P&G's New Online Subscription Service Only Sells Tide PODS. Why?

Procter & Gamble recently launched the Tide Wash Club, a beta-test online subscription service that only sells a limited selection of Tide PODS in the Atlanta market. The timing of the launch happened to overlap with Unilever’s announced acquisition of Dollar Shave Club, but the underlying causes of both initiatives are not coincidences.

Why create such a narrow offering? Sure, this is a beta version, and future iterations could expand scope in terms of assortment and geography. But, according to the Tide Wash Club FAQs, all P&G products are already available online at P&G Shop, not to mention on Amazon and other third party online retailers.

Historically, consumer packaged goods (CPG) companies have implicitly assumed that brand equity, combined with an attractive value proposition, were the pillars of long-term customer lifetime value (CLV). This made perfect sense given the traditional CPG route to market through wholesaler and retailer intermediaries (bricks-and-mortar, e-commerce).

Both P&G’s Tide Wash Club and Unilever’s Dollar Shave Club are ways for CPG companies to bypass intermediaries and build their own retention/relationship with individual consumers.

An important difference between laundry detergent and razor blades is the degree to which consumers switch among a repertoire of brands. In that sense, laundry detergent is more typical of CPG than razor blades, which have a switching cost to the consumer who moves from one handle system to another. With laundry detergent, consumers switch at will and with no cost. What might be interpreted as brand loyalty could actually just be behavioral inertia combined with a willingness to buy any acceptable brand that is on promotion.

Brand switching is the biggest leak in the bucket for CPG companies; brand switching is how CLV is lost. The limited assortment of Tide Wash Club allows P&G to test ways to reduce brand switching. When reorders do not occur on a customer’s predictable purchase cycle timeline, P&G can test what incentives, if any, are necessary to prevent switching. By reducing deals while increasing share of wallet, P&G can grow CLV beyond what was possible when selling through retailer intermediaries.