Procter & Gamble Company (P&G), an American multinational consumer goods company, is as familiar to the average American as Mom and her famous apple pie. Established in Cincinnati, Ohio in 1837 by William Proctor and James Gamble, the new company weathered the economic storms and a plethora of competitors to stake out a leadership role in the quickly expanding consumer products market.
Consumers today, as every generation since its founding, are as familiar with one or several P&G brands as they are with their closest sibling. P&G recorded $83.68 billion in sales in 2012 through product segments including; beauty, grooming, health, snacks and pet care, fabric and home care, baby care and family home care. To remain ahead of its competitors, P&G spends a reported 9.3 billion dollars globally on advertising and marketing in prior years and retains a world-wide market share of 20%.
When P&G management recently announced that it would be retraining marketing spend to focus on return on investment (ROI), its announcement succeeded in getting the ad industries attention very quickly. Chief Financial Officer Jon Moeller said he expects advertising spending to lag sales growth by about 0.2 percentage points this year. Restraining ad spending below sales growth “does not mean less reach, less frequency,” Mr. Moeller said. “It means more effective advertising, the right mix of media, and, importantly, reducing non-advertising costs that the consumers never see.” He said the share of P&G marketing spending on digital in the U.S. is “up to 35%,” ranging down to 25% on some brands. “We have some businesses and brands where digital is incredibly effective and we’re doing more.” He went on to say, “We have other brands that are on the learning curve. We’ve got to get up the learning curve faster.”
The shift to larger marketing spend to digital should be a concern for large and ultra-large advertising and marketing agencies who have been struggling to retain their margins in the new Digital Age. But the future of small agencies may be a bit brighter due in part to recent mergers of already giant firms into behemoth conglomerates who are motivated to leverage the relationships, investments and proprietary trading desks of their parent companies, a move that may not be in the best interest of clients.
While not every major marketer is inclined to throw their big ad firm over the side, some notable brands are viewing small agencies as a viable alternative to mega firms, providing an opportunity for small agencies to differentiate themselves and focus on a strategy of delivering value at every touch point with their clients. As often is the case, mega company shareholders and investors on Wall Street tend to apply pressure to increase focus on revenue and equity, not creativity. The best innovation and creative ideas usually flow from smaller organizations whose growth projections are more focused on deliverable value and creativity. Big is always bigger but bigger is not always better. As more mindsets continue to change in the marketer’s arena opportunities for smaller, more creative, nimble and flexible agencies will likely abound.