Brand giants favour digital

06 February 2012

NEW YORK: Brand owners including Procter & Gamble, Unilever and Kellogg's are ramping up their digital expenditure, in the belief this approach offers greater effectiveness and provides cost savings.

Unilever, the FMCG giant, boosted its digital outlay by 15% in 2011 on an annual basis, from which it benefitted by exacting the maximum value from this expenditure.

"We've really made a step change in that area and that gives us not only effectiveness in spending, but it gives us also a much better connection to our consumers," Paul Polman, Unilever's CEO, told analysts on a conference call.

"The absolute A&P number is becoming less relevant, just like the absolute R&D number is becoming less relevant if you move to open innovation."

Procter & Gamble, a rival to Unilever, has traditionally spent between 9% and 11% of revenues on ads, but expects costs to "moderate" due to the rising number of new media channels available.

"We're quickly moving more and more of our businesses into digital," Bob McDonald, its CEO, said. "We find that the return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient."

As an example of this, McDonald's pointed to Old Spice's "Smell Like a Man, Man" campaign, which yielded 1.8bn impressions, and also cited the rising importance of platforms such as Google and Facebook.

Kellogg, the food group, invested over $1bn in advertising in 2011, some 9% of the company's sales, but an overall figure which hides a fundamental change in approach.

"What you can't see ... is the shift of our spending in recent years to digital media," said Ronald Dissinger, its CFO. "This shift has allowed us to partially offset inflation and increase effectiveness at the same time. We've done a lot of work measuring the optimisation of our mix."

General Mills, another packaged food manufacturer, has ramped up its new media activity with regard to brands such as Yoplait and Nature Valley, something the company anticipates will become a wider trend.

"In 2012, many marketers will start with content as a way to engage their best customers and grow their business versus advertising," said Mark Addicks, the company's CMO.

"They will realize the power of content to enhance the brand experience, deliver the brand's purpose and extend the opportunities for the brand to serve."

Data sourced from Seeking Alpha/Forbes; additional content by Warc staff