As it looks to save money on marketing by buying advertising more efficiently, Procter & Gamble intends to reinvest those savings into more marketing. Speaking on the company’s quarterly results call, top management suggested that, rather than pocketing the savings, it intends to plow the money back into advertising but do so in a more efficient way.
The consumer packaged goods giant is famous in marketing circles for conducting rigorous and sophisticated research and analytics to ensure its marketing dollars deliver maximum return on investment. “As we bring more media spend into our optimized targeting tools, as we increase the percentage of digital media around the world, as we continue to optimize our own algorithms to target messaging to consumers, there continues to be significant opportunity,” Chief Financial Officer Andre Schulten said, as reported by Ad Age.
Rising transportation costs and a shortage of raw materials have negatively impacted the company, which last week said it would increase prices for some of its brands. While Schulten suggested the company would use some of its marketing savings to offset those cost pressures, incoming CEO Jon Moeller made the argument for reinvesting the money into marketing.
“It might seem kind of an odd dynamic,” Moeller said, “but the more efficient and effective we can make our marketing spend be — and as Andre indicated just now there's lots of opportunities that you can do that — the more attractive it becomes to make those investments. So, in a maybe somewhat of an odd way, efficiency breeds effectiveness. Effectiveness breeds spending, and that all drives the market.”
The statements from Moeller, P&G’s former CFO who takes over as CEO from David Taylor next month, suggest P&G intends to keep its aggressive brand spending at a high level. According to the Ad Age Datacenter, the company allocated $11.5 billion in marketing spend for its just completed fiscal year.
After returning to the airwaves four years ago following decades of radio silence, P&G is now airing 200,000 spots on broadcast radio a week for more than a dozen products. Data suggest its radio investment is delivering the broad reach the company needs for products most people use every day, like toothpaste, toilet paper and dish detergent. Across 15 brands advertised on both TV and radio, the average P&G brand experienced a 36% lift in reach with persons 18+ by including radio in its media mix, according Nielsen data analyzed by Cumulus Media’s Audio Active Group.
P&G reported savings of about 0.8% of sales on overhead and marketing efficiencies, which was offset by 0.9% of increased marketing investment. Ad Age says that equates to a net of about $20 million more in marketing spending. Importantly, it also means the company’s marketing spend rose faster than its 5% increase in sales for the quarter, despite taking a $800 million hit from increased commodity and transportation costs.