Why P&G is Easing Up on Promotion

Can big brands drive marketing growth without price promotions?
Promotions are under the microscope at top consumer goods companies like P&G, where they are starting to question if the balance has tipped too far in discounting’s favor, according to a recent report in Marketing Week.
 
P&G’s chief financial officer Jon Moeller has argued that growing the business by significantly increasing promotion spending would be “a pyrrhic victory,” Marketing Week noted.
 
“When you talk about increasing trial and sampling at point of market entry and point of market change with noticeably superior products, that moves markets over time. And being able to price behind superior innovation also moves markets over time. What doesn’t move markets is leading the march down on promotion spending,” he said, speaking on an investor call.
 
While Moeller admitted there are many cases where investing in price promotion is an effective use of P&G’s funds, it is also looking to redirect its spend to other elements of the marketing mix.
 
“[We want to] focus back again on how we can drive market growth in our categories and how we can drive shopping trips and basket size for our retail partners. And it’s really [about] working together in a joint context to identify where those opportunities are,” he explained.
 
Other top brands are doing the same, reports Marketing Week. Mondelez CEO Irene Rosenfeld recently said the company is shifting its spend by investing behind its “power brands” and putting a bigger emphasis on advertising rather than consumer promotion. Meanwhile, Unilever’s head of investor relations Andrew Stephen admitted the company is taking a closer look at its spending after the UK saw a “revised spate” of price promotions.
 
Marketing Week reasoned that when brands rely too heavily on price-led sales promotions, there is little space to focus on personality and differentiate from competitors.