Proctor and Gamble (P&G), one of the world’s largest consumer packaged goods companies, announced last week that it was rethinking its Facebook advertising strategy. Specifically, the company has concluded that Facebook’s advanced targeting capabilities, e.g. Moms in the South who drive Japanese minivans, aren’t more effective for its brands than more generic targeting, e.g. Women 25-49. Since the former costs more than the latter, P&G feels it can improve its marketing ROI and is changing its approach accordingly.
I don’t disagree with the logic. I just think that the episode reveals a significant opportunity for companies such as P&G to change in order to compete more effectively today.
To understand why, just reflect on the consequences of mobile becoming the most dominant media of our time.
With half of all digital media time spent on mobile, advertisers understandably feel compelled to shift their media dollars to mobile marketing.
Within the mobile marketing landscape, Facebook and Google are dominant, and not by a narrow margin. They possess numerous advantages, too many to document here, over their rivals. Among them: time spent with their properties. Facebook, for example, captures on average a whopping one out of every five mobile minutes.
Though Facebook and Google offer video and display ad units, just as TV and banner advertising do, they are significantly unlike most of these alternatives in critical ways.
This includes offering more effective targeting options. For example, a company can upload its list of email newsletter recipients to Facebook and either exclude them from its advertising on the social network or have Facebook find and target other people who resemble these subscribers.
They also offer marketers higher degrees of attribution certainty. That old adage about knowing that half of a marketing budget works and half doesn’t work, but not knowing which half is which? Facebook and Google can remove a lot of that uncertainty.
If you really want to understand how the rise of mobile usage and sophisticated platforms such as Facebook and Google have changed marketing, read this terrific piece by the former head of growth at SoundCloud. It introduces the concept of a “mobile marketing stack.” Think of this as an organizing principle governing the approach a mobile marketer should take to her craft.
The mobile marketing stack assumes the full power of channels such as Facebook and Google to monetize marketing in a direct way: by driving sales. Herein lies the problem for companies such as P&G, which tend not to sell directly to consumers. They traditionally have measured much of their marketing effectiveness in indirect ways, e.g. brand lift and changes in aided and unaided awareness. Companies reliant on retailers to sell their goods monetize only when they increase sales to these retailers, e.g. when Walmart restocks. That means they are dependent on the Walmarts of the world to fuel sell-through to end consumers.
It’s this gap between manufacturer and end customer that neutralizes much of Facebook’s power. Without the ability to directly impact sales, P&G is left to use these all-powerful channels for the same things they expect from “dumber” channels, especially television: i.e. increase brand uplift and aided/unaided awareness.
P&G and its competitors have at least two ways to change their approach to mobile marketing. First, they could pool some marketing budget with the likes of Amazon and Walmart to encourage direct sales of their products through those retailers. CPG companies spend significantly on co-op marketing budgets, much of it going to coupons in newspaper circulars. Perhaps they can put some of that budget to good use on Facebook.
Alternatively, and in a move that would be far more disruptive and exciting, they could go direct-to-consumer. Today, their websites redirect visitors who want to shop to retailers, as you can see here:
It’s a lousy customer experience that almost certainly drives volumes that count as no more than a rounding error. There’s so much room for improvement that going direct feels like a no-brainer.
So why not go direct? Because that almost certainly would result in war with Walmart and others. As long as they avoid that fight, P&G (and other traditional CPGs) will continue to use mobile channels with one hand tied behind their back. Meanwhile, Amazon has started its own CPG line, Amazon Basics, so even when P&G and others defer, their retailer partners don’t reciprocate.
The rise of mobile usage and mobile marketing doesn’t require just a change in tactics. As the disruptors born in the mobile age, including Uber, Dollar Shave Club, airbnb and others show, they may require a whole new business model.