In certain categories, such as laundry detergent, the overdosing phenomenon became more pronounced when manufacturers rolled out increasingly concentrated detergent: consumer-product makers could count on extra sales from shoppers who poured in too much concentrated detergent with every load.
P&G decided to think different and burst this bubble. P&G introduced Tide Pods capsules, which fixed the amount of detergent used per wash and ushered in the era of "unit dose" products. The result was total U.S. sales of laundry detergents fell 2.1% in the 12 months to March, according to market-information firm Nielsen, whose data excludes sales from Costco and some other retailers. Compared with the pre-pod age 3 years ago, detergent sales are down 5.1% in dollar terms, to US$7.06b from US$7.44b.
Competitors selling low-price detergents have been negatively affected by P&G's Pods and the shrinking of the size of the industry. Church & Dwight, which sells low-price detergents under the Arm & Hammer and Xtra brands, blames P&G.
Traditional thinking is new products should expand the revenue pie for manufacturers and retailers, not shrink it. The last round of more-concentrated liquid in 2008 drove laundry detergent sales up 5%. Clorox noted concentrated bleach helped lift overall bleach sales.
If your strategy relies on giving consumers more product than they really need to, and can, use, somewhere out there is a competitor thinking about how to disrupt your business. By thinking differently, P&G figured out a way to make the economics of pods shift to its favor, at the expense of several competitors. Consumers pay about US$0.25 per load for Tide Pods vs. US$0.20 per wash load for bottled Tide. This compares to US$0.07 for competitors' low-price detergents. By shifting its customers to pods, P&G is earning more money.
P&G expects sales of Tide Pods to hit US$500m in the fiscal year ending in June 2013 with sales of unit dose and higher-priced detergents growing while the low-end market is losing share.
Strategy and new products are about growing the higher/top-end, not the bottom end. Competing at the bottom end is based purely on price. Innovation, differentiation and value comes from competing in the top end.
"Is Innovation Killing the Soap Business?", Wall Street Journal, April 3, 2013
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