OPINION: P&G’s tough talking may signal cost-cutting bids

Procter & Gamble’s global agencies are used to having the frighteners put on them periodically. So is there any reason for them to get in a fluster over the latest doom-laden warnings from the world’s biggest advertiser?

Procter & Gamble’s global agencies are used to having the

frighteners put on them periodically. So is there any reason for them to

get in a fluster over the latest doom-laden warnings from the world’s

biggest advertiser?



The comforting answer is that this is no more than a shaking of the tree

by P&G’s new regime led by Durk Jager, its incoming chief executive.



Indeed, the leaked memo from Wolfgang Berndt, P&G’s head of European

operations, calling for a cut of at least 5 per cent in advertising and

marketing costs, may be a politically expedient gesture. Better to show

he is grappling with costs before Cincinatti tells him he must.



A less comforting scenario is that P&G is demanding much more from

agencies in return for its unswerving loyalty to help transform a less

than glittering recent performance.



P&G has displayed uncharacteristic timidity over new-product development

of late. While Unilever, its greatest rival, has pushed boldly ahead

with new-product launches, P&G confines itself to limited trials, often

losing any technological advantage it might have gained. Attempts to

lift sales by 7 per cent a year failed lamentably. It managed a rise of

just 1 per cent in 1997.



Jager ushers in a much tougher and ruthless approach. P&G agencies have

long benefitted from the company’s steadfast adherence to the full 15

per cent commission level. But they may find incomes dropping

substantially as the big-volume client flexes its muscles to drive

levels down.



And who would bet against it relaxing its rigid conflict policy in a

quest to find the best advertising solutions. The P&G milch cow is

starting to kick - and agencies had better keep their heads down.