P&G shrinks marketing spend as mobile boosts impact but costs less
By Chantal Tode
April 28, 2014
A recent Vine video for Tide
A Procter & Gamble executive recently said the company is reducing its marketing budget this year, but still expects the overall impact to be well ahead of previous years thanks, in part, to a bigger focus on mobile and social strategies.
While P&G has been actively embracing mobile for some time, the comments made last week by the consumer packaged goods giant’s chief financial officer Jon Moeller are significant because, as one of the biggest spenders on advertising and marketing, they reflect how mobile and social are impacting the marketing sector. In particular, the comments point to the growing reallocation of budgets away from traditional media, the growing importance of mobile and social startups and the evolving role of ad agencies.
“We continue to drive marketing effectiveness and productivity through an optimized media mix with more digital mobile search and social presence, improved message clarity and greater non-advertising marketing efficiency,” Mr. Moeller said during a conference call last week with analysts to discuss the company’s latest quarterly financial results.
“We expect marketing spending to come in below prior year levels, due to productivity improvements in non-working marketing and advertising cost,” he said. “Importantly, the overall effectiveness and the consumer impact over advertising spending will be well ahead of the prior year."
As one of the biggest brand marketers across several competitive categories, reaching consumers with marketing messages plays an important role in its success. On the surface, a reduction in dollars could suggest that P&G is placing less emphasis on marketing.
Mr. Moeller emphasized in his remarks that this is not the case. Instead, the company is shifting dollars into areas that are more effective than traditional media – mobile and social among them – that also happen to be more cost effective.
“We are very focused on assuring that the overall impact of our advertising program, the number of consumers that we are reaching, the quality of that interaction grows, does not decline,” Mr. Moeller said. “We are at a point where simply looking at dollars, it's just not representative of the strength of a marketing program in a rapidly changing marketing landscape.”
A recent print ad from P&G
One of the factors driving P&G’s improvements in marketing effectiveness and efficiency is “a reduction in non-working dollars,” per Mr. Moeller. The phrase non-working dollars typically refers to the money spent on creating advertising and marketing content, work that is often done by agencies.
As digital marketing grows, big brand marketers such as P&G are increasingly taking some of the creation portion of their marketing investment in-house, farming it out to technology partners or automating it.
As a result, the traditional role of the agency is evolving, with agencies increasingly under pressure to develop mobile and social capacities.
“As for agencies, I’m pretty sure they’re not walking away completely but, again, reallocating budgets simply because many of the tools some of the start-ups are bringing to the party are enabling big brands such as P&G to do so much of what used to require so much human intervention and input,” said Michael McGuire, Santa Clara, CA-based vice president of research at Gartner for Marketing Leaders.
“P&G already has partnered with a few start-up mobile vendors, I would expect that to continue,” he said. “We’re also likely to see them push their existing platform providers to enhance/introduce mobile-social-specific capabilities to their platforms.”
P&G used mobile to promote Braun during the Winter Games
Agencies’ role evolves
However, agencies still have a role to play for P&G.
In particular, the growth in mobile has brought with it an explosion of consumer data that brands need help sifting through in order to deliver more relevant communications.
“Marketers today still need help wrangling the data available through these channels to execute personalized targeting, and they also need help providing the creative to keep up with these channels,” said Jennifer Wise, analyst at Forrester, Cambridge, MA . “Ad agencies can help here, but they are seeing competition as many ad tech vendors are flooding the market with capabilities.
Companies such as Mondelez and Unilever and others have been pouring more dollars into mobile and social startups as way to bring an infusion of creative energy into their marketing strategies.
P&G has been active in this area as well, with last week’s remarks suggest more such investments could be in the making.
“Some marketers are building out their own networks, are harnessing their first party data to use for personalized targeting, and are staffing-up for mobile social ad content creation,” Ms. Wise said. “But with the mobile ecosystem as complicated as it is today in terms of reach, access to data, and ability to track and target a user, working to build or partner with those who have built mobile-first ad solutions does make sense.”
Digital touch points
P&G has been actively embracing mobile across numerous brands for some time.
For example, while some brands struggle to find the right way to leverage social, P&G hit all the right notes with a recent campaign for Tide that leveraged the Vine mobile app to send out bits of video in real-time during the Super Bowl and incorporated other brands’ TV spots during the game (see story).
The company is also reportedly looking at building branded video streaming channels in India as an alternative to television ads (see story).
“P&G is a global CPG company," said Julie Ask, vice president and principal analyst at Forrester. "Their target audience is about seven billion people of which six billion have mobile phones, close to two billion will have smartphones and probably a much smaller number will have either PC's or a TV subscription. Mobile phones are absolutely the most important digital touch point for P&G.”
Chantal Tode is associate editor on Mobile Marketer
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