• Ad Age, Friday, December 15, 2006 11:30 AM

Although Procter & Gamble hopes to increase its operating margin from 19.4% last year to around 24% in 2010, it says it will reinvest any savings it makes from marketing efficiencies back into the business. P&G intends to grow its business through cost-cutting, sales growth and shifts to more profitable businesses, like beauty care and higher-value products, executives told a meeting of analysts in Cincinnati yesterday.

At the same time, however, the company went to lengths to point out that restraining ad spending doesn't necessarily have to hurt brands. P&G's North American fabric-care business, for example, cut ad spending as a share of sales by 2% over the five fiscal years ended June 30, but increased sales $900 million, boosted market share 3.5 points and built scores for brand equity on flagship Tide to record levels, according to CFO Clayton Daley.

In a taped segment, global marketing officer Jim Stengel reported that the increased use of the marketing-mix modeling is now delivering increased marketing return on investment, and that the company's brand equity measurement is up. "There has been no corporate mandate to cut ad spending as a percent of sales," Stengel says, "only to spend all marketing money more efficiently."

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