Procter and Gamble (NYSE:PG) made headlines with their recent cuts and pending layoffs. The reports have P&G cutting their marketing and 1,600 workers.
Per the CEO Robert McDonald, “As we’ve said historically, the 9% to 11% range [for advertising as a percentage of sales] has been what we have spent… 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”
Old Spice and it’s social media marketing make the cut. Google makes the cut. Facebook makes the cut. But some of the marketing team is getting cut. Marketers take note. “In God we trust… All others must bring data.”
The Marketing Spend Debate
There marketing conundrum is always in the cost/benefit or ROI equation. The problem much marketing faces is the hard numbers. When looking at cutting marketing dollars, Henry Ford is often quoted with “A man who stops advertising to save money is like a man who stops a clock to save time.” But on the return banter you have “You can’t spend your way to prosperity”, “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”, by Sir Winston Churchill.
Both views are valid. The real question to be determined here is whether marketing is an expense.
Is Marketing an Expense or an Investment?
On the company’s accountant driven spreadsheets and cash flow, marketing is an expense. They only see the outgoing money. The equation disconnects marketing expense with incoming profits. The equation only looks at total cost and total revenues. What catches me off guard is the admission of the CEO in that P&G’s budget is 9% to 11% of sales. This may help keep a tight ship, but what if the marketing isn’t the weak link? What if research and development isn’t pulling it’s 10%?
I hate to use Henry Ford’s example, as advertising is only a small part of the marketing equation, but Ford gets it. Marketing is an investment. If monitored properly then you have a return on your investment. When you know that $1000 spent on a marketing weapon brings back $2000 then marketing stops appearing as an expense. The portion of Proctor and Gamble’s marketing team that is getting cut did it wrong. They failed to show good numbers.
Online Marketing Carries Proof
The advantage that marketing is gaining online is that there are now real numbers to be shown. For Old Spice, it was 1.8 billion impressions. The CEO says it was a well thought out plan. Online marketers need to plan it out. Monitor it. Show numbers. Show that the marketing is worth its weight in gold. And if the marketing efforts are carrying their weight then learn to help identify the areas that are not. The closer a marketing team can anchor its numbers to an actual increase in revenues the better.
I am encouraged by the fact that the Proctor and Gamble CEO took note of the social media campaign. I find his comments about Facebook and Google as more efficient and take stock in the fact that some internet marketer is passing up the data and the CEO is hearing it. My note to marketers everywhere, if you run from your data then you are running from your job.