How P&G Plans to Cut $1 Billion From Marketing

Procter & Gamble Co. doesn't just use the latest digital technologies for marketing -- the company partners with technology providers to help drive innovation. That's part of the consumer products giant's big cost-savings plan.

P&G plans to save $10 billion over the next four years, cutting $1 billion from the marketing budget, by thinning out marketing executives and spending more efficiently. That means more use of lower-cost digital marketing and less reliance on pricey broadcast ads, said Marc Pritchard, P&G global marketing and brand building officer, in an interview with the Wall Street Journal's Emily Glazer.

Pritchard, who stepped up as P&G's marketing head in 2008 after more than 20 years at P&G, said he started out by working with a small group to master digital marketing and drive it throughout P&G, starting with search, then digital banner ads. The same thing is underway now with social media, including Twitter and YouTube.

Pampers, Old Spice, Secret, and the SK-II skincare brand in Asia are furthest along in digital marketing. "We love to see people try different things and watch it explode," he told the Journal. Brands with the smallest budgets are often the most innovative. Aussie, a hair-care brand, is all-digital, as is Secret deodorant. Old Spice had a small marketing budget; it advertised its "Smell Like a Man, Man" campaign prior to the Super Bowl rather than during the game, then got a lift from YouTube, with extra PR through Twitter.

P&G partners strategically with tech firms to drive innovation, including Google, Microsoft, Yahoo, and Facebook. "The deal with these partnerships is that we grow together. They exchange ideas, new approaches, and technology with us. We exchange our ideas and insights. It's mutually beneficial," Pritchard said. P&G also meets with venture capital companies to learn about new technology on the horizon. The company recently investigated Shazam and Klout.

P&G is working on an industry-wide initiative to improve ROI measurement for social marketing initiatives, specifically defining Electronic Gross Rating Point (EGRP), a measure of audience reach. "You can look at what an impression from Google, or Facebook or Twitter is actually worth," Pritchard said. P&G is working with the Association of National Advertisers on ROI metrics.

P&G plans a big marketing push behind the Olympics, using Twitter, Google, YouTube, and Yahoo. More than 30 brands will use the Olympics for marketing, with 150 athletes. The brands and athletes have Facebook pages. Community managers will amplify the discussion, engaging on Facebook, YouTube, Twitter, and other platforms.

P&G said in late January that it plans to cut about 1,600 "overhead" or non-manufacturing jobs, including some in marketing, and use digital marketing to help contain long-term media spending.

P&G plans to take advantage of free distribution for digital marketing to drive down costs, chairman-CEO Bob McDonald said in an earnings conference call in late January. Short-term, heavy spending on the 2012 elections is likely to drive up the cost of TV advertising, he said.

The company plans to continue to spend 9 percent to 11 percent of sales on advertising long-term. The company is increasing spending this quarter and next for global Olympics-related sponsorship, which McDonald said the company expects will add $500 million in incremental revenues.

What do you think? Can a global brand like P&G succeed by shifting marketing spending from broadcast to digital? Or is digital still too unproven?

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— Mitch Wagner , Editor in Chief, The CMO Site