The Issue: How P&G Brought Back Herbal Essences

It updated a stale mass-market shampoo to appeal to younger Gen Y and Millennial women

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When Procter & Gamble acquired hair-care company Clairol in 2001, it inherited a floundering shampoo brand. By 2004, Herbal Essences, at the time nearly 35 years old and a mass-market hair-care brand for women, was in a "long-term decline," reports Chairman and CEO A.G. Lafley. Marketed to all women (or at least those who wash their hair), the line had gone stale, with little distinction from the many competitors it shared on the drugstore shelf.

By 2006, Lafley and P&G's beauty business chief, Susan Arnold, knew something had to be done with the tired brand. "We had three choices," Lafley says. "Abandon it, divest it, or frankly, reinvent it and resuscitate it." Arnold chose the third, putting together a small interdisciplinary team of R&D, marketing, and design managers to help revive the hair-care line.

At first, it wasn't clear what could be done to give Herbal Essences back some shine. "It turned out the brand around the market had just grown older, and it was a broader 'every woman' target," Lafley says. "We thought the target group was interested in natural and herbal ingredients, and we took that a little too literally."

Jump-Starting Innovation

To find the right new, smaller target market for the brand, Arnold and her team turned to Clay Street, an immersion program for P&G managers to jump-start innovation. There, the team came up with a new target audience for the brand—Generation Y. "In the case of Gen Y, there really wasn't another hair-care brand that was really meeting their needs," says Lafley. "The question was: 'Can Herbal do it?'"

Arnold's team bet yes. They redesigned the packaging of the product to "fit" this more tailored market: The shampoo and conditioner bottles are curved so that they literally fit together on the shelf. The nesting shape not only helped Herbal Essences stand out from others on the shelf but also encouraged more young women to buy both products, driving up conditioner sales.

To appeal to Millennials, the team also updated the language on the packaging. The ho-hum "dandruff" reference gave way to "no flaking away." Names for different hair styles were changed to more youthful phrases such as "totally twisted" or "drama clean." "We totally reframed the proposition," says Lafley. While P&G doesn't break out sales figures on specific products, the company reported in a conference call soon after the shampoo was relaunched that the brand was growing again, with sales growth rates in the high single digits.

McGregor is BusinessWeek's management editor.