Procter & Gamble (P&G), the large US consumer products company, has a well-earned reputation as
one of the world’s best marketers. With its 80-plus major brands, P&G generates more than $37
billion in annual revenues worldwide. Along with Unilever, P&G is a dominant global force in
laundry detergents, cleaning products, and personal care products. P&G expanded abroad after World
War II by exporting its brands and marketing policies to Western Europe, initially with considerable
success. Over the next 30 years, this policy of developing new products and marketing strategies in
the United States and then transferring them to other countries became entrenched. Although some
adaptation of marketing policies to accommodate country differences was pursued, it was minimal.

The first signs that this policy was no longer effective emerged in the 1970s, when P&G suffered a
number of major setbacks in Japan. By 1985, after 13 years in Japan, P&G was still losing $40 million
a year there. It had introduced disposable diapers in Japan and at one time had commanded an 80
percent share of the market, but by the early 1980s it held a miserable 8 percent. Three large Japanese
consumer products companies were dominating the market. P&G’s diapers, developed in the United
States, were too bulky for the tastes of Japanese consumers. Kao, a Japanese company, had developed
a line of trim-fit diapers that appealed more to Japanese tastes. Kao introduced its product with a
marketing blitz and was quickly rewarded with a 30 percent share of the market. P&G realized it
would have to modify its diapers if it were to compete in Japan. It did, and the company now has a 30
percent share of the Japanese market. Plus, P&G’s trim-fit diapers have become a best-seller in the
United States.

P&G had a similar experience in marketing education in the Japanese laundry detergent market. In the
early 1980s, P&G introduced its Cheer laundry detergent in Japan. Developed in the United States,
Cheer was promoted in Japan with the US marketing message–Cheer works in all temperatures and
produces lots of rich suds. But many Japanese consumers wash their clothes in cold water, which
made the claim of working in all temperatures irrelevant. Also, many Japanese add fabric softeners to
their water, which reduces detergents’ sudsing action, so Cheer did not suds up as advertised. After a
disastrous launch, P&G knew it had to adapt its marketing message. Cheer is now promoted as a
product that works effectively in cold water with fabric softeners added, and it is one of P&G’s
bestselling products in Japan.

P&G’s experience with disposable diapers and laundry detergents in Japan forced the company to
rethink its product development and marketing philosophy. The company now admits that its UScentered
way of doing business no longer works. Since the late 1980s, P&G has been delegating more
responsibility for new-product development and marketing to its major subsidiaries in Japan and
Europe. The company is more responsive to local differences in consumer tastes and preferences and
more willing to admit that good new products can be developed outside the United States.
Evidence that this new approach is working can again be found in the company’s activities in Japan.
Until 1995, P&G did not sell dish soap in Japan. By 1998, it had Japan’s best-selling brand, Joy,
which now has a 20 percent share of Japan’s $400 million market for dish soap. It made major inroads
against the products of two domestic firms, Kao and Lion Corp., each of which marketed multiple
brands and controlled nearly 40 percent of the market before P&G’s entry. P&G’s success with Joy
was due to its ability to develop a product formula that was specifically targeted at the unmet needs of

Japanese consumers, to the design of a packaging format that appealed to retailers, and to the
development of a compelling advertising campaign.
In researching the market in the early 1990s, P&G discovered an odd habit; Japanese homemakers,
one after another, squirted out excessive amounts of detergent onto dirty dishes, a clear sign of
dissatisfaction with existing products. On further inspection, P&G found that this behavior resulted
from the changing eating habits of Japanese consumers. The Japanese are consuming more fried food,
and existing dish soaps did not effectively remove grease. Armed with this knowledge, P&G
researchers in Japan went to work to create a highly concentrated soap formula based on a new
technology developed by the company’s scientists in Europe that was highly effective in removing
grease. The company also designed a novel package for the product. The packaging of existing
products had a clear weakness; the long-necked bottles wasted space on supermarket shelves. P&G’s
dish soap containers were compact cylinders that took less space in stores, warehouses, and delivery
trucks. This improved the efficiency of distribution and allowed supermarkets to use their shelf space
more effectively, which made them receptive to stocking Joy. P&G also devoted considerable
attention to developing an advertising campaign.
(Source: Pfoertsch W (2010) Proctor & Gamble in Japan: From marketing failure to success,
http://www.pfoertsch.com/wiki/uploads/Main/pgjapancase.pdf, accessed 21 July 2016)

Case Study Questions:
1. What factors made P&G’s old strategy ineffective?
2. Critically discuss how a company should approach a new market. Use the case as an example.