P&G Increases its Internet Ante
At the CMA's 2nd Annual Business of Ideas Forum, Tim Penner (President of Procter & Gamble Canada) reportedly announced that his company was increasing it's online marketing spending from about 3% to 20% in the next year.
You may ask what could have triggered such a large shift? Below are some observations that I gathered through articles, conferences and monitoring P&G's marketing over the last 4 years.
Step 1: Global CMO Criticises Media Stakeholders
P&G's transformation started in 2004 when Jim Stengel (Global Marketing Officer) challenged US advertising executives at a conference and told them that core problems of media cost inflation and declining efficiencies was hurting marketing clients. Stengel assessed the Media industry was providing "C-" services. His message was...find another model and prove it's effectiveness through better measurement (better industry standards and more robust testing methods). According to the Wall Street Journal, P&G subsequently shifted 8% out of television and into alternative media.
Step 2: Testing DM & Emerging Media
So P&G started to test different forms of direct marketing and it dipped it's toe into mail, banner advertising, online contests and other interactive web elements. Direct Marketing was easier to measure and was seen as a natural "consumer involvement" lever.
P&G's mailing activity increased and there were a number of mail tests with brands. In Canada, some of these tests were with retailers (Shopper Drug Mart) and other mailers directly with brands.
In the US, P&G began experimenting with two separate viral groups of influential consumers: teens and mothers. Starting in 1999, P&G created a group of teenagers called "Tremor" (it took over 2 years to build a critical mass of 280k). Similarly, "Vocal Points" is panel of 650k engaged mothers who provide their feedback on products and who also help spread the "word of mouse" for new product launches. P&G finds that the one-to-one approach is especially effective when marketing sensitive products such as dandruff or tampons.
In 2006 at various trade shows I attended in the US and Canada, I noticed that a number of contacts mentioned that they were called by P&G for roundtable table discussions on internet marketing. The discussions were open ended listening sessions where the brand marketers tried to understand each online medium and key success factors.
P&G has significant experience with banners but is also using paid search.
Step 3: Aggressively Growing their Email Permission Base
With a critical mass of consumer opt-ins gathered through contests, P&G underwent a major email acquisition strategy to grow their Canadian permission lists to 1 million consumers. (Cdn DM News 02/01/06).
P&G's core email property is a newsletter called "Everyday Solutions". P&G have been an Epsilon/Doubleclick email customer since 2004 and has been consistently testing the email medium. P&G has one of the better approaches of relational newsletters and transactional alerts in their CPG sector.
Step 4: Focusing on Measurement
P&G used measurement through each of the previous steps and online measurement is becoming one of it's core competencies. At the end of the day, the new marketing is about measurement. Online marketing is perfect for sequential A/B tests, multivariate tests and a scalable/fast rollout.
Given their marketing discipline, I suspect that P&G examines both "above the line" and "below the line" impact. A quote from a senior US P&G exec confirms this…" Procter measures everything. We are a very data driven company, and every time we ran a program, we did a control group...and the results were significant". Leaders in online marketing have the formula and are quietly widening the gap.
Conclusion
So why is P&G upping the ante in online marketing?
This was all part of a multi-year strategy and shift to find a new optimal mix of mass media and targeted media that will drive profitability. While other CPG marketers hesitate about online, P&G is upping the ante. Now is the time for all eleaders to find their formula and stake their cyberturf.
Online marketing is effective for many marketing scenarios; it is measurable, has a high ROI and creates a Sustainable Competitive Advantage (SCA).
Geoff Linton is VP at Inbox Marketer and a Professor at Conestoga College in Kitchener-Waterloo.
