Cuts Aren't Over, But P&G Wants to Restore Agency Profits

After cutting nearly half its agencies and around 30% of its creative and production fees, Procter & Gamble Co. isn't finished yet. But in a speech to the 4A's Transformation conference in Los Angeles on Tuesday, Chief Brand Officer Marc Pritchard said the onus will be on P&G to fix its own problems too and even focus on restoring agency profitability. The speech was part of a trilogy that started with Interactive Advertising Bureau and Association of National Advertisers conferences in January and March respectively. Those focused primarily on problems with digital media. He didn't delve as deeply into that subject this time, though he did, without naming names, weigh in on the brand-safety crisis afflicting Google in recent weeks. There, he returned to his theme of "head fakes" from digital media players that was the focus of his March ANA speech. "Here's the head fake you might get: 'But you've only had a couple thousand impressions served on objectionable content.' Response: 'That's a couple thousand too many.' We have a zero-tolerance standard when it comes to brand safety," Mr. Pritchard said on Tuesday. "Our brands are protected in other forms of media." P&G has declined to comment specifically on YouTube or whether it has suspended spending on it or other Google platforms, as some others such as Johnson & Johnson, PepsiCo and Nestle have. He didn't get into P&G's ongoing review of agency contracts, focused particularly on media shops and prompted by discovery that at least one was holding P&G funds as float to make additional money off digital buys. At the 4A's, he focused on the role of media shops as partners in helping P&G enforce brand safety and otherwise get accountability and transparency from digital media players. Mr. Pritchard focused broadly on issues with creative agencies, including the contention that they're sometimes not making money on P&G business. "Having agencies that don't make money is not a sustainable business practice," he said. "So we're refining our compensation to make sure we're paying for the work that you do and the talent that you bring to our brands, especially the creative talent." In interview after the speech, Mr. Pritchard said the effort isn't a sweeping change in P&G compensation formulas, but more on a case-by-case basis. And much of the focus is on productivity, he said, including reducing the number of management hours spent by agencies on managing the client, and vice versa. "Do we really need a mirror organization to each other, matching account people and brand people, duplicating research and strategic planning people?" he asked in his speech. "How much testing is really necessary? How many hub locations do we need?" P&G now has 95% of its creative work handled by 20% of its agencies. But the long tail of the other 80% is still too long, Mr. Pritchard said in his talk. "It's astonishing to me that we still have digital agencies," he said in the speech. "Do we have print, radio or out-of-home agencies? Of course not. We expect our agencies to be skilled at all mediums." P&G has returned to the full-service model in some markets, and has mostly eliminated separate digital and general creative shops in the U.S. But he said in an interview later that the company won't categorically eliminate overlap of digital and general shops everywhere and doesn't have a specific numerical goal for further reduction in agency count. Part of the productivity improvement he seeks includes reform of briefs, which are often anything but brief and sometimes go on for 10 pages. He recently condensed one of those 10 pagers into "a one-sentence challenge and a conversation with the creatives." P&G is also tacking the problem of "re-work," including carefully polished and re-polished PowerPoint presentations sent prior to meetings, then re-presented in the meetings. "Have we lost the ability to talk without reading from a slide?" he asked. "I recently had a round of creative reviews, and asked, 'Just show me the work.' I eventually did see it, embedded in hundreds of slides of explanation. Please stop." P&G is also looking to reform its agency evaluation process, a problem described by one creative director as "P&G polites you to death." Mr. Pritchard said the company's 5-point rating scale has devolved into 1.5 points, where 4.5 is "true love," under 4 is "you're in trouble," and anything below 3 means "you're dead." The company is trying to revamp evaluations by incorporating more real-time feedback and moving more toward objective third-party assessment of creative quality and business results, he said in his talk. In the later interview, Mr. Pritchard described the process as using assessments from industry organizations and by "third parties" within P&G who aren't "directly invested in the business" whose work is being evaluated. On the production front, where P&G is also looking to squeeze costs, the company doesn't appear to have been affected by the bid-rigging issues under investigation by the Justice Department, he said. He's looking to gain efficiencies through better use of technology and simply reducing the amount of advertising produced, using it longer until it stops working with consumers rather than automatically replacing ads on a fixed schedule.

Cuts Aren't Over, But P&G Wants to Restore Agency Profits

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