Procter & Gamble, Coca-Cola, Unilever, Heineken, Microsoft, McDonald’s, and Samsung were among the companies detailing their spending and investment in marketing in first-quarter earnings reports, a tactic picking up speed when compared with previous periods.
Experts say the trend is the result of numerous factors. For one, as the economy picks up steam, an earnings report gives a company the opportunity to talk about how they are taking advantage, says Kathy Bloomgarden, CEO of Ruder Finn. She adds that a corporation may want to highlight why it has adjusted its marketing strategy for the year, particularly in the first-quarter report.
"Companies may also be reporting marketing spend in an effort to help analysts and investors understand the business and its future key growth drivers," Bloomgarden explains.
For instance, Coca-Cola reported that in Q1 2014, its net operating revenue fell 4% to $10.6 billion from the same period last year. The company noted that it will increase its marketing investment through 2016 as part of a productivity plan to generate $1 billion in incremental savings to be redirected toward media investments. As part of the plan, it is also putting $400 million toward media initiatives for this year.
During its earnings call, Coca-Cola CEO Muhtar Kent said only 5% of the company’s incremental marketing spend for this year had been used, and that by "ramping up the quality and quantity of our marketing, [the company] will drive better alignments."
"We are focusing on and reinvesting in our brands as one of our priorities," says Ann Moore, communications director at Coca-Cola. "This isn’t the first time we have decided to increase our marketing spend, but this is all a part of our business’ current strategic approach."
The shift toward integration
Coca-Cola’s marketing investment does not cover its PR function, which sits under a separate department, but this is not the case with every company. The marketing umbrella commonly covers both advertising and PR spending, says Scott Allison, CEO of Allison+Partners.
Historically, traditional advertising and PR were well defined, but the marketing segment is fundamentally changing. Marketers are now looking at a myriad of channels, including social media, mobile, data analytics, SEO, and content generation.
"You are seeing a lot of PR firms pushing into areas that were generally more of a mainstay of an advertising function," Allison explains. "But we are not really seeing any clients shifting dollars out of PR into other venues."
Procter & Gamble CFO Jon Moeller detailed on an earnings call what his company is doing to rationalize its marketing spend and how this is affecting marketing and communications. He said P&G will drive effectiveness and productivity through integration. This includes better digital, mobile, search and social presence, improved message clarity, and greater non-advertising marketing efficiency. Moeller added that P&G expects marketing spending to come in below prior-year levels due to "productivity movements" in marketing and advertising.
Yet, it is not unusual for marketing to be mentioned on P&G’s earnings calls, says Jennifer Corso, corporate media relations staffer at the company.
"For this past call, it was part of the discussion related to our company’s focus on productivity, of which marketing is one factor," she adds.
As companies shift their marketing focus to digital opportunities and investments, along with traditional advertising, PR will play a big role, Bloomgarden says, adding that she sees the magnification on marketing spend as an opportunity for the industry.
"Communications people do well in content generation and digital channels, because the fundamentals of PR are all about content and telling stories," she explains.
Measurement equals more pressure
Experts also note that companies are increasingly taking a more stringent look at their general cost structures in an effort to become as efficient as possible across the business. Erin Lash, senior equity analyst at investment research firm Morningstar, attributes this to the competitive environment within mature, developed markets.
"With the volatility we have seen in commodity cost, companies are looking to offset both the competitive pressures, as well as the cost pressures they are facing by really scrutinizing their cost structure," she says.
Although companies are analyzing expenses across the business, firms are interested in measuring and studying the ROI on every dollar spent, and with marcomms measurement tools prevalent, companies can easily determine what works, and what does not.
Allison cites this as another reason for increasing pressure on marketers.
"With all of the marketing folks we work with, there is extraordinary pressure to see ROI on everything they do," he says. "There is a really intense environment around measurement, with a lot of testing, trials, and investment in different areas, measuring to see what is effective."
McDonald’s president and CEO Don Thompson said at the company’s Q1 earnings call last month that a balanced focus between core and new products and "enhancing marketing effectiveness" is part of the fast-food chain’s priorities.
McDonald’s is one of four companies, along with General Electric, General Motors, and Southwest Airlines, that adopted the first round of measurement standards proposed by the Coalition for Public Relations Research last October. The guidelines cover traditional media measurement, digital and social media capacity, communications lifecycle, and ROI as part of its six-stage process.
Bloomgarden adds that it is becoming easier from a marketing standpoint to target consumers and better understand their demands and dynamics due to the increased use of insights and analytics.
Throughout the past number of years, companies have stressed the importance of bringing new products to market that resonate with consumers. While innovation is key, marketers are also responsible for figuring out how to launch innovations and address emerging markets, which are now a more critical focus. Yet Lash notes that even good products fail when consumers don’t know about them.
"Spending behind the marketing of these new products so they get in front of consumers and so consumers understand the added value these products offer is extremely important," she adds.