After Gillette deal, P&G took a closer look at PR synergies, resulting in a consolidation of agencies
When Procter & Gamble acquired Gillette in 2005 for $57 billion, the combined company became the world's largest consumer products organization. An unintended effect of the acquisition, however, would lead to P&G dramatically changing the way it approached its PR function.
Last week, PRWeek reported that the company was narrowing its roster of nine brand-focused agencies to five in a comprehensive restructuring plan, intended to help the consumer products giant establish a more collaborative environment between the company and its agencies, as well as among the agencies themselves.
The 18-month process was a result of two factors, born from P&G's acquisition of Gillette and P&G's own commitment to measurement, says Laurie Steuri, P&G associate director of corporate external relations.
"We tend to get quite insular about how we think about things," Steuri explains. "The Gillette acquisition opened our eyes. The way they were working with their agencies was different. It caused us to think [about our procedures]."
In addition, Steuri says, P&G "cracked the nut on measurement," which led it to look at the different ways it could operate its PR function.
In a document given to agencies for the review process, titled "Global PR Agency Renewal," obtained from a source close to the review process, P&G says it spent $80 million on PR in 2005 and 2006, a figure that Steuri would neither confirm nor deny. The document also says that, as a result of the transition, DeVries Public Relations would rep the Gain and Cheer brands.
"As a matter of company policy, we do not disclose PR or other media, marketing, and communication investments," Steuri says. She was not able to comment on the contents of the document, citing confidentiality.
The principles of consolidation, according to the document, were to work with a "smaller number of agencies to foster deep, continuous relationships" and to create "brands grouped into clusters based on similarity of influencers." Each cluster would ensure "agencies have enough business to warrant dedicated teams."
"Most of our work was concentrated in a few agencies, and a small amount of work was concentrated on a large number of agencies," Steuri says, quantifying P&G's PR budget as 80% of the spending going to 20% of the agencies.
Previously, the process of picking a firm focused on whoever delivered the best pitch. That led to an increase in agencies on its roster and some agencies representing a "strange combination of brands," Steuri adds. She declined to discuss how this would change in the future.
Steuri reiterates that the PR budget won't be cut and that the restructuring was mainly geared to creating synergies and better reaching influencers.
"It's about getting more for what we spend," Steuri says. "It's not just [about] the dollars we spend, but the human resource [bandwidth]."
"It makes sense for really big companies to consolidate in a way that minimizes conflict and gain synergies at the management level, as well as in the work that gets done," says Steve Boehler, founder of marketing management consultancy Mercer Island Group. "[The move] sounds very much like P&G."
While P&G's procurement department (which it calls "purchasing") was involved in the process, Steuri stresses that the internal PR department had the final say.
"Purchasing was instrumental in helping us understand how we are spending our money," Steuri says. "It helped us come up with options to reduce complexity and streamline our operations. Its role was advisory; ultimately... PR together with our business partners made the decisions."
She says the new arrangement provides for a more healthy relationship between client and agencies.
"It was not likely that the [smaller] agencies were going to grow [in that role]. Their assignments were likely to get smaller and smaller," Steuri says. "That's not the kind of relationship we want, and it's not the kind of relationship that leads to success."