There’s an inverse trend happening with the world’s largest marketer, P&G. For the second quarter in a row the company had reduced its overall marketing budget yet sales have still grown. In its Q1 earnings call P&G reported organic sales growth of 5% YoY, despite reducing its overall marketing spend by $165M.
Before anyone in media jumps out a window on this news it’s important to understand where and how P&G is cutting costs. Most of the $165M in savings is coming from a reduction in creative spending and the disintermediation of third party AdTech vendors. Simply put, P&G is squeezing the middle of the marketing pipeline to make itself more efficient. By contrast, they don’t appear to be reducing actual media spending – which is ultimately what the consumer sees anyways.
It’s also important to understand how long the brand marketing cycle can be for categories like CPG. Take P&G’s Bounty brand as an example. Over the decades they’ve spent hundreds of millions to establish Bounty as a premium paper towel brand. So even if you haven’t seen a Bounty ad recently, you’ll still be familiar with the brand the next time you hit the grocery store. With that said, if P&G were to neglect Bounty’s branding for years (which they would never do), it would eventually erode the brand’s position and sales.
It’ll be interesting to see if P&G can continue to squeeze more juice out of the marketing lemon in future quarters.