Businessmodel of Procter & Gamble

Customer Segments

Procter and Gamble’s products primarily reach consumers via a network of retailers and distributors. Its customers include department stores, supermarkets, mass merchandisers, salons and grocery stores, among other businesses. The Company’s largest customer is the Walmart supermarket chain, which reportedly accounted in 2015 for 14% of total revenue. Procter and Gamble also sells products to large retail groups such as JC Penney, Sears, Family Dollar Stores, Macy’s, Big Lots and Dillards.

According to data from 2014, North America is Procter and Gamble’s largest market, accounting for around 39% of the Company’s revenue, with the US alone accounting for more than 35%. Western Europe and Asia each account for approximately 18%, while the remainder is spread across Central and Eastern Europe, the Middle East, Africa and Latin America. No individual country other than the US generates more than 10% of Procter and Gamble’s total revenue.

Procter and Gamble also sells its products to consumers directly through its online store. With its broad variety of products, ranging from male grooming products to diapers to toothpaste.

Value Propositions

Procter and Gamble provides value to consumers through its range of quality products, its customer service and its reputation as a reliable manufacturer. The Company provides products that cater to all customer segments, including some of the world’s most popular and respected consumer brands.

Procter and Gamble’s broad range of high quality products, and its reliable supply chain and distribution operations, also create value for its retail and distribution customers in the form of revenue and sales.

Channels

Data regarding Procter and Gamble’s activities can be found at its various regional websites through www.pg.com. The Company also sells products directly to consumers through its online store at www.pgshop.com. It also sells products through traditional channels, supplying retailers and traders via a network of distribution centres. Its products can be purchased by consumers in all major supermarkets, grocery stores, and department stores.

Customer Relationships

Procter and Gamble has little direct contact with its consumer customers, who are able to purchase the Company’s products through third-party retailers or via its self-service online store. The Company’s network of retail customers must deal directly with members of the Procter and Gamble sales and marketing team, or deal indirectly with the Company via distributors. Larger customers, notably Walmart, work closely with the Company on supply chain and distribution operations, while smaller retailers receive products primarily via third-party distributors.

Procter and Gamble provides support to its various partners and retail customers through its website, and can be contacted directly over the phone. Customers of the Company’s online store are able to contact customer service representatives by email or phone and are provided access to order tracking and FAQs. Procter and Gamble also operates social media accounts with Facebook, Twitter, Instagram, YouTube and LinkedIn, and provides email and mail subscription services, through which it can interact directly with its customers.

Key Activities

Procter & Gamble manufactures and supplies consumer packaged goods to retailers and consumers. The Company operates in five business segments: Fabric Care and Home Care; Baby, Feminine and Family Care; Beauty, Hair and Personal Care; Health Care; and Grooming. It manages one of the world’s largest consumer product portfolios, comprising household brands such as Ariel, Gillette, Head & Shoulders, Oral-B, Vicks, Pampers, Pantene and Fairy.

Procter and Gamble operates in 70 countries worldwide, selling products in more than 180 territories. The Company also manages a network of partners, including supply chain partners and innovation partners, and creates and implements brand strategy, product upgrade and marketing plans.

Key Partners

Procter and Gamble parters with numerous small, medium and large businesses from a variety of sectors. The Company’s supplier partners, comprising suppliers of both materials for manufacturing and services for, include companies from the professional services, consumer goods, chemicals, packaging, metals, energy, advertising and warehousing sectors.

The Company is reported to work closely with its supply chain, in some cases bringing suppliers in-house and locating members of its own staff at supplier sites. Among the Company’s Top Performing Global Partners for 2015 were professional services firm EY, Czech textile company Pegas Nonwovens, Italian packaging company Ronchi Mario and Japanese electrical supplier Yamada Electric.

Procter and Gamble operates a network of more than 2,000 innovation partners, with which it collaborates on strategic innovation projects in return for access to the Procter and Gamble research and development, consumer understanding and marketing expertise.

The Company also operates the P&G Corporate Platforms program, through which it partners with technology companies and entrepreneurs, including Shopkick, Navigenics, Shazam and Endorse.

In the recent creation of its high-tech supply chain centre, Procter and Gamble also partnered with software companies BOI Solutions and SAP.

Key Resources

Procter and Gamble’s key resources are its brand portfolio, its manufacturing facilities, its supply and distribution infrastructure, and its personnel. The Company’s range of recognisable and popular household brands, and its means of manufacturing them, are Procter and Gamble’s most valuable assets. Its supporting infrastructure and personnel, notably sales and marketing, research and development and customer service employees, also play an important role.

Cost Structure

Procter and Gamble incurs costs standard costs relating to the retention of its 118,000 employees – including the payment of salaries and benefits – and fixed costs rental and utility costs in relation to the operation of its worldwide network of offices.

The Company also accrues costs relating to cost of sale, manufacturing – including the purchase of materials and operation of its manufacturing facilities, supply chain and logistics, research and development and warehousing.

The Company also accrues significant advertising and marketing costs across its brand portfolio. Its advertising costs have been estimated to amount to around 11% of its annual sales, making Procter and Gamble the world’s largest spender on advertising.

Revenue Streams

Procter and Gamble generates revenue through the manufacture and sale of consumer goods to retailers, mass merchandiser and distributors. Its operations are divided into five business segments, which contribute varying amounts to overall annual revenue: Fabric Care and Home Care; Baby, Feminine and Family Care; Beauty, Hair and Personal Care; Health Care; and Grooming.

Of the Company’s $76.3 billion in revenue in fiscal year 2015, the sale of Fabric Care and Home Care products accounted for 29%, Bay, Feminine and Family Care products accounted for 26.5% and Beauty, Hair and Personal Care products accounted for 23.8%. The remaining revenue was shared relatively evenly between its remaining business segments.