In the past, both Unilever and P&G have cut overhead and
headcounts in part to fuel more marketing spending. But now they
are both tapping the brakes on ad spending, which has grown
considerably. P&G boosted ad spending $1.8 billion to $9.3
billion during the past two years. Unilever has added more than $1
billion to annual spending compared to three years ago to reach
$8.2 billion in reported spending last year.
Both also have said they plan to spend more this year, but want
to at least moderate the increase. P&G doesn't plan to increase
its ad-spending-to-sales ratio this year after watching it rise
more than two points to 11.3% last year. Unilever carved 0.7 points
off its ratio to 13.3% last year.
And while Unilever and P&G continue to spend more on TV than
any other medium, both are looking to digital to help keep that
spending in check (P&G also has ramped up print as a share of
spending in recent years.)
P&G Chairman-CEO Bob McDonald said Jan. 27 that while heavy
spending by candidates on the 2012 U.S. elections is pressuring
P&G's TV costs, digital can offset that . "In the digital
space, with things like Facebook and Google and others, we find
that return on investment of the advertising when properly
designed, when the big idea is there, can be much more efficient,"
Mr. McDonald said.
Unilever Chief Financial Officer Jean-Marc Huet also mentioned
his company's 15% increase in digital spending last year vs. a 2%
increase overall in the context of spending efficiency in a Feb. 2
investor meeting. That follows a December investor presentation by
Chief Marketing Officer Keith Weed in which he noted several
digital programs that produced north of $3 in revenue for each
dollar spent.
Beyond that , even as Unilever hikes spending on media, it's
squeezing agency fees and production costs. "We significantly
reduced our nonproductive spend during the year," Mr. Huet said.
"As you know, that 's the money we spend on production costs and
agency fees, money that 's not directly driving the exposure of our
brands to the community and consumers."
Unilever is likely to look for further savings in a global
communications-planning and media review that launched last month,
the second time in two years the company has reviewed media
buying.
P&G last week announced plans to cut 1,600 non-manufacturing
jobs by June 30, and it's not clear how many of those will come
through layoffs. But the headcount reduction isn't caused by a
shift toward digital spending or social media, which is actually
more labor-intensive for marketers. P&G, for example, has added
community managers in recent years to shepherd their brands in
social media.
In earnings calls, executives for both P&G and Unilever got
peppered by questions from analysts about marketing spending, not
so much out of concern it was too high, but for fear their
restraint in the face of rising prices and commodity costs could
hurt market shares.
UBS analyst Nik Modi cut his rating on P&G to neutral from
buy last week, for example, citing concerns P&G's culture
wouldn't let it cut staffing or make other changes quickly enough
-- but also saying P&G may need to further increase marketing
spending amid market-share declines last quarter.
Of course, digital-media players are happy to talk with both
companies about spending more with them, regardless of whether any
of the motivation is to save money elsewhere. Unilever has had a
series of "top-to-top" senior-management discussions with digital
players in recent years, most recently at the Consumer Electronics
Show in Las Vegas last month.
P&G is bringing digital executives to its Cincinnati
headquarters for a March summit, including Twitter CEO Dick Costolo
and executives from Facebook, Microsoft, Yahoo and
Federated Media, in addition to executives from fellow marketer
Coca-Cola.
