Thanks, Procter & Gamble.
Shares of WPP, Interpublic and Omnicom, tumbled today following P&G brand chief Marc Pritchard’s vow “to take back control” of marketing from agencies in order to save $2B in spending.
His May 6 speech at a London ad conference begs the question, Why did P&G give up control in the first place?
The P&G executive admitted that the consumer products giant had been clueless about getting the biggest bang for its marketing dollar.
How on earth could P&G have allowed its agency roster to swell to 6,000 members? That’s a recipe for waste.
Pritchard told the Financial Times the Cincinnati-headquartered company has trimmed that bloat to 2,500 agencies and is committed to halving that hoard. Bravo!
Agency and commercial spending at P&G dropped $750M during the past three years, and Pritchard plans to up that number to $1.2B by 2021.
As paymaster, Pritchard has every right to demand that agencies reorganize themselves.
WPP boss Martin Sorrell put those wheels in motion last week by merging Burson-Marsteller and Cohn & Wolfe. Pritchard didn't seem overly impressed, saying it remains to be seen if WPP's moves will be enough.
As the world’s biggest advertiser, P&G deserves some blame for inefficiencies at agencies. It set the pace. Again, P&G once used 6,000 shops. The agencies were just following the lead of their paymaster.
Wall Street took a run at P&G last year. Corporate activist Nelson Peltz, with help from Sard Verbinnen & Co., launched a proxy fight with P&G.
Peltz’s Trian Fund Management rapped P&G for disappointing financial results including weak shareholder returns, deteriorating market share and excessive costs/bureaucracy.
P&G narrowly beat back Peltz.
Pritchard may be able to browbeat ad agencies into submission, but Peltz or another corporate raider may get the last laugh in the next run at P&G.