P&G said it would lay off 1,600 staffers, including marketers, as part of a cost-cutting exercise.
CEO Robert McDonald told Wall Street Analysts that he would have to "moderate" his ad budget because Facebook and Google can be "more efficient" than the traditional media that costs P&G a large share of their budget.
P&G's revenues were up to $22 billion in the quarter but the company's costs for sales, general and administrative work were flat.
McDonald Stated “ As we've said historically, the 9% to 11% range [for advertising as a percentage of sales] has been what we have spent. Actually, I believe that over time, we will see the increase in the cost of advertising moderate. There are just so many different media available today and we're quickly moving more and more of our businesses into digital. And in that space, there are lots of different avenues available.
In the digital space, with things like Facebook and Google and others, we find that the return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient. One example is our Old Spice campaign, where we had 1.8 billion free impressions and there are many other examples I can cite from all over the world. So while there may be pressure on advertising, particularly in the United States, for example, during the year of a presidential election, there are mitigating factors like the plethora of media available”.
McDonald's recent discovery that digital media is free comes after the Tide Pods launch was delayed. Its now scheduled for a month from now but with only a limited supply. The ad budget for that campaign is estimated at $150 million and will come from agency Saatchi & Saatchi.
Because of the Tide Pods delay, several competiting companies have already launched their laundry pod products. So the competition is going to be fierce.
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