I recently heard from some friends who work on the P&G business, that P&G is cutting 50% of their existing Ad Agency & Media Companies from their roster in 2018. This is part of their next phase in development and planning.
P&G is a global consumer products giant. It sells its products in over 180 countries around the world. It generates over $65 billion in annual sales. Approximately 55% of sales are derived from outside North America. Recently, P&G even ‘slimmed down’ to just 65 brands, down from 170 previously.
Having worked on P&G while at Leo Burnett and at Agency.com/Omnicom – I can assure you, this is massive news to every person or supplier in the Ad Industry. When the ‘biggest whale’ in the Industry cuts half of its partners and budgets, people listen and take notice! And, this is on top of the whopping $2 Billion n they’ve cut over the previous five years!
I can also assure you, holding companies and thousands of Agencies around the world in over-drive working to keep their share of P&G business safe, intact and alive. Some of the obvious Holding Companies and Agencies to watch with intense interest this year are: Leo Burnett/Publicis, Omnicom, IPG, WPP/Mediacom, Carat, Starcom/Mediavest Group to name a few.
In fact, to give you some idea of the scale of P&G’s worldwide advertising investment, from 2011- 2017, they spent an average of approximately $7.2 Billion per year!
The company now operates five reporting segments, based on the following product categories:
- Fabric & Home Care (32% of sales)
- Baby, Feminine, & Family Care (28% of sales)
- Beauty (18% of sales)
- Health Care (12% of sales)
- Grooming (10% of sales)
Some of P&G’s biggest spending brands include: Olay, (measured spend $215m), Tide ($197m), Crest ($176m), Pampers ($143m), Febreze ($138m), Swiffer ($136m) and Gillette ($134m).
Picture: Advertising expenditure of Procter & Gamble worldwide from 2011 to 2017 (in million U.S. dollars)
Here are some of the highlights of this recent announcement:
- In 2014 P&G first announced it would reduce the 6,000 agencies it works with by nearly 40% and cut agency and production spending by $400m.
- By 2016, P&G estimated it had saved, $1 bn from their media spend, plus an additional $500m in agency fees and more.
- Now, P&G want to save another $400m in marketing costs by reducing their agency roster by another 50%.
- They plan to cut their agency roster by 50% by the close of 2018. (This is the latest in a four-year cull which saw some 4,700 firms axed from P&G’s books.)
- P&G will do more private marketplace deals with media companies and precision buying fueled by data and digital technology
- With 2,500 agencies currently on their global roster, P&G plan to have 1,250 by the end of the year.
- P&G has several competitive advantages. The first is its strong brand portfolio. P&G has several brands that generate $1 billion or more in annual sales
- P&G, like 90% of all other major brands globally are demanding greater transparency in 2018.
- Importantly, P&G chief financial officer Jon Moeller revealed that despite slashing the number of agencies it works with and saving $750m in associated costs (as well as improving cash flow by over $400m through 75-day payment terms) it was still looking to save another $400m by reducing its agency roster by another 50%.
P&G will also continue to take even more services In-House and they are moving rapidly in this direction. But, I think that at least 80% of all major US marketers will also be moving more of their marketing services in-house this year based on what I am seeing and hearing!
As you know, an In-house agency is owned and operated by its one and only client the advertiser e.g. P&G for example. Instead of a company outsourcing its advertising and collateral to an ‘outside’ agency. However, with this model, marketing and communications requirements are mainly handled by their own In-house agency.
I personally believe over the last few decades, clients have finally woken to this fact, many Organizations have now recruited more talented and versatile staff. In fact, it’s been interesting to watch the steady flow of senior agency marketing folks into client-side ranks since start of the digital disruption of the Ad Industry twenty years ago.
As organizations such as P&G expand their in-house agency services, we are increasingly seeing the migration of people across traditional lines as they bring with them more skills to make sure they own the whole customer journey.
Since the beginning of Digital Marketing about 20 years ago, I have witnessed the marketer and agency relationship deteriorating faster than at any time in history. This has been especially true with marketers who are now prioritizing customer strategies, experience delivery and marketing performance. Digital disruption has now created the Age of the Customer!
Having graduated from Miami University, in Oxford, Ohio, just down the road from P&G’s Cincinnati, Ohio head office, I am fully aware of the immense range of their products including: foods, beverages, cleaning agents, and personal care products. P&G has long been on my radar.
In fact, Miami University has had a close partnership with P&G for decades. P&G has even had a significant impact on lifting the standards of Miami’s Farmer School of Business too!
With P&G’s ongoing investment, commitment, funding, collaboration, recruitment, etc. The Farmer School is one of America’s elite Business schools and has consistently delivered, a world-class educational experience in Business, Marketing and Entrepreneurship
Picture: Miami University, Oxford Ohio – The Farmer School of Business
As an undergrad at Miami University I clearly remember, a number of companies would come to recruit at Miami University each year. But it was P&G that was always the most in-demand company every year. Everyone loved P&G because their head office was just a short drive from campus. And, I simply have never forgotten that experience. So, having said that, here is my take after watching and observing P&G since the early 1980’s.
WHAT’S MY TAKE?
Over the last three decades, I have witnessed some amazing overhauls in the Advertising Business. Primarily, the shift to a mobile first, analytics-driven marketing and technology-enabled business growth has forever changed the nature of advertising agencies the legendary agencies like: JWT, Grey, Saatchi & Saatchi, Leo Burnett, McCann Erickson, DDB, BBDO and Ogilvy & Mather.
Source: Barclays Global Consumer Conference, page 8
The era of ‘Mad Men,’ where advertisers primarily focused on TV, radio, press and print advertising is gone – dead and buried as we once knew it. But, there has also been a massive talent and ‘brain drain’ too. Working in digital media has become far more exciting and rewarding. In its place are specialists who focus on social media, digital media, and traditional media.
I believe P&G and todays’ top marketing companies want:
- More bang for their bucks
- More effective methods and tactics for winning and retaining existing clients
- Insight-driven interactions with individual clients and customers. (Something TV and traditional broadcasting haven’t been able to deliver.)
- Engaging environments for their products, services, customers, staff and clients.
- The hottest areas this year for high performance marketers will continue to be: big data, data management, insight services, data monetization, analytics, business intelligence and adding value all around their customers!
- Customer Obsession will be critical to all the best marketers and brands too. They must be more demanding, faster, more nimble and aggressive partners to develop deeper, better connections with their customers and clients
- Many of the brightest marketers on the planet such as P&G, have realized that advertising has changed, most people have less time for ‘interruption-based advertising’
- Most CMO’s and elite marketers understand that ‘customer –obsessed’ strategies are critical today – especially in the digital and mobile world.
That’s why P&G and other savvy Marketers Moving In-House!
It’s obvious to me that P&G want greater control and transparency and that is the primary reason to cut their agency roster and moving more activities in-house. I totally believe they fully understand, that in today’s ‘always on’ marketplace, it is no longer fiscally responsible to have thousands of marketing partners worldwide, and in many cases, it’s better to have people in-house working for the brand.
Additionally, today’s global marketplace is far more complex than in decades past. The smartest and best marketers now realize that trying to brief multiple teams nationally or globally, is just too hard without access to all the data, insights and nuances of today’s data driven environment.
Other important insights and considerations:
- Agencies move more slowly than today’ clients expect and many simply don’t work in the always-on, demand-drive digital and mobile marketplace.
- Agencies are often too slow to connect and engage with customers and clients in social media marketing, mobile marketing, content marketing and in developing fully integrated models.
- With today’s explosion of data and insights companies no longer want to outsource customer relationships.
- Today’s Marketers and Brands want to own and use their own data. Especially as marketing activities today generate unprecedented amounts of data. (In the ‘old days,’ we might get a standard report of ‘impressions’ from an Ad agency, but not today. Now there’s the data, analytics and skill set requirements and many Ad Agencies have fallen woefully behind. In fact, I think many clients now have far better qualified internal core talent than most Ad Agencies.!)
- Ad Agencies don’t seem to be attracting the best digital talent today. With the startup market, digital giants like Facebook, Google, Amazon, Uber have also been attracting the best and brightest.
How Does an In-House Agency Operate?
There is little structural difference between an in-house agency and a traditional agency that has multiple clients.
If done right, In-house agencies has their own creative directors, art directors, copywriters, production experts, media planner and buyers, account executives, along with every other role you’d expect to see in traditional ad agency.
Importantly, an In-House agency is far more cost-effective. (And it will never charge you overtime costs either.) I have watched with interest the recent developments of having in-house agencies. The ‘client’ is getting 100% dedication and focus, no overtime or rush charges, subject matter experts, plus all staff and employees directly benefit from the company doing well.
It’s cheaper, it’s faster, and these days, it’s way easier to get very talented people to come ‘client side’. Companies like Apple, Microsoft, Facebook, NIKE, Google are attracting big names from advertising. The stigma that was once attached to “selling out” and promoting only one brand has evaporated.
After all, why work for an International Ad Agency that hires, and fires based on the clients it wins or loses when, with an In-house agency you can have the stability, and financial support of a company that wants you to succeed?
I believe the relationship between brands like P&G and its agencies has been in a state of flux for years, in part because the role of the traditional agency is not as clear as digital marketing continues to grow.
It’s also clear that P&G and many other marketers are after far greater transparency and growth in dealing with the new complexities of the digital/mobile environment. It will be fascinating to watch the speed, nimbleness, transparency and efficiency efforts that blossom at P&G this year. I also can’t wait to watch and learn about the cost benefits too!
With all this movement and consolidation happening this year with P&G and others, today’s best and brightest agencies will immediately implement and incorporate ‘full-on’ new business strategies which will enable them to become even better with more accountability. The best Agencies and New Business programs will:
- Dive deeper into the clients brands and business,
- Become far more efficient with investment,
- Present far better quality work more often,
- Add significantly more horsepower in digital knowledge
- Prioritize customer strategies, deliver real-time insights and have intense customer obsession based on big data, analytics, business intelligence and build powerful customer relationships!
In 2018, one thing is for sure, P& G and all CMOs will remodel their organizations and strategies to stimulate one thing in particular – growth.
Wishing you continued growth and success too!
About Geoff De Weaver:
Super Strategist for the Fortune 500 – Geoff is a leading international expert on new business development, brand marketing, innovation, and growth. He has also directly assisted hundreds of Fortune 500 brands and clients generate billions in new business revenue from North America to Asia to Europe, South America and Australia/Oceania.
Geoff has successfully built businesses, agencies, opened offices worldwide, saved companies and helped clients generate billions of dollars of revenue and growth with their brands.
Geoff is passionate about the art of influence, new business and presentation. His techniques can help you communicate and lead more effectively. As a global marketer, coach and workshop leader, Geoff makes mastering these advanced skills an enjoyable and achievable process. His sound business acumen and results driven approach have made him a trusted business advisor to many of the world’s leading organizations and their senior executives.
Geoff works with business leaders to ignite their courage and confidence so they can step up and step out in the way they engage people and communicate their leadership style. He is in high demand with CEO’s, CMO’s, directors, corporate executives and senior managers for his expert counsel and guidance in creating strategies for face-to-face communications and integrated global campaigns that are engaging and delivered with confidence and passion to key stakeholders.
Want to win more new business, grow faster and increase your revenue? Then get chemistry on your side. For more information, contact Geoff De Weaver at firstname.lastname@example.org or DM me on Twitter at: https://twitter.com/geoff_deweaver or call me at: +61 411 224 961