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Industry Contributor 22 Jun 2019 - 2 min read

P&G puts big agencies on notice with deeper budget cuts

By Paul McIntyre - Executive Editor

Procter & Gamble chief marketer Marc Pritchard has signalled more pain for holding groups as it doubles its rate of budget cutting, shifting spend to new formats and nimble partners (Financial Times).

 

Key points

  • CMO Marc Pritchard says P&G has made $1bn savings in fees and production over last four years
  • Aims to increase savings to $2bn by 2021
  • Says rise of ad blockers forcing greater experimentation
  • Diverting budget into nontraditional formats
  • Striking partnerships with different types of partners, a deal with Ariana Huffington’s behavioural health venture Thrive Global, announced at Cannes, another with singer John Legend

Another billion dollars out of the pockets of the holding groups and further confirmation that the market is moving faster. Little wonder they're  spending big on data and customer relationship management capabilities (Merkle, Axciom, Epsilon et al). Can they pivot quickly enough?

Less money for big ad agencies, more money for partners that can help P&G reach customers in different ways – and embed “habit and positive ritual” around its products, according to Ariana Huffington. E.g. a wifi connected toothbrush that feeds back to customers, or urging parents to sing to their babies while changing their nappies, or tell themselves something life affirming when applying deodorant, at least according to this Fortune interview.

Sounds right on, but it's making money for P&G. Pritchard says its brands that market around social purpose are realising double digit growth. "The reality is that there is a business case," Pritchard told Business Insider. "When you do these things, it does positively affect the business and growth."

In terms of traditional advertising, presently 95% of P&G’s $7bn budget, the world’s second largest advertiser is also reweighting spend in favour of reach. “Excess frequency is the biggest waste and in every aspect of our media we’re finding waste to allow us to be able to invest back in creating reach,” Pritchard told Marketing Week.

That view aligns with Australian media owners. SCA’s Brian Gallagher says in this week’s podcast that advertisers are increasingly refocusing on reach.

"You see a lot of people pulling back, unsure whether they have lost more than they have gained in the process of hyper-targeting audiences," he says. "We're starting to see sensibility return to the market around the purpose of reach. Reach is becoming more and more important."

What do you think?

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