Procter & Gamble cutting $1 Billion by 2016 and going heavy on digital

Procter & Gamble Places Big Bet on Digital Marketing

By Dale Buss

Procter & Gamble shook up the retailing, marketing and advertising worlds recently when CEO Bob McDonald and Chief of Global Marketing Marc Pritchard revealed their intentions to cut $1 billion from the company’s annual marketing budget by 2016. Going forward, they aim to lean much more heavily on digital programs to achieve the same overall impact with marketing.

The Cincinnati-based CPG giant is adjusting mightily to the sea change in consumer behavior and preferences that places more and more emphasis on online research and interaction even though the in-store experience remains important as well.

P&G has a clear and well-defined vision for digital marketing.

“Everybody is seeing a shift on consumer behavior across at least two or three vectors,” Alex Tosolini, P&G’s vice president for e-business, told CPGmatters.

First, Tosolini explained, “All of us are spending more time digitally to get information and education about various products.”

Second, “People are starting to shop online more than in the past for some of our categories. And every single retailer we work with has to shift their behavior to meet those two vectors.”

The third significant factor, he said, is “the social vector. Digital is becoming an amazing platform for connecting with consumers and having two-way communications for the brand, whereas in the past, communications was much more one-sided. Brands talked to consumers. Now, the whole social community and marketing, are taking this religiously to the next level.”

Pritchard has been mulling these trends for awhile and then decided that P&G not only will boost investments in digital marketing for these reasons, but also plans to trim pricey broadcast-television ads. That amounted to an earth-shaking revelation from the company that helped fuel the rise of modern-day TV advertising by sponsoring soap operas beginning in the Fifties.

But Pritchard and Tosolini are emphasizing what beefed-up digital efforts will enable P&G to do, and what it will do for retailers and consumers as well, not what the company might be trimming to finance them.

Tosolini pointed out, for example, that online promotion of P&G brands can result in higher sales in bricks-and-mortar stores as well; that occurred recently, for instance, when Amazon did an internet promotion for Crest Whitestrips.

“The good news is that, if a job is well done, whatever you do online has effects offline as well as online,” he said. “It’s no longer a binary world. It’s a multi-channel world. And while Amazon doesn’t have stores, original retailers more and more are able to start winning customers across all channels because they’re following consumers there.”

Also, P&G plans to become faster to turn events, and consumer and shopper insights, into executed marketing programs, which will benefit all of its retailer customers. One recent successful execution of that idea was the 24-hour turnaround the company accomplished in producing a MyTide TV ad and video showing use of the detergent to clean up a jet-fuel spill following an accident at the Daytona 500 auto race.

“As a brand builder, you have to take advantage of that,” McDonald, the CEO,  said at a digital workshop in Cincinnati earlier this month. “You can’t be mired in this plan you put together in the Kremlin.”

Tosolini added that McDonald was conveying that “if you listen to consumers in a very new and flexible way, with technology now you can respond much more quickly than we are used to. We want a real-time connection with our audience. And we want to turn that into a competitive advantage.”

The P&G executives have been making a point of telling the marketing community that the company is “open for business” from outside sources when it comes to ideas and programs aimed at improving its performance in the digital space and taking advantage of opportunities its staff might not see.

“We want to leverage the knowledge and power of people outside the P&G roster to innovate together,” Tosolini said. “Whoever has wonderful ideas, please come to us and we’ll be open to co-innovating with you.”

In fact, Tosolini said, what P&G wants to accomplish with digital marketing, and welcoming ideas in from the outside, is similar to the sea change that the company has pulled off over the last decade in bringing ideas for products and refinements into the company’s R&D labs from the outside. Once a chief proponent of the “not invented here” syndrome, P&G has made “outside-in” innovation one of its chief competitive differentials.

With a company this big, powerful – and willing – Tosolini is suggesting P&G may soon become a leader in digital communications as well.
CPGmatters, Shopper Marketing



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