In an earlier post, I discussed how P&G and Georgia-Pacific are not advertising toilet paper in order to increase consumption (a.k.a. compete with non-consumption). Rather they are combatting each other for market share. Since people (in the developed world, at least), will use the same amount of toilet paper no matter what, based on the number of times they relieve themselves, no amount of advertising will induce someone to buy more toilet paper.
A reader and very smart friend of mine, Judah Kaplan, (check him out, really smart guy) pointed out that there may be an ability to increase consumption, either temporarily or permanently, based on marketing campaigns. These kinds of increases in consumption, even from existing customers, are likely to have a relatively small impact, but even a few percentage points of revenue or profit for P&G or G-P can be a lot of money. While P&G does not break out Charmin sales separately, the combined “Baby and Family Care” segment, which includes Charmin toilet paper, Bounty towel, and Pampers diapers, accounts for 19% of P&G’s $84BN in 2011 annual sales and of its $10BN in profit. Each percentage point increase in sales is $840MM in revenue and $100MM in profit.
What are the two, temporary and permanent, increases in sales?
- Timing: Marketing can convince you to buy more toilet paper now, rather than later. If there is a sale, a perception of a later shortage, or inconvenience. This is temporary, since buying now means you won’t buy next month (or however often you buy those soft wipes). However, the moving ahead of purchases creates financial bottom-line increases in short-term revenues and profits for P&G/G-P.
- Rationing: You’re sitting in the facility, you look, and realize the roll is almost finished. What do you do? You ration. You use fewer pieces of paper, more carefully, thus reducing your permanent consumption. While it may not happen every day, or even every week, it does happen to everyone at some point. This rationing is, essentially, reduced consumption. If marketing by manufacturers can make you aware of the discomfort of toilet paper rationing, and thus induce you always to stock enough that you never run out, they have gotten you to permanently increase your consumption from what it otherwise would have been.
Thus, even in a relatively fixed market, there is room to increase your sales, both temporarily and permanently, through solid understanding of your customers and how and when they use your products. As always, in the end, it comes down to really knowing your customers.
Many thanks to Judah Kaplan for pointing out these two issues.