Passion For 'Digital' Pumps P&G's Spending

The first quarter of 2009 may mark a turning point when the world's biggest marketer and its broader industry finally got serious about digital media. Even as P&G cut measured U.S. media spending 18% overall last quarter, it more than doubled spending on internet display ads, according to data from TNS Media Intelligence.

Where P&G has been spending its money

Digital has been a focus area for Marc Pritchard since he became global CMO last year and as he prepares to assume broader duties over design and PR as global brand-building officer. "It really is such an incredible way to connect with consumers and to really have much deeper ongoing relationships with them”, Mr. Pritchard said. “Our media strategy is pretty simple: follow the consumer. And the consumer is becoming more and more engaged in the digital world."

Of course, the jump is relative. P&G's big spike in internet spending, coupled with such factors as a whopping 44% decline in network-TV spending, still only brought online display to 4% of P&G's $672 million quarterly measured outlay. And because measured-media data don't capture many of the fastest-growing digital-spending buckets, such as online-video ads, behaviorally targeted ads, mobile or search, P&G's digital outlay as a whole probably exceeded 5% of its media spending last quarter.

P&G isn't the only CPG titan suddenly spending bigger online -- just the biggest. Rival Johnson & Johnson hiked its measured spending overall last quarter 28%, but it nearly doubled its internet-display spending to $15.5 million. That brought J&J, like P&G, to 4% of its $397 million outlay.

Time to model

Once a brand spends about 5% of its media on digital or any medium, it's usually possible to apply the CPG industry's ROI measurement of choice: marketing-mix modeling, said Gregg Ambach, managing director of the Cincinnati office of Analytic Partners, which handles such modeling for P&G and others. "The general trend is that internet is becoming a bigger part of the advertising budget," said Mr. Ambach. "And we're definitely measuring more and more of it."

Better data ultimately will be what it takes to get CPG brands to spend more on digital. Gian Fulgoni, chairman of ComScore and former CEO of IRI, makes the analogy to the advent of scanner data in the 1970s. When CPG marketers suddenly could see the full impact of trade promotion, they started spending more on it, he said.

Mixed results

Several brands stood out as making digital a particularly large part of their mix last quarter. Those include CoverGirl, P&G's biggest internet spender, with about 10% of its $50 million media outlay going there via work from WPP Group's G2i, primarily for Outlast lip stain. Bounce's $2.4 million outlay on internet display last quarter from Publicis Groupe's Digitas made up 35% of its media spending. Vicks put 45% of its $8.7 million quarterly spending on the internet via WPP's Bridge Worldwide, while bigger-spending Head & Shoulders put 18% of its $19.7 million outlay into internet display from Digitas.

The results appear mixed. CoverGirl continued its run as one of P&G's best-performing brands of late. And it gained the most share where it focused its digital spending: in lipstick, up two points last quarter, according to IRI data from Deutsche Bank. But Bounce, faced with rising sales of value and private-label brands, lost 2.4 share points. P&G also lost share in cough and cold, but Head & Shoulders appeared to continue a strong run in share growth. These numbers don't account for impact of promotional activity by P&G or its competitors or competitive spending and pricing -- factors marketing-mix models take into account.

Mr. Pritchard said P&G wants to increase its media weight - not necessarily spending - and is using marketing-mix modeling to do so more productively. "We like innovation as well", he said. "Obviously digital has a lot of opportunity for that. But we've been looking for that from our print and TV partners as well."