Lessons from the world's largest marketer

Procter & Gamble's Marc Pritchard is reinventing brand-building and his description this week of the CPG behemoth's journey to a state of perpetual disruption warrants close examination.

P&G manufactures and markets some of the biggest brands in the world.

When the world’s most high-profile marketer speaks it’s usually worth a listen.

And Procter & Gamble’s chief brand officer Marc Pritchard certainly generated column inches this week following a presentation at the Morgan Stanley Global Consumer & Retail Conference in NYC.

Pritchard used Tide's When is #Laundry Night? campaign to illustrate the way P&G is "leading constructive disruption by reinventing brand-building to drive growth" - reimagining creativity and marketing by merging the ad world with the creative worlds of entertainment and sports.

His examples were not ads in the traditional sense. They were part of an entertaining series than ran during Sunday night football that he claims people actually looked forward to watching.

P&G now operates in a "perpetual state of disruption," just like the world around it. It’s a world where thousands of startups form every day; TV reach keeps declining; trust in digital media is eroding; and over-the-top streaming is rising exponentially.

It’s a world where e-commerce keeps expanding. There are numerous new media and entertainment ecosystems. And data, analytics and technology increasingly dominate P&G’s work.

Pritchard says the best way to deal with disruption is to lead it, but P&G plans to lead it through what he calls "constructive disruption."

"It’s one thing to disrupt and destroy value, but our job is disrupt and create value in the categories in which we compete," he explained. "But performance drives brand choice."

At P&G, performance is measured via five key success metrics: growing the market, new users, share, sales and profit.

Pushing back on digital media platforms

As Pritchard tells it, P&G has led the way in reforming the Wild West nature of digital media and "taking more control after years of higher digital spending with little visibility."

It called for industry-wide digital media transparency and demanded third-party verified data on ad viewability, audience reach measurement, agency contracts, ad fraud prevention, and brand safety.

That process unveiled "substantial waste" in P&G’s media buying, which led to the CPG behemoth reducing its wasteful spending and reinvesting money into better-performing media.

Facebook, Twitter and Google may not regard themselves as "media owners," but Pritchard certainly does. "We’re now calling for more control over content quality to match the standards we expect of any media provider," he said.

That encompasses the moderation of editorial comment to eliminate toxic speech that hijacks conversations, common consumer privacy standards and data transparency across media platforms to stop excess ad frequency that annoys consumers and wastes money.

The reward for compliance is that those media platforms that meet the standards will be P&G’s preferred providers and will be prioritized for marketing dollar investment.

Taking media, production and creative in-house

In the area of in-housing, which has been a hot topic for a couple of years now, P&G is also making big plays.

It created its own one billion-strong consumer privacy-centric and compliant database, covering 50% of adults online, to better engage people in ways they prefer rather than traditional interruptive advertising. P&G is also building startups internally to transform how it innovates.

Pritchard’s teams are also reinventing their approach to media, moving from mass blasting with a lot of waste, to mass reach with one-to-one precision facilitated by the consumer database, which allows advanced programmatic media buying that finds people with higher propensity to buy without the "annoying ad frequency."

In terms of innovation, China is P&G’s most sophisticated market, with 80% of digital media bought this way. "Last year, we reduced digital media waste by 30% and increased the number of people reached by 50%," noted Pritchard.

The database shifts the focus from generic to "smart" audiences, made up of profiles with proprietary algorithms that identify people based on demographic and behavioral characteristics, such as those who purchased or sampled a product.

Pritchard told the Morgan Stanley audience that, in the last fiscal year in the U.S., P&G’s skincare brand Olay used the smart audience strategy to reach 65 million high potential users, more than the generic audiences of women aged 25-54. It spent 10% less money reaching them and achieved high-single-digit sales growth.

The move to a data-led strategy also enables greater TV effectiveness. By analyzing U.S. set-top box data, detergent brand Tide found it was hitting the same households 22 times in a month. So it cut off the excess and placed ads in programs with greater precision to eliminate the annoying experience of seeing the same ad over and over again.

"We have achieved substantial media savings and efficiencies in the past five years, which we’re reinvesting to reach even more people," said Pritchard.

P&G is commonly identified as the world’s largest advertiser but Pritchard says it has even disrupted this concept. "It’s not who spends the most; it’s who reaches the most people efficiently and effectively to drive growth and value creation," he explained.

Reinventing advertising

This reinvention of media at P&G has led to a reinvention of the company’s advertising, moving from "mass clutter to ad experiences that are more superior, useful and interesting," to the point where Pritchard claims consumers actually look forward to seeing them.

On a creative level, P&G is making ads more useful for people who don’t necessarily know how to use its products. These infomercials communicate what the product is, how to use it correctly to get the most benefit, and why it’s better.

"The Mr. Clean Magic Eraser infomercial probably won’t win any awards at Cannes next year, but that’s OK because of the sales growth [achieved] when that ad aired," said Pritchard. "It’s the same with Swiffer and Febreze. This works, so more brands are following with infomercials."

The marketing is also being made more interesting through engaging with the worlds of comedy and music. He cited entertainment web series Bare Skin Chat and Masterclasses for SK-II, featuring James Corden, Japanese comic Naomi Watanabe and Chinese actress Tang Wei in comic vignettes extolling the virtues of pitera, the key ingredient in the Japanese cosmetics brand. The spot also featured John Legend, who wrote a song about pitera.

The series attracted 661 million views and led to a 27% increase in search for SK-II and double-digit sales growth in terms of new users. Pretty impressive results by any standards.

"We’re on the edge of a great revolution in creativity," said Pritchard. "We can imagine a world without ads as we know them today, to the intersection of multiple genres where we can create engaging new experiences while still reinforcing [product] superiority."

Agency disruption

All these developments have significant implications for P&G’s 3,000 agency partners, down from 6,000 five years ago. The CPG company is shifting from being comprised of "brand people who outsource too much of their work" to "brand entrepreneurs with their hands on the keyboard."

"P&G people are doing more media planning in-house, with nearly 30% of our media spend already planned in-house," said Pritchard. "We’re implementing ‘fixed and flow’ agency models, with a fixed amount of work with a trusted partner that requires experienced creatives for our core brand campaigns, supplemented with a flow to the work approach through flexible sourcing and smaller, more agile shops."

It’s reinventing core agency partnerships and has led to developments such as co-locating with one agency on several brands, creating what Pritchard calls a "no-borders approach" to work and collapsing creativity lead times from "months" to "hours."

"We’ve co-located with another agency group to create fast-cycle work in our oral care brands," said Pritchard. "And we’ve created an entirely new model that brings multiple agencies together in one integrated team called Woven that created the Tide work."

More creative and production work is being taken in-house, with deodorant brand Secret no longer employing an AOR after having split with incumbent Wieden & Kennedy. "We’re creating and producing ads for a tenth of the cost and in one month instead of five," noted Pritchard.

A Secret ad was shot in Cincinnati with the opening scene filmed in P&G’s home office. "The producer is the associate brand director, the creative director is the brand manager, and it’s winning in-market," said Pritchard. "Sales have consistently grown mid-single digits since in-sourcing this work."

The item that received most publicity from Pritchard’s speech was the fact that, despite already saving $1 billion over the past five years through the reinvention of its partnerships with agencies, there is still a "long runway ahead" in terms of further efficiencies.

Doing good as good business

The world’s most-high-profile marketer ended by reaffirming P&G’s commitment to purpose, moving from brands that are "all about themselves" to brands that are a "force for good and for growth."

I hope that, in seeking out the opportunities available on the "long runway" that P&G also remembers to stretch its purposeful commitment to values and equality to the way it treats its agency partners.

In this world of reinventing agency partnerships, high-profile beer brand Anheuser-Busch InBev just launched a media review in which it demands payment terms of 150 days, 30 days more than its usual 120, and is conducting part of the pitch via a live online reverse auction that will in effect make agencies undercut each other in what some would call a race to the bottom.

P&G’s payment terms apparently range from 75 to 120 days and Pritchard said that, generally, it had to "focus on getting the best creative output at the lowest possible cost."

But, while it is true agencies needed to disrupt themselves for the new realities of marketing, if these new partnership dynamics are to work for both parties clients have to allow enough room for firms to make sustainable profits and operating margins themselves.

As Pritchard himself said, disruption doesn’t have to result in destruction.

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