World's Biggest Advertiser P&G Shifts Focus to Sampling
The world's biggest ad spender is done cutting ad spending for a while, but that won't mean a windfall for a slowing U.S. TV market. Instead, Procter & Gamble Co. is looking to plow more marketing spending into sampling.
Chairman-CEO A.G. Lafley calls sampling a "point of market entry" (or POME in a new P&G acronym). And speaking at the company's every-other-year annual investor conference in Cincinnati today, he pointed to such programs as Gillette's effort to send every U.S. male a new Fusion ProGlide Razor with FlexBall technology on his 18th birthday as an area of increasing marketing focus.
Sampling at hospitals and other places where P&G can reach new mothers has been one key to Pampers overtaking Kimberly-Clark Corp.'s Huggies for market-share leadership in U.S. diapers and training pants in the past year after trailing for two decades, he said.
POME is meant to address surprisingly low percentages of people who've tried even relatively well-established P&G brands. For example, Swiffer, despite having been on the market for 15 years and generating $1 billion in annual sales globally, still has only been tried by 10% of people in the U.S., he said. P&G's top-of-the line Fusion ProGlide blades have only been tried by 14% of men. And Metamucil has only been tried by 4% of U.S. adults.
Besides sampling, P&G continues to shift dollars to less-expensive digital media, said P&G Global Brand Officer Marc Pritchard in a pre-recorded presentation, for the first time acknowledging the company is using a proprietary programmatic buying system to do so. But he said P&G is also looking to make TV and print more effective, in part by making fewer ads. That's part of P&G's effort to keep reducing the $4 billion in "non-advertising" or "non-working" costs in its $13 billion marketing budget, said Chief Financial Officer Jon Moeller.
"With the overwhelming amount of information clutter in the world, we're finding that fewer advertising messages, communicated more consistently and with fewer changes, are more effective at delivering top-of-mind awareness" Mr. Pritchard said. That also means fewer spokespeople, and lower agency and production costs, he said.
It also means fewer marketers writing briefs for those ads. P&G has reduced its internal marketing ranks by a third over the past two years, said Mr. Pritchard. That's happened through consolidating the marketing, market research, design and communications functions under a single brand group, focusing brand-manager positions on the top 70 to 80 brands, and eliminating overlapping duties. Those cuts continue, as P&G recently has extended a new round of buyout package offers to marketers and other non-manufacturing employees.
But while P&G cut ad spending absolutely and as a share of sales last year, the idea for the current fiscal year begun July 1 is to reinvest marketing savings into more marketing, Mr. Moeller said. Even last year such brands as Tide and Pamper had increased spending as a share of sales, he said.
In response to a question about P&G having lost market share across 60% of its business last quarter, Mr. Lafley said he's not always concerned about share.
"I really don't care about our market shares on [some] of our businesses," he said, such as the 10% of sales for brands due to be divested or discontinued. In other cases, he said, it's bad strategy to worry about market share "until we're ready" with full turnaround plans, because that leads to short-term promotional fixes. The times when brands build meaningful share gains, he said, are when they have disruptive innovations or when competitors make mistakes.
P&G's New Marketing Lexicon
A.G. Lafley's first tour of duty as CEO last decade ushered several additions to the company's marketing language, such as "first moment of truth" (when people decide whether to buy a product in a store) and "second moment of truth," (when they use the product). His second tour is bringing new additions to the P&G dictionary. Besides POME (point of market entry) key phrases on display at the company's Nov. 13 analyst conference were:
Zero Moment of Truth. This back-formation of Mr. Lafley's first two moments, popularized years ago by Google VP-U.S. Sales Jim Lecinski, describes the moment when people research products online. It's now been officially adopted by P&G. Incoming Group President-North America Carolyn Tastad said in a pre-recorded segment that while less than 5% of P&G's sales are via e-commerce, 50% of purchases are influenced by online search or marketing.
Trade up. P&G's primary growth model on Mr. Lafley's first watch, it stopped working so well in the depths of the recession. But it remains alive and well in such products as Tide Pods, and despite slowing developing-market economies, P&G is still banking on a historic growth of urban middle classes there to drive trade up. Indeed, it's getting out of low-end laundry detergent bars in favor of more premium products where it's been relatively slow to compete in such markets as China, Mr. Lafley said.
Trade across. This is where P&G gets consumers of one of its products – such as Tide detergent – to try another product in its regimen, such as Downy Unstopables, or from Crest toothpaste to Crest Sensi-Stop sensitivity strips.
Trade in. Where consumes are lured into a P&G brand for the first time, such as value detergent brand buyers brought into the Tide franchise with the lower-priced Tide Simply Clean line.