P&G to cut marketing costs

19 November 2012

NEW YORK: Procter & Gamble, the consumer goods giant, is seeking to cut $1bn from its marketing budget during the next four years, at least partly by making greater use of big ideas and digital media.

Marc Pritchard, the firm's global brand building and marketing officer, told analysts that the $13.7bn it invested in marketing last year constituted the third largest category of corporate expenditure, behind people and materials.

The firm's goal of achieving number one or two share positions in each category relied on achieving the same status for brand awareness, he added. Despite this, however, some "significant efficiency opportunities" are still available.

"Cost savings opportunities exist in each step of the advertising process: in idea creation, in production and in the media mix that we use to get our message to consumers," said Pritchard.

One example is reducing the number of "messages" on air for each brand, which often leads to fragmented media spend and dilutes the communication of its core equity benefit. Pampers, for example, was once using eight different claims at once.

"These multiple touches also have a cost, and all too often those costs weren't adding incremental value," said Pritchard. "We're increasingly developing fewer, bigger creative ideas that can travel around the world."

As an example, its Olympics campaign covered 30 brands. It mixed traditional media like TV ads with paid and earned media across platforms like Facebook, Twitter, and YouTube, and was applied in 4m stores across the globe.

"Designing and executing a few big multi-brand commercial programmes … versus lower return single-brand events will reduce the sheer number of activities, lowers the cost per brand and drives incremental cross-brand purchases," said Pritchard.

"We're also using technology to shift spending from more traditional advertising to higher return on investment digital and social media."

Upon assessing broader aspects of marketing like production, coupon distribution and in-store, together costing $4bn a year, Pritchard reported "even more opportunities" existed to cut back.

"What makes this spending so difficult to manage is that it's a combination of thousands of local activities," he said. "However, that's also what gives us confidence we can achieve significant savings by approaching this spending matter more systemically."

Buying at scale was highlighted as one core goal, potentially offering savings of 20% on marketing materials alone. P&G has also cut its number of marketing suppliers from 20,000 to 13,000 in five years, which is still "way too many".

"Simply shining the light on wasteful spending can cut costs of some of these elements literally in half," Pritchard said.

Data sourced from Procter & Gamble; additional content by Warc staff