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P&G to axe up to US$500mln in global agency spending

In P&G’s latest round of cost-cutting, it has announced that it plans to save as much as US$500 million in agency spend, as well as improve the effectiveness of its marketing.

This is the latest in what has been two years of marketing changes at the company. The firm has now said that a consolidation of agencies globally is what it is considering next.

Chief financial officer Jon Moeller made these announcements in a conference call this week. According to The Drum, a large part of marketing cost-cuts will be around “non-media costs”. One such cost is in the area of agency spending, Moeller was quoted as saying. This includes fees and production costs for agencies it uses for marketing.

He said: “We plan to significantly simplify and reduce the number of agency relationships and the costs associated with the current complexity and inefficiency while upgrading agency capability to improve creative quality and communication effectiveness.” Marketing has reached out to P&G for the implications on its Asia Pacific operations, with the company yet to comment.

The firm has been making a series of major changes to its business since 2012, announcing a major productivity plan with plans to cut costs of US$10 billion over the next five years. It also has been restructuring its marketing and communications operations. (Read also: P&G scraps marketing titles within).  Late last year, as part of a massive streamlining exercise, P&G announced it will drop a majority of its brands to focus on its top earners, with up to 100 brands to be divested in the next two years. It has already sold Duracell. It also sold the bulk of its pet food business to Mars Inc for US$2.9 billion in 2014 as well.

Read also: Why P&G produces top marketers: Inside its training strategy

According to Ad Age, however, chief brand officer Marc Pritchard said that it was not about reducing the number of holding companies it works with, but more about reviewing the “talent and capability of the agency itself”. A merger of duties for general creative and digital agencies is expected as well.

“I really just see that as a natural outcome in the industry, because digital is a form of media, and creatives need to be good at handling all media,” Pritchard was quoted as saying.

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