Werner Geissler is Vice Chairman of Global Operations at Procter & Gamble. He talked to Seán Meehan about the challenges and opportunities Asia presents.
Stereotypes of Asia abound. What are the most important and distinctive characteristics of Asia P&G must pay attention to?
Asia is an integral part of our purpose-inspired growth strategy of touching and improving the lives of more consumers, in more parts of the world, more completely. Today, we reach a bit over four billion consumers per year. Our goal is to add one billion by 2015. The majority of these will come from Asia. Three characteristics in particular impact P&G:
- Asia is vast. While we want to have manufacturing scale, we must stay close to the region’s high-potential local markets. We serve these from several regionally dispersed multi-category sites which enable back-office synergies and logistics cost efficiencies.
- Asia is diverse. Its many languages render region-wide advertising challenging. A multiplicity of retail formats, together with a rapidly emerging, very diverse e-commerce landscape, challenges our go-to-market approach. The most important challenge, though, is to effectively serve consumer segments ranging from high-income consumers willing to pay premium prices for premium performance, to consumers living on less than five dollars a day. They also want best performance, but at affordable prices.
- Asia is growing. Fifty million babies are born in Asia every year. Whilst we all like the significant growth contributions from Asia, it also triggers some interesting strategic questions concerning capital and human-resource allocation. How much do you lean forward and invest ahead of the growth curve? How much can you re-allocate without foregoing growth opportunities in other parts of the world? What are appropriate pay-out periods for capital investments?
What is the most challenging aspect of doing business in Asia?
One of the most challenging aspects is recruiting and retaining the best employees. As a ‘build from within’ company, attracting, developing and retaining the best talent is our biggest priority – we are, in effect, hiring our future leaders. We are constantly working to strengthen our relationship with target universities to identify and recruit the right and best talents. We also focus efforts on functional and managerial development programs. The downside is that our people are systematically being poached by other companies in a red-hot labour market.
Recognising this, our Asia organisation has developed their Employee Value Proposition (EVP), based on the Asia breakout of our corporate employee survey. It addresses the specific needs of the young and fast-growing employee population there. It encompasses, among other factors, being a player on a winning team and getting responsibility ahead of the prevailing seniority curve. In 2010, the organisation was awarded the Asian Human Capital award, recognising the EVP program and approach as a “breakthrough in people innovation.”
Is there the same opportunity for brand development in Asia as we’ve traditionally seen in North America and western Europe?
Brands are very important in Asia because they carry the promise of quality and a guarantee that they work. Consumers at the bottom of the pyramid rely on brands because the risk of spending money on a product and finding that it fails to deliver expected performance is unacceptable and unaffordable. In parallel, rising consumer confidence at the middle and upper tiers fuels an appetite for global brands and breakthrough innovation.
We draw on local inspiration to create new product forms or variants of global brands. For example, Gillette Guard, a single blade innovation, was inspired by the living conditions of low-income consumers in India. It addresses the reality that most of our consumers in that segment do not have access to running water and typically have thicker beard growth. Similarly, Downy Single Rinse has become a business success in places like the Philippines because it helps conserve a very scarce resource – water.
Some brands developed for Asia have been successfully marketed elsewhere. For example SK-II, P&G’s high end Skin Care offering, was initially developed for Asian consumers. Similarly, Pantene started as a regional Asian hair care brand that P&G commercialised and then successfully expanded globally.
In which markets have you enjoyed the most success, and why?
P&G came to Asia 75 years ago, and set up its first operation in the Philippines. It continues to be one of our top growth markets in the region. Japan, despite the very challenging economic environment there, continues to grow ahead of the market and local competitors. In India, we have been growing in high double digits for over ten years, and recently crossed the US $1 billion milestone. We have seen explosive growth in emerging markets like Indonesia and Vietnam.
China remains our biggest business in Asia, at over US $5 billion, and is in fact the largest business globally outside of North America. And China (next to India) holds the biggest growth potential going forward. Today, we realise on average about US $4 in sales per year from each of the 1.3 billion people living in China. In the United States, that’s about US $100.
In all of these markets, success can be attributed to very simple fundamentals. Wherever we are, our priority is the consumer – understand her or his needs, design to meet those needs, and delight them with our brand propositions. When we do this well, we are rewarded with profitable growth in the market.
How do you deal with market research being less than fully developed in some Asian markets?
Understanding consumers and shoppers is in P&G’s DNA. Consumer needs drive and shape our decision making, and consequently our business. This is as true in Asia as in other parts of the world.
Our approach to consumer understanding is holistic. Our people spend time with consumers and shoppers, talking to them and spending time with them in their homes and in stores. We also use extensive quantitative data and analytics on the business. Analytics is just one source of consumer understanding that must be added to in-market observations and fieldwork, as well as applied to a forward understanding of the industry, market and consumer trends. To do this well, we use data from a variety of sources, often integrating and triangulating to draw conclusions. We also have modelling and scenario-creating capability that allows us to manage data variability.
When we do have data outages or inconsistencies, we collaborate closely with data providers to find win-win solutions for increasing the access, coverage and accuracy of the data.
Asia is very much online. How do you leverage the internet to connect with Asian consumers?
Being online in Asia simply extends and builds on the holistic relationship we have with consumers in the off-line “brick and mortar” world. This includes everything from being present on basic i-media (eg, brand.com websites) to using a wide range of social media touch points, making our products available at multiple e-commerce channels, and everything in between. In some category/country combinations, e-commerce represents well over twenty per cent of our sales.
We are also increasingly using the internet, particularly social media, to understand consumers. This enables us to shift from asking questions of consumers to listening to what the consumers want to tell us.
We have a strong network of partners like Google, Facebook, Yahoo and Microsoft, who help us design online strategies and to evolve in this space.
Have you been able to transfer key learnings from Asia to enhance your approach in other parts of the world?
In general, P&G has a well-developed system of search and reapplication that allows the best work from around the world to seamlessly reach all our employees as inspiration.
Our Asian division continues to make strong contributions to this pool of best-in-class work and ideas, while it learns from the best elsewhere in the world.
P&G Asia has been at the forefront of developing business models, and even product innovations, that are relevant to low-income markets around the world, and we definitely capture and capitalise on those key learnings.
Werner Geissler is Vice Chairman of Global Operations at Procter & Gamble and Seán Meehan is the Martin Hilti Professor of Marketing at IMD, Switzerland
For those wishing to join ESOMAR in Vietnam for our annual Asia Pacific event, which takes place in Ho Chi Minh City on 7th – 9th April, please visit www.esomar.org/apac