CINCINNATI — Reports that Procter & Gamble Co. is sharply cutting its advance buying commitment of TV commercials indicates a trend toward companies demanding more options as consumers tune out commercials, marketing and industry observers say.
The Cincinnati-based consumer product company, a pioneer in television advertising known for brands such as Tide and Pampers, would not confirm a report Monday by The Wall Street Journal that it is making sharp reductions in its upfront buying commitment for the fall TV season.
But P&G has been focusing for some time on widening its media mix and finding better ways to reach targeted consumers.
David McCracken, manager of external relations for P&G, said the company was in negotiations and he could not comment on details of its TV marketing strategy. He said all companies are being challenged to target their advertising dollars toward an audience that can generate more business.
The Myers Report, a daily advertising industry newsletter, reported last week that P&G’s media agency had placed calls to several network executives advising them of dramatic reductions in upfront spending.
“I think the pressure is intensifying on all media to focus beyond just cost and audience reach and build more of a base on return on investment,” said editor Jack Myers.
Upfront negotiations are held annually to determine how much companies will commit in advance to buying TV commercials for the upcoming season. Officials with CBS and ABC declined to comment on the reports Monday. Calls to NBC and Turner networks were not immediately returned.
Marketing and industry observers point to continuing audience erosion, increased prices and digital video recorders that allow viewers to skip commercials as factors leading advertisers to seek alternative ways of grabbing consumers’ attention.
“The handwriting has been on the wall for years,” said Gary Stibel, head of the New England Consulting Group in Westport, Conn. “We are telling all of our media clients, not just those in broadcasting, that they must provide marketers with ways to precisely pinpoint target audiences and provide them with more flexibility.”
Advertisers don’t want to be tied into a system where they have to make decisions months in advance in a business that can change weekly, he said.
Stibel said changes in the upfront buying have been coming for years and while P&G apparently is taking the lead, he expects more companies to do the same thing.
P&G spent $2.5 billion of its $3 billion advertising budget on television in 2004, making it the top U.S. advertiser.
Some observers have said that P&G might be planning to spend more later in the season, but most believe that networks should see this as a signal to make some changes.
Stephen A. Greyser, consumer marketing professor at Harvard University’s business school, also believes that networks must be more responsive to marketers looking for more effective ways of reaching target audiences.
Jon Kramer, group president of EMARK, a marketing communication agency in Chicago, said that network technology is yesterday’s technology.
In 1973, a company wanting to reach 95 percent of women aged 25-49 would only need three network commercials, Kramer said.
“Today, you would need 92 commercials to reach that same group,” Kramer said.
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