P&G slashes agency costs; what's next for the new CEO?

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David Taylor will become P&G's chief executive in November.
David Taylor will become P&G's chief executive in November.

The world's biggest advertiser has cut its agency roster by 40%

P&G, the world's biggest advertiser, has cut the number of agencies it works with by 40 per cent globally, it has emerged as it released its Q4 earnings in the US.

The maker of Duracell, Head & Shoulders and Gilette, reported a fall in net sales of 9% to $17.79 billion from $19.60 billion in 2014.

Its chief financial officer, Jon Moeller, told analysts there were more savings to come in the coming years, and said most of the savings would be reinvested in stronger advertising programs.

In a conference call, chairman and chief executive AG Lafley promised to deliver stronger growth in the coming year and said savings and production costs moved into media.

It comes at a time of big changes for P&G, as David Taylor prepares to succeed Lafley as chief executive. Earlier this month, the company agreed to sell off 43 of its brands, including Wella and Max Factor, for $12.5 billion.

James Pattinson, the chief ordnance officer at Reluctantly Brave, and a former P&G brand marketer, said Taylor’s biggest challenge will be balancing "blue-chip" culture with the risk-embracing culture of smaller competitors.

In an article for Campaign’s sister title Marketing, Pattison said: "Taylor has worked for Mr Lafley for 20 years and will have been carefully groomed for succession. He is a product of the very system that he needs to evolve."

"I know from personal experience at P&G that there is a restless desire to improve, change and reach for better solutions," Pattison continued. "But at the same time P&G may benefit from a culture that is more innovative and more willing to take risks. In P&G’s case, incremental changes could add up to a significant change in overall performance."

Pattison speculated that Taylor might consider introducing a "Profense" approach, which combines a defensive strategy (protecting what’s important) with a more proactive one, "adding small elements of innovation into everyday P&G processes in order to enact cultural change."

"But brand teams would need to feel empowered to take risks with internal process to achieve this, which can be a challenge at a business the scale of P&G," he said. 

Taylor will replace Lafley as chief executive in November.

This article first appeared on campaignlive.co.uk.