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Procter & Gamble (P&G) Retail Feature

Procter & Gamble: the world's biggest channel hopper

By Joe Fernandez |

April 2, 2012 | 6 min read

The world’s biggest marketer Procter & Gamble has announced that it will be cutting $1bn from its marketing budget over the next five years as it moves away from traditional TV advertising. In its place comes a new focus on digital, inspired in part by the massive 1.8bn free page impressions the FMCG giant enjoyed for its soaraway Old Spice campaign, ‘The man your man could smell like’. Joe Fernandez asks whether other brands should change channel too.

As economic woes continue, industry giants are changing the way they look to advertise products and engage with consumers. Out goes the multi-million TV strategy and in comes the increased digital budget.Leading the charge are two of the world’s biggest companies – Procter & Gamble and AB Inbev. Procter & Gamble, the consumer goods giant, says it is abandoning TV ads to strengthen its “quest” of fully digitising the company inside and the way it goes to market. It plans to cut $1billion from its annual marketing budget by 2016 through the cuts.AB Inbev meanwhile has adopted what it describes as a “Fans First” strategy in social media, defined by attracting followers and providing them with content which is highly relevant to their lifestyles.So, are we about to see the much anticipated digital revolution arise or is this simply a sign of the weak economic times we are in?Matt Barnett, head of digital at shopper marketing agency, MARS\Y&R, believes a trend is emerging. He says: “There is patently a certain amount of streamlining going on and this includes cuts in advertising and promotional budgets. Digital activity of this kind allows for much tighter ROI than is the case with traditional channels.”James Hurst, head of digital at Figtree Creative Network, adds: “In this landscape successful brands aren’t shouting their proposition from billboards; they are using the banter between consumers.”The old adage about digital is that advertisers serious about their brands continually assess where their existing and potential consumers are at present. Online offers unprecedented opportunities for innovative creative executions, dynamic targeting, content in relevant contexts, harvesting of data and development of collateral to match.Nick Berry, planning director for digital at Draftfcb London, says its strength comes from its robust model and brands should apply budgetary values according to their needs and not ad-hoc.“In re-allocating media budgets both attribution and econometric modelling are needed to ensure that digital’s contribution is correctly measured and sufficient weight given to offline influences. The most important factor is how the budget is spent in each channel. Digitally this focus needs to be on developing content, services and innovative communications products that consumers want and companies can use to engage and create new revenue streams. Cutting budgets based on the efficiencies digital creates risks starving digital brands of the investment they need to prosper.”Speaking on a conference call with analysts, Carlos Brito, AB InBev’s CEO, emphasised the rising “importance” of this rapidly-developing medium to the organisation’s efforts. He said: “We estimate that our brands have already attracted over 30m Facebook and other social media friends worldwide, helping us to stay relevant to beer lovers around the world and sustainably grow our business”, adding that social media now has a central role to play.Tim Hipperson, chief executive of G2 Joshua, agrees that efficacy is making brands change their focus on luring in consumers: “Creating one-to-one relationships in real time with the consumer can only be achieved by tapping into consumer conversations through online channels. As data analytics and social media monitoring technology continue to improve, it is enabling deeper insights into the consumer, allowing brands to forge these closer relationships.”Ogilvy Action global head of digital, Hugh Boyle, adds: “The reason why digital is more efficient than traditional media is that it works on a more egalitarian basis, allowing a free flow of content and opinion in both directions with those who receive its messages.”Yet, not everyone agrees that efficacy is a valid reason for brands to hone in on digital. Brands should really monitor campaigns and know when to invest in digital elements to boost a campaign.Elle Graham-Dixon, a planner at Elvis, argues: “Chasing effectiveness rather than efficiency is what we should all be striving for. It is much easier to control than the act of taking a punt on a big creative idea and a media strategy that may or may not reach the eyes and hearts of their demographic.” Jo Boyd, Managing Director UK & NI at Anthem Worldwide, adds: “The thing to remember is that for brands the choice between digital and traditional advertising it is not an either/or decision but digital media provides brands with the wherewithal to create much more engaged active relationships – both types of communication have value.”In the UK, P&G is the biggest spender on TV advertising. Nielsen claims it spent £136m in 2010.Yet Jamie Matthews, CEO of INITIALS Marketing, is dubious of the company’s reasoning for axing TV investment. “While digital has the potential to cost less, it also demands that brands be constantly switched on, rather than the historical model of on for the couple of months during which the campaign runs.”P&G’s global brand building officer Marc Pritchard and CEO Bob McDonald identified digital as an area where they would attempt to more than make up for marketingbudget cuts by being much more effective, saying “We love to see people try different things and watch it explode. Some brands that have very little money get very innovative.”Marco Scognamiglio, CEO at Rapp endorses their views: “I think the issue is less about traditional spend and more about audience understanding. Today ‘nontraditional’ media presents brands with wonderful opportunities to do just that and yes it does require less spend.P&G and AB InBev are smart as they know technology platforms are going to continue to play a critical role with new generations of users and creators of content as digital becomes the norm for society. Norms bring stability.” In the end though, as both P&G and AB-Inbev have realised, the social bubble is rapidly evolving online and brands must keep up with this trend if they want to prosper in the new digital era.Andrew Strange, CEO of the Brandwidth Group, concludes: “The inescapable truth is that online advertising in all its forms is coming-of-age – a most inconvenient fact for those who work in a traditional media business. Not only is it faster and more agile to deploy, it is also easier to target and measure – we are starting to have enough evidence showing how on every ‘sales funnel’ measure, online simply works harder for brands.”
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