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P&G Case Study

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by

Brayden Beverage

on 2 December 2013

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Transcript of P&G Case Study

Scenario 1: Base Case
Procter & Gamble: Investment in Crest Whitestrips Advanced Seal
Introduction
P&G is one of the world’s premier consumer goods companies.
P&G’s 50 Leadership Brands are some of the world’s most well-known household names.
Represent more than 90% of P&G sales and profits.
25 of these 50 brands are Billion- Dollar Brands
P&G’s wide range of brands

Scenario 2: Proposal to Drive Revenue
Increase the initial media plan and decrease price by $1 to accelerate sales.

Sell Advanced Seal Crest Whitestrips at $21 per unit and assume:
Increase Advertising budget to $7.5M for Year 1
Unit Sales will increase to 3.25M
Problem Identification
Scenario 3: Proposal to Minimize Cannibalization
Recommendation
To Solve the Problem
The task of putting together the economic perspective on Advanced Seal involves:
Preparing a report of the prospects and implications of the new product
Determining which pricing and marketing strategy will result in the maximum value for shareholders
Creating a realistic profit & loss forecast and baseline net present value.
NAOC
North American Oral Care
Leveraging the collective benefits of multiple products enabled P&G to focus on more complete health solutions.

Crest Whitestrips Advanced Seal
When introduced, Crest Whitestrips saw nearly $300 million in annual sales, but virtually no growth in sales or profit after the first year.
Due to the abrupt halt in growth, multiple attempts at line extensions had failed to significantly improve results.
It only managed to breed skepticism in major customers.

NPV of Proposal to Drive Revenue
NPV of Base Case
NPV of Proposal to Minimize Cannibalization
Initial Assumptions
"The math isn't really complicated, but the results all depend on what you assume. "
Calculation Assumptions
$2M Advertising Increase per year
$4M Capital Expenditures
$1.5M One-Time Development Expense
6-Year Depreciation Schedule
Premium and Basic Lines had $250M in revenues in 2007
40% Tax Rate
8% Discount Rate
To Launch a Profitable Product
Get the merchandising support that they will need in order to get the new product off to a good start.
Provide marketing with enough funds to allow for strong trade margins to get display space and offset the high carrying cost of this inventory.
“We could charge a 25% premium without having a precipitous drop in volume. The problem is that this product improvement will drive up our costs by almost 75%."
Case Assumptions
Crest WhiteStrips rival far more expensive dental office treatments.
Advanced Seal will be:
Superior to all products on the market.
Provide a strong sales lift.
Improve market share.

Whitestrips Advanced Seal!
Investment in Crest WhiteStrips Advanced Seal
Procter & Gamble
Created by: [The V-Neck REPUBLIC]
Brayden Beverage, Joseph Chadarevian, Daniel Hagen, Ellycia Halden, & Zachary Veenstra
Sell Advanced Seal Crest Whitestrips at $22 per unit and assume:
$12 Cost (per unit)
2M Units Sold
$6M Advertising Expense per year
70% Cannibalization from Existing P&G Sales
Prevent cannibalization by focusing marketing on untapped customers and raising the price by $1 to offset gross profit differential.

Sell Advanced Seal Crest Whitestrips at $23 and assume:
$5M Advertising Expense per year
1M Unit Sales
45% Cannibalization

Implement strategy to drive revenue
Scenario that has the highest NPV
"The tendency of Whitestrips to slip off teeth is the number one barrier to repeat purchase and word-of-mouth recommendation."
Full transcript