Preview Case

Unilever: Power?

Persil Power

Procter & Gamble strikes back: these campaigns draw attention to the damaging effects ofPersil Poiecr's manganese 'accelerator'.

worried P & G not just because the rivals were doing so well, but because Power contained a manganese catalyst, known as the 'aeeelerator', 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 live years of developmental work, lay behind Unilever's strategy to salvage its market position in the £6 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 £roup.

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 ] 994. 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 detergent, they also discovered holes in clothes washed in Power.

On 31 March 1994 Amt 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 torni 'Power for its own detergents. Tin rigs were getting 'grub-bier'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-organized 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 8Q 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 1-V^ver 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 criticisms 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

Preview Case: Unilever • 145

package was changed to concentrate use of the product in lower temperatures 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' Association Which? investigation, confirmed everybody's suspicions - that Power, even the reformulated version with reduced manganese, was defective.

What are the Costs of the Power Fiasco to Unilever?

After spending more than £200 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 exacted on reputations - the company's and those of the Pcrsil and Onio 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',

The Lessons

Many soap war observers would conclude that, with Power products, Unilever had practised socially irresponsible marketing - and deservedly paid heavily for it. However, the case has much broader lessons for businesses. The marketing environment for goods and services is getting fiercer. Unilever had failed to appreciate how competition and other environmental forces impact on its organization.

QUESTIONS

1. What are the key actors and forces in the company's marketing environment that affect its ability to serve its target customers effectively?

2. Identify the most critical actors or forces that accounted for Persil/Omo Power's ultimate downfall.

.1 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. Criticallv evaluate the motives of P & G.

5. What are the key lessons for management?

6. Could the problems have been anticipated and avoided? How?

Introduction marketing environment The actors and forces outside marketing that off eat marketing management's ability to develop and maintain successfu I transactions with its target customers.

in iero en vironin ent

The forces close to the company that affect its ability to serve its customers - the company, market channel firms, customer markets, competitors and publics.

macroem<ironment

The larger societal forces that affect the "whole microenvironment -demographic, economic, natural, technological, political and cultural forces.

In Chapter 3 we examined the marketing strategy and planning process which helps marketing management develop and maintain successful transactions with its target customers. Companies succeed as long as they have matched their products or services to today's marketing environment. This chapter addresses the key forces in the firm's marketing environment and how they affect its ability to maintain satisfying relationships with target customers.

A company's marketing environment consists of the actors and forces outside marketing that affect marketing management's ability to develop and maintain successful transactions with its target customers. The marketing environment offers both opportunities and threats. Successful companies know the vital importance of using their marketing research and intelligence systems constantly to watch and adapt to the changing environment. Too many other companies, unfortunately, fail to think of change as opportunity. They ignore or resist critical changes until it is almost too late. Their strategies, structures, systems and culture grow increasingly out of date. Corporations as mighty as IBM and General Motors have faced crises because they ignored environmental changes for too long.

A company's marketers take the major responsibility of identifying significant changes in the environment. More than any other group in the company, marketers must be the trend trackers and opportunity seekers. Although ever;' manager in an organisation needs to observe the outside environment, marketers have two special aptitudes. They have disciplined methods - marketing intelligence and marketing research - for collecting information about the marketing environment. They also normally spend more time in the customer and competitor environment. By conducting systematic environmental scanning, marketers are able to revise and adapt marketing strategies to meet new challenges and opportunities in the marketplace.

The marketing environment consists of a microenvironment and a macroenvironment. The niierocrtvironmeiit consists of the forces close to the company that affect its ability to serve its customers - the company, suppliers, marketing channel firms, customer markets, competitors and publics. The niiieroenviron-nient consists of the larger societal forces that affect the whole microenvironment -demographic, economic, natural, technological, political and cultural forces. We look first at the company's microenvironment.

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Responses

  • MARCEL
    What were the most critical actors or forces that accounted for persil/omo power’s final downfall?
    8 years ago

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