Thursday, 23 April 2015

P&G eyes $500m savings from global agency fee cuts

Procter & Gamble (P&G) said it plans to save as much as $500m in agency fees globally through a reduced number of relationships, as it continues a business-wide drive to cut costs.
The FMCG giant, which is the world’s biggest advertisers, has already kicked off a programme to divest 100 “non-core” brands, with chief executive AG Lafley arguing “less will be much more”. It will now focus on 65 brands where the "size and prize of winning" are highest.
This scheme to create a "faster-growing company that is far simpler to operate" is set to impact agency partners, too.
Reporting today on P&G’s disappointing third quarter results – with revenues down 8% year on year to $18.1bn – chief financial officer Jon Moeller told analysts the company also believes it can make “significant” savings in its agency roster.
“One non-media cost are which offers significant opportunity is agency spending, which includes fees and production costs for agencies we use for advertising, media, public relations, package design and development of in-store material,” said Moeller.
“We plan to significantly simplify and reduce the number of agency relationships, and the cost currently associated with the complexity and inefficiency, while upgrading agency capability to improve creative quality and communication effectiveness.
“We see an opportunity for up to half a billion dollars in cost savings in this area, along with stronger communication to consumers across all touchpoints.”
Moeller said the cost-savings would allow P&G to maintain “strong media weights” despite the cost pressure from foreign exchange, although he added that the firm is looking to continue to shift away from traditional media.
“By following the consumer, we’re improving marketing spending efficiency and effectiveness to deliver more for less. We’re shifting more to digital advertising media - search, social, video and mobile - which is where consumers are spending more of their time,” he said.
Alex Brownsell, London


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