Wednesday, September 05, 2007

P&G redefines "ad spend" to include digital signage and other in-store media

I posted this to Retail Media News yesterday but figured it's pretty central to the (many non-overlapping) readers here who are more interested with digital signage than anything else. The long and short of it: P&G is clarifying the way they spend advertising money to include in-store media, "restating 11 years of ad-spending data in an effort to align their past marketing expenditures with their new terms and plans. AdAge speculates that the new restatement has as much to do with the company's internal goals as it does with the firm's share price, which has stumbled due to lack of organic growth and a slipping ad-to-sales ratio, the primary measure by which its growth was measured throughout the 90s and early this decade." From AdAge:
In all, P&G's restatement added $349 million to 2006 ad spending, with much smaller adjustments in other years, though Sanford C. Bernstein analyst Ali Dibadj believes the differences between the old and new definitions could have boosted P&G's reported 2007 outlays by $350 million, too. P&G said it hadn't calculated or disclosed the 2007 impact....

P&G's figures in the past 11 years show a very high statistical correlation (0.78) between ad spending ratios and organic sales growth under the old advertising definition, and an even higher one (0.87) under the new definition. For the past five years, however, the new ad definition shows a much lower correlation to sales growth than the old one.
The amount of money that P&G spends inside of stores is more than the vast majority of other advertiser s spend in total, and while the financial restatement doesn't necessarily indicate that they'll continue to broaden their reach inside the store, given how fragmented traditional media is and the difficulty P&G is having reaching new consumers, I'd venture to guess that in-store advertisements currently give them the best bang-for-the-buck. The coming challenge is going to be optimizing their presence at retail, since at any given store there's a finite (and fixed) amount of space and increasing competition and clutter from other brands (and the retailers themselves) who all want a piece of the customer's attention.

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