P&G Just Unloaded 100 Brands. Now What?

Marketer Will Even Out Spending, Up Broad-Reach TV and Embrace 'Open Sourced' Creative

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Procter & Gamble Co.'s belt-tightening on agency and production costs isn't over, but the focus appears to be more on production now. And its increased spending on media looks to benefit the biggest social-media platforms and "broadly appealing" TV shows, based on the company's analyst day Friday in Cincinnati.

Credit: Courtesy Procter and Gamble

P&G didn't unveil many new initiatives, but provided some color on how it plans to rekindle growth just 49 days after completing the bulk of its massive divestiture of more than 100 brands.

While P&G has been increasing media and sampling spending, that doesn't affect all line items equally. The focus is on "reach and continuity," said Chief Brand Officer Marc Pritchard, with brands such as Tide, Pampers and Febreze increasing reach 10% to 20% in the U.S. while still focusing on their most important consumer segments.

That effort has included "shifting to more broadly appealing television shows and also higher-reach digital platforms," he said. On the TV side in particular, the move seems to reflect what some brand managers privately have said for years in the face of optimizer-driven buys that moved funds into thinly watched cable shows – that they saw better results from broader-reach primetime shows.

On "continuity," P&G is moving away from media schedules that vary month to month in order to "balance spending more evenly across months and quarters to enable top-of-mind awareness year round," Mr. Pritchard said. Even Vicks has spread its advertising out more, he said, because "40% of colds actually happen outside of the winter."

Marketing costs are P&G's "third largest spend pool behind people and product," he said, noting that the company has focused on productivity by reducing spending on agency fees and production by $620 million, or around 30% from three years ago to around $1.4 billion, in part by cutting the number of agencies it works with in half to around 3,000.

Those cuts haven't fallen entirely evenly. Juan Fernando Posada, president of the Latin America Selling & Market Operation, said P&G has cut these so-called "non-working media" costs by $100 million in the region – accounting for around 16% of P&G's overall reduction, even though it represents only around 8% of company sales. Those cuts haven't hurt Latin America sales, which grew 8% organically last fiscal year, he said, well ahead of the company average.

More broadly, Mr. Pritchard said, "We reassigned several brands to higher-quality partners, and we cut the workload to produce far fewer but much better advertising and marketing campaigns.

"Companywide there's still plenty of opportunity, as we're still spending around $500 million in advertising production around the world," he said, though agencies aren't entirely off the hook. Future efforts to improve marketing productivity will include using "digital technology for production, pooling production and also using open sourcing in creativity in our work to create advertising both within and outside existing agency networks," Mr. Pritchard said.

He pointed to P&G's high-end SK-II beauty brand, which has "open sourced its advertising at about 50% the cost of traditional ads."

A spokeswoman noted that agency-of-record Leo Burnett came up with SK-II's broad "Change Destiny" campaign, but that briefs for individual projects within the campaign have been given broadly to other agencies in and outside Publicis Groupe. Independent Forsman & Bodenfors, later bought by MDC Partners, created the widely honored "Marriage Market" ad in China as part of that campaign.

As Chief Financial Officer Jon Moeller described it, P&G's divestitures have gotten it out of businesses that rely on "self expression in fashion, flavor or fragrance and flavor" toward "daily use" categories driven more by technology and performance. And several P&G executives outlined ways they're doing that.

President Global Fabric Care Shailesh Jejurikar noted that he still sees plenty of room to expand fabric enhancers such as Downy, still used by under 30% of households globally and 29% in the U.S. He hopes to build use of laundry detergent in part by encouraging people to do more frequent, smaller loads, which can save water and energy – while increasing use of detergent, particularly unit-dose Tide Pods.

Chairman-CEO David Taylor noted that by launching a car air freshener that works in warm and cold weather alike, Febreze has energized a sleepy category the past four years, roughly doubling it to $500 million and capturing a roughly 45% market share.

Olay, which has been struggling for years, continues to face sales challenges amid a 20% reduction in underperforming items, acknowledged Alex Keith, president-global skin and personal care. But its Regenerist Microsculpting Cream is the leading brand in its segment and saw 7% growth last year. And the Olay Eyes line launched this summer has captured a 9% market share and prompted double-digit segment growth while getting most of its users from outside the Olay brand, she said.

Besides showcasing rising stars, such as Ms. Keith, Mr. Jejurikar and President Global Feminine Care Fama Francisco, Mr. Taylor also noted that the company is following through on his February pledge to recruit more talent from outside. As part of that, he announced the company's first hire of a line general manager from outside – former RB (Reckitt Benckiser) executive Paul Gama, who's coming to P&G as VP-personal health care.