GDM CASE STUDY ANSWER SHEETS - Seven consumer goods firms, including Kraft, General Food, Quaker Oats Co., and Colgate-Palmolive are experimenting with pricing strategies


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Sales and Distribution Management

Case 5 :- Procter & Gamble Tries New Pricing Strategy
          Seven consumer goods firms, including Kraft, General Food, Quaker Oats Co., and Colgate-Palmolive are experimenting with pricing strategies that appears to achieve the same goals as everyday low pricing. But most of these firms deny they are initiating everyday low pricing strategies. Not to be confused with everyday low pricing by retailers like Wal-Mart Stores, the strategy used by manufacturers, eliminates the varying prices they offer retailers as a part of trade promotion deals. Proctor & Gamble, however, did use everyday low pricing, when it reduced the listed prices on many of its best selling brands.
The goal of Proctor & Gamble’s everyday low pricing strategy is to give better value to consumers who have suffered through a recession. But although the strategy is designed to give greater value to consumers, many retailers have openly protested. Vice President of corporate affairs by Big Y Foods said, “We are not happy with Pig’s everyday low pricing programme. It takes away our flexibility as a retailer. Basically, P&G is saying we have one option – take it or leave it. We are therefore leaving it when we can.”
Most warehouse clubs and mass merchandisers prefer to everyday low pricing. On the other hand, many supermarket chains, including lewel Food Stores and Supermarket General’s Path mark, have publicly or privately expressed dissatisfaction regarding Proctor & Gamble’s policy. Those retailers who operate with a “high-low” prices with frequent specials are particularly upset.
Proctor & Gamble has felt the pressure but says it will not back out. The firm believes that, the programme will benefit everyone – Proctor & Gamble, retail stores, and consumers – because it results in lower operating costs and lower prices. In theory, the strategy frees trade promotion money for additional promotion spending directed toward consumers. Proctor & Gamble put the Tide and Cheer detergent brands under the everyday low pricing programme; the entire laundry detergent line is now under the plan.
Most other packaged goods marketers are watching Proctor & Gamble and silently applauding its efforts. They also favour everyday low pricing as an alternative to expensive trade promotions, but do not have the resources to weather the potential backlash from retailers. Many companies are testing pricing programmes with different names but all designed for the same reason, to reduce trade promotion spending and increase promotion to the final consumer. Meanwhile, the entire industry is hoping that P&G is successful.

GDM CASE STUDY ANSWER SHEETS - Seven consumer goods firms, including Kraft, General Food, Quaker Oats Co., and Colgate-Palmolive are experimenting with pricing strategies
GDM CASE STUDY ANSWER SHEETS - Seven consumer goods firms, including Kraft, General Food, Quaker Oats Co., and Colgate-Palmolive are experimenting with pricing strategies



Questions
1.       Study the case and determine the significant issues in the case.
2.      Examine the pricing practice of P&G. Do you think it can spoil P&G’s relation with retailers and harm the company in the long-run?

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