P&G to lay off 1,600 non-manufacturing employees to cut costs

As part of cost-cutting due to flat market shares and growing investor pressure, Procter & Gamble Co plans to eliminate about 1,600 "overhead" or non- manufacturing jobs - including some in marketing - banking on digital marketing to help contain long-term media spending.

The plan was announced by executives at the company's earnings conference. Reality appears to have finally dawned at Procter & Gamble, the world's largest marketer, whose $10 billion annual ad budget has hurt the company's margins.

Earlier this month, P&G announced that it would outsource in-store merchandising work covering about 2,700 employees, most of them part-time, to brokerage firms and expand a programme put in place for some categories two years ago.

That reduction affects about 3 per cent of P&G's non-manufacturing workforce of about 50,000.

Chief Financial Officer Jon Moeller said P&G would rely on a combination of attrition, "selective hiring" and restructuring to get to the reductions, which will result in $240 million in annual savings, in line with what P&G typically generates through annual restructuring spending.

Meanwhile, social networking site Facebook has claimed it managed to boost sales of a Procter & Gamble deodorant, underlining its growing significance in the retail industry.

As part of its IPO filing this week, Facebook highlighted a case study involving women's deodorant, 'Secret', saying a dedicated page related to anti-bullying helped boost sales of the brand by 9 per cent.

P&G chose to advertise on the site to generate awareness for the 'Mean Stinks' campaign and selected a female audience likely to be receptive to the campaign.

The sales growth was reported in the first 26 weeks after the campaign was launched in the US, Facebook claims.

This claim has led to a trend in which more companies will move their advertising dollars from the traditional to the digital media for convenience, more exposure and ease of usage.

According to a marketing expert at Washington University in St Louis, Procter & Gamble is banking on digital marketing to help contain media spending in the long-term.

Company CEO Bob McDonald said he expects its advertising costs to moderate as it moves into the digital arena, citing the billions of free impressions generated by Internet-only ad campaigns, like P&G's Old Spice commercials in recent years.

"With the advent of digital ad tracking software and digital ad shops like Google, companies are able to track the effects of digital ads in real time in a fine-grained manner," said Seethu Seetharaman, PhD, the Patrick W McGinnis Professor of Marketing at Olin Business School.

"Companies can quickly monitor who is clicking on an ad, with whom they are sharing the link to the ad and what that second person is then doing," he said.

Traditional media offers no such capability.

"Is it possible to track whether someone who bought Time magazine this week actually viewed the ad on page 10?" Seetharaman asked.

"Or if so, how much time did he spend viewing the ad? Did he show the ad to his spouse or other family member?" he continued.

"This aspect, coupled with digital content consumption from news websites and others, is fast displacing traditional content consumption, making it likely that traditional media will lose their importance moving forward.

"In the pre-digital media era, companies had no choice. "The rationale for their large traditional media spend was, 'This is necessary for brand building for the long term', even if they could not measure return on investment in terms of sales impact or even eyeballs' impact,' Seetharaman said.

"A manager complaining, 'I know half of the money I spend on advertising is wasted. Unfortunately, I don't know which half' was still making an understatement," he said.

"Such compromises are no longer necessary in today's world," he added.