Procter & Gamble issued its quarterly earnings results today and Wall Street pushed the company’s stock up nearly 1%, apparently pleased with the CPG giant’s plan to raise prices.
But it was the discussion on the earnings call that was more interesting from an agency standpoint. It’s no secret that P&G has been on a mission to make its global advertising program more efficient in the past few years.
And the company seems to be succeeding, albeit with more work to do.
Company CEO David Taylor outlined some of the measures being taken and savings being achieved. Over the last four years, he said, the firm has slashed $1 billion in agency fees and production costs.
Spending has remained roughly flat at $7-plus billion.
Taylor said the company has achieved “the elimination of substantial waste in the media supply chain,” reducing media costs by 20%.
Waste has been curbed in part, Taylor noted, by reducing the frequency of ads that the company had been hitting some customers with — 10 or 20 times a month versus the three times that would do the job just as efficiently.
Taylor also said the firm is focused on shifting dollars away from “wasteful mass marketing” to creating “one-to-one brand building enabled by data and technology.”
He cited China as an example of where the company is achieving optimal results, noting that 70% of the company’s ad budget there is digital and where 30% of sales are achieved via e-commerce.
The firm has invested hugely there in a data analytics platform, which has helped the Olay brand adjust its spending strategy to focus more on in-store marketing efforts. Media spending is down 50% for the brand there in the last two years. Olay China has achieved five years of double-digit revenue growth.
Taylor had more to say on the subject, including that agencies can expect further budget reductions going forward as the firm brings more media buying capability in house.
The upshot: P&G has achieved better quality and greater creative output and faster ad development cycle times, while saving money in the process.
If you’re an agency person, listen to Taylor’s comments on the call. P&G is driving change in your business.