Reflecting higher value creation based on its differentiation
strategy, P&G generally charges a 20–40 percent
premium for its products in comparison to retailers’ privatelabel
brands. For instance, a 150-oz. container of liquid
Tide detergent is $18 at Target, while the retailer’s privatelabel
brand is priced at $15. Given recent recessionary
pressures on disposable household incomes, many consumers
switched to private-label brands that they felt
did just as fine a job. Not only
has P&G lost market share
because of its higher prices to
consumers; its profit margins
have also been squeezed by rising costs of input factors.
One underlying problem that P&G is facing is that
rather than creating new product categories that it is
famous for, it is tweaking existing products incrementally.