Procter & Gamble (P&G) is turning to “pooling production” and “open-sourcing” as it looks to continue its drive to reduce marketing spend.
The FMCG-giant’s marketing chief Marc Pritchard revealed the plans at an analyst event in Cincinnati last week. Driving marketing productivity, efficiency and effectiveness and slashing its once $8bn spend has been his remit, but that's so far seen it drastically tighten agency costs.
It has consolidated the 6,000 agencies that it used by about 50% since 2014 and reduced the $2bn in fees that it was paying by the same amount. However, looking ahead, Pritchard said it will now clamp down on its production costs, which currently stand at about $500m globally.
“We see more savings runway ahead using digital technology for production, pooling more production and also using open sourcing and creativity in our work to create advertising, both within and outside of existing agency networks," he said.
This process of ‘open-sourcing’ has already been used on its skincare brand SK-II. Agency of record Leo Burnett now devises the overarching campaign for the brand but then briefs for individual projects within that master idea are handed out to other agencies, both in and outside of the Publicis Network.
Offering an example, a spokesperson told AdAge that Leo Burnett came up with the recent ‘Change Destiny’ campaign but independent agency Forsman & Bodenfors (now owned by MDC) created the ‘Marriage Market’ ad which ran in China as part it.
Specifically, for SK-II, Pritchard said it spent 50% less than it traditionally would on a campaign.
“By improving the efficiency and the effectiveness of our marketing spending, P&G brands are continually improving productivity to grow users and drive top and bottom-line growth,” said Pritchard.
Collaborating with retailers
While its agencies are going to have to get used to the idea of collaboration, P&G’s own marketers are also trying to shift how they would usually work with their retail partners to embrace a more joined up approach to marketing in-store.
Chief financial officer Jon Moeller said last month that he wants to “increase the continuity of marketing spend and sampling activity” over the coming fiscal year, especially over the third and fourth quarters when it will be launching a number of new products.
In fiscal 2016, it spent $15bn on promotional spending and Moeller added last week that this is “too big of a spend pool to ignore".
“We see clear opportunities to improve the effectiveness of the spent for us and our retail partners to build the value of our categories and our brands,” he said.
“Our key objective is to drive category growth with our retail partners by leveraging new tools and data analytics to help identify which events work best and which SKUs are most effective.”
Offering an example, Moeller said in some categories “a full price and capped display of a premium tier product will generate more revenue and profit for both our retail partners and ourselves than a deep discount promotion on a lower price item.
“Combining our efforts and resources on joint marketing programs can be more productive to drive additional shoppers into the store and to our categories than deep discounts. More effective spending and category growth are the objectives here, a win-win for us and our retail partners.”
Broadening media reach all year round
P&G has previously lamented the decision to get too targeted when it comes to its advertising, and Pritchard is now keen to create a “broad media reach” across the spectrum of platforms available to it.
“We are increasing media reach by 10% to 20% on brands like Tide in the United States by shifting to more broadly appealing television shows, and also higher reach digital platforms,” he said.
It is also increasing media continuity “by bouncing spending more evenly across months and quarters on all brands.”
In the case of health-care brand Vicks, P&G would usually advertise during the peak cold season in winter. However, it’s hoping to see the benefits of taking a “balanced” approach by spending on the brand year-round.