P&G cuts agency fees while 'getting more? out of mobile, social
Procter & Gamble reduced its overall agency costs in fiscal 2015 by approximately 15 percent while getting a lot more out of its digital, mobile, search and social programs, according to company executives last week.
Executives said during a conference call with analysts to discuss fiscal fourth quarter earnings that the company?s marketing strategy is evolving, with reductions in agency fees and plans increase in media spend by 20 percent or more in its new fiscal year.
?Again, I'm not going to go into the details, but in our plans in the year going forward, we have 10 percent, 20 percent and more increases in media budgets,? said Alan G. Lafley, president and CEO at P&G, during the conference call. ?It's hard for you to see our investments in communication and media because most of it's being funded by reallocation.
?We're simply shutting down the unproductive non-working dollars and we're converting it to working, and we're getting a heck of a lot more out of our digital mobile search and social programs depending on market, depending on category, depending on brand,? he said.
?But we've invested in sales.?
Programmatic buying
P&G?s focus on mobile is evident across a number of its brands, including recent efforts for Febreze on Facebook, for Pampers on YouTube and for Old Spice with a mobile game.
The evolution in its agency structure reflects, in part, the growing role of programmatic in digital and mobile buying.
?There has been a greater spotlight and drive for transparency on the fees agencies are charging advertisers across marketing in digital channels,? said Damon Ragusa, CEO of ThinkVine. ?Programmatic has been an area where the biggest margins have been realized for agencies and now negotiated down.
?At the same time many firms, like P&G, are driving larger volumes of their programmatic buying through their own internal teams and technology,? he said. ?P&G was one of the earliest ?big advertisers? to build their own demand-side platform.
?That has enabled them to focus on bringing things like programmatic buying in house in a big way.?
Mobile activation
Programmatic is one of several ways marketers can and are driving efficiency.
?We expect advertisers will start to refine what that target means even more by focusing on the efficiency of their buy by social graphics and buyer graphics,? said Joline McGoldrick, director of research for Millward Brown Digital. ?Large advertisers are also moving to models where they pay only for viewable impressions (regardless if on desktop or mobile).
?In addition, advertisers are becoming more sophisticated in their understanding of duplication of reach as people are exposed on multiple devices (e.g. reaching a consumer on a smartphone and tablet is not 2x reach, but 1x reach & 2x frequency),? she said.
Marketers are also adopting ways to extend their messaging with out requiring additional investment.
?One way is by leaning on retail partners to piggy-back on their efforts to drive mobile attention and activation,? Ms. McGoldrick said. ?Another approach is to utilize research to better understand dynamic consumer touchpoints, and creating engaging content that reaches the right audience at the right time.?
Increasing reach
P&G?s chief financial officer John Moeller said that the company is delivering greater reach, higher frequency and more advertising for less overall cost, with the savings coming primarily from cutting the fees and production costs paid to agencies.
P&G is also simplifying its agency relationships and reducing the number of agency relationships it has.
These cuts are coming at the same time that the company is upgrading agency capability to improve creative quality and communication effectiveness.
?There is no doubt that a larger portion of the media is shifting to mobile. Mobile is the primary resource consumers look to when they are doing product research,? Shuil Lowy, marketing director for mobile at Ping Mobile. ?The majority of social media is consumed on mobile devices.
?Mobile is also the place through which consumers are digitally connected when their on the go and shopping for CPG products,? she said.
?The numbers speak for themselves. We can be sure that if P&G?s management is shifting their media spend to mobile it?s not doing so because mobile is popular ? but rather because their spend on mobile is driving the results they?re aiming for.?
In Brazil, P&G consolidated agencies and cut spending by 50 percent.
In the United States, P&G reduced by a third the number of shopper and consumer marketing agencies handling its hair care business and lowered total agency spending by 20 percent.
In another beauty category, P&G consolidated to a single global agency for digital marketing, reducing spending for these services by more than 75 percent.
The company expects to be able to realize more savings, with most of the money invested in stronger advertising programs.
Agency upheaval
The news comes at a time of significant upheaval in the relationships between big brands and agencies, some of which is being driven by the growth in mobile.
A remarkable number of big brands are reviewing their media agency relationships in 2015, and while it is not clear if this because these marketers were unhappy with how mobile is currently being leveraged, industry insiders agree that having a well-integrated mobile practice will be one of the deciding characteristics of the agencies likely to pick up business from brand marketers such as P&G and Coca-Cola (see story).
A number of big advertisers are reducing agency fees similar to P&G, per Mr. Ragusa.
?P&G is not the only brand working to consolidate its agency work,? said Shuil Lowy, marketing director for mobile at Ping Mobile. ?Many others are as well and are opting to bring everything under one roof and pull in localization agencies.
?Digital media has made it so much easier to identify and reach a target audience at a larger scale. Bringing in everything under one roof also allows for better cross-channel attribution,? she said.
Final Take
Chantal Tode is senior editor on Mobile Marketer, New York
