Procter & Gamble boosts adspend by $1bn

05 August 2010

CINCINNATI: Procter & Gamble boosted its adspend by $1bn (€759m; £629m) in the last year, in an effort to increase awareness, trial and repurchase levels during the downturn.

"Year-on-year, advertising spending was up $1bn," said Jon Moeller, the FMCG giant's chief financial officer, on a call with investors.

This took the company's outlay to $8.6bn, and included an expansion of 400 basis points in selling, general and administrative expenses in Q2 2010, when several new products were rolled out.

Pampers Dry Max, which were subject to critical online word of mouth on sites like Facebook and Twitter after some mothers suggested they caused rashes, received considerable backing.

Gillette's Fusion ProGlide razor hit store shelves in June, and benefitted from similarly substantial exposure, helping it to claim the number one spot in its category.

Crest 3D White, a premium extension attempting to bridge the gap between the health and beauty sectors, was another key part of the organisation's media activity.

The company also unveiled the "re-staged" Pantene haircare range, delivering immediate returns through a share gain of over 0.5%.

"We've talked about how that was back-half loaded," Moeller continued. "And, put simply, we would have been crazy to do anything else.

"If you look at the strength of the innovation program that was coming to market, we literally took every resource available to us and put it behind those innovations because we believe so strongly in them."

In the last 12 months, P&G's adspend came in at approximately 11% of sales, consistent with long-term figures, and this approach will retain its primacy.

"We'll be holding promotion relatively steady year-to-year," said Moeller. "We'll be increasing advertising, doing that in line with sales, so the percentage should stay about the same.

"We're very comfortable headed into next year in terms of both the level and the quality of the support that we have against the business."

According to Robert McDonald, P&G's ceo, the multi-brand "Thanks Mom" campaign for the Winter Olympics demonstrated a coordinated model of innovation and marketing.

P&G sponsored 16 US athletes and their mothers during the event, generating 6bn impressions, $100m in incremental revenues and TV ads with 30% higher recall than the norm.

It plans to further develop this initiative to build on the recently-announced sponsorship of the 2012 Olympic Games in London.

"The international reach of the Olympics will expose consumers worldwide to P&G's full lineup of global leadership brands," said McDonald.

He also praised the success of Old Spice's "Smell Like a Man, Man", and the family-friendly films "Secrets of the Mountain" and "The Jensen Project" produced in conjunction with Wal-Mart.

"When you look at our shift from TV and traditional forms of media to other forms of media, we're not only talking about the spending level; we're talking about a significantly increased effectiveness," he said.

More broadly, Procter & Gamble is using "big ideas" across its operations, such as the "digitisation" of design and development to reduce lead times, and emphasising open innovation.

"We're making the ideas that we have larger, so that we're spending behind larger ideas," McDonald argued.

This strategy applies to marketing, where an assessment of P&G's current pattern of expenditure yields a very positive picture.

"You would see higher levels of advertising on established brands, and that's the reason we're growing market share on 60% of our business today as we're supporting it with advertising versus year ago," said McDonald.

Data sourced from Seeking Alpha; additional content by Warc staff