Procter & Gamble’s overall advertising budget is still decreasing as the company pulls back on agency fees and services, but the world’s biggest ad spender has begun to return spend to working media, CEO David Taylor told investors during the company’s earnings call on Tuesday.
P&G has spent more than a year pushing new digital media supply chain standards, and it can start spending more on paid media now that it feels more comfortable measuring its quality, Taylor said.
“(We) plan to reinvest savings on wasted spend back into reaching actual customers,” Taylor said.
Some P&G brands, for instance, were targeting people 10 to 20 times per month, instead of their preferred frequency of three or four. Changing that imbalance will let P&G spend more on media that delivers value or is personalized to an individual, Taylor said.
Google, Facebook and other data-driven vendors have delivered about 95% of what P&G requested in its transparency and anti-fraud program, he said.
The company reported lackluster growth on Tuesday, with organic sales up 1% in the past quarter and profitability down 15%. Profitability has been buoyed for the past year by aggressive cuts to advertising and content production costs.
Tuesday’s earnings report was the first full quarter with Nelson Peltz as a board member, after the activist investor won a shocking recount victory last year to oust a director (former Mexican president Ernesto Zedillo) and take a seat on the board.
Peltz’s critique of the company, which earned him a slim majority support of shareholders, focused on P&G’s brand-building strategy and loss of market share.
But P&G has gotten some investor pushback on its marketing cuts, which some investors think has improved quarterly balance sheets at the expense of ceding market share to startup brands.
“It wouldn’t make sense to dial back on support for brand creation, and we haven’t done that,” CFO Jon Moeller told one investor who was concerned about the long-term viability of such deep cuts to advertising.
Some costs won’t return, like the company’s old agency model with high fees and retainers, but working media spend bounced back 4% year over year, Moeller said, and there isn’t a contradiction in continuing to increase paid media with reduced supply chain costs.
