P&G sees marketing savings again, looks to focus on performance marketing

Procter & Gamble (P&G) has posted a 1.4% savings in marketing expenses and overheads for the fourth quarter of its financial year ended 30 June 2019 (Q4 2019). According to the financial statement, the 1% gain from the sale of its real estate in Boston were partially offset by 1.7% in marketing reinvestments. Overall, the FMCG giant posted a 4% year-on-year (yoy) increase in net sales to US$17.1 billion during Q4 2019.In an earnings call, David Taylor, chairman, president and CEO said it is finding efficiencies in its overall media programme. “We’re looking in at stronger media delivery, stronger programs at lower cost. We found ourselves in many cases over frequented. So our frequency of ad presentation was too high and our reach was too low we’re adjusting that,” he said.He added that P&G is also looking to reduce media compensation, its agency compensation and production costs to increase the overall effectiveness of its media programme, which includes the right mix different by category for both traditional and digital media.Taylor also said during the conference call that it is moving from generic demographic targets such as women aged 18 to 49 to more than 350 “precise smart audiences”. It involves reaching the right people, such as first-time mothers, Millennial young professionals, or first-time washing machine owners, at the right place and time. He added:We’re reinventing brand building from wasteful mass marketing to mass one to one brand building fueled by data and technology.To do so, it has developed a “very large proprietary database” with more than one billion consumer IDs worldwide, to help it carry out propensity marketing with people that have similar characteristics, Taylor explained. He said that moving forward, this practice is “only to get more powerful” as P&G continues to collect data and refine it. The company intends to become “more accomplished at performance marketing” and use the data in “a respectful way” to serve consumers with products, propositions and messages that meet their needs.According to Taylor, P&G is disrupting the way it innovates by accelerating the speed and quality of learning through lean innovation. “This new approach is delivering significant benefits in time and costs, helping to reduce our learning cycles from months to even days. We’re monetising innovation across industries to accelerate investment in R&D and broaden societal impact,” he said.Taylor added that P&G is benefiting from lean innovation as it is “testing more ideas and finding bigger ideas” before focusing on incubating and bringing it to market. Besides innovating, being better at performance marketing and having superior packaging, P&G also understands the value of its go-to-market communication strategies. Taylor explained that it creates advertising that makes consumers think, talk, laugh, cry, smile, share and buy.“Advertising that drives growth for categories and brands. Advertising that clears the highest bar for creative brilliance, sparking conversations, affecting attitudes, changing behavior and sometimes even defining popular culture,” he added.Organic sales for its healthcare and fabric and home care segments both saw a 10% increase, according to the financial statement. Sales for the healthcare segment was mainly driven by “premium innovation” and a positive mix from the disproportionate growth of developed regions, while sales for the fabric and home care segment was mainly boosted by innovation, market growth and positive mix due to the disproportionate growth of premium products.P&G’s beauty segment saw an 8% yoy increase in organic sales, with organic sales for skin and personal care being driven by market growth, innovation, positive product mix from the disproportionate growth of SK-II and Olay Skin Care and increased pricing, the financial statement said. Meanwhile, the baby, feminine and family care segment posted a 5% increase in organic sales, while the grooming segment had a 4% increase in organic sales.Looking ahead, Taylor said P&G will continue to focus on superiority, productivity, constructive disruption and improving P&G’s organisation and culture. This is in a bid to deliver sustainable, balanced top-line and bottom-line growth along with strong cash generation in a challenging competitive and macroeconomic environment.P&G has been streamlining its product portfolio and corporate resources of late to increase focus, agility and accountability. In November 2018, it restructured its business into six distinct units with individual CEOs. According to P&G, the structure supports ongoing efforts to move resources closer to the consumers and customers it serves, and supplementing internal talent with skilled, experienced external hiring. Last year, it also saw a 6% drop in overall marketing spend.(Photo courtesy: 123RF)