P&G: ‘We’re spending less on agencies, and more on advertising’ | M&M Global

P&G: ‘We’re spending less on agencies, and more on advertising’

The world’s biggest advertiser said its agency cost-cutting drive has allowed it to reduce spending by $370m, and helped it to invest more in marketing support.

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Reporting its Q2 earnings, Procter & Gamble (P&G) said its core sales had returned to growth in the three months to end of December, up 2%. It marks an improvement on the previous quarter, when those sales were down 1% – P&G’s first quarterly decline since 2008.

It follows the appointment of new chief executive David Taylor, who replaced predecessor AG Lafley in November.

As part of a transformation plan, which has seen the FMCG giant divest “non-core” brands like Duracell and Clairol, the company also instigated a cost-cutting programme in its marketing department.

The owner of brands such as Gillette and Tide has reduced the number of agencies it works with by 40%, and plans $200m in agency-related savings later this fiscal year.

“Continued digitisation has been and will be a big enabler of our overhead and manufacturing enrolment efficiencies,” said chief financial officer Jon Moeller on an investor call.

“We’re reducing non-working marketing expenditures – costs that do not impact reach, do not impact frequency. Last year we reduced the number of agencies we worked with by nearly 40% and cut agency and production spending by about $370m. We’re aiming for an additional $200m of agency-related savings this year.

“These are non-working savings that enable us to invest in advertising and in trial of consumer-preferred products. We’re strengthening our working marketing programmes – greater reach, higher frequency, greater effectiveness, at less overall marketing costs.”

Late last year, P&G transferred the bulk of its North American media-buying and planning business into Omnicom Media Group, following its first review of the account in nearly 20 years.

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