With the goal of “reinventing” their agency relationships and focusing on creativity, Procter & Gamble created three new agency models.
P&G CMO promised to take back control from agencies – this is what happened
“We will take back control of our marketing and do more in-house.” Stated Marc Pritchard, Chief Brand Officer at Procter & Gamble, in March 2018. By that time, P&G had already, for three years, operated to reduce its external agency and production expenses by $750 million. In other words – this was only the start of something big.
During the time of the statement, P&G spent around $11 billion a year on marketing but had the ambition to “rethink” its relationship with its agencies. “We previously worked with 6,000 agencies around the world and have reduced it to 2,500,” Pritchard then told the Financial Times.
Took too long to get things done
During that same time, at the ISBA conference for British advertisers, Pritchard also said that agencies need to change their organizations: “We had too many people between us and the consumer,” adding that it took “too long to get things done. We have to move forward much faster.“
So how were they to change? With the goal of “reinventing” their agency relationships and focusing on creativity, Procter & Gamble created three new agency models:
The first was the creation of a group of several agencies that combined talents from all of them. They called the model “People First.” The equivalent of what Customersonly label as cross-agency teams.
The second model was called “Fixed and Flow,” which meant more flexible agency relationships in addition to the company´s fixed partnerships, thus enabling a more substantial portion of the marketing budget for new and fast collaborations. “Fixed and Flow” is also a model that will move away from what Pritchard has called the “archaic Mad Men model.”
The third model focused on media planning, which P&G placed mostly in-house, with a particular focus on creative work in digital media. The composition of the marketing team put greater emphasis on data and analysis – P&G would hire more data scientists and fewer project managers.
So how did it work out?
Marc Pritchard in an interview with the Financial Times on June 2019, just over a year later:
“We have cut spending by nearly $1 billion in fees and production over the past four years and reinvested it into other creative partnerships.”
He also said that the increasing use of ad blockers forced large companies to experiment more and try to create ads that “people actually want to watch.” And during Cannes Lions, some of the company’s new partners were introduced, including Ariana Huffington’s new company Thrive Global, which hopes that Internet-connected versions of, for example, Oral-B toothbrushes can function as “wellness boosters.”
Agencies losing business
Traditional advertising agencies have lost business from auto, pharmaceutical, and consumer goods companies that have traditionally formed the backbone of their business. Vast sums are at stake. Tim Andree, Managing Director and Chairman of Dentsu Aegis, says that the traditional clients of the agencies “will not spend in the way they have done.” The company, which was formed in 2012 when Japanese Dentsu acquired Aegis for £3 billion, ought to instead, according to Andree, focus on helping companies with data, identify potential customers and reach them better with tailored advertising. And Martin Sorrell, who founded purely digital S4 Capital after his departure from British agency giant WPP last year, has criticized the business model of his former company, saying they are too big to adapt to the new data-driven advertising world.
New areas to disrupt
And at Procter & Gamble, they keep operating on their new agency models. As Pritchard said, when he was recently named “industry legend” by The Advertising Club of New York – after 37 years at the same company: “My early days at P&G were fantastic because I learned a lot. But the truth is that I still learn a lot. It has not stopped. I would say that it has probably increased exponentially.“
Pritchard says he will never finish. Content is at the top of the list of new areas to disrupt. As well as, thanks to P&G´s new agency model, reducing marketing costs by another 50 percent.
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