By Krissy Clark
September 6, 2013
Procter & Gamble is a big company that makes a lot of the little things we use every day: Paper towels, toothpaste, razor blades.
Now P & G is leading the charge in offering upscale versions of some of these everyday products. From specially-embossed paper towels, to designer tampons or fancy dishwashing detergent.
To understand this trend you need to understand the word bifurcation.
Bifurcation is industry lingo for “splitting the market.” That is, when a company targets some products to high-end consumers and others to bargain hunters. And in an era when, by many tallies, the American middle class is shrinking and the extremes are growing, bifurcation is a consumer products survival tool.
The country is “bifurcating into the Dollar Stores and the Saks Fifth Avenues of the world,” according to Milton Pedraza of the Luxury Institute, a research firm that specializes in luxury products.
So what to you do if you are a company like Procter & Gamble, which has traditonally made middle-tier products like Tide, Ivory Soap and Crest that are targetted at middle-class consumers?
Procter & Gamble’s approach involves offering ”book-end” lines.
On the low end, the consumer products giant is introducing cheaper, stripped-down product lines like Bounty Basic Paper Towels and Tide Simply Clean and Fresh. On the high end, the company is launching new products like Bounty DuraTowel, Cascade Platinum dishwasher soap, and Tampax Radiant Tampons.
“Toyota did it many years ago with Lexus,” says Pedraza, noting this isn’t a new concept. “And they’ve been extremely successful.”
Yet, consumer trends consultant Alex Smith has her doubts about P&G’s strategy. “The recession made everyone, even higher-income individuals, think more critically about the things they buy, and not just fall in to the indulgence-for-indulgence’s-sake trap.”
Headed in to a supermarket in downtown Los Angeles, Jessica Czar and Matt Chisum could have been the perfect target customers for Procter & Gamble’s new high-end household items. They are both young professionals, making good money in the financial industry. So I asked them what they thought.
First, they looked at the Bounty DuraTowels, for sale at the store for more than $0.05 per square foot– almost twice as much as the regular Bounty paper towels.
“It’s not clear to me that this is any more durable than regular Bounty,” says Czar, unmoved by the print motifs and the ’3x Cleaner than a Germy Dishcloth ™’ claim on the packaging. “I wouldn’t spend more money.”
Chisum shook his head at the Cascade Platinum Dishwasher soap, with the words ‘Our Ultimate Clean For Dishes — Even Helps Keep Dishwasher Sparkling’ printed across the top of the silver bag. Inside, the soap pods were priced at $0.47 per pod, compared to regular Cascade pods that sell for under $0.25.
“Just because of the platinum branding, I don’t think it means it’s any better than the regular,” Czar said.
Then Czar squinted at the label for Tampax Radiant Tampons in a metallic pink box — $0.37 per tampon versus $0.25 for the more basic Pearl Tampax brand.
“I don’t know what radiant means, if it’s like metallic and shiney?” she asked.
All in all, Czar and Chisum’s verdicts were not in these products favor.
“You’re going to dispose of this stuff,” says Chisum.
“Right,” nods Czar. “These are just basic staples that are disposable.”
That sentiment doesn’t surprise Burt Flickinger of the consumer-consulting firm Strategic Resource Group. People are willing to spend a little more on fresh food and juices and produce and automobiles, he says, “but they’re not going to spend more to do their dishes or wash their clothes.”
Pedraza, of the Luxury Institute, is more optimistic that people might spend more on detergents and tampons, if they can be convinced that there is substance behind the shiny boxes.
“If you can show superior performance then you’re going to have a high probability of success,” Pedraza adds, “If you’re not, and it’s just packaging and fluff, then you’re going to have a much lower probability.”