It's also less clear that P&G's scale as the biggest U.S. or
global-media buyer will translate as readily into digital, where
vast inventory already means low prices. Google's search system
doesn't reward big buys with lower prices, for example.
With help from Yahoo, P&G has implemented Hawkeye, an
in-house digital-media-buying optimization system, said people
familiar with the matter. But such rapid-fire optimization systems
are increasingly being offered to large and small players alike,
and they tend to reward nimbleness and ability to change plans
quickly rather than bulk buys.
"Scale advantage is no longer limited to "bulk buys'
only—although [that 's] still important," the P&G
spokeswoman said. Scale now also "involves quality and amount of
data, and the consumer expertise and algorithms to do that actual
optimization." Overall, she said, "digital media has proven to
build the business with higher-than-average ROIs, which is why
digital is now a sizable part of every brand's media mix."
But while P&G has been talking more about building digital
capabilities, so have competitors Unilever, L'Oreal, Estee Lauder
and others, which are forging their own partnerships with Facebook
and Google, ramping up digital training and building out
digital-agency rosters and exclusive content.
In fact, rivals are likely to match, at least proportionately,
the $1 billion in marketing efficiencies in five years that P&G
anticipates from more use of digital media, said Sanford C.
Bernstein analyst Ali Dibadj. While P&G has said its cost cuts
will include marketing -- and marketing growth will be held below
the pace of sales growth -- analysts aren't so sure it will resist
pouring it back into marketing. "We have a hard time seeing how
greater savings won't enable [P&G to reinvest] to more
aggressively pursue market-share expansion," said Morgan Stanley
analyst Dara Mohsenian.
Mr. Dibadj said that P&G's projections account for only
taking about a quarter of its $10 billion five-year cost savings to
the bottom line, with the rest to be reinvested. "On the record,
they'll tell you marketing spend on average will be down [as a
share of sales by 0.1 to 0.15 percentage points the next five
years] because they can get more efficient," Mr. Dibadj said. "I'm
doubtful how much more efficient you can get in that period of
time, particularly as your competitors are increasing their
advertising spend. So while they haven't said where they're going
to invest, and they've said marketing won't be part of it, I would
argue that 's part of what they have to do to maintain these
It doesn't take a long memory to recall the last time P&G
started talking about media efficiency -- late 2008, near the
beginning of the financial crisis and end of former Chairman-CEO
A.G. Lafley's tenure. And the results weren't good: When P&G
cut ad spending in 2009 (even if impression counts were maintained
as P&G contended) market shares began to suffer. In response,
P&G under Mr. McDonald began ramping up marketing spending and
regained some of that share by 2010, leading to P&G's record
spending of $9.3 billion for the fiscal year ended June 30.
While P&G's broader cost-cutting plan was well received by
investors -- the stock has jumped 5% since the announcement last
month -- stock of such competitors as L'Oreal, Colgate-Palmolive
Co.and Kimberly-Clark Corp. rose 3% to 4% over the same time
period. Translation: Investors don't appear to expect them to
suffer much from P&G's newfound strength -- digital or
"There's no question Procter used to be miles ahead of their
competitors, whether it be by geography or category," Mr. Dibadj
said. "And now the competitors, particularly in this past half
decade or so of Procter not executing well, they've caught up."
"Procter can get better," Mr. Dibadj said. But the question is
whether it can maintain its leadership status.
In fact, L'Oreal, Unilever and package-goods marketer Henkel --
maker of brands such as Purex and Dial -- are now seen as more of a
threat, said an executive for a P&G rival. "People aren't
afraid of P&G anymore," he said.