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Designed to Sell: Procter & Gamble
April 20, 2007
Claudia Kotchka holds Procter & Gamble's new secret to driving customer sales: infusing innovation into brands.
By Julia Chang
 When Claudia Kotchka wants to prove the impact of good design, she likes to show, not tell. This means the Procter & Gamble executive has found herself on occasion roaming the corridors of the consumer products giant's Cincinnati offices with tchotchkes on hand to show off to her colleagues.
One of her favorites is a pair of measuring cups. The first is a basic plastic one she bought from Wal-Mart. She shows it to unsuspecting executives and asks them how they would change it. Most would look at it and say that it functioned exactly how it was supposed to, so could you even improve upon it? Then Kotchka would take out a second measuring cup, this time one from OXO, the household goods manufacturer known for its innovative design. This one has an angled surface that lets you see from the top how much liquid is going in—this way, the user no longer has to stop pouring to lift the cup and check the measurement. "It has such a better consumer experience. Then the lightbulbs would go off," says Kotchka, vice president of design innovation and strategy. "Once you see it, you say, 'Oh why didn't someone think of this before?' They are great examples [of good design] you can readily understand."
Kotchka, a 29-year P&G veteran, is making a lot of these lightbulb moments happen. She is the first person to hold her title, a position that was created by CEO A.G. Lafley to, as Kotchka describes it, "build design into the DNA of P&G." In other words, Lafley didn't think of design as art folks to be squirreled away in a cube working on how to add a logo to a package. He wanted design—a synonym for innovative thinking—to be woven through the business. His mantra is that consumers, and how they react to a product both on the shelf and in use, are everyone's top priority. Design is an extension of that branding and consumer experience, and the creative thinking that accompanies it has to be part of the company's new lifeblood.
While P&G may be one of the more recognizable companies in the world espousing a new design philosophy, it's certainly not alone. Lafley's focus on innovation is a sign of the times: According to a Boston Consulting Group survey, 72 percent of companies said that innovation was a Top 3 business priority for them in 2006. As a result the same percentage said that they would increase spending on innovation. Forty percent of firms said it was the No. 1 priority, compared with only 19 percent in 2005. That doesn't mean just creating prettier products or a new corporate logo: Innovation means changes in how business is conducted, creating more brand awareness and ultimately, higher sales.
And it's not just the consumer packaged goods companies that are leading the way—once-staid industries like banks and professional services are getting in on the act, too. (See "Bank on Design," below.) "I think there is much more awareness now of the value of design in business," says Thomas Lockwood, president of Boston-based nonprofit the Design Management Institute. "People are starting to ask, 'How do we know what's good design and bad design?' They are starting to wonder how to go about improving it"—and thus improve the bottom line.
The Design Trend
You don't have to look much further than the corner drugstore to see how much we've become a design-obsessed culture. Once boring products like hand soap, mops and toothbrushes look as crafted and well-engineered as luxury automobiles. Instead of finding ways to cut costs by skimping on the bells and whistles, companies are following the lead of innovators like Apple and Target, who've built their brands on good design—and have seen their revenue follow. In 2006, Target posted nearly $60 billion in revenue, a 13 percent hike over the year prior. And Apple continues to dominate the digital-music player market, shipping more than 21 million iPods in the first quarter of 2007 alone, which contributed to revenue of $7.1 billion.
But make no mistake; these products don't sell themselves. Good design is really good branding and grabbing the mindshare of consumers who want more these days than a functional widget at a good price. Taking this big-picture view of branding, and realizing that every business unit can learn from a more creative thought process, was what prompted Lafley, who became CEO in 2000, to create Kotchka's position. In order to inject innovation into a company known previously for its insularity, he knew he would need someone who understood design to take the helm. Kotchka initially turned down the position because she was overseeing Tremor, P&G's word-of-mouth marketing business, but finally agreed to take on the role in 2001 because "A.G. said, 'This is really important to me, this is important to the company.' And I figured, if he's that serious, then I'll do it." Because no one had held her job before, Kotchka had some freedom to determine how to infuse design into the business units. And she knew it would require a mindshift in P&G's culture.
Indeed, the biggest obstacle to infusing innovation into a company is often corporate culture. Despite the fact that innovation is a hot buzzword, throwing it around isn't quite the same as doing it, even for the company that invented brand management. Kotchka figured this out firsthand when, back in 1991, she became the head of art and package design, despite not having a design background. Kotchka's career to that point included stints managing brands and advertising. She understood the business side, "but the designers quickly informed me that they were not the art department, they were the design department, and I didn't know anything about design. The more I learned about what design is, how designers think and process and problem solve, the more passionate I became about how that can really benefit our company."
Still, that didn't mean her new job as the head of design innovation and strategy was going to be easy. Kotchka knew she'd have her work cut out for her when she walked into the finance manager's office to talk budget. "He said, 'Oh, design—isn't that the first thing we usually cut?' That's when I knew the way to help people understand the value of design was to show it. So I started to use a lot of case studies to show how design builds business."
That explains her penchant for whipping out products to prove a point. Besides the OXO cup, her other favorite illustration is Wrigley's Altoids mints. She has asked employees before to examine the metal tin, the paper inside, the slightly misshapen mints that have a handcrafted feel. Then she asked them how they would change it if P&G were to buy the brand. The typical answers were: Save money by using plastic; scrap the inside paper; manufacture the mints uniformly. The result is a model Kotchka had made called "Proctoids"—the same mint taste, but in a cheap plastic package that loses all its character and is less likely to build branding with the consumer. It was then that employees understood that good design equals better brand experience, equals consumer loyalty.
The first step to spreading this understanding through the company was embedding designers throughout the life of the brand, from research and development to brand management to when the product hits store shelves. "I think the most important thing was getting designers involved early in the process, because too often we would get things at the end, and then it's too late to make the kind of difference we wanted to make," Kotchka says. "[We had to get them] involved up front and really integrate design into the business processes." So instead of having a centralized design function, designers are located within the business units to provide firsthand input early on.
The second major culture change was straying from P&G's promote-from-within tradition. In order to be truly innovative, Kotchka knew that she needed to get input from outsiders. P&G currently employs about 250 designers, and most are veterans. "We wanted to build the design capability fairly quickly, and I knew it took quite a few years to build mastery in design. Right now most of our designers are experienced and from other companies, and have anywhere from ten to twenty years experience, and that was a big shift for P&G." Another change was working more with outside branding agencies. But perhaps the most visible of her strategies was forming a Design Board that meets in Cincinnati three times a year and includes heads of outside design consultancies, fashion retailers and executives from major corporations such as General Motors. The board meets not only to discuss big-picture innovation issues such as sustainability, but also to provide input on P&G products before they reach the market—a major change for the once closely guarded company. Recently, P&G majorly tweaked a wall-covering product in testing based on board feedback. "They had a big impact on the visual identity and the positioning, the patterns we were using—they had a very big influence on that brand."
Designing for Results
At the end of the day, whatever influence design has on a brand will mean nothing if it doesn't drive sales. Kotchka doesn't mind when the number-crunchers ask for results. "The fact that they ask for results is a good thing," she says. "[Design] does have to deliver on the bottom line. …Any business leader that wants to build design into their business, we work with them." Typically, business unit heads will tell Kotchka where they think they may need design help, and designers will start working with those brands' teams; their influence can be seen in products such as Pampers, Olay, Swiffer and Herbal Essences.
Pampers was an early adopter of infusing design into the product development stage. "Historically, P&G design was mostly about logos, and they looked at how to incorporate design into the product," she says, "and it's been very, very successful." The technicians who worked on the diapers' technology received design input on the fit, features, and the overall look-and-feel of the product.
But the Pampers branding isn't just about the technology. It is also about the mother-baby bond it creates, says Jerry Kathman, president and CEO of LPK, a Cincinnati-based branding firm that works with P&G on the Pampers brand. "The role that design plays at the purchase event is critical," Kathman says. "But there is also a larger awareness role, the post-purchase role. [The product we use] is a projection of our aspirations. So it matters when the Pampers bag sits in your baby's nursery—it has to feel like it's a part of your commitment to nurturing." Brand awareness was built with design touches that included graphics placed directly onto the diaper, and marketing collateral for moms called "The Pampers Journey Series," which gives important information about children's development, reinforcing the brand through, as LPK describes it, "key moments in the pathway to purchase."
Another more recent rebrand, on which LPK also worked with P&G, was the restaging of the Herbal Essences hair care brand, which in recent years had fallen off consumers' radar screens. Extensive market research and focus groups resulted in a new logo, snappier copy, new ingredients, and a new bottle design. The new shampoo and conditioner bottles have slight curves to them in a yin-yang shape, which make them fit together. "That significantly improved conditioner sales, because consumers are now buying them as a system," Kotchka says. "And that has been a huge hit."
That's one thing that really hasn't changed much within the halls of P&G: The company closely monitors sales and does extensive market research as part of any brand's redesign process to make sure that, at the end of the day, the strategy adds to the bottom line. One of the biggest debates in the design community right now is how to uncover the more quantitative business impact of design. There's no agreed-upon set of metrics, but there is one measurement that will always speak volumes: revenue. For P&G, the results have been seen in the market successes of design-influenced products. For instance, sales of Febreze Air Effects air freshener and Downy Simple Pleasures fabric softener were twice their projections; Crest Vivid White toothpaste saw three times its sales projections; and Olay Regenerist is currently the number-one anti-aging facial moisturizer line in the United States.
And earlier this year, based on strong overall results, P&G raised its corporate fiscal-year 2007 organic sales growth projections to between 5 and 6 percent. "We watch people use the product so that we can come up with ways to make it better; a better experience, a better-performing product for the consumer. So we constantly watch the sales and do a lot of research," Kotchka says. "Design thinking can work in any business, and in any function."
Side bar: Bank on Design
How Umpqua turned innovation into dollars
If you want to know how Ray Davis, president and CEO of Umpqua Bank, feels about design, go to Chapter 18 of his book, Leading for Growth: How Umpqua Bank Got Cool and Created a Culture of Greatness. It is aptly titled "Put Design into Everything You Do," and the quote that jumps out at you on the page reads: "If you don't understand design and you compete against me, I am going to kick your butt."
That's because design has been at the center of growth for Umpqua Bank. The Portland, Ore.–based community bank is a prime example of how creativity and innovation can transform even the most staid of industries, financial services. Everything from rethinking the design of spaces to making over how employees viewed their jobs has contributed to Umpqua's continuous growth: In 2006, Umpqua recorded 13 percent growth in deposits, as well as $87.3 million in earnings, up from $69.9 million in 2005.
Visit Umpqua's branches, and it's not hard to see what makes them different. The first thing you'll notice is that their branches don't have the typical teller-behind-the-plexiglass design. Instead, they are modeled after the experience you'd normally get from a retailer: Umpqua's stores are set up so that back-office functions are gone, and only those things that enhance the customer experience remain. Visitors can browse materials on products and services, surf the Web, enjoy a cup of coffee, or simply hang out. Umpqua has even started creating new branches that are neighborhood stores, which act as third spaces in their communities, with interactive displays and meeting spaces. "Design is an important part of the customer experience. You want an environment that is conducive to making things happen, where people feel comfortable," Davis says.
That means eschewing a hard sales culture and focusing on service instead. Employee training doesn't just mean Umpqua's tellers know about the latest in loans or checking accounts. They also go through the training offered by hotel chain Ritz-Carlton, which is renowned for its service, and are encouraged to thrive in an entrepreneurial environment where they don't constantly need management approval to complete tasks. Tellers are, in fact, known as universal associates at Umpqua, because everyone is trained to do everything so no customer has to wait for the "right" associate to help them.
In Davis' mind, the combination of physical space, redefined job descriptions, and encouraging a culture of employee empowerment all comprise design. Says Davis, "When [customers] get to the store, I want them to experience something like they've never experienced before in banking, which includes the design, the layout of the facility, and the people that are trained on customer service."
Sidebar: Designed to Sell
Process-oriented departments such as sales, marketing or finance probably have the hardest time thinking in the freeflowing, unstructured way that designers often do. But if innovation is one of your top priorities, then it might be time to rid yourself of old habits—at least once in a while—to inject some creative thinking into your team. Here are some tips to help get ideas flowing:
Bring in outsiders.
Working in silos never spurred creativity. Bring in someone from an entirely different department or company just to get their opinions on how to solve a dilemma. Someone who has never sold has still been a buyer, and can give you an outsider's view of sales or marketing.
Forgo the formalities.
There is a time and place for everything, but sometimes when the idea well has run dry, a change of environment might do the trick. Find time to do something informal—eating a meal, going for a field trip to somewhere on the corporate campus, or even simply sitting in an empty room tossing a football—to create a relaxed environment where brainstorming can occur. Just make sure someone remembers to jot down those ideas.
Do a ride-along.
Not with your sales reps—have them shadow someone in a different department for a day, or even an hour, just to get a sense of the role that other people in the company play in providing the customer experience. Your engineers' skills when fixing a tech meltdown or your service reps' sunny disposition when righting customer wrongs could provide fodder for your next sales pitch.
Always be ready for inspiration.
The next big things have always been conceived at the unlikeliest times. Start a file of lightbulb-moment ideas so you won't forget them. And don't be afraid to keep those cocktail napkins or random business cards on which you jot them down. They'll serve as nice mementos for when your breakthrough goes big.
Thoughts? Send us comments at edit@salesandmarketing.com. Please use "Letter to the Editor" as the subject line.
Sales & Marketing Management Magazine
This article is brought to you by Sales & Marketing Management, the leading authority for executives in the sales and marketing field.
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