In June 2000, at the start of its new fiscal year, Procter & Gamble knew that its first priority - or 'Job One' - was getting its business back on track and growing again. This process had begun in 1998 with Organization 2005, P&G's new structure to drive innovation to world markets faster. P&G revolutionary for a company that's widely perceived as being arrogant.
Elsevier Food International, Vol. 5, Number 1, February 2002
Pascal Kuipers

Up until recently we have been rather naive, focusing solely on increasing sales via a self centered, go-to-market strategy", says Jeff Schomburger, vice president customer business development of Procter & Gamble Western Europe. "We didn't care about our customers' positioning. We wanted retailers' strategies designed to fit ours - call it arrogant and dogmatic if you will. We had a standardised US approach that we implemented as a global one-size-fits-all strategy. Our intentions were good, but the execution was bad."
Schomburger's explicitness in expressing Procter & Gamble's corporate mea culpa is based on his confidence that things have definitely changed. "We completely turned this attitude around and are focusing now on the retailers' strategy," he says. "Be it high/low or EDLP-based, what the retailer wants counts for us. We used to be more stodgy, but now we are open. Relaxed. Even humble."
Customer Business Development (CBD) is the name P&G attaches to its commercial strategy, aimed at optimising its customers' category performance. "In fact this is a European led approach and, as such, is ground breaking for a US company like P&G", says the American Schomburger, who's spent the last five of his 17 years with P&G working in Europe and who took over from John Thomson last November. "The vast majority of the world's leading retailers are Europe-based, so if we want to be a global winner we need a good strategy for the region."

Balancing levels
Organization 2005 implies that the company is divided into global business units (GBU's) for each of Procter & Gamble's major categories. These 'Global Centres of Excellence', as P&G calls them, are where global R&D knowledge is made available to the different marketing development organisations (MDOs), and this knowledge is then tailored to regional and even local levels. "This GBU/MDO structure is essential for beuei understanding our customers and markets", says Paul Polrnan, P&G's president Western Europe. "In this way we can efficiently balance global, regional and local levels, develop markets for our brands with respect for cultural differences and

"Here we bring category management to life and can discuss things with our retail customers, who we invite over" Jeff Schomburger

sensitivities, and optimise our contacts with retailers."
Polman acknowledges that P&G's transition as envisaged in Organization 2005 .. is more difficult than anticipated", but he inconvinced that the benefits will win through in the long run. "P&G is a 150-year-old company and its definitely here to stay for at least another 150 years," he says. "Historically we always have been on the front end of innovation, acting as an agent of change. In its early years, when P&G in the US decided to focus more on retailers instead of wholesalers, the company almost went bankrupt because the wholesalers who still dominated the US market back then decided to boycott us. We were also the frontrunners in category management and collaboration with retailers - with Wal-Mart in particular - which resulted in what was named in a later stage Efficient Consumer Response. What we intend to establish with Organization 2005, however, runs much deeper. Compared to this, we have only been scratching the ECR-strategy surface."
Schomburger readily admits to being a long-term practitioner of ECR, and later CPFR. "In the early 1990s I rolled up my sleeves to do extensive Activity Based Costing calculations. I co-operated with Brian Harris - the guru of Category Management - and I was working closely with retailers about how to organise the supply chain efficiently by sharing data. When I heard consultants define CPFR, I realised that this had been our practice for some years already." Mindful of its heritage as frontrunner in category management, Procter & Gamble designed its Solution Centre in Geneva, which collaborates with P&G's Home and Store of the Future in Cincinnati. "Home and Store of the Future is a larger set up as it covers the whole supply chain and contains front end technology like scanning systems too", says Schomburger. "But what we have on top is our Virtual Supermarket Technology - a comprehensive tool with which to design and layout the shelves, to create a virtual shopping experience based on real shopper insight. It actually brings category management alive."

Solution Centre
The Solution Centre is kept in a protected area in the basement of Procter & Gamble's European head office in Geneva, Switzerland. Visitors are requested to sign a form stating that they respect P&G's intellectual property and that they won't give information to third parties before P&G itself informs the outside world about this Virtual Supermarket, a process that will begin on 15 February. The 'store' as such is a 1,000 square metre area with different product categories integrated into the space. Virtual reality takes over as computer graphics are used to project various store concepts onto the walls, each one tailored to specific requirements as per the store concept's positioning and marketing.
"What discriminates it from what we already know about category management is the fact that this is a true solution centre," says Schomburger. "Here we bring category management to life and can discuss things with our retail customers, who we invite over. By combining our data with theirs, we can prepare the Virtual Supermarket according to their requirements. In addition, we can design the categories in which P&G is represented in a way that should optimise performance by combining main lines with value-added premium products. The results are then discussed with the retailer, who gets a very efficient and insightful view on the categories -efficient, as we can easily adapt the Virtual Supermarket to different store sizes and positionings, and insightful, because we include an enormous amount of consumer data. We know a lot about the shopping behaviour of our retailers' customers. Every year we add new research on what consumers do and why per channel, banner, socio demographic group and so on."
"In fact, we are the world's biggest market research company and provide this knowledge to retailers to drive categories sales and profitability", adds Polman. "This Virtual Store is only an example of our focus on CBO. There are two moments of truth: the shopping moment and the consumption moment. For the latter part we must make sure that consumer benefits of our products are proved. As far as the shopping moment is concerned, this Virtual Store gives great new insights."

Humble diplomacy
According to Schomburger it's all about execution. "There are some great stores in Europe where categories are managed perfectly well", he says. "But these are mostly retailers' pilot stores.

But what about the thousands of other stores? The problem with category management is mostly in its execution. Who is really doing it? And on what basis? And is it getting executed across all the stores?"

But to convey this message, diplomacy is needed - otherwise, regardless of the company's newly discovered humbleness, retailers might well tell P&G that they are perfectly able to mind their own business. "It's a joint effort with our retail customers", Schomburger says reassuringly. "We work out category plans based on shared facts and data.
It's a fast moving business that was hitherto theoretically driven, but in this Virtual Store we make it practical and tangible."
"Retailers respond positively to the Virtual Store", says Polman. "Shopping behaviour comes alive and, together, we can actively put things in place to optimise category returns. With CBD in general we work with dedicated teams for retailers across Europe where a lot of additional growth can be achieved. In the 1990's the growth rate in the US was twice as big as in Europe. US productivity increases exceed European performances. For what reason? Thanks to retailers that were able to grow markets collaboratively with suppliers. In Europe there is still a huge opportunity to enlarge the pie. The 285 million European households offer us the potential to double our European business."
Procter & Gamble therefore badly needs its customers to get Job One done and cheer up its shareholders.