Practice Prize Paper: Marketing-Mix Recommendations to Manage Value Growth at P&G Asia-Pacific

Procter & Gamble (P&G) Asia-Pacific is interested in managing value growth. Only after fully understanding the true effects of the marketing-mix variables can P&G managers make strategic decisions answering questions such as the following: (1) Are the P&G brands in the detergent market inelastic or elastic with respect to price? How has the price elasticity changed over time? Can P&G increase the price of its brands to gain value growth? (2) What are the price, distribution, and sizing combinations needed to achieve the desirable value growth? (3) How can P&G gain market share from its competitors without cannibalizing its own brands? P&G Asia-Pacific approached us to develop a value growth framework to answer these questions. To generate the answers for the above questions, we develop a three-step weighted random coefficient estimator that captures the heterogeneity across cross sections (different stock-keeping units and states) and the endogeneity of distribution. Based on the parameter estimates, we provide strategic recommendations to P&G for a field test to validate our suggestions. We developed a simulator for P&G managers so that they can generate appropriate marketing-mix strategies for achieving the desired value growth. As a result, P&G gained over $39 million in value growth over a one-year period by implementing the recommendations from our modeling approach.