|Mach 3 Gillette razor
Mr. Kilts on Tuesday promised investors and analysts that the company would conduct a comprehensive review of all external spending he called a "Strategic Sourcing Initiative."
"All external spending, direct and indirect, is up for review, even if there are long-standing relationships with existing suppliers, and decisions on sourcing will be based on what's best for our company as a whole, not what's best for individual product lines or business units," Mr. Kilts said. "The [Strategic Sourcing Inititative] will harness Gillette's scale to secure the best possible price on all external spending."
Omnicom Group's BBDO Worldwide is by far Gillette's biggest agency, handling the flagship Gillette men's and women's shaving business, Duracell batteries and Right Guard and Soft & Dri deodorant brands along with media buying. Interpublic Group of Cos.' Lowe Lintas & Partners handles the Braun men's shaving and Oral-B oral care businesses.
A Gillette spokesman said the review would include ad agencies.
Blamed the quantity of work
In his first public engagement since taking over as Gillette's CEO 100 days ago, Mr. Kilts blamed the quantity of Gillette ad spending rather than the quality of creative and said the company also needs to improve "integrated marketing intelligence" and the analytic capability needed to develop the right media mix for its brands.
He praised BBDO's work on the current Venus women's razor launch, calling it the highest-testing advertising in Gillette history, and said the launch is ahead of plan so far in both distribution and consumer sales.
Ad spending down
But he said Gillette's ad spending as a percent of sales has declined to 5.6% from around 8% since the early 1990s, adding that ad spending has fallen $58 million to $608 million since 1995, despite a 5% annual media inflation rate.
He said he plans to control trade spending and increase ad spending by an unspecified amount, funding some of the increased media budget from improved productivity, which includes the Strategic Sourcing Initiative.