Industry behemoths Procter & Gamble Co. and Unilever started slashing TV spending last year well before P&G's earnings disappointment this month increased the focus on bottom lines of companies throughout the business.
One reason: dot-coms, telcos and drug companies are pouring millions into TV, causing lower-margin package-goods companies to be simply priced out of the market, said media consultants.
P&G cut TV spending to $1.2 billion, down more than 11% compared to the year-earlier period, as part of an overall decline of 4.3% in measured media spending for the 12 months ended Nov. 30, according to Competitive Media Reporting. Much of P&G's TV savings went to print, with the company's outlays up 17.4% to $484 million. Spot TV was hit particularly hard, as P&G cut back 36.9% to $111 million.
Unilever, which faced an earnings disappointment and stock plunge of its own in November, cut even deeper and more indiscriminately last year, according to CMR, slashing overall ad spending 22% to $547 million. TV and print were cut roughly evenly, with the ax falling especially hard on the All, Salon Selectives, Snuggle, Vaseline and Wisk brands.
P&G and Unilever combined withdrew $227 million from the overall TV market for the year, with P&G's $65 million reduction in spot buying accounting for about half its total TV cuts. If P&G's spending trend continues at its current pace, print expenditures in 2000, at $568 million, will exceed its network TV outlay of $562 million.
A P&G spokeswoman, while not disputing the CMR numbers, said P&G's spending on national TV would be slightly up for the fiscal year that ends June 30. She did not comment on spot spending. Overall ad spending will also be up for the fiscal year, she said, though she confirmed P&G has pulled back on network buys for the fiscal fourth quarter.
"Our brands are experimenting with a variety of media vehicles beyond television and trying to determine what is the right solution for them in a media-fragmented environment," she said. "Television will continue to be an important medium for our brands to communicate with our consumers."
A Unilever spokesman could not be reached for comment. In a December interview, Unilever Co-Chairman Antony Burgmans said savings from the company's paring of up to two-thirds of its global brands would be used to provide more consistent marketing support for the company's major brands.
The soap rivals' flight from TV comes as no surprise in one sense, since both have said they are looking to rely less automatically on TV as the centerpiece of their advertising output.
"Television pricing is going up and up, and there's nothing they can do about it," said media consultant Erwin Ephron. After years of lowballing TV media, the package-goods players have lost their bargaining clout as other buyers are more than willing to snatch up any spots they don't want, he said.
Optimizers, which P&G employed to reduce media costs, also have played a role in the spending decline, Mr. Ephron believes, and may also figure in P&G's cutback in spot TV.
"The optimizers that [P&G TV agency of record] MediaVest uses can't handle spot," Mr. Ephron said. "It's a measurement problem, because spot is not in the national database."
BEAUTY CARE SHIFTS
Even companies that don't use optimizers are moving away from spot, because it isn't cost-effective to spend the time needed to make informed buys, said Jim Van Cleave, former VP-media and programming for P&G.
P&G's move from TV to print is most pronounced in beauty care, which saw several radical shifts in media outlays last year. P&G slashed overall spending on what had been its biggest-spending brand, Pantene, from $149 million to $71 million, increasing the print share of the budget from 26% to 37%, according to CMR. About two-thirds of the $38 million launch budget for Oil of Olay cosmetics through November went to print, according to CMR, and P&G moved almost all spending for its Max Factor cosmetics and Ivory soap brands to print last year.
Those moves don't appear to have hurt any, said one analyst. Even though some industry-watchers have labeled Oil of Olay cosmetics a disappointment, James Dormer, an analyst with Morgan Stanley Dean Witter & Co., said the launch has helped do something that TV-laden marketing didn't do for P&G in any of the prior five years -- build market share and push P&G ahead of Revlon to become the No. 2 marketer in cosmetics. For the 52-week period ended Jan. 30, P&G had a 26.8% share; Revlon, 26.2%; and No. 1 L'Oreal, a 28.8% share of the $3 billion category.
Pantene, despite the cut in spending and greater emphasis on lower-cost print, also grew its market share for the 52-week period ended Jan. 30, Mr. Dormer said. Its share was up 0.2 percentage points to 14.1% in shampoo.
The exodus from TV to print also could provide a glimpse into how P&G plans to use efficiency to keep launching new brands without breaking its marketing budget and triggering another devastating earnings surprise, he said.
But P&G's overall reduction in spending comes as a surprise in a year when the company launched three major new heavily supported brands and brand extensions -- Swiffer dusters, Dryel home dry cleaning kits and Oil of Olay cosmetics. Take away the $90 million spent on those brands and P&G's spending would have been down 9.5%.
"Just as a stockholder and a former employee, I worry a little seeing P&G's advertising dollars going down," said Mr. Van Cleave. "When we have more products and less advertising, you've diluted the horse's oats with a lot of sawdust."
Contributing: Mercedes M. Cardona