PHAN HANH NGUYEN VU

MKTG 541 – Fall 2012

Tide Pods – From Idea to Store Shelf

NPD Project Briefs

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TIDE PODS – FROM IDEA TO STORE SHELF

EXECUTIVE SUMMARY ............................................................................. 2

NEW PRODUCT DEVELOPMENT PROCESS ...................................................... 2

CORPORATE STRATEGY ........................................................................ 2

OPPORTUNITY IDENTIFICATION ............................................................... 3

DESIGN ........................................................................................... 3

TESTING .......................................................................................... 4

INTRODUCTION ................................................................................. 5

RECOMMENDATION ............................................................................... 6

APPENDIX ........................................................................................... 7

ARTICLE ............................................................................................. 9

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EXECUTIVE SUMMARY

On February 2012, Procter & Gamble (P&G) introduced their latest invention, Tide Pods, “a

palm-size, liquid detergent-filled tablet that are design to be tossed in the washer.” The

product can dissolve in hot or cold water, and can be used with any type of washing machines.

With its breakthrough features, Tide Pods is Tide’s most technologically advanced answer to

customers’ requests for laundry solutions that provide excellent results with minimal time

and efforts. However, in order to create such an inventive product, P&G has spent eight

years, drawn 450 sketches, conducted over 6,000 consumer tests, and invested hundreds of

millions of dollars. The stories behind the design and development process of Tide Pods not

only provide a closer look at how a product in the Consumer Packaged Goods Industry,

specifically detergents, was born “from idea to store shelf,” (Appendix 1), but also reveal successes

and failures in the product innovation efforts of one of the leading corporations in the

industry.

NEW PRODUCT DEVELOPMENT PROCESS

Corporate Strategy

Procter & Gamble is a multinational manufacturer of product ranges including personal care,

household cleaning, laundry detergents, prescription drugs and disposable nappies. During

their 175-year history, P&G is always considered a proactive player in the market. The

company constantly looks for hidden customer needs and expectations, then bases on their

advantages in R&D, production manufacturing, and distribution systems to invent and launch

new products that can satisfy those needs. Each year, they generally spend $2 billion on R&D

and introduce about 27 products with an average success rate of 50 percent.

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Opportunity Identification

Market Definition: The Laundry Detergent Industry in the U.S has a huge market with

$6.5 billion in annual sales. The market is very competitive yet also attractive. In 2004, P&G’s

current detergent product, Liquid Tide, was the best-selling detergent in the industry,

following by Church & Dwight’s “cheaper rival” – Arm & Hammer Oxi-Clean Laundry. The

competitive situation, short product lifecycle, and the need for the-next-big-thing at that time

made P&G decide to “freshen up” the category.

Idea Generation: (Appendix 2) In order to find new ideas for their detergent category, P&G

conducted surveys and observations of 6,000 customers. The research indicated three main

problems related to detergent usage: First, the detergent bottle was often too heavy for

customers to carry back and forth between their house and the laundry room. Second,

customers tended to think that the suggested amount of detergent did not get their laundry

clean enough. Third, customers usually confused about the detergent products they should

use in different situations: regular washers versus high-efficiency machines, big load versus

small load, and hot versus cold water. The problem-solver for those issues would be a product

that “weighed less, cleaned better and could be used with any washing machine, any size load and in

water at any temperature.” P&G had introduced pod-like products on the market in 2000, yet

they had not been successful. However, with the development of technology after 4 years,

P&G would have been confident to go forward with their product innovation.

Design

Core Benefit Proposition: Among the revealed product problems, the most critical one

was the confusion that regular products caused for customers when they did their laundry in

different ways; following by product quality and product weight. Therefore, the core benefit

proposition of P&G’s new detergent product was identified as Easy use in any type of

washer, with any size load; cold water clean; better clean; easier to carry.

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Engineering: P&G hired MonoSol, a water-soluble-film manufacturer, to develop a film

that can dissolve in water at any temperature. The film also had to be soft to the human touch,

but strong enough to not break when being stretched over the top of a can of marbles and

shaken. Next, the company reduced the amount of water included in the detergent to 10

percent in order to prevent the pod to melt before it even got into the wash. Finally, they

developed a technology that can sections the pod into three chambers for cleansers,

brighteners, and fabric softeners. The pod design helps combine three liquids into one

product, while keeping them separate until the pod dissolves in the wash. This allows

customers to easily bring one or some small detergent pod(s) with them when they go

laundry.

Marketing Mix: Product - After the engineering process, the actual product was born as

“a soft ball with three separate bubbles filled with liquids in Tide's trademark white, blue and orange

colors.” (Appendix 3). The product, which was named Tide Pods, has palm size and can dissolve

quickly in the hot or cold water after being tossed in the washer. It works in all washing

machines and with any size load. Price - The price set for Tide Pods was $20.89 for 57 pods,

more expensive than regular liquid and powder detergents. Promotion - P&G spent about

$150 million on a marketing campaign to roll out Tide Pods. TV commercial for Tide Pods,

with the tagline “Pop In. Stand Out,” would be first on air during the Academy Awards, one of

TV’s biggest events. Place – Tide Pods would be sold in many supermarkets, convenience

stores, and smaller retailers all over the U.S.

Sale Forecasting: P&G expects that Tide Pods will bring $300 million in sales during its

first year; that means P&G would be able to sell about 14.3 million 57-pod packages.

Testing

P&G used laboratory pretest markets, which allowed the full strategy to be tested without

alerting competitors.

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First, P&G researchers wanted to understand how consumers do laundry and how they do it

using Tide Pods. The tests took place at The Beckett Ridge Innovation Center; the center

included a 2,000 square-foot mock clapboard house where participants were observed,

videotaped, and analyzed while they are doing their laundry. This method helped the

researchers see things that customers might not be able to explain or articulate. The research

showed very promising results. 97 percent of the testers were satisfied with their laundry

experience using Tide Pods, while only 68 percent of them were satisfied beforehand using

regular detergents. The testers also liked how Tide Pods felt in their hands.

In order to test product packaging, P&G created a virtual grocery store at the Innovation

Center. The participants could see early design of Tide Pods packaging on the virtual shelves

along with other detergents. The researchers found that sometimes it was a disadvantage if

customers could not see the product inside the package. Thus, P&G decided to design a clear

fishbowl-like container that allows customers to see the product insight clearly.

Product Introduction

P&G planned to launch Tide Pods on September 2011; at that time, Tide Pods would have

been the first dissolvable pods entering in the market. However, they ran into some problems

in product manufacturing while the market demand was so high. These issues forced the

company to postpone the launch date of Tide Pods to February 2012 and took away their

advantages to be an early entry in the market. By the time Tide Pods was introduced, the

market was already getting crowed with Henkel’s Purex UltraPacks and Sum Product’s All

Mighty Pacs – the two new dissolvable pods with similar prices. Three months later, Church

and Dwight also launched its Toss ‘N Done Power Packs which was made of crystals.

(Appendix 4)

Although not having the early-entry advantages, P&G still has a strong brand name as well as

a great product. The company believes Tide Pods would make “a huge wave” in the market.

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RECOMMENDATION

P&G did a very nice job in developing Tide Pods, starting by discovering customers’ hidden

needs for laundry, then taking advantages of their technology and investment funds to design

a product that can satisfy those needs. However, there is a critical issue that prevented P&G

from having a bigger success: Timing. When P&G decided to postpone Tide Pods’ launch

date, they gave other players in the market an alert about their new innovation and allowed

their competitors to react even before Tide Pods was placed on store shelves.

This timing issue happened due to some failures in P&G new product development process.

First, the process took an enormous amount of time. During nearly eight years Tide Pods was

developed, P&G’s competitors also moved forward with their ideas, technology, and new

products. They could introduce new products which made Tide Pods not such a superior

invention. Second, initial sales forecasting from P&G’s analysts underestimated the market

demand. Finally, P&G failed in product manufacturing preparation for Tide Pods, which

required different equipment from what is used to manufacture regular detergents. The two

later failures were the direct causes for the delay in launching Tide Pods.

In order to avoid the above problems, P&G could have shorten the product development

period by overlapping steps in the process. For instance, P&G could initiate preliminary

design work before they completed 6,000 customer surveys and observations, based on early

indications of potential. Furthermore, sales forecasting should have been done more carefully

so that P&G could predict accurately the market demand for their first product launch. Lastly,

P&G should have adjusted their manufacture equipment earlier after the consumer tests

confirmed the product potential. This would help them be ready to launch Tide Pods on their

first expected time and be able to response to the market demand after that/.

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APPENDIX

Appendix 1. New-Product Development Process

Appendix 2. Idea Generation

Appendix 3. Product Design

Opportunity Identification

Market definition

Idea generation

Design

Core benefit proposition

Engineering

Marketing mix

Sales forecasting

Testing

Laboratory pretest market

Introduction

Launch planning

Sources of Ideas

Market needs

Methods of Idea Generation

Exploratory user studies

(Observation)

Primary research (Surveys)

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Appendix 4. Perceptual Map

Convenience

Economy

Tide Pods

All Mighty

Purex Ultra

Toss ‘N Done

Liquid Tide

Oxi-Clean

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ARTICLE

Anderson, Mae (2012), “From idea to store shelf: A new product is born," The Wall Street

Journal

From idea to store shelf: A new product is born

NEW YORK — It took eight years, 450 product sketches, 6,000 consumer tests and hundreds of millions of dollars for Procter & Gamble to create something that it hopes will be destroyed in the wash.

Tide Pods are palm-size, liquid detergent-filled tablets that are designed to be tossed in the washer to take the measuring cups — and messiness — out of laundry. P&G says the product, which hit store shelves last month, is its biggest innovation in laundry in about a quarter of a century.

Tide Pods aren't the sexiest of inventions, but they illustrate how mature companies that are looking for growth often have to tweak things as mundane as soap and detergent. The story behind Tide Pods provides a window into the time, money and brainpower that goes into doing that.

P&G, the maker of everything from Pampers diapers to Pantene shampoo, has built its 175-year history on creating things people need and then improving them. (Think: Ivory soap in 1879; Swiffer Sweeper in 1999.) Each year, the company spends $2 billion on research and development and rolls out about 27 products worldwide — more than two a month.

That focus on innovation has paid off. P&G says 98 percent of American households have at least one of its products in their cupboards, broom closets or bathrooms.

And while about 15 to 20 percent of all new products succeed, P&G has claimed a 50 percent success rate. Four of the top 10 new consumer products in 2010 were made by P&G, according to research firm SymphonyIRI.

"What they've gotten very good at is being able to understand consumer expectations," says Robert Passikoff, president of Brand Keys Inc., a New York customer research firm.

But improving things like window cleaner and toilet paper can take years. It also can cost hundreds of millions of dollars — or up to 100 percent of first-year sales — to develop, make and market them. And even then, new products are a tough sell to consumers.

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"You have to develop a product that is meaningfully better than the ones out there, which is tough because generally speaking consumer products work pretty well," says Ali Dibadj, an analyst at Bernstein Research who follows P&G. "You then have to convince the consumer to try the product ... and then get that consumer to break their old habit to make a new one."

FIRST LOAD: A PRODUCT IS BORN

The laundry detergent industry, with $6.5 billion in annual sales, is always looking for the next big thing. Over the years, fruity scents were introduced, along with suds that work in cold water. There also were concentrated and super-concentrated detergents that need less packaging.

Liquid Tide, which costs about $15 for 32 loads, is the best-selling detergent, according to SymphonyIRI, the research firm. But cheaper rivals have been gaining: For instance, the number of units sold of Church & Dwight's Arm & Hammer Oxi-Clean Laundry, the No. 2 detergent brand that costs $8 for 35 loads, rose 13 percent in the past year. Unit sales of Liquid Tide were flat.

In 2004, P&G decided to try to freshen up the category. Surveys and observations of 6,000 consumers found that more than a third dreaded doing laundry. A big reason: Many apartment dwellers hated lugging a seven-pound detergent bottle downstairs to the laundry room or a Laundromat and back.

Researchers also found that people rewashed loads about 20 percent of the time because they thought detergent didn't get their laundry clean enough.

And many were confused about which detergent to use when they wash in different ways: in regular washers versus high-efficiency machines; in big loads or small; and in hot or cold water.

"We knew people felt laundry was complicated," says Alex Keith, vice president of P&G's unit that makes laundry detergents and fabric softeners.

So P&G set about creating a product that weighed less, cleaned better and could be used with any washing machine, any size load and in water at any temperature.

Pod-like products had been on the market before. P&G introduced tablets filled with powder detergent in 2000, but yanked them from stores shelves two years later. The problem was that powder tablets didn't always dissolve completely, leading to messiness. They also worked only in hot water.

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To make sure Tide Pods would dissolve in cold water too, P&G turned to MonoSol, a company that makes water soluble films. MonoSol developed a polyvinyl alcohol film that not only dissolves in any temperature water, but even in sweaty palms. The film also is strong — it won't break even when stretched over the top of a can of marbles and shaken — but soft to the touch.

The film created another problem, though. Detergents, which mostly consist of water, would cause the pod to melt before it even got into the wash. So P&G made a detergent that is 10 percent water — compared with Liquid Tide, which is 50 percent water.

Next, scientists had to figure out how to combine cleansers, brighteners and fabric softeners into one product, while keeping them separate until the pod dissolves in the wash. Doing so would ensure each liquid would work better. After 450 sketches and iterations, P&G developed a proprietary technology that sections the pod into three chambers for all three liquids.

The result? A soft ball with three separate bubbles filled with liquids in Tide's trademark white, blue and orange colors.

INNOVATE, RINSE, REPEAT

Making the product was half the battle. Consumer testing is at the heart of product development for P&G, which has more than 25 facilities across the globe where people can use the things it makes.

The Beckett Ridge Innovation Center, about 30 minutes from P&G's Cincinnati headquarters, is one. Inside, there's a 3,000-square-foot grocery store packed with everything from Charmin diapers to Cascade dishwashing liquid. There's also a 2,000-square-foot mock clapboard house where researchers analyze how people do laundry, wash dishes, take showers and change babies' diapers.

About 50 P&G researchers work at the center, watching and videotaping about 20,000 people each year in their "natural" environment. The testers are picked by third-party companies and paid based on the task they complete.

"When we watch consumers in action, we can see things they can't otherwise explain or articulate," says Jessica Hall White, director of P&G's unit that makes fabric care brands like Tide, Gain and Downy.

When P&G researchers had consumers test Tide Pods at the center, they found that 97 percent were satisfied with their experience, compared with about 68 percent who were

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satisfied beforehand using regular detergent. People also liked how Tide Pods felt in their hands.

When it came to packaging, P&G took a more futuristic approach to testing. The company used three screens at the Innovation Center to project 3D images of a virtual grocery store. There, testers could see early designs of Tide Pod packaging on the virtual store shelves alongside regular detergents.

Researchers learned that people sometimes overlooked the product. So P&G determined that in order to stand out, Tide Pods needed to have see-through packaging. The company developed a clear fishbowl-like container that shows the pods clearly.

The product was developed. The consumer tests were done. The packaging was complete. Next, it was time to get Tide Pods to market. P&G was poised to be the first detergent maker to get its new dissolvable pods into stores. They were to cost $20.89 for 57 pods and land on shelves by September 2011.

But the company ran into problems making the pods, which require different equipment from what's used to manufacture regular detergent. At the same time, P&G was flooded with orders from supermarkets and retailers.

P&G declined to detail the manufacturing problems, but it says the issues forced it to push back the launch date of Tide Pods by five months to February. In the hyper-competitive world of consumer products, that might as well be an eternity.

Tide Pods entered a market that was already getting crowded. Henkel's Purex UltraPacks and Sun Products' All Mighty Pacs came out in February, too. And Church and Dwight plans to launch its Toss 'N Done Power Packs— made of crystals — this month.

All of the products are priced similarly — more expensive than liquid or powder detergents. But P&G has a big advantage. The Tide brand is one of the most recognized in the world, so P&G hopes to win over shoppers with performance and brand recognition. The company says it expects Tide Pods to ring up $300 million in sales during its first year.

John San Marco, an analyst with Janney Capital Markets, says P&G is at a slight disadvantage because it wasn't first to market its product. But he believes its Tide Pods product is likely to hit its first-year sales goal.

"It seems when Procter does anything in the laundry category it makes a huge wave," he says.

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Still, P&G isn't taking chances. The company spent an estimated $150 million on a marketing campaign to roll out Tide Pods. The first commercial debuted during the Academy Awards, one of TV's biggest events.

The tagline for the ad: "Pop In. Stand Out."

http://online.wsj.com/article/AP685dcde20845419787c259b285cd7b9e.html