Trade Marketing Finally Gets Some Respect (Well, at P&G)

Brand Managers, Not Sales Force, to Now Oversee Retail Strategy

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Who Wins?
BATAVIA (AdAge.com) -- Talk about the moment of truth: Procter & Gamble Co. is preparing to give some $2 billion in retail-marketing funds a seat at the same table as advertising.

The company is partially consolidating its marketing groups to put retail-marketing strategy under the same marketing directors who oversee brand teams instead of under the group that manages the sales force. Once the new system is introduced, general managers or marketing directors who find a brand responds better to trade marketing than consumer marketing will be able to shift more funds in-store. This should make for a more genuinely discipline-agnostic P&G.
Procter and Gamble likely spends more than $2 billion annually on trade marketing.
Procter and Gamble likely spends more than $2 billion annually on trade marketing.

The move aims to answer questions that long have dogged package-goods marketers: who should control the tens of billions of dollars spent on trade promotion -- often the largest part of the marketing budget -- and how to make those dollars work in the same strategic plan as advertising and consumer promotion.

$2 billion
There are no reliable figures on how much the industry pours into various forms of trade marketing, from temporary price reductions to in-store ads, since most of it is not reported externally. But the total likely exceeds $2 billion annually for P&G alone.

Up to now, those dollars have been managed mainly by marketers' sales forces or, as at P&G, by the same group that manages its sales force. As a result, trade marketing is sometimes kicked around like an interdepartmental political football; other times it's largely ignored by marketers who set brand strategy.

The new system should help P&G end turf wars over retail marketing by treating it like the rest of the marketing mix and subjecting it to the same budgeting, oversight and return-on-investment criteria. Essentially, the structure makes retail marketing more "media neutral." Combined with efforts P&G has helped spearhead to develop a TV-ratings-style system for measuring in-store marketing through Nielsen Co., P&G's new structure could add legitimacy to a retail-marketing field that struggles for respect.

"What they're doing is effectively legitimizing the retail aspects of marketing," said Ken Harris, managing director of WPP Group's Cannondale Associates. That's especially meaningful coming from P&G, with its long history of value pricing and efforts to eliminate wasteful, brand-eroding trade spending in the 1990s. "It represents P&G, and to a lesser extent the industry, coming full circle back to days when brand marketers controlled the whole marketing budget."

Sitting duck?
The risk for P&G, however, according to a person familiar with the company, is that the system could make it easier and more appealing to hike trade spending, which in turn could weigh on revenue growth under accounting rules. P&G's top-line growth has been keenly watched for the past year by investors skeptical the $80 billion behemoth can keep growing as fast as it has in the past.

A P&G spokeswoman said the new alignment simplifies how its global business units (where brand teams reside) and market-development organizations (where sales teams reside) work together. "And this includes finding ways to make better decisions faster."
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