This is continuation of our interview with Universal Robina Corporation’s Vice President-Marketing Edwin Totanes on Launching and Defending New Products. In this second part, Mr. Totanes generously shares about lessons he learned from failures. For Part 1 of his interview, click here
Q7: One of your early marketing assignments was as brand manager of Procter and Gamble for Crest. While Crest is a leading brand in many countries, it was clobbered by Colgate in the Philippines and was phased-out eventually with single-digit market shares in the 1970’s, tell us what happened then? What could have been done differently at that point?
My story on Crest is a long one and can form 3 chapters of a book if ever I wrote one. Importantly, the failure of Crest in the Philippines cannot be seen in isolation of its global perspective. At the time of its life in the Philippines in the 1980s, of which I was Brand Manager, it would seem then that Crest was simply outspent and out-witted by a strong and dominant leader in Colgate. Colgate even resorted to “black operations” just to ensure that Crest would fail in the Philippines. Following are some of the “unfair” practices that Colgate had done during that time, to name only a few:
During our House-to-House operations in the test areas of the Visayas, Crest promotions crews would sample a tube for every household. The Colgate promotions crew would immediately follow and offer to get the Crest sample in exchange for two Colgate tubes. Our respective crews would then be involved in fist-fights in the field; as such practice was really getting out-of-hand. P&G filed cases in court for “disruption of promotion.” Colgate countered by filing cases in court for “misleading advertising” without coursing the issue with the Adboard thus escalating the competition into a legal battle; Eventually, both P&G and Colgate management realized that it was only the lawyers that were gaining in such a battle so they settled through a memorandum of agreement that each side would then compete only in the marketing field and not resort to unfair competition.
All my print ad placements had Colgate placements in the same newspaper or magazine. I began to be suspicious when many magazines would offer me “free placements” only to find out that a Colgate ad would be there too. One magazine eventually confessed to me that Colgate had sent them each a ready Print Ad across all magazines and were instructed that any Crest ad should be countered by a Colgate one. In effect, enterprising magazines needing print ad revenues would rather provide Crest with free advertising as they were then assured of a paid Colgate ad;
4 years after I had left P&G, I got a call from a former colleague from the Ateneo, and he just wanted to tell me that he was already employed by Colgate and that he has in his possession the Test Market and Expansion Plans of Crest which I had written back in the 1980s. So, Colgate had all our plans all along! I controlled only 10 original copies of the Marketing Plans, one for each Director and one for myself. I was able to trace through a code from whose Director’s original the Colgate copy was copied and purchased from. As it turns out, the secretary of that Director had probably sold a copy to Colgate and she had by then already migrated to the US. These are but a few examples of how Colgate competed in those days, practically “throwing the book at us”!
To fully understand why Colgate in the Philippines competed in this manner; resorting even to unfair competition, we must consider the global perspective of such a competition. Crest is the number one toothpaste in the United States. Unfortunately, however, it is only in the US that Crest is number one. Colgate remains to be the leader in every other country outside the US. Crest was successful in the US because it was the FIRST to introduce effective cavity-prevention through the inclusion of fluoride in toothpaste. Crest had a 3-year clinical study among US elementary students proving empirically that consistent use of Crest effectively reduces the incidence of cavities. Furthermore, Crest was able to secure the endorsement of the American Dental Association, with such endorsement printed in every tube of toothpaste. These product performance attributes with effective advertising communicating the same eventually rested leadership from Colgate in the US. Colgate’s defeat in the US made them resolve that never should it happen in any country thereafter. As such, each country outside the US were authorized to have an anti-Crest fund every year to defend against any Crest introduction. I was “told” (not verified) that at the time of Crest’s introduction in the Philippines in test market in July 1981, Colgate in the Philippines had already a 7-year accumulation of an anti-Crest fund!
So, the question now is “Why then did P&G not introduce Crest in the Philippines immediately after their success in the US?” I did ask that question of P&G management at that time that I was assigned to lead the introduction of Crest. The answer to me at that time seemed the right action, but now on hindsight appears to be totally wrong!
I was told then that the active ingredient of Crest in the US was “Stannous Fluoride” or “Fluoristan” as printed on every Crest tube. Unfortunately, stannous fluoride’s efficacy can only be preserved if packed in plastic laminate tubes. That is why Crest in the US was also the first in plastic laminate tubes. I was told then that stannous fluoride could not be packed in aluminum tubes the way all toothpastes in the Philippines were and in many parts of the world. To pack Crest in plastic laminate tubes then would make the cost of Crest too high and not be able to compete in the cut-throat pricing conditions in the Philippines, given a poor economy. By the 1980s, Crest in the US had already developed a new active ingredient “Sodium Fluoride” or “Fluoristat” as printed on every tube. This formula now was compatible to aluminum tubes and thus would be appropriate for the Philippine market. That answer seemed to me, then a young 24-year old Brand Manager, logical and correct.
However, on hindsight, I believe P&G missed the opportunity of capitalizing on “being FIRST” in the market by delaying launch in all other countries with low-income economies, like the Philippines. By then, it had allowed Colgate to develop its own fluoride toothpaste and prepare to defend its market everywhere else outside the US. Sadly therefore, Crest is number in the US, but yes, only in the US!
The Philippine situation also had its share of mis-steps during that period. I believe that P&G management relied too heavily on the traditional way of marketing even as Colgate was already throwing the book at us, and even resorting to black operations.
Allow me to cite a few examples:
First, the practice of test marketing. In July 1981, we launched Crest toothpaste in the Visayas region. We implemented all our plans in Visayas first to assess the market. It was also in this area that Colgate started competing aggressively with us. Whatever Crest did in the Visayas, Colgate would then do a similar activity, not only in the Visayas, but nationally! A clear example was our TV advertising. The introductory launch TV ad of Crest involved a scientist, Dr. Russell Morton, discussing how Crest blocks cavities and prevents tooth decay. In a couple of months, Colgate introduces in national TV their own scientist by the name of Dr. Eric Baines. This TVC had very heavy weights and even had many variations of a TVC. Soon, Dr. Eric Baines was a household name and in some TV commercials he would already start speaking a few Tagalog words, further endearing him to the Filipino consumer. In the meantime, our Dr. Morton TV ad only aired in the Visayas and we were not yet in Manila or national TV.
By the time of Crest’s national launch in January 1982, I recommended to P&G management that I do not want to air our Dr. Morton TV ad, but instead our sustaining TV ad which we had already developed and produced but have not yet aired in the test area, Visayas, nor in Manila. The TV ad featured a father coming home to his daughter, who promptly asks her Dad, “Ang chocolates ko?” requesting her “pasalubong.” Instead of chocolates, the father brings out a new Crest tube and tenderly talks to his daughter how sweets can harm her teeth while Crest can help prevent cavities and keep her teeth strong and keeping her always beautiful. This tender scene, I believed then, would have a better chance of countering Dr. Baines gaining popularity in Manila and all over the country. P&G management rejected my recommendation. I must confess that in my passion for the brand and perhaps my immaturity as a 24-year old brand man, I disobeyed management. I called my counterpart at the Ace-Compton Advertising Agency and instructed that we are to air the “Father and Daughter” TV Ad on its launch in January 1982. The Agency followed my instruction, thinking it had the approval of P&G management.
The TV Ad was an instant hit! There was immediate good feedback from our Sales team and consumer sales started to pick-up and seemed to counter the Dr. Baines TV popularity. The TV ad was so successful that P&G management “heard of its success” and I was promptly called to the President’s Office! I was reprimanded for disobeying management decision. I will never forget the words of President to me at that time. He said, “You know, Edwin, P&G is like a well-oiled football team, even if competition knew our every move, we at P&G execute our plans so excellently that competition cannot defend against it.” After that meeting, I was also asked to air the Dr. Morton TV ad and replace the “successful” “Father and Daughter” ad. As soon as I did, again the Sales force immediately gave the feedback that the market thinks we are copycats of the Dr. Baines TV ad. Sales and other consumers asked me, “Why?” And I simply answered “Management Orders.”
Second, is P&G’s over-reliance on research. Consumer research results showed that consumers preferred the color white for their toothpastes. As such, we launched Crest Regular in white color even if Crest in the US was colored aqua. I would have preferred to launch Crest in aqua to be exactly as the US, inasmuch as, our print ads had the strong headline, “the number 1 toothpaste in the US!” In any case, I again had to follow management orders to abide by research findings. In August 1982, we were ready to launch Crest Mint. This time, I again recommended to management that we should launch Crest Mint in aqua color, instead of white, in order to differentiate from the regular flavor and to be even more consistent with the US product which was in color aqua. Research results showed that consumers preferred the color white in toothpaste, but I countered that the reason why consumers preferred white was because of Colgate’s dominance and consumers do not know any better, or any other color than white! Besides, I said, perhaps, consumers did not realize that the other color was meant for another variant and not the general preference of color for a toothpaste. Again, my recommendation was rejected and we had to launch Crest Mint in white color! Again, at the very Sales Launch, the salesmen asked me, “Why is Crest still white, even for the Mint flavor?” I simply said, “Management Orders.”
Despite the above, Crest was able to surpass its Year one market share objective by gaining 12% points. However, this achievement could not be sustained and had begun to slide to single-digit shares by its second year. Eventually, when the US fell to an economic recession, sometime in 1985 (I was already at Kraft Foods, having resigned from P&G in March 1983), there were orders from the Head Office in Cincinnati to cull all products falling below 10% market share. Crest was one of those brands that were culled from its roster.
What could P&G have done differently? As I have discussed above, first, P&G could have introduced Crest FIRST globally even if it had to introduce each tube in the expensive plastic laminate tubes. I am sure consumers would still prefer and purchase a more expensive product for as long as it provided a superior performance over competition. Crest invented fluoride in toothpaste and secured a place in history to be the FIRST in cavity prevention. However, P&G failed to capitalize on this superiority globally! Sad!
Second, as I have mentioned above in the C2 example, research findings should be “used directionally” rather than be “followed directly…or even blindly!”
Q8: You also have your share of new product failures in URC, such as Refresh water in cups, Rush fitness water and energy drink, etc, can you share with our readers what to avoid when launching new products? What lessons did you learn about failures? How does it shape your behavior as a marketer?
By the time I first joined URC in March 2003, Refresh Water in Cups was already developed and ready for launch. I felt very uncomfortable that we were to launch Refresh Cups to be drank with a straw and packed in a case of 48s, exactly the way it was sold (or given away free) in Indonesia. Personally, I felt it went totally against the practice of drinking water in the Philippines, which I believed was still a matter of prestige and image. Refresh Water in Cups failed primarily because it was a direct copy of an Indonesian success but failed to recognize that the Indonesian water market was totally different in both size and consumer behavior than that of the Philippine market.
First, let me discuss the matter of market size. The Indonesian water market is as large as the Philippine soft drink market, practically a commodity as water from the tap is not at all potable. In Indonesia, water in cups were practically given away free and Companies can afford to do so as they earned heavily in the traditional water in PET bottles, where the market and earnings really were. In Indonesia, it was common practice that when you visited an office or home, you would be provided Water in a Cup with a Straw. Even when I had my haircut in the barbershop, I was provided Water in a Cup with a straw for free. I then found out, when I was assigned in Indonesia in 2006, that Danone’s Aqua water brand, the number one, would give away Water Cups in cases of 48s for purchases of either their 5-Gallon Water Jars or PET 500ml bottles. In other words, Water in Cups in Indonesia was big business, but the real money was still earned in the traditional water in PET bottles. Perhaps, because of the ubiquity of the Water Cup in Indonesia, URC may have observed wrongly that that cup market was huge and could therefore be duplicated in the Philippines.
Second, let me discuss the matter of consumer behavior. Package water in Indonesia is a matter of necessity and thus a commodity. On the other hand, in the Philippines, the Water market was still a matter of image and prestige, at that time, as potable water was still largely available from the tap. Moreover, Filipinos, unlike its Asian neighbors, are not in the habit of using straw for their drinks, much less for water in a cup! In my short stint with Coca-Cola in Thailand, I realized that Thais drink using a straw because they find drinking straight from the bottle was impolite. I even noticed that water in a glass in restaurants were still provided with a straw. This practice was to a certain extent also observed in Indonesia and Malaysia, during my travels. Finally, I was able to convince URC management to abandon the Water Cup business and in its place I introduced Refresh Juice Drink in cups packed in 10s (not 48s) to be a viable competitor to Zesto juice drinks. Refresh Juice in Cups is a viable challenger to Zesto’s business today.
Rush Fitness Water was not a failure. It was de-listed from the roster at that time as we needed all the capacity to support the growing popularity and sales of C2. If and when capacities allow, we should consider relaunching that concept.
URC’s entry in the energy drink business with Explode likewise failed because it was not in the package format that of returnable glass bottles (RGBs) that the market leader, Cobra, was in, allowing it to be priced P10 per bottle. We then re-introduced it in a non-carbonated format in the smaller 230ml Solo bottle in order to compete in that price point. However, its flavor profile of orange and cola were just not fit for a non-carbonated product. We just might re-enter this market as soon as we settle product and capacity issues.
There are many lessons to be learned in failures. In fact, as a Marketing discipline, I never just walk away from a failed product without analyzing the factors leading to its failure and learning from them.
Record-breaking, bestselling author Josiah Go is the Chairman of Mansmith and Fielders, Inc. (the leading marketing and sales training company in the Philippines), and Chairman of Waters Philippines (the market leader in the direct selling of premium home water purifiers in the Philippines). He is Chairman / Vice Chairman / Director of over a dozen companies.