading supermarket chains in various
countries were considering emptying their shelves of Power, even
though unilever stood firmly behind its products, denying that there
was a problem.
On 3 June 1994 Unilever announced that it would:
? drop the lawsuits against P&G (after P&G assured Unilever that its
spokesman had been misquoted);
? reformulate Power, and reduce the level of the accelerator in the
powder by SO per cent.
Meanwhile, P&G persisted in proving its point, releasing to the
press pictures of clothes damaged by Power, plus results from six test
institutes, all of which became front-page news in several European
countries. Consumers associations damned Power detergents;
environmental campaigners in Sweden accused Power of putting the
nation?s clothes in imminent jeopardy! Unilever remained defensive
with both the press and the public, failing to find an effective
counter to criticism from all sides.
Unilever?s climbdown
Unilever revamped and relaunched Power products, while also retreating
from its original broad market positioning to a more specialized niche
? the package in lower temperature and on white fabrics. The company
attempted to reassure consumers through advertisements that guaranteed
the safety of its revamped product. But then the Dutch consumers union
confirmed the damaging effects of the upgraded Power.
In late 1994, Unilever management finally admitted: ?We made a
mistake. We launched a product which had a defect which we had not
detected. We were very enthusiastic about an exciting new product and
did not look closely enough at the negatives. Somewhere between
research and marketing something went wrong under the normal pressure
to be first to the market?
Unilever obviously failed to anticipate how violently its arch rival
would react. By the end of the year, new independent tests, including
the UK Consumers Associations Which? Investigations, confirmed
everybody?s suspicions ? that Power, even the reformulated version
with reduced manganese, was defective.
Costs of the Power fiasco to Unilever?
After spending more than ?300 million on developing, manufacturing and
marketing Power products, Unilever remains a poor second to P&G in the
European detergent market. A heavy price was extracted on reputations
? the company?s and those of the Persil and Omo brands. Unilever?s
image as a shrewd marketer and innovator was undermined. The whole
affair has exacerbated consumers scepticism towards manufacturers; as
one retailer said, ?the whole [detergents] sector is drowning in
over-claiming and publicity which leaves consumers confused.
Power products were eventually withdrawn from all markets. There
were painful lessons to be learnt by management. Not least, the
company has to try harder to develop new products that satisfy
changing customer needs profitably. In 1998, the company beat rival
P&G to the launch of revolutionary Persil tablets. Revolutionary
because the concept of tablets (in this case, two to be used in each
wash) for the first time offers consumers the benefits of no mess, no
waste and no confusion about the amount used.
Questions:
1. Identify the key actors and forces in the company?s marketing
environment that affect its ability to serve its target customers
effectively.
2. What were the most critical actors or forces that accounted for
Persil/Omo Power?s final downfall?
3. Show how each of the actors/forces you have identified in question
2 directly (or indirectly) impacted on Unilever?s final decision to
revamp and relaunch the defective Omo/Persil Power.
4. Critically evaluate the motives of P&G.
5. What are the key lessons for management?
6. Could the problems have been anticipated and avoided? How?
