Digital Gabe
Cutting Edge Commentary On All Things Media

Marketing Spending Down, Sales Up At P&G

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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.


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