Misplaced ads and bots lead to P&G cutting digital ad spend

Procter & Gamble (P&G) has revealed a drop in its digital ad spending. This was due to its decision to "temporarily restrict spending in digital forums” where its ads were not being placed according to its “standards and specifications”.

Jon Moeller, P&G chief financial officer said in the fourth quarter reduction in marketing was almost all in the digital space. This was because it was "ineffective" and ads were being served to either bots as opposed to human beings, or the placement of ads was not facilitating the equity of brands.Moeller added on the call that it was now working with media partners to create "very efficient supply chain that helps build the brands" under P&G umbrella.

He added the cut on digital spend did not hamper the company's growth.  Meanwhile, P&G will put more focus on product and package benefits, as it needs to be "communicated with exceptional brand messaging, advertisement makes consumers think, talk, laugh, cry, smile, act and of course buy".

The company is also now setting a higher standard on advertising quality with focus on brand performance claims that communicate a brand's benefits and superiority to create awareness and trial.

"We are improving the quality of consumer insights, agency creative talent, and production. We are applying a body of assessment on advertising quality," Moeller said.  Meanwhile, its core selling, general and administrative expenses declined 170 basis points as compared to the previous year. According to P&G, this was driven by 80 basis points of productivity savings from overhead, agency fee and ad production costs. P&G also saw e-commerce online organic sales rise around 30% for the period, significantly outpacing offline sales. Online sales represented more than 5% of its total business in fiscal 2017.

According to David Taylor, chairman, president and CEO, P&G met or exceeded its "going-in" objectives for the fiscal year 2017. He added that significant progress was made on its key priorities. This includes accelerating organic sales growth, continuing to drive strong productivity improvement and cost savings. It also prioritised strengthening the organisation and culture and completing moves to simplify and strengthen its product portfolio.

“As an organisation, we are accelerating efforts to execute and deliver on the plans we’ve put into action. Achieving our objectives will not only require continued focus as an organisation, but also that we prevent anything from derailing the work that is delivering improvement,” Taylor added.

The revelation follows cost cutting plans the company revealed in April this year, which saw its intention to reduce its marketing spend by US$2 billion in the next five years. This was part of a broader US$10 billion cost reduction plan it launched one year ago, according to several media reports.

Moeller explained then that the half or more of the US$2 billion savings opportunities in marketing spending will likely come from media rates or eliminating supply-chain waste. Meanwhile, the company is targeting up to half a billion in saving from reducing agency fees and ad-production costs.

When it comes to agency fees, P&G added it is looking to squeeze US$1billion or more out of the system. This follows a stand P&G chief brand officer Marc Pritchard took in February this year, which saw the  company reviewing all of its agency contracts this year in a bid to drive a cleaner media supply chain and transparent digital measurement.