P & G’s $140 Million Lesson On Transparency

The marketing industry had a seismic reaction last week to news from Procter & Gamble’s disclosure that it slashed digital ad spend by $140 million last quarter, and did so without suffering any negative impact on their business results. P&G cited brand safety and “largely ineffective” ads as the reasons behind the massive cut.

Many received the news from one of the world’s biggest advertisers with trepidation and anxiety, probably because of what it portends to their own business model. As an agency charged by its client partners with delivering the best business results for their media budgets, we want to share PMG’s position on the news, and offer key guideposts for brands and agencies alike.

First, let’s look more into the events that led to last week’s news. For those paying attention, it shouldn’t have come as a surprise. P&G started making waves in 2016 when it put the industry on notice (first privately to its partners, and then publicly at an IAB event) about their new standards for digital advertising transparency. It had discovered that one of its media agencies was using the media fees P&G paid them in advance as float. That prompted them to re-examine all of their agency partner contracts, as well as take a broader look into its media supply chain. They didn’t like what they saw (or rather, what they didn’t see, due to the lack of transparency throughout the supply chain). In April 2017, P&G further announced that it would cut marketing spending by $2 billion over the next five years. So, the news of a $140 million cut follows what they’ve been promising for about a year now.

It seems like P&G had some fat to trim from their media plans, mostly due to ad campaigns running inefficiently. That shouldn’t be news to anyone since not all digital media spend is accretive, especially when advertisers don’t have viewability benchmarks for their channels. Given that reality, advertisers of all sizes need to move away from black-box technology providers, publishers, and agency partners that rely on opacity for their market advantages. Additionally, sophisticated marketers will develop their own marketing mix model powered by data-driven multi-touch attribution, so they can accurately evaluate how each of their channels are impacting the overall media mix.

While one of digital marketing’s features is its rapid pace of change and advances, the amount of time it’s taken for brands of a massive size like P&G to take action from those learnings has been surprisingly methodical. Still, it is great to see brands like P&G finally catching up! We welcome the news that they are actively adopting the principles of transparency and measurability that PMG has always held.

Here’s where we will get actionable. If you are a brand marketer, we want to provide you with a list of questions and steps you should demand of your agency partners. If you have a partner whose priority is your brand’s business health, you should not have to compromise on any of these.

Are they measuring the effectiveness of your digital spend? Those are table stakes. Anyone who tries Jedi mind tricks on you about the inability to tie any type of spend — whether it be from direct response to branding — to performance should immediately be put on notice.

Beyond measurement providing quantification, do you understand your partner’s methodology? How are they ensuring the accuracy of those numbers, and managing consistency across myriad publishing and programmatic partners?

What are the actual results your digital spend is producing? P&G did not invent the concept of “ineffective spend.” If your agency isn’t already constantly trimming the proverbial fat on a daily or weekly basis, then there’s a ton of low-hanging fruit to grab (though you may want to consider getting a new partner to do the harvesting).

Beyond cutting spend in ineffective or brand unsafe areas, you should also look to see if your media mix allocation is optimized for desired results. This doesn’t just mean low-funnel acquisition, but also audience-expanding brand building. Regardless of where in the funnel that spend happens, though, make sure there are measurement models in place to gauge results.

Do they maintain a dynamic list of brand-safe publisher partners, and how are they actively managing adherence of those partners to your brand’s standards? In this post-truth era, you need to be sure your ads are running alongside appropriate content.

Lastly, demand that your agency clearly illustrates the results of where each dollar is spent. If they cannot do that, it either means they haven’t got the capabilities in-house to do so, or they are more interested in serving their business rather than growing yours.