The marketing world is abuzz about the announcement by Procter & Gamble (P&G) that it plans to sell more than half of its brands. Arguably the greatest consumer brand company the world has ever known, P&G is largely responsible for the manner in which consumer brands have been marketed for over a hundred years.
Here's the key to P&G's action: Profitability. P&G owns around 180 brands, but 70 or 80 of them throw off 90 percent of the company's sales and 95 percent of the company's profits. About 22 of P&G's brands (such as Pampers and Tide) are each responsible for $1 billion or more in sales, according to the company.
P&G is a marketing company through and through, and this decision will surely be painful for the marketers who have worked tirelessly to champion the 90 to 100 brands the company will now try to sell. But P&G recognized that it could no longer be agile and nimble with such a large brand portfolio. A.G. Lafley, who retired as CEO but returned to P&G, told the Wall Street Journal, "I'm not interested in size at all. I'm interested in whether we are the preferred choice of shoppers." Notice the emphasis -- squarely on the consumer.
So what can marketers learn from this extraordinary announcement? Sometimes getting lean and mean is the better strategy. Recognizing where your sales and profits REALLY come from can lead to tough decisions, but it will likely result in a stronger bottom line. Even if, as in this case, that means jettisoning brands, it is probably the right thing to do in the long run.