When Proctor and Gamble Questions Brand Advertising, Madison Avenue Has a Problem
Published: February 6, 2012
Author: David Rodnitzky
If you want to be a brand marketer, the best university to attend isn’t Harvard. Actually, it isn’t a university at all; it’s Proctor and Gamble. P&G has mastered the art of creating great brands. Just look at this partial list of P&G brands, and you’ll see what I mean:
Marketing at P&G is big business. How big? How about $10 billion of advertising spend a year? That’s $833 million a month, $27 million a day, $1.14 million an hour, $19,000 a minute, and $310 a second! So assuming you are one of the brand marketers who control spending on one of the 80 or so P&G brands, you have on average $130 million of learning opportunities a year.
This sort of spending is hard to fathom for an online marketer. According to SpyFu, for example, the biggest spenders on AdWords like Zappos and Amazon are “only” spending $18 million a month. And keep in mind that those top spenders are ecommerce players who quantify every purchase and demand positive ROI from their marketing investments (as an aside, one of P&G’s absolute largest brands – Gillette – spends around $270,000 a month on AdWords).
Now before you (or I) criticize P&G’s spend as reckless and bloated, it’s worth noting that P&G has been an incredibly successful company. The company has a market cap of $172 billion, and a share of P&G stock bought in 1978 has returned investors 30X the initial price. Turns out that all of this aggressive, largely un-measurable advertising has obviously had a positive impact on P&G’s sales.
So when the CEO of P&G starts to question the efficacy of brand advertising, that’s a very big deal. That’s like the CEO of Starbucks criticizing coffee. This is exactly what happened a few weeks ago during P&G’s most recent quarterly earnings call with analysts when CEO Robert McDonald noted:
“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.”
I don’t want to give McDonald too much credit for independently coming to this conclusion. It turns out that stock analysts have been heavily criticizing P&G’s reliance on brand advertising for several years now. One analysis, after an earnings call in late 2011, held back no punches in describing P&G as “a company that is out of control, addicted to advertising budget increases, that lacks discipline and is kidding itself it is healthy.”
But still, for a CEO to admit that the entire history of marketing strategy is now obsolete and must be fundamentally transformed takes guts. After all, history is full of CEOs who steadfastly refused to acknowledge change – consider the demise of Kodak, Blockbuster, and Borders as recent examples.
The brand marketing community, no doubt, will be split into two camps: people who refuse to admit the end is nigh, and those who try to transform themselves into modern marketers. My suspicion is that most brand marketers – whether at an agency or in-house – will take the “stick their heads in the sand” approach and fight any change.
For agencies, to admit that brand marketing is dead is to lose 90% of their revenue. You simply can’t make one billion dollars of revenue a year from SEM and Facebook advertising campaigns, and yet if you spend $10 billion on behalf of P&G and charge 10% of spend, one client can get you over a billion dollars! What choice do these agencies have but to either a) try to convince their clients that branding still works or b) lay off almost their entire staffs, lose all of their revenue, and basically rebuild from the ground up? Given the choice, I’d take option A if I was in their shoes too.
I read an article last week about Crispin Porter + Bogusky – perhaps the poster child of what’s wrong with brand agencies – in which the agency’s head of PR attempted to justify her agency’s existence by taking credit for clients’ financial success: “Our work for Domino’s Pizza has been ground-breaking and transformative to the business. The brand continues to succeed as fiscal third-quarter net income rose 33% (for 2011), primarily driven by domestic and international same store sales growth. Domestic same store sales for the third-quarter also rose 3% versus the year-ago period.”
Never mind that in the next sentence, Crispin’s PR director falls back on arguments that can be basically summarized as ‘our ad campaigns are cool’ (“Ad Age cited our last Super Bowl spot for [Best Buy] as one of the 20 most memorable in Super Bowl history”) and proceeds to dig even deeper in justifying a Kraft Mac and Cheese commercial (“in addition to being a great campaign, it ended up giving Ted Williams a new lease on life. One year later, as Adweek recently wrote, he is no longer homeless and is thriving”). In other words, if a client does well financially, it was our marketing that did it! If they don’t, hey, don’t blame us, our ads were great!
For brand marketers, the future is no brighter. Asking a brand marketer to suddenly understand and embrace ROI-driven marketing is about as easy as asking an ice-delivery man to become a refrigerator repair expert. The skills needed for branding advertising (and I am the first to admit that there are definite skills required, most of which I don’t have) do not transfer well to online marketing. Sure, there’s a need for great creative and market research in online marketing, but the nuts and bolts of online success stem from data analysis and microscopic management.
Marketing is becoming (or has become) a quantifiable profit-center. P&G knows it and they are trying to evolve before their obscene brand spending drives them to extinction. Online marketers know it – any online agency with at least average competency is hiring like crazy to keep up with demand. Does Madison Avenue? To a large degree, it doesn’t matter, because these big agencies no longer control their destiny. Giant agencies, like blacksmiths, typewriter manufacturers, travel agencies, camera film producers, and book stores before them, can do nothing to stop the change that will destroy their entire business model. Some agencies may evolve into much smaller, much more accountable shops, but most won’t. There are tar pits forming on Madison Avenue, and there’s not much brand marketers can do to stay out of them.
– David Rodnitzky, CEO