P&G Outlines Advertising - Sales Equation

18 December 2006

CINCINNATI: Procter & Gamble says it has no mandate to cut advertising as a percentage of sales - although the world's highest-spending marketer aims to deploy its ad billions more efficiently and effectively.

The consumer goods titan hopes to increase its operating margin from 19.4% last year to around 24% in 2010.

Cfo Clayton Daley told an analysts' meeting at company HQ: "Our sustained-growth model doesn't actually count on P&G reducing marketing as a percent of sales. As such, we will look to reinvest [marketing-efficiency savings] back in the business."

However, he pointed out that pegging back adspend is not necessarily harmful to brands.

The meeting heard the company's North American fabric-care business cut adspend as a share of sales by 2% over the five fiscal years ended June 30, but increased sales $900 million (€686m; £459m).

As a result market share rose by 3.5 points and raised brand equity on flagship detergent Tide to record levels.

The company, whose brands also include Pampers diapers and Crest toothpaste, has cut global adspend as a share of sales for the past two years - to 9.9% from 10.7% in fiscal 2004.

And television is now not the default lead in the marketing mix. Global marketing officer Jim Stengel cited a recent feminine care Always upgrade that relied entirely on "targeted print media", while antacid remedy Prilosec "has done the same with interactive approaches".

Data sourced from AdAge.com; additional content by WARC staff