Procter's Creative Gamble

Is a change in advertising strategy behind Procter & Gamble's recent spectacular growth or has the company always been a creative innovator, John Tylee asks.

As the representative of a global leviathan long accused of dragging creativity back kicking and screaming into the Dark Ages, Jim Stengel's question wasn't one his agency was used to.

The new ad was good, Procter & Gamble's global marketing chief declared.

But was it good enough to win at Cannes? Yes, the creative director replied, a few subtle tweaks could certainly turn it into a Lion contender.

Those who have always believed that P&G is to good advertising what King Herod was to babies, will doubtless have difficulty deciding which is the more remarkable part of this story. That Stengel should give a fig about a gong - or that his agency should believe its P&G work capable of winning one.

But a lot has changed since the turn of the millennium, when age seemed to be creeping up on the world's biggest advertiser, the owner of famous products such as Flash, Fairy, Daz, Tampax and Pampers, and with a formidable aggregation of agency networks (Grey, Saatchi & Saatchi, Leo Burnett and Publicis) to promote them.

Having taken its eye off the big brands that were fundamental to its fortunes and with its stock tumbling by 43 per cent, P&G was in a bad way.

Five years on, the contrast could not be starker. Where self-obsession and secrecy once prevailed, a less inhibited culture now dominates. Not only has P&G regained its sureness of touch (it posted a 19 per cent sales rise of $51.7 billion in its last fiscal year as well as across-the-board market share growth) but it strides ahead while its rivals stumble to keep up.

At Colgate-Palmolive, fourth-quarter earnings dropped by 23 per cent as the company spent aggressively on restructuring in the wake of its first profits warning in almost a decade.

At Unilever, the situation is worse. Not only is it labouring under an inefficient Anglo-Dutch dual structure, but the company also saw its profits slump by 36 per cent last year, mainly because of the damage inflicted on its Slim-Fast offshoot by the Atkins diet.

David Taylor, the managing director of the consultancy brandgym and an ex-P&G marketer, says that product innovation is at the heart of the company's success. "The product is king at P&G," he says. "It is obsessed by product performance and ensuring that it is better than the competition."

In a presentation to analysts made at the end of last year, P&G said innovation was the primary driver of sales and earnings growth in virtually all of its consumer products categories. Product launches have been backed by creative strategy including a tie-up with the US TV show The Apprentice 2, in which contestants were tasked with creating a marketing campaign for Crest Vanilla Mint toothpaste. In the US, where P&G's beauty, haircare and personal categories had been showing static growth, sales rose by 8.3 per cent last year to $2.7 billion.

Unilever is no slouch in the innovation stakes, but its current misery looks like being compounded by P&G's impending $57 billion acquisition of Gillette. The result will be to augment its current stable of brands with a greater breadth of health and personal care products with which to lay siege to its biggest rival. "If Unilever thought it was going to have to play 'catch up' before the Gillette deal, it knows it for sure now," an industry source says.

Meanwhile, P&G's resurgence has been impacting on its agencies. Time was when the brightest talent shunned P&G account groups. Not any more.

P&G has become stimulating business on which to work, particularly now that the company has moved away from paying commission to a payment system based on a percentage of product sales.

P&G's growing preoccupation with Cannes perhaps provides the most accurate snapshot of the changing mindsets within the company. Stengel's first visit to the global ad jamboree in 2003 was heavily symbolic in all sorts of ways. For one thing, it took place in a blaze of publicity.

No jetting in alone to cast a critical eye over some work, followed by a discreet dinner and sales pitch from the boss of a marketing supergroup. Not only did Stengel ensure his presence on the Croisette was heavily flagged, he took 40 of his senior marketers with him.

Stengel isn't going to Cannes only because of concern about P&G's awards tally, although one gold, two silvers and four bronze media Lions over the past two years is a modest haul for such a behemoth.

"We will again use Cannes as an opportunity to learn from experts, including new agency partners such as WPP, as well as other creative leaders we involve in our training," Stengel told Campaign. "Winning is great but it's important that we are in contention for recognition at Cannes."

What has astonished many of those who encountered the Stengel crew at Cannes was how the insufferable arrogance that seemed to go hand-in-hand with an annual adspend of around $3 billion has given way to humility.

"They go as students of advertising," the creative director of a P&G agency who helped introduce the "Proctoids" to the festival remarks. "But they know a Cannes winner is no good unless it works."

Others suggest the company's increased interest in Cannes is a reflection of the festival's recognition of the creative use of media and the honouring of it. This is right in line with P&G's mantra of putting consumers at the centre of all it does, and with its perceptible shift away from mass media to more targeted communications.

Indeed, Alan G Lafley, the unassuming Midwesterner who, as P&G's chairman and chief executive, has been the catalyst for the company's revival, bears this out.

Meeting last year with the leaders of his agency networks, the man known to everybody as "AG" confided that scooping media Lions was just as important to him as award-winning creative work because they helped confirm the company was getting more bang for its buck.

Nevertheless, it would be a massive over-simplification to conclude that the scales have suddenly dropped from P&G's corporate eyes and that it has seen the creative light.

In reality, the company has always been among advertising's early adopters.

Moreover, until the emergence of the more ad-literate and media-savvy consumers of the 80s and 90s, the company's philosophy of interruption and repetition had served it well. Nobody pursued such a single-minded strategy of simply introducing the product and explaining what it did more successfully than P&G.

Even today, as media and markets fragment, the company has no intention of abandoning this approach. It simply wants it expressed more creatively to meet the demands of a changing world. Also, Unilever's willingness to embrace more adventurous advertising has not gone unnoticed in Cincinnati.

Stengel, though, acknowledges that P&G still has a way to travel. "We've made our advertising more engaging, more watchable for consumers but we're still not where we want or need to be," he insists.

P&G-watchers believe that its quest for memorable but effective advertising is the reason its staff have been hitting Cannes en masse. "It sees what Stengel is doing as a way of motivating creative people," one says. "Until recently, they didn't give a shit about what creatives thought of them."

This was undeniably true when Lafley, a former P&G beauty executive, took over in 2000 to clear up the mess left after the disastrous 17-month reign of his predecessor, Durk Jager. A brusque, gung-ho Dutchman, Jager had attempted to transform P&G into an innovating growth machine more like a drug company. The result: flattened volume margins and shrinking profits on the company's biggest brands.

Under Lafley, P&G has been transformed. Bolstered by the purchases of Wella and Clairol, the company is about to make a huge leap by swallowing up Gillette. Not only will its media buying clout be formidable but it also enables P&G to match the negotiating power of the giant retail customers such as Wal-Mart.

Described by those who know him as a straight-talking guy with a humble demeanour that belies his status, Lafley has taken P&G back to basics.

It is his vision for creative but effective communication that the sharp and highly polished Stengel, a P&G lifer like his boss, has been briefed to implement.

The Lafley/Stengel double act has allowed a more open climate to evolve - though not open enough for agency commentators to be willing to speak on the record about the business. But Stengel's decision to end P&G's tradition of never allowing commercial data to be revealed did allow Publicis to win a silver at the IPA Effectiveness Awards for its work on Bounty kitchen paper, the first time a P&G brand has been so honoured.

"Lafley is the catalyst and Stengel the facilitator," a source close to the company points out. "The real marketing power lies with the leaders of each global brand but Stengel co-ordinates it very well. He's no brain surgeon but he doesn't have P&G's old hesitancy about publicity, he has Lafley's ear and he knows how to motivate people."

The vision Lafley and Stengel share for P&G is creativity, but on their own terms. The company isn't trying to become another Nike. Nor will it add Mother to its roster. Wacky creative work still scares P&G. The company took a while to get over a gridiron-themed turkey for Charmin tissues cooked up by Publicis to run during the Superbowl broadcast two years ago. "AG and Jim hated the spot," an associate claims.

For P&G it was a lesson in what happens when hearts rule heads. "They'll never just follow their instincts," an insider remarks. "It's not in their DNA."

Hence the company's interest in Project Apollo, a joint venture between the research company Arbitron and AC Nielsen. This year it will begin tracking the media habits of 30,000 US consumers who will wear pager-like devices that respond to signals from TV, radio, cinema, outdoor, in-store and possibly even print advertising.

The project's leaders stop short of claiming Apollo will be the market research equivalent of a moon landing, but insist the feedback will be the best they have had.

Stengel has high hopes for Apollo. "Today, we're able to look at how well a specific component of the marketing plan does in reaching a consumer. But we don't have a good enough sense of how effective all the components of the marketing plan are in engaging the consumer to give us a good idea of the return on our marketing investment," he says.

How much all this signifies a shift away from above-the-line media remains to be seen. Undoubtedly, P&G's requirements of its agencies are changing.

"A brief no longer just talks about reaching 18- to 49-year-old women," the senior executive of a P&G network says. "Now it demands a more psychologically led definition of its target."

At the same time, more examples are emerging of P&G shunning mainstream advertising to engage more directly with consumers. Its Pampers website is claimed to be the most popular of its kind for young mothers in the UK.

Nevertheless, too much shouldn't be read into last month's decision by P&G to slash its second-quarter US TV spend by millions of dollars. The company is wedded to TV and will remain so. In fact, its spend for the 2004/5 fiscal year has risen.

"It's no secret that the way we utilise television as a medium is changing," Stengel acknowledges. "But TV remains an important part of our advertising plans."

This may have something to do with what is said to be constant tension between P&G's marketing and media teams. "The marketers want us to do better creative work but it's a problem to steer the media people away from TV while they can buy it cheaply," a P&G agency account executive says. That, though, is unlikely to stop P&G looking beyond its roster for extra creative firepower. Stengel points to P&G's growing use of creative boutiques and of the encouragement given to its roster shops to work with specialists to achieve the right results.

Some believe this will lead to "challenger" agencies being appointed.

Bringing together a group of non-roster shops to run the rule over the company's work has put Stengel in touch with industry iconoclasts such as Dan Wieden. The result could be a tangible reward for Wieden & Kennedy.

WPP's Sir Martin Sorrell is also said to be pressing the case for his creatively led Red Cell operation.

However, that may be nothing compared with the politics that will be played out when Gillette is merged with P&G. This will not only bring Gillette's aligned network, BBDO, into the equation but will add an adspend estimated at between $550 million and $600 million. And BBDO has a powerful ally in Jim Kilts, Gillette's chief executive, who becomes Lafley's deputy.

P&G's custom when acquiring brands has been to give the advertising assignment to a roster agency, as it did with Wella and Clairol. But BBDO has much going for it. Although the network's output for Gillette hardly pushes the creative boundaries, BBDO has an enviable creative reputation.

Also, as it proved when gaining entry to the Mars roster a decade ago, it can make the most of its chances. What's more, the marketing philosophies of P&G and Gillette are strikingly similar. Both have concentrated their efforts on a small number of "super brands" which have contributed more and more to the overall sales of each company.

"P&G's club agencies are right to be nervous," a BBDO source says. "When we became a Mars agency, we were the new kid on the block; now we're Mars' largest agency worldwide. We believe P&G will want to involve us because it wants creative consistency. Gillette's ads ought to be better and will become so under P&G. This is our biggest ever opportunity."

And maybe not just for BBDO but also its Omnicom parent. John Wren, Omnicom's chairman, has been desperate to get a line into P&G, industry sources claim. And he has two other creatively led networks in DDB and TBWA to offer as bait.

Stengel says it's too early to speculate on the post-Gillette agency lineup. "We are continuing to operate as two separate companies until closing a deal and it would be premature for me to make statements about future plans," he says.

However, one insider predicts much jockeying for position. "Publicis Groupe agencies now run about three-quarters of P&G's business," he says.

"It's not a situation with which P&G is entirely comfortable. That's where Wren comes in."

Whatever happens, one thing is for certain. P&G has changed irrevocably.

The pledges have been too public and the humiliation would be too great for there to be any backped-alling. "Our commitment to creativity is here to stay," Stengel promises. Goodbye Prince of Darkness. Hello Renaissance Man?

THE PROCTER & GAMBLE STORY

1837: Englishman William Procter, a candlemaker, and Irish immigrant James Gamble, a soapmaker, marry sisters in Cincinnati. Their father-in-law convinces them to set up in business. They each put up $3,596.47 to get Procter & Gamble underway.

1882: Harley Procter, William's son, persuades the partners to allocate $11,000 to advertise Ivory soap nationally for the first time.

1896: P&G's first colour print ad for Ivory appears in Cosmopolitan.

1911: P&G introduces Crisco, the first all-vegetable shortening, as a healthier alternative to cooking with animal fats.

1923: Crisco sponsors cooking shows on network radio, putting P&G among the medium's advertising innovators.

1924: A market research department, one of the first of its kind, is established.

1930: First overseas subsidiary established with purchase of UK's Thomas Hedley, maker of Fairy soap.

1931: New marketing organisation created, based on competing brands managed by dedicated groups of people. P&G's brand-management system is born.

1933: Ma Perkins, a radio serial sponsored by P&G's Oxydol soap powder, becomes the first "soap opera".

1937: Five months after the introduction of TV in the US, P&G airs its first ad (for Ivory) during the first televised major league baseball game.

1946: Tide introduced as "the washing miracle". It boasts a new formula which claims to clean better than anything on the market. By 1950 it becomes the leading laundry product in the US.

1955: Crest toothpaste launched. Announces plans to form individual operating divisions to better manage its growing lines.

1957: Joins the paper products business with the acquisition of Charmin, a regional manufacturer of toilet tissue, towels and napkins.

1961: Pampers test-marketed in Peoria, Illinois. The test fails but leads to an improved product at a lower cost that eventually replaces cloth nappies as the preferred way of keeping babies dry.

1963: Acquires Folgers Coffee.

1983: Always/Whisper sanpro products launched. Within two years it becomes the leading world brand in its category.

1985: Acquires Richardson-Vicks, maker of Vicks and Oil of Olay.

1989: Enters cosmetics and fragrances category with acquisition of Noxell, manufacturer of CoverGirl.

1991: Buys Max Factor.

1996: Celebrates Tide's 50th birthday with a "Dirtiest Kid in America" contest. Acquires the US baby wipes brand Baby Fresh.

1997: Expands its feminine protection business globally with acquisition of Tambrands.

1998: Announces Organisation 2005 to drive innovative ideas to world markets faster.

2000: Alan Lafley succeeds Durk Jager as president and chief executive.

2001: Acquires the Clairol haircare business from Bristol-Myers Squibb. Announces major multimedia marketing partnership with Viacom Plus.

2003: Acquires controlling interest in Wella, the professional haircare specialist.

2005: Makes $57 billion offer for Gillette. Warren Buffett, the renowned US investor, describes the merger as a "dream deal", creating "the greatest consumer products company in the world". The merged operation will usurp Unilever as the world's leading company of its kind.

PAMPERS FROM PANTS TO BETTER PARENTING

The rivalry between Procter & Gamble's Pampers disposable nappies and Kimberly-Clark's Huggies is said to be even more intense than that between Coke and Pepsi.

And it's easy to understand why. Babies' bottoms represent big bucks for P&G. Pampers is P&G's single biggest global brand, with sales in excess of $5 billion.

It's a tough market where constant product innovation is vital and consumer trust essential.

At the end of the 90s, P&G was determined to give Pampers a broader positioning beyond mere dryness, with marketing and advertising to reflect it. The tactic was personified by a Saatchi & Saatchi ad from the time, in which a mother laughs that her baby daughter's skin really is like a baby's bottom and "not like my bum".

P&G's conclusion was that nappies were only one factor in helping to protect babies' delicate skin and that the brand had the potential to do much more in this area.

While Huggies opted to take a humorous approach with ads showing babies dressed as grown-ups, Pampers' target has been mothers who are actively interested in their child's development and want to learn how to become a better parent.

The benefit of the Pampers strategy was twofold. For one thing, mothers could be convinced that by choosing Pampers they were helping their babies' development. For another, it would be a hard tactic for own-label rivals to copy.

A wide range of marketing activity has been harnessed to underpin the strategy. Mailshots to 95 per cent of mothers in the UK are timed to coincide with key stages in their babies' development.

Meanwhile, a Saatchi & Saatchi commercial featuring a baby playing peek-a-boo with a teddy bear draws mothers to the Pampers.com website, a parent advisory service now visited by more than 400,000 people a month.

BOLD FROM DRAB TO DRAMA

The makeover of Bold detergent stands out as a prime example of a P&G brand abandoning rulebook advertising in favour of greater emotional rapport with its customers.

Until the late 90s, Bold's "money waster" advertising campaign was textbook P&G. It was built around the perpetual theme of somebody going shopping and returning home with Bold in their bag and change in their pocket because they didn't have to buy both detergent and fabric softener.

By 1998, the brand had reached a crossroads. Research showed consumers saw Bold simply as a product that did the job. Price was incidental.

As a result, Bold's marketers retrenched and rethought their tactics for stealing market share from Unilever's Persil and Surf. Advertising ran only when there was something new to say and the only significant marketing support was a tie-up with Camelot to offer Lottery tickets with promotional packs of Bold's 2 in 1 variant.

Meanwhile, P&G debated what could be done to bring the brand to life, to understand what it meant to consumers in emotional terms and to interpret that creatively.

The "fabric of life" work, which broke a year ago through Grey London, in which a freshly washed item of clothing becomes the focal point of a drama, takes a more realistic view of life.

In one spot, directed by the art-house filmmaker Asif Kapadia, a T-shirt symbolises the relationship between a father and daughter over a number of years. In another, a family's stress over a delayed holiday flight is alleviated when a father uses a jumper washed in Bold as a makeshift pillow for his small son.

Since the campaign first aired in March last year, Bold's market value share has grown from 12.2 per cent to 14.9 per cent. "In this category that's pretty good," Mark Brickhill, P&G's UK and the Nordics fabric care managing director, says.

"It's come about because we're buying work that's very different in tone and format. The agency is totally committed to it and we're convinced we have a campaign with legs."

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