Why Procter & Gamble Needs to Shave More Indians

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McDonald predicts P&G will have 5 billion customers by 2015, up from 4.2 billion last year. It currently offers only half its 38 product categories in many of its top 50 markets. He says pushing consumption of P&G products in China, India, Indonesia, and sub-Saharan Africa to the level the company has reached in Mexico would generate an additional $60 billion in sales annually.

That's why he's working hard to entice emerging market consumers with products that are hits in the West. In India, where 50 percent of men go to barbers when they want a shave, P&G last year launched a "Women Against Lazy Stubble" campaign to increase at-home grooming. It featured surveys indicating that women favored clean-shaven men and television commercials where women in vans snatched men with stubble off the streets and shaved them with Gillette's mid-priced Mach3 razor. The campaign, along with another touting a new, lower-priced razor, helped P&G capture almost half of razor sales in the country in less than two years, it says.

To win over mothers in India to its disposable diapers, P&G chose a marketing pitch different from the one back home. Instead of emphasizing the convenience of Pampers, it highlighted research showing that babies who wear disposable diapers overnight sleep better—and consequently develop better. The result: P&G now has the biggest share of diaper sales there, it says.

While McDonald expects employees to spend time in customers' homes, observing how they mop floors or dye their hair, he's increasingly using technology to gather data. He has joined with Cisco Systems (CSCO), SAP (SAP), and others to develop IT systems that help P&G decipher its extensive consumer research and sales data for its products. Gazing at their digital map during meetings, P&G executives can click on a country and see what consumers are buying, which promotions are working, where inventory needs to be replenished, and how sales compare to plan.

McDonald and his team in recent months were debating whether to launch a line of lower-priced diapers in Germany when data indicated they'd begin to lose customers within six months without a bigger offensive. So they decided to release the cheaper brand along with a premium line and subsequently captured two-thirds of the market in Germany, an all-time high.

In March, P&G struck an agreement with Israel's Teva Pharmaceutical Industries (TEVA), the world's biggest maker of generic drugs, to jointly develop over-the-counter medicines. The agreement should expand P&G's market for Vicks cough and cold products and other health brands. While the payoff from developing new brands can take longer, McDonald says, it's worth the investment. He's also tiptoeing into providing services with two franchise businesses in the U.S. built around hit P&G products, Mr. Clean Car Washes and Tide Dry Cleaners. They will have 15 and seven of the outlets, respectively, by August.

"I'm not going to argue that the Mr. Clean Car Wash we have here in Cincinnati or the Tide Dry Cleaners stores are the next Swiffer," McDonald says, referring to the hot-selling mop that has become a billion-dollar brand for P&G. "But this is an example of how far afield we're willing to go in order to continue learning and to try new things."

Whatever products P&G launches—often after hefty spending on research—can be quickly copied by private-label manufacturers that offer knockoffs at lower prices. Drugstore operator CVS Caremark (CVS), for one, sells its own package of 56 teeth-whitening strips for $17, compared with a package of 20 Crest 3D White Whitestrips, which P&G sells for $28. Still, McDonald says he isn't planning to cut the annual research budget of almost $2 billion because it generates new-and-improved products that give P&G an edge. That's one reason, he says, that in the past year "we've grown share in the U.S. and Western Europe while private-label share has been declining in Europe and flat or declining in the U.S."

Such gains come slowly. But Roger L. Jenkins, dean of the Farmer School of Business at Miami University in Ohio, likens McDonald's emphasis on slow and steady growth to the parable of the tortoise and the hare: "Bob is like the tortoise—he's going to get there."

The bottom line: P&G must grow 4 percent to meet expectations. Changing consumer behavior abroad is its key strategy.

Coleman-Lochner is a reporter for Bloomberg News.