Lou Prichett: Negotiating the P&G Relationship with WalMart

Lou Pritchett 

Lou Pritchett rose from soap salesman to VicePresident, Sales and Customer Development for Procter and Gamble and over the course of 36 years, made corporate history as an “Agent of Change” at P&G.

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It was Lou Pritchett who changed the way America does business by creating an audacious concept that came to be known as “Partnering”.

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It was Lou Pritchett who, in 1987, boldly engineered an adventuresome partnership between two corporate titans (P&G and Wal-mart).

The Market Context in the 1980s The The Business Business Aproach Aproach 

By the mid 1980s, P%G was “a $40 billion global empire”, and “one of the most successful companies of the 20th century.

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Historically, P&G would bring extensive, comprehensive reearch on consumers to retailers and use it to argue for more volume, more newspaper ads, and more shelf space.

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Load ‘em and leave ‘em [strategy].

Changing Changing Market Market Dynamics Dynamics 

The last strategy should be replaced with rtailer-supplier partnership

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Load ‘em and leave ‘em strategy was alive and well in the Philippines.

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Succed in solving some inventories prolems in Philippines, made Pritchett prepared for his next post.

Overcoming the Supplier-Retailer Barrier 

The prevailing sentiment in the consumer products industry was that suppliers had market power and no one retailer controlled the market.

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P&G Pritchelt announced his proposal to try to work more closely with Wal-Mart.

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The proposition of partnering was simply looked at by the supplier as a tactic for the retailer

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The supplier did not see any direct benefit to relationship with Wal-Mart.

Internal and External Negotiations First First Moves Moves 

Walton told Pritchett that he just want to sell what the customer wants.

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Pritchett and Walton agreed that in order for both companies to not only survive into the 1990s, but to prosper.

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From the short term, adverarial, confrontational win-lose relationship that had been the hallmark of the past 20 years to a partnership built on trust and committed to a shared vision.

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They had to work collaboratively to meet the consumers’ needs while in the process drive excess cost out of the system.

Mapping the Internal Strategy When the rate of external change exceeds the rate of internal change disaster is imminent Pritcheet woul require several rounds of internal negotiations Some vice president of P&G didn’t want P&G brands to sell in discount store like Wal-Maert because lack of understanding and lack of knowledge about the costumer They want to revolutionize the way they do business

They want to make new relationship to look like

First Steps Toward Trust and a Common Vision Prichettt & Walton create draft vision

Create multinational team

Subtitue information for inventory trough electronic data interchange

Confront radically different pricing philosophies

EDLP (Everyday Low Price) and HL (high Low)

Test ELDP versus HL

To learn if a onecompany approach with costumers could create better results, potentially at lower sales expense

To see what internal changes would be required to enable the concept

Operational efficiency The test required to see the potential internal cost savings and offer operational cost savings to WalMart and other retail costumers.

“Top-to-Top” costumer team approach would lead to benefits well beyond operational cost savings

Wal-mart was a pioneer in a new form of retailing, and P&G became a pioneer in a new form costumer selling or CRM (costumer relationship management)

Negotiating Principle Stop viewing the future solely as an extension of the past and start working together with costumers and suppliers towards inventing the future Challenge the conventional thinking

Start using information technology to manage the business, not just audit it

Stop creating internal functional fiefdoms

You have to be issue focused, not position focused

Never sacrifice yourself on the fiels of battle;rather live to fight another day