P&G shifts 35% of US ad budget to digital

06/08/2013

Procter & Gamble's digital spend makes up 35% of its ad budget in the US, as the FMCG giant looks to maximise the return on its marking investment.

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The move comes as new research indicates that Americans will spend more time online this year than watching TV.

P&G company executives say digital media in many cases is proving to be a faster and cheaper way for P&G's brands to reach consumers, and feedback is also faster.

Announcing the company’s latest earnings, CFO Jon Moeller said: "We will again increase advertising spending pretty significantly year-on-year, but we'll do it probably 20 basis points lower than the rate of sales growth. That does not mean less advertising. It does not mean less reach, less frequency. It means more effective advertising, the right mix of media and importantly reducing non-advertising costs that the consumers never see."

P&G- Biggest marketing spend

According to Ad Age, P&G was the top advertiser in the US last year, but its spending was down 15% to $4.8bn.

In 2011, about 19.3% of these companies' U.S. advertising spending went to digital media.
P&G has yet to disclose how much it spent on marketing in its recently ended fiscal year, in which its total sales topped $84bn.

In its 2012 fiscal year, the company spent $9.3 billion on marketing, including advertising on television, radio, print, digital and in-store ads. About a third of P&G's revenue comes from North America, which is the biggest market for its media spending.

The company will now increase its marketing spend this year, although its spending will represent a smaller percentage of sales.

P&G CEO A.G. Lafley added, "We're interested in effectiveness. We know brand by brand in the U.S and in a lot of other markets the range of effectiveness we can deliver and it's wide. And so we are holding all of the businesses to a minimum ROI."

The P&G executives did not specifically address television spending, which usually gets the largest share of the giant marketer's ad budget. But they talked about the growing importance of digital.

Lafley said that digital is now up to a 35% share of P&G's ad spending in the U.S. "It goes up and down, 25% to 35%," We have some businesses and brands where digital is incredibly effective, and we're doing more. We have other brands that are on the learning curve. They've got to get up the learning curve faster," he said.

"But it's a brand by brand, category by category, consumer segment by consumer segment set of decisions. Our problem is not the total amount we are spending. Our problem is the mix, our opportunity is the mix and we are going to get the mix better and better and better and there is a lot of opportunity there," Lafley said.

P&G earnings

Announcing its earnings, P&G reported a 48% drop in profit to $1.9 billion for the quarter ended June 30, reflecting restructuring costs and other charges, while sales ticked higher to $20.7 billion.

P&G said it will sharpen its focus on product innovations, cost cuts, and execute well with core brands and its most important markets.

The firm also has a plan to revive its Pantene and Olay beauty brands, which have been losing share to rivals in recent years.

Online to overtake TV in US?

The average time that consumers spend with digital media per day is expected to surpass TV viewing for the first time this year, according to research firm eMarketer, which estimates the average adult will spend more than five hours per day online, on mobile devices or with other digital media this year. By contrast, the average person will spend four hours and 31 minutes watching television

Companies that make consumer packaged goods spent about $13.4bn on advertising in the US last year, of which 22.2% was spent on digital media, according to data from IRI, Kantar Media and eMarketer.

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