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P&G’s agency costs cut by 25% – and there’s still ‘more room’ for $200m in efficiencies, it warns

P&G’s agency costs cut by 25% – and there’s still ‘more room’ for $200m in efficiencies, it warns

Procter & Gamble (P&G) says it expects to spend $1.5bn on agency-related marketing costs next year, down 25% on its previous expenditure, and that there is “still room” for further cuts.

The FMCG giant – the world’s largest advertiser by measured media – has previously stated its intention to reduce the costs that “do not impact reach [and] do not impact frequency”.

Last year, P&G cut the number of agencies it worked with by 40% from a total of 6,000, including transferring the bulk of its  North American media-buying and planning business into Omnicom Media Group, following its first review of the account in nearly 20 years.

P&G chief financial officer Jon Moeller told investors on a call to mark its Q3 earnings announcement that the firm is targeting an additional $200m in agency-related savings to add to the $370m previously identified, and said those funds will be reinvested in paid media and sampling.

“We increased investments in innovation, advertising, and selling capacity to enhance our long-term prospects for faster, sustainable top line growth and value creation,” said Moeller.

“We’re reducing non-working marketing expenditures, costs that do not impact reach, frequency or continuity of our advertising and trial generation programmes.

“After two strong years of savings, we’ll enter next year still spending $1.5bn in agency-related marketing costs, still more room to improve. We’ll continue to look for efficiencies in working media with better advertising targeting and earned media campaigns with engaging content,” he added.

Moeller also revealed that P&G is increasingly looking to fill senior marketing roles with “leaders who have significant selling experience”.

“We’re changing our talent development and assignment planning to drive more mastery and depth. The objective is simple, improve business results by getting and keeping the right people in the right places to develop and apply deep category mastery to winning,” he said.

P&G posted a 6.9% year-on-year drop in Q3 revenue, reaching $15.76bn, but with quarterly profits up 28% to $2.75bn.