P&G invests in ‘superior communication’

Procter & Gamble, the consumer packaged goods giant, boosted its adspend for the second year in succession, its annual report shows, with a 12% boost to $8.2bn in the 12 months to June 2021 following the previous year’s 7.3% rise – and it is using this outlay to focus on brand superiority.

Why it matters

Two years of increased investment are a reversal of the preceding three years when P&G was focused on cutting marketing spend and agency costs. In a recent earnings call, David Taylor, P&G’s CEO, referred to a “superiority strategy”, whereby innovative products are backed by “meaningful investment” in marketing. This approach, he said, had trebled the company’s annual average growth rate from 2% five years ago to 6% today.

The financial details

• P&G’s adspend in the fiscal year 2021 increased by $850m.
  
• Advertising was 10.8% of sales (a year-on-year increase of more than 40 basis points).
• P&G believes there are still significant productivity improvements it can make within its media spend.

Communicating brand superiority

• P&G’s formulation for “superior communications”, according to its annual report, centres around messaging that “must create awareness, demonstrate superior performance, and create the desire to purchase”.
  
• It suggests product and packaging benefits should be “communicated with exceptional advertising that makes you think, talk, laugh, cry, smile, act and buy – and that drives category and brand growth”.
  
• As a case in point, P&G cited Charmin Ultra Soft toilet paper, which is 2x more absorbent, with the resultant proposition that consumers can use less than a leading discount brand. Highlighting this superior performance, its manufacturer explained, contributed to double-digit organic sales growth for the brand in the 2020 fiscal year.

Key quote

“Superior communication is a core element of our superiority framework and we’ve not reached the point of diminishing return on those investments” – Andre Schulten, CFO, Procter & Gamble. 

Sourced from Seeking Alpha