P&G Reinvents the Paper Products Business (Ch 6: Rising Tide)

The chapter discusses P&G’s entry into paper products business, the investments for which were huge and
unanticipated. There were also concerns from the management that it could cannibalise P&G’s soap and
detergent business since after introduction of disposable towels consumers won’t bother to clean dishcloth or
rags, but just throw it away.
1. P&G’s brand extension into paper products business did have some fit with their already existing
businesses like they were already involved in R&D of cellulose fibres and its long history of marketing,
brand building and distributing low-cost consumer products. The market was already existing;
however, the company newness was high.

2. The chapter discusses a lot about organisation structure and how top management’s commitment
could result in morale boost of the team and improving the products in order to stay relevant to the
consumers in presence of strong competitors in the market.

3. P&G figured out that technological innovation was the key and high level of improvements were
needed so that quality perceived by customers is high which could translate into higher brand loyalty
and process innovation could lead to lower costs.

4. As the paper division expanded, they came up with a product after disruptive innovation: affordable
disposable diapers which was a high convenience product. However, the behaviour changes were quite
high and initial perception of value was low since parents disliked disposables as they didn’t fit well and
leaked, along with problem of disposal of used products.

5. P&G soon came up with product innovation of developing a one-piece, plastic-backed and kept on
innovating it incrementally while also focussing on leveraging economies of scale to reduce the price
and make it affordable.

6. Selling of diapers by P&G gives another lesson, they tried to relocate the product in baby food items
rather than toiletries, since they were complimentary products, however this turned out to be quite a
difficult task since the sections were small and crowded while diapers were bulky.

7. The launch of diapers by P&G bursts one of the myths of product development, that if we get it right
the first time, we will be more successful, however pampers did fail in first 3 test markets but
ultimately was a huge success.

8. Originally, P&G planned to sell diapers to affluent customers, but they soon realized there was a
leakage market and the lower income consumers in urban areas also desired the product as they found
utility and high value perception.
Soon, P&G was the leader in business and even though the competition they were unable to reach P&G’s
manufacturing efficiencies and they also lacked the ability to communicate their products’ advantages

Indian Institute of Management Bangalore 1

showcasing how P&G mastered the entire value chain from product to manufacturing to distribution and
marketing.

Indian Institute of Management Bangalore 2