For Olay, the how-to-win choices were to formulate genuinely better skin-care products that could actually fight the signs of aging, to create a powerful marketing campaign that clearly articulated the brand promise (“Fight the Seven Signs of Aging”), and to establish a masstige channel, working with mass retailers to compete directly with prestige brands. The masstige choice, which was a decision to win in the channels P&G knew best, required significant changes in product formulation, package design, branding, and pricing to reframe the value proposition for retailers and consumers.

Fine fragrances, however, were important to hang on to, for two strategic reasons. First, a fine-fragrance presence was an important component of a credible and competitive beauty business. P&G wanted to be a beauty leader, on the strength of hair care (Pantene, Head & Shoulders) and skin care (Olay). But to be truly credible with the industry and consumers as a beauty player, the company needed a position in cosmetics and fragrances as well. The knowledge transfer between the different categories is significant, meaning that what you learn in cosmetics and fragrances—through both product R&D and consumer research—has a lot of spillover into hair care and skin care, and vice versa. In other words, just being in the fragrance business makes you better in beauty categories overall.

In addition, fragrance is a very important part of the hair-care experience—scent alone can significantly influence consumer product preferences. And it isn’t just true in hair care, which leads to the second strategic reason to play in fine fragrances: in many household and other personal-care businesses, there were significant consumer segments that cared deeply about the sensory experience. P&G could affect consumer purchase intent with the right fragrance. It soon became clear that fragrance was an important part of creating delightful consumer experiences and that P&G was the biggest fragrance user in the world. This little fine-fragrance business was important well beyond its existing size; it was crucial to building core capabilities and systems that could differentiate and create competitive advantage for brands and products across the entire corporation.

Choosing a different place to play gave the fine-fragrance team the time and opportunity to test its strategy and business model, to hone its capabilities, and to build confidence that it could win.

Industries with fewer rivals and with competitors that seek to serve different parts of the market with unique offerings are more attractive than those in which a number of competitors compete fiercely for the same consumers in the same way. P&G favored beauty and personal care, including feminine care, because these were industries with low capital cost in which highly fragmented rivals attempted to differentiate their products in unique ways.