P&G to Cut More Millions Of Agency, Production Costs

Waiting For the Winds To Change
Waiting For the Winds To Change

Not the best time to be an ad agency, especially an agency that works with P&G. I’m guessing a lot of executives lost some sleep this weekend tossing and turning. There are many people in the ad industry who have exactly one account: P&G, and if that revenue vanishes, so does their job.

Chairman-CEO David Taylor said in an investor presentation that the company plans to reduce such spending by $400 million through the fiscal year ending June 30, 2021. That comes after a combined $750 million in such savings over the past three fiscal years. ….

The process has involved cutting the number of agencies that P&G works with by 60 percent since fiscal 2015, but Taylor said the company will cut further, reducing them by 80 percent from the original base. P&G also is also changing how it works with agencies, he said, with more “open sourcing” of project work instead of solely relying on agencies of record. So agencies should get ready to start bidding more.

While P&G historically has spent a large portion of its agency fees on fixed retainers, says spokeswoman Tressie Rose, “Moving forward, we intend to take a more balanced approach between fixed retainers for a portion of the work, and project-based fees for other work. Open sourcing in this context means we will look both at our existing agency partner who is on retainer in addition to other agencies on our roster for the project-based assignments to determine the best quality, capability and value for each project. If a crowd-sourcing platform makes sense, we would consider this, but our first step will be to look at our roster agencies.”

(click here to continue reading P&G to Cut Another $400 Million in Agency, Production Costs | CMO Strategy – AdAge.)

and of course, P&G is only one such corporation slicing back on marketing budgets…

P&G isn’t the only giant packaged-goods marketer squeezing agency and ad-production costs. Unilever, the number-two global ad spender, also has been cutting agencies, their fees and production costs in recent years, in part by reducing the number of traditional ads it makes and by bringing more work into in-house studios.

Unilever will keep up cutting, Chief Financial Officer Graeme Pitkethly said in a speech to the same CAGNY conference on Thursday. Overall, around $2.5 billion of the $7.5 billion Unilever plans in cost savings by 2019 will come from a combination of marketing and overhead reductions (such as thinning the internal management ranks), Pitkethly said. 

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