P&G cuts marketing spend as it transitions to digital and internalises media buying
The latest quarterly results from Procter & Gamble, a leading global advertiser, show it is in the midst of transforming its media planning strategy. The consumer products conglomerate spent less on marketing in the period and estimates lower spending for the full year ahead on the back of increased digitalisation and reach-based performance measurement.
Asked about this, CFO Andre Schulten explained at the event that already more than 50% of what P&G spends on media buying is going to digital as part of a realignment of budgets from online TV. The goal is to devote more money to ways that allow for greater segmentation and precision in spending to achieve impact, but the reduction in aggregate investment draws the attention of analysts in the current context: rising prices in a scenario of inflation, pre-pandemic inventory levels of products or virtually zero growth in market share that private labels are fighting with many promotions.
The consumer products giant changes its strategy and prioritises measurable reach in digital to gain efficiency in spending.
The consumer products giant is shifting its approach to investment from a category-based model to one based on reach targets for each brand, which will precede the planning calculation across the different media that can meet them. In this transition, P&G is building its own dashboard of first-party data to gradually make spending more efficient, and is also hiring more marketing and technical staff for its internal planning team.
This last move also explains the possible distortion of possible comparisons, as part of the budget that was directly allocated to media buying now goes to overheads associated with these internal activities. In addition, P&G had been increasing its investment significantly, to a total of 1.2 billion euros in the last three years alone, something that Schulten also points to as an important factor when comparing previous and current data.
The company achieved 7% higher revenues in the reporting quarter mainly due to price increases, as the volume of products sold fell by 3%. Its segment is particularly sensitive to a situation like the current one, as many consumers are considering switching to private labels from more well-known brands that may have raised prices to save money and cope with the rising cost of living. This leaves large conglomerates such as P&G with the choice of whether or not to use marketing leverage to keep their brands at the forefront of consumers’ minds for values beyond price.
