The latest of Procter & Gamble’s North American roster restructures has seen its in-house agency take a larger share of the media business while Dentsu Aegis Networks’ Carat has won a piece too. The move is another step in the business' quest for control of its efficiencies, but by no means signifies the end of its reliance of agency partners.
Somewhat unconventionally, P&G’s recent media review comprised an internal bid between its incumbent agencies – Dentsu’s Carat, Omnicom’s Hearts & Science - and its own internal shop, rather than a formal pitching process.
While the company would not comment “on agency assignments as a matter of policy”, it reportedly handed Carat a larger share of its media business, while cutting a proportion of Hearts & Science’s remit.
Meanwhile, P&G’s internal media team won the bid for its oral care business, Adweek reported.
“We are constantly working to optimize our media buy, and we will work closely with our media agencies on how that work is done,” said a spokesperson for P&G. “We clearly see an important role for the agencies.”
They added: “We can confirm we are in partnership with our agencies as we explore a new media model for fiscal year 2019-2020 that ensures our brands are in best control of their levers for growth while maintaining the significant scale advantage P&G currently sees.”
The spokesperson also noted it had previously outsourced all work “from planning to buying through bill pay to an agency”. Now, the company will gives its brands the chance to take operational work – including “planning, digital buying or ... search and programmatic” – in-house.
A spokesperson for Hearts & Science said: "We’re happy to have secured the businesses for which the scope and terms align with our offer."
Carat did not immediately return The Drum’s request for comment.
Internal efficiencies vs agency benefits
While chief brand officer Marc Pritchard has continually foreshadowed a slimmed down agency roster in his hunt for greater efficiencies, the informal, internal nature of the bidding process so early on in the year came as a surprise.
One analyst imagined it was a calculated move on the client’s part to quietly push Hearts & Science out of the account, despite the agency being founded around the FMCG’s client’s needs.
Yet others believe the internal maneuvers were intended to give P&G the power to take greater control of its marketing output, despite handing Carat the bulk of its media business.
“Pritchard has developed a fairly robust, centralized marketing and media operations group that will need to work with potentially multiple agencies if each division elects to make some roster changes,” said Jay Pattisall, Forrester’s principal analyst serving chief marketing officers.
“P&G owns its own data. The contractual relationships with its suppliers are direct with the client, and not through the agency. That [centralized] infrastructure was something that Pritchard had built, and I would suspect that that type of investment stays in place.”
Pattisall added that despite P&G’s transparent plans to do more in-house, the expertise of Carat – and, to a lesser extent, Hearts & Science – is still necessary, as bringing all media in-house is still “a more difficult proposition for any marketer”.
“[We] see examples of brands and marketers that begin the process of bringing the programmatic operation in-house, and will often stop at some point, or will only go so far once they realize the level of investments in technology, talent and data infrastructure to pull that off,” he said.
“The largest advertisers are able to do some of that with some success with the right types of resources, but they still need agency partners. Media agencies are still the best solution for specialist expertise.”
Brian Wieser, senior analyst at Pivotal, agreed, noting it "seems likely that over time the balance between agency capabilities and client needs will lead to work going back to agencies, given the advantages they will have in terms of relevant expertise and access to talent".
Assessing the gaps
Alternatively, P&G may have called the internal media reshuffle in order to identify exactly where it is falling short on the in-house offering.
Ana Milicevic, principal and co-founder of Sparrow Advisers, noted the company’s decision to bring non-creative “back office” operations in-house could be viewed as an initial step in “trying to understand internally where their teams may be at an advantage versus where the agencies they're currently partnering with may bring that advantage”.
She explained: “If you're looking at an external bid that is commercially attractive, you can also make the argument in-house that, if you were given a budget to build that team internally, over a longer period of time you can realize some economies of scale.”
P&G may well still see the value of a media agency partner for now. But its decision to hand its North American fabric care media business to internal shop Woven is telling, given that the business is its largest global cash-cow. If the experiment pulls off, analysts told The Drum, it’s likely will attempt to duplicate the success across other businesses.
But what of Hearts & Sciences, Omnicom’s division that was hired by P&G before it was even fully realized?
The majority of analysts The Drum contacted believed any loss of business to be an anomaly; one that could be put down to the growing direct-to-consumer threat that has emerged – and, arguably, been underestimated – since P&G appointed the agency in 2015, or the haste in which it was hired.
“They still retain sizable portions of the business and as an agency and they've had tremendous growth in the three year's they've been in existence,” said Pattisall.
“This is just part and parcel of the business. As an agency they have a lot of momentum, and I suspect they will continue to add more business to their roster as they have been.
“They've been in growth mode and this is likely just a blip and they'll continue to grow.”
Reporting by Katie Deighton and Andrew Blustein