Proctor & Gamble will cut hundreds of millions of dollars worth of media agency partnerships in a bid to streamline its current marketing operation, the company has confirmed.
P&G is looking to limit its agency ties in an effort to free up huge cost savings and remove some of the inefficiency it claims to be suffering from.
Widely considered to be one of the world’s biggest consumer goods firms, P&G spent $9.2 billion on marketing in the year up to June 2014, although this was down $400 million from the previous 12 months.
In a conference call yesterday (April 23), P&G chief financial officer Jon Moeller said the cutting of agencies would refer to groups used by the company for advertising, media and public relations as well as package design and the development of materials.
”We plan to significantly simplify and reduce the number of agency relationships and the costs associated with the current complexity and inefficiency while upgrading agency capability to improve creative quality and communication effectiveness,” he added.
Severing ties
Spend on outsourcing appears to be having a crippling effect on P&G’s finances, with AdAge believing its agency contracts to be worth in the region of $1 billion.
The company is looking to switch up its marketing and media operations in general and has recently overseen a shift in spend to digital channels.
In January of last year, P&G said 30% of its media spend was in digital, later announcing an intention to buy 75% of this – in the US market – programmatically.
Unfavourable movements in exchange rates were owed to sales falling 7.6% in Q1 2015 and it looks like part of the loss will be offset by the cutting of agencies.
Some of P&G’s brands are also set to head out the door, with divestitures planned for Iams, Ace bleach and Duracell among others.