P&G to axe US$2 billion in marketing spend over five years

Lindsay Bennett
By Lindsay Bennett | 28 April 2017

Procter & Gamble is slashing a whopping US$2 billion in global marketing spend over the next five years as part of a broader $10 billion cost-cutting initiative launched a year ago.

The marketing spending cut follows a decline in third-quarter earnings report where the company missed sales-growth expectations and lost market-share, despite upping ad spend.

Reductions include US$1 billion or more in media spending and another US$500 million to agency fees, on top of previously implemented US$600 million cuts that reduced P&G’s spending to around US$1.4 billion annually.

In Australia MediaCom holds P&G's media planning and buying account and the media spend is thought to be about AU$60 million.

 

On a company earnings call on Wednesday, chief financial officer Jon Moeller stated the savings opportunity in marketing spending was found in adjusting media rates and eliminating ad supply chain waste.

P&G also has a new brand mission for "Irresistible Superiority." The concept is that the company will grow market share slowly by providing consumers with an irresistibly superior experience that extends to the quality of its advertising, according to Moeller.

"We see over $2 billion in savings opportunities in marketing spending, with half or more coming from media rates or eliminating supply-chain waste," said Moeller.

“We're targeting up to half a billion more from reducing agency fees and ad-production costs. And we see about half a billion in sales from in-store materials, direct-to-consumer programs, and improved efficiencies in trial and sampling programs."

P&G is the world's largest advertiser, but it appeared to pull back in 2017 amid frustrations with the media supply chain, especially in the digital space.

Earlier this year, P&G's top marketer Marc Pritchard announced a comprehensive review of all agency contracts, vowing to put an end to “murky” and “fraudulent” practices within the industry and crack down on rip-offs related to digital marketing.

P&G is the second retail FMCG giant this year to announce a significant reduction of marketing spend, with Unilever announcing earlier this month it would reduce its advertising output by 30%.

With this two retail giants arguably the biggest advertisers in the world, the latest moves to slash marketing spend could kick off a trend that sees other brands follow suit.

Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at adnews@yaffa.com.au

Sign up to the AdNews newsletter, like us on Facebook or follow us on Twitter for breaking stories and campaigns throughout the day.

Read more about these related brands, agencies and people

comments powered by Disqus