Pampers: The Launch of Pampers Rash Guard (a)

Abstract

Students must estimate the size of the market for Rash Guard diapers, a disposable diaper designed to treat and prevent diaper rash. In addition, students must evaluate P&G's proposed price for the new diapers.

Excerpt

UVA-M-0688

PAMPERS: THE LAUNCH OF PAMPERS RASH GUARD (A)

Procter & Gamble (P&G) introduced disposable diapers in the United States in 1961. Since entering the market in 1968, Kimberly-Clark (K-C) had battled with P&G for market leadership. Although P&G maintained its lead for over two decades, the 1993 launch of Huggies Supreme propelled K-C past P&G in dollar sales. In 1998, Huggies held a 41 percent dollar share of the U.S. market, while P&G's share had declined to 38 percent. Pampers accounted for about $ 1 billion of P&G's U.S. diaper revenue, and Luvs contributed an additional $ 477 million. In early 1999 P&G executives prepared to launch Pampers Rash Guard, a new product designed to knock K-C from its leadership position in the U.S. market. As the launch date approached, company executives wondered what steps they should take to ensure the success of Pampers Rash Guard.

The History of the Disposable Diaper Market

In the 1950s disposable diapers accounted for less than 1 percent of diaper changes in the United States. Almost all cloth diapers were cleaned at home in a two-stage process. A dirty diaper was first dunked in the toilet to remove solid waste and then placed to soak in a diaper pail. Later, the diapers were laundered, dried, and folded.

In December, 1961, P&G introduced Pampers, a new brand of disposable diapers, in Peoria, Illinois. The test was a failure because the price—ten cents a diaper—was too high: mothers typically paid 3½ cents per change for a diaper service, while mothers who washed their own diapers paid about 1½ cents. To make Pampers price-competitive, production engineers developed a block-long machine that enabled P&G to profitably sell Pampers for 5½ cents each. In 1966, when P&G began its national rollout of Pampers, disposable diaper sales totaled about $ 10 million. By 1970, the disposable diaper market had grown to $ 200 million, and P&G may have had as much as 90 percent of the market. That same year, Forbes estimated that the average baby wore 60 diapers in a week.

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Keywords: market, size, estimation, demand, forecasting, pricing, new, product, launch