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P&G plans $2bn further marketing cuts

News, 28 April 2017
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CINCINNATI: Procter & Gamble, the FMCG giant, saw its net sales fall 1% year-on-year in Q3 2017 and has reacted by announcing plans to cut its marketing spend by $2bn over five years along with other substantial savings.

The company's Chief Financial Officer, Jon Moeller, told investors during an earnings call that total sales for the third quarter were $15.6bn and that the company faced a series of external challenges, ranging from geopolitical uncertainty to the impact of the strong dollar on foreign exchanges.

He outlined plans to cut costs by a further $7bn over the next 10 years, in addition to $10bn of savings announced last year, and a significant proportion will affect its marketing budget, including agency fees.

"We see over $2bn of savings opportunity in marketing spending with half or more coming from media rates and eliminating media supply chain waste," Moeller said.

"We're targeting up to $0.5bn more in savings from reduced agency fees and ad production costs and we see about $0.5bn of opportunity in spending for in-store materials, direct-to-consumer programs and improved efficiency in trial building and sampling programs."

He added that all of this could be achieved while P&G strengthens its overall strategy of increasing reach, increasing continuity and improving effectiveness.

Moeller also told investors and analysts that P&G expects its "Irresistible Superiority" initiative to underpin its approach across all its operations, including packaging, advertising and in-store promotions.

He explained that this will mean advertising will need to meet "body-of-evidence" standards, as currently achieved by campaigns such as "Always, Like A Girl" or "Tide, If It's Got To Be Clean, It's Got To Be Tide", and that campaigns must prove their effectiveness for at least one year.

"We're raising the bar in advertising quality with a focus on superior brand performance claims that communicate the brand's benefit superiority to create awareness and trial," Moeller said.

"We're applying a body-of-evidence assessment to advertising quality. To be assessed as proven effective, our highest bar, a campaign must drive awareness, household penetration, and share growth for at least one full year, and be determined by a panel of objective experts to be effective advertising."

Data sourced from P&G, Financial Times; additional content by WARC staff

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