Higher Ad Budgets Generating Sales Increases for CPG Firms

During tough economic conditions, businesses are often tempted to cut marketing budgets. Advertising experts typically say that’s the wrong strategy. The recent experiences of a few large consumer packaged goods (CPG) marketers show that higher ad budgets make a difference.

Earlier this year, three heavyweights and well-​known brand marketers in the CPG industry increased their marketing expenditures. They took this step in the face of continued economic strain and competition from store-​brand products.

Kimberly-​Clark reported that its increase in “strategic marketing spending” was about 25%. The increase brought marketing expenditures, outside of price promotions, to a level of 5% of revenue. Colgate-​Palmolive, which has already bumped up advertising by 4% this year, intends to commit more funds to advertising for the rest of 2012. And, Unilever’s $400 million added allocation to advertising spending included a 50% increase to digital. The firm’s CEO noted “advertising that meets tougher action standards before we actually put it on air, faster global rollout of some of our bigger bets, better people, better trained and [with] better tools for the job, and encouraging and rewarding great performance and no longer tolerating mediocrity” all attributed to growing sales.  Both Kimberly-​Clark and Colgate-​Palmolive are projecting healthy sales growth this year.

Compare these attitudes to the gloomy outlook recently projected by P&G which competes with all of these marketers. The well-​known company recently announced a lower sales forecast. The firm also intends to limit any marketing increases to a level below sales growth for the rest of the year. And the marketing budget will be cut by $1 billion in the long run.

Higher marketing budgets likely aren’t the only factor contributor to the success of P&G’s competitors but the presence of well-​designed and coordinated advertising across multiple media formats is attracting consumer attention and driving sales.

[Source: Neff, Jack. Packaged-​Goods Powers Beat Expectations. Adage​.com. 26 Jul. 2012. Web. 15 Aug. 2012] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.