P&G to cut advertising costs by $400m

P&G chairman and chief executive David Taylor has revealed that the FMCG giant plans to reduce its advertising costs by $400m (£286m), largely by implementing new agency models and reducing the number of agencies it works with by up to half.

Speaking at the Consumer Analyst Group of New York Conference, Taylor confirmed that the company has already reduced the number of agencies it works with from 6,000 to 2,500 since it began cost-saving exercises in 2015, a move which has reportedly saved the firm $750m in agency and production costs.

Last month, P&G chief financial officer Jon Moeller told investors that the company was undertaking another review of its agency roster, and Taylor announced this “next phase” will see the number of agencies the firm works with reduced by another 50 per cent.

“We continue to reinvent our agency relationships, consolidating and upgrading P&Gs agency capabilities to deliver the best brand-building creativity,” Taylor told the audience at the event.

According to Taylor, while P&G will continue to work on a fixed retainer basis with agencies for creative that it is “certain of”, like major campaigns, smaller work will rely on “open sourcing”, which he claims will drive greater local relevance, speed and quality, as well as providing P&G with lower costs. The company estimates that this, along with other money saving strategies, will save it $2bn in marketing productivity by the end of financial year 2021.