Discussion:
Alternative cost management strategies) Robert L. Wehling, Procter & Gamble's senior vice president for advertising and market research, would like to wean Americans off coupons. His relentless cost-control efforts, which P&G began in the manufacturing area in 1993, have led to moves to eliminate couponing, increase print advertising, and curb growth in P&G's marketing spending. In fact, fewer than 2% of the 291.9 billion coupons that companies distributed in 1995 were redeemed. . . . P&G has been plowing back savings from cost-cutting initiatives into lowering prices on most of its 300 brands. Since 1992-93, the list prices on P&G brands, excluding coffee, have declined by $1 billion. Prices on diapers and detergents have particularly declined. In February, P&G eliminated all promotional coupons in three New York state markets-in a test that many industry watchers doubted could be successfully expanded nationwide because coupons are such an integral part of American consumers' psyche. Until P&G came along, no company had risked eliminating all coupons in a big geographical market, despite the growing consensus among major marketers that coupons are expensive and turn brand-loyal customers into bargain hunters who select brands based on short-term price promotions. P&G spent $3.3 billion in 1995 on advertising. Its popular brand names include Tide, Vicks, Cover Girl, and Pampers.
a. What costs and benefits did P&G likely consider in its decision to discontinue the use of coupons to promote its products?
b. What is P&G's apparent market strategy in deciding to lower prices? Explain.
c. What risks should P&G take into account before discontinuing the use of coupons nationwide?