P&G Leaders On Precision Digital Marketing, Why Less Can Be More – HBW Insight

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After two quarters of reduced marketing spending, P&G’s top executives used Investor Day 2022 to highlight the efficiencies and higher effectiveness of digital marketing compared with traditional. “We would be missing the point of productivity improvement if we only measure the effectiveness of our brand building by the dollars we spend,” CFO Andre Schulten said.
P&G reported 7% organic and 1% net sales growth in latest quarter to $20.6bn. Analysts projected organic growth of 5.5% and saw results as indicator firm’s execution strategy, which includes cutting back on costs, is working.
P&G will provide additional detail at its November Investor Day, but says Supply Chain 3.0 is an adaptation to the new normal that will unlock efficiencies and enable reinvestment in brands.
The European Commission should extend the proposed six-year deadline “significantly” for replacing microplastics in leave-on cosmetics such as sunscreens and nix microplastic labeling requirements for makeup, lip and nail products, says the Personal Care Products Council’s executive VP of global strategies Francine Lamoriello, calling the task before industry “huge.”
Procter & Gamble Co. leadership stressed to investors on 17 November that the health of the company’s brand building activities cannot be inferred from marketing spend alone.
“Delivering superior, engaging consumer-tested advertising that has sufficient levels of reach at the optimal frequency delivered to our prime consumer targets is fundamental to how we plan and execute our marketing programs,” chief financial officer Andre Schulten said at the firm’s Investor Day 2022 in Cincinnati, OH.
Nowadays, P&G is achieving the same or better outcomes via targeted digital advertising, at lower cost, compared with traditional approaches.
“More efficiency and greater effectiveness enable us to reach all potential category buyers when and where consumers are most receptive to that advertising,” Schulten said. “That yields higher quality engagement and, when orchestrated across media platforms, avoids excessive advertising frequency, which at best is a waste and, in the worst case, really annoying to the consumer.”
The largest advertiser in the world, followed by Amazon Inc. and Unilever PLC, P&G noted in October when presenting fiscal 2023 first-quarter results that soaring costs drove reduced marketing spend for the second quarter in a row. (Also see “P&G’s Organic Growth Despite Market Volatility: Validation For Firm, Surprise For Analysts” – HBW Insight, 19 Oct, 2022.)
The timing and wisdom of the cutback concerned some analysts, despite P&G’s organic growth of 7% for the quarter, which beat analyst expectations.
Schulten suggested to Investor Day attendees that recent dips in P&G’s marketing investment must be put in perspective. In fact, the firm has increased media spending by more than $1.2bn in total over the past three years while improving productivity.
P&G now commits more than 50% of its media budget to a cast of dominant brands that includes Olay skin care, Pantene and Head & Shoulders hair care, Gillette razors, Crest toothpastes, Vicks cough and cold products, and Meta fiber supplements.
According to chief brand officer Marc Pritchard, P&G, like its peer set, is evolving away from “linear” TV, where viewership continues to decline, to digital channels and video streaming platforms where consumers amuse themselves, learn and shop.
“We’re constantly reinventing brand building from mass marketing with significant waste to brand building with greater precision on a mass scale fueled by data and digital technology,” he said. “We transparently gather consumer data on our own platforms, which are made possible because people choose to engage with P&G brands on our websites, apps, direct to consumer, packaging and media.”
He highlighted another piece of the firm’s Consumer 360 repository for proprietary consumer data which makes use of sensors to gain insights within consumer households that choose to participate. (Also see “P&G Recalibrates ‘Irresistible Superiority’ As Economy, Competition Tighten” – HBW Insight, 28 Nov, 2022.)
“We also use the vast repository of P&G propriety consumer research data on habits and practices on advertising testing and on technical product and packaging studies,” said Pritchard.
Schulten explained how P&G’s brands monitor feedback from consumers on social media, direct-to-consumer comments, sales and share trends, ratings and reviews, and search queries, to ensure ads are having the desired effect. “If we sense that something isn’t working as planned, the team can diagnose and quickly work to address it, strengthening the message, enhancing brand content, changing the media mix or adjusting the media frequency in near real time speed,” he said.
The CFO added, “We know you can’t see these measures and we’re not going to start reporting them, but we would be missing the point of productivity improvement if we only measure the effectiveness of our brand building by the dollars we spend.”
P&G also is investing increasingly in retailer media, which accounts for about 11% of the firm’s current media spending. Retail media encompasses all marketing at point of sale both online and in-store.
Retailers including Target Corp. and Walmart Inc. have built robust media networks leveraging their own first-party data. Through Walmart Connect, the retail giant promises to “unlock growth for suppliers and sellers of all sizes” by enabling vendors to get their products in front of consumers actively looking to buy in their categories.
With sponsored search, for example, Walmart places advertisers’ brands in “high visibility” spots on screen after customers enter relevant search terms.
P&G teams have been able to employ that insight to develop winning campaigns based on searches, key words and timing, said Mindy Sherwood, P&G president of Global Walmart and chief sales officer.
“Our previous, mostly manual process allowed us to update our brand strategies once per workday, five times per week. With our digitized and automated process, we update our brand strategies every 15 minutes, 24/7, 672 times per week,” she said. “These digital tools have helped us win across top retailers such as Target, Walmart and Amazon, doubling our share of search.”
In an 18 November analyst report, Evercore ISI analyst Robert Ottenstein agreed that “reductions of so-called ‘non-working media’ shouldn’t be equated with disinvestment.” He said P&G “is likely pacing productivity initiatives, given potential gains through digitization, which can lift returns in ad spending while maximizing reach and driving conversion rates through precision advertising.”
P&G also discussed at its Investor Day how it is raising the bar in its “irresistible superiority” program for products, packaging and communications amid rising macroeconomic and competitive pressures, and provided additional color on its “Supply Chain 3.0.” (Also see “P&G’s Answer To Logistics Challenges In COVID Era: ‘Supply Chain 3.0’” – HBW Insight, 13 Sep, 2022.)
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