P&G plans to erase $2B in marketing spend over next 5 years

Dive Brief:

  • As part of a previously announced $10 billion cost-cutting plan, Procter & Gamble said it aims to slash $2 billion from its marketing spend over the next five years, as reported by Ad Age. The move stems, at least in part, from the CPG giant missing on growth expectations in Q3 last year, and means that more investments in product formulation, sales, R&D and advertising are incoming. 
  • Cuts include $1 billion or more in media spending and another $500 million to agency fees, on top of previously implemented $600 million cuts. On a company earnings call, Chief Financial Officer Jon Moeller stated the savings opportunity in marketing spending was found in adjusting media rates and eliminating ad supply chain waste.
  • P&G also has a new brand mission for "Irresistible Superiority." The concept is that the company will grow market share slowly by providing consumers with an irresistibly superior experience that extends to the quality of its advertising, according to Moeller. The strategy "integrates technical tests, blind tests, [tracking call and online contacts], household panel tests, and in-market product reviews," he said, per Ad Age. "It adds behavioral data, which is more reliable than attitudinal data, which is what we've historically used."

Dive Insight:

P&G is putting its mission of honing in on the quality of marketing over sheer quantity and scale into greater focus, especially with the "Irresistible Superiority" strategy. The CPG brand is one of the world's largest advertisers, but it's appeared to pull back a bit in 2017 amid frustrations with the media supply chain, especially in the digital space. Given P&G's massive influence, it will be interesting to see if other marketers follow its cost-cutting lead. 

Chief Brand Officer Marc Pritchard started the year off with a bang by announcing his company would require all digital advertising partners receive third-party media accreditation from the MRC lest they lose its ad business. At the time, he also called for greater transparency as well a desire to see a clean and productive media supply chain.

Later, in early April, Pritchard also put out a call to action for advertising agencies, bemoaning how complex the system has become. "Bottom line: We need you to get simpler," he said of agencies at the time, and the proposed $500 million cuts to agency fees demonstrate that P&G is willing to back those demands where it really counts — with its wallet.

Ad Age speculated that some of the more general cuts in P&G's marketing spending will come from Pritchard’s tougher stance on digital advertising. While P&G is looking to make major cuts in its marketing spending, it actually increased ad spending last quarter at $1.8 billion compared to $1.7 billion the same quarter last year, the publication said.

Filed Under: Trends Corporate News
Top image credit: P&G