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Top 100 Marketer CEO and CFO 1Q23 Commentary
I try to follow comments that companies’ CEOs and CFOs make about their advertising and marketing activities on earnings calls. Below are verbatim comments from earnings calls transcripts from over the past month to help understand how those individuals (and their companies, all among the 100 largest advertisers globally) are thinking about related issues.
In alphabetical order, this note covers calls from Adidas, Allstate, American Express, Booking, Capital One, Clorox, Colgate-Palmolive, Expedia, Hershey, Kimberly-Clark, P&G, Progressive, Restaurant Brands International, Unilever and Wayfair.
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There are general points on spending trends which are positively oriented around spending from the companies focused on packaged goods and travel, while financial services companies sounded more tepid. But beyond any data points, I think the qualitative commentary should be of primary interest here, especially the balancing act many of the executives convey between driving short-term and long-term results.
Adidas (May 5, 2023)
“Marketing is very subjective and there's no formula that tells you where to invest because if there was one, we would all invest like it but then the formula will be destroyed again, right? So marketing is 50% rational and 50% emotional. And you also have to remember that the component that goes into marketing over the last 20 years have changed dramatically. Performance marketing, Google Search and all those things didn't exist only 10 years ago, and it's now hundreds of millions to actually generate traffic on your e-com. And of course, that didn't exist before. So it is a different, what should I say, buckets, and it's very hard now to sit and say that, okay, with 11% or 12% (of revenue), these are the changes we should have been done.
“If you look at marketing in general, you need as a company as Adidas to have certain global, I would say, assets that makes it a global brand. So Real Madrid, Manchester United, Bayern Munich, the German Federation, the Italian Federation and stuff is the basis to even be a soccer brand. And then you have…individual stars, and you can always survive by reducing them short term. But the question is what happened in long term if you do it? Then I wouldn't be in a situation to criticize what Adi has done because I think Adi always kept the visibility in sports.
“To a degree, maybe that if I should criticize (prior management), they have gone out of too many smaller sports lately to be efficient and are losing a little bit of this difference to Nike by being in the smaller sports, which we will go back into again. And again, I really have the feeling that we need to be Adi visible across almost all sports, also those who are not commercially very important because they don't cost a lot. The creativity that we then have in design of making a wrestling shoe or a ski boot or whatever will have a positive impact on the creativity in the brand in general, and that's why you don't need to measure it only on the business, but actually measure it more on a creative spirit in the company.
- Bjorn Gulden, CEO
Allstate (May 4, 2023)
“We've dialed back new business and advertising not so much because we're trying to manage the P&L but because we're managing the economic growth.”
- Thomas Wilson, CEO
American Express (April 20, 2023)
“Our plan has been to spend the same amount of marketing that we spent last year this year, and that number is $5.5 billion. And when you look at that number, we try and get more and more efficient with that and we push our partners to become more and more efficient as well. And so, you get to a point of scale where you just don't spend anymore.”
- Stephen Squeri, CEO
Booking Holdings (May 4, 2023)
“This is a year that we still expect to be leaning into marketing and merchandising because we believe there's recovery in the travel market available to us.”
- David Goulden, CFO
Capital One (April 27, 2023)
“Our choices in domestic card marketing are the biggest driver of total company marketing. First quarter marketing was down about 2% from the year ago quarter and down about 20% from the fourth quarter of 2022 as the first quarter is typically the seasonal low point for domestic card marketing. We continue to see attractive growth opportunities in our Domestic Card business. Our opportunities are enhanced by our technology transformation, and we're leaning into marketing to drive resilient growth. As always, we're keeping a close eye on competitor actions and potential marketplace risks. We are seeing the success of our marketing and strong growth in domestic card new accounts, purchase volume and loans across our card business and strong momentum and our decade-long focus on heavy spenders at the top of the marketplace continues.”
- Richard Fairbank, CEO
Clorox (May 2, 2023)
“Advertising continues to be an incredibly important part of how we support the superior value of our brands. We believe fundamentally in it. And it's why we've done everything to continue to maintain spending what we think is about the right level over a year, which is about 10% of sales, and we'll continue to be on track for doing that this year. As you noted, Q3 was significantly higher than other quarters, and that's given innovation that we launch and timing of merchandising.
“And again, we don't manage quarter-to-quarter, but this was the right time to spend this money to support our brands and coincides with having our fourth price increase in the market, which is good timing. We continue to believe that about 10% is the right spending, but we adjust that and look at that depending on what the businesses require. And we're not afraid to move or adjust that moving forward. But again, right now, about 10% we're on track to do that for the year.
“And if you look at our ROI on marketing, it has been terrific and is another reason why we continue to feel strongly that, that investment contributes to the value creation that we can get from our brands. And our focus, as you know, has been on improving our ROI given the fact that we are driving personalization. So we wanted to get to know 100 million consumers in the U.S. And what getting to know 100 million consumers does is it allows you to know them better and it allows you to personalize to them.
“And we've had the added benefit of driving efficiency and effectiveness by doing that. So we're getting the right people, the right message at the right time and spending our money more effectively.”
- Linda Rendle, CEO
Colgate-Palmolive (April 28, 2023)
“We intend to continue to do everything we can to increase that advertising support in the back half, particularly in emerging markets in order to: one, support the innovation we have; second, drive the pricing into the market and continue to accelerate volume growth in the category.”
“We're really pleased with the level of advertising we're getting in the P&L, and that is obviously driven by the circular nature of how we're driving the business, obviously, more advertising is driving the top line, and we're able to get more leverage to the P&L to continue to support that. And we feel as we move out getting the pricing in the P&L was critically important to sustaining and increasing our levels of advertising.”
“We've obviously moved more money into digital. We're seeing great ROIs on digital and our programmatic and the personalized content that we're delivering in the market. We're seeing growth in market shares relative to where we're spending the money, particularly around the Hill's business, and our Oral Care and Skin Health businesses. So we're really pleased with the fact that the advertising levels continue to deliver against the expectations that we have. And we balance that off with obviously a broad portfolio of offerings that we think are attracting and building the brands that we speak.”
“We've…significantly increased our advertising support. We said we would do that as we built up more capacity. That is very strategic and deliberate and we're seeing the results of that in the marketplace, particularly as we drive new innovation into the market, and we drive pricing in the market, the ability to sustain and elevate that moving forward is going to be largely driven by our ability to sustain the strong levels or even increase our advertising levels.”
“We have high household penetration, with many of the brands around the world, our ability to drive reach and continue to sustain that reach is very, very important to the growth that we're seeing in the business. As we look forward, we would anticipate to continue to spend behind those businesses. We still have some businesses, in my view, need more support, particularly businesses in parts of Europe and some of the categories in the U.S., and we would expect to continue to fund those as we get more gross margin accretion through the back half of the year because we're seeing the results.”
“Brand equity, which is obviously the big testament to the brand support and how are we getting what we want out of it continues to show a strengthening of our brands, and that bodes well for continuity and sustainability of the growth moving forward, and that's how we're kind of running that flywheel right now, continue to invest, drive leverage in the middle of the P&L, accelerate the top line and ultimately deliver better margins, better earnings per share for our shareholders.”
“We're using a wide spread of different mediums to grow brand awareness and brand penetration. Obviously, TV for a lot of reach and frequency given the scale and scope of our brands in many markets, but really fine-tuning behind our digital transformation, our ability to drive higher ROI spending in the digital space. And clearly, as we see more ROI coming, we see continued growth in terms of penetration, in terms of consumption, and in terms of ultimately delivering share growth and category growth for our retailers, we'll continue to elevate our spending. We're measuring it very quickly. This is not just for the sake of increasing spending. We want to be sure and absolutely deliberate and making sure that the spending is returning back to the brands, driving category growth.”
- Noel Wallace, CEO
Expedia (May 4, 2023)
“In our B2C business, we leaned into marketing to take advantage of the strong demand environment and to accelerate gross bookings growth. And we also maintained our marketing spend mix towards longer-term payback channels to drive loyalty members and app users, which given the longer-term return profile of the spend is less closely correlated to demand within any given quarter.”
- Julie Whalen, CFO
Hershey (April 27, 2023)
“Advertising and related consumer spending increased approximately 9% in the first quarter, in line with our expectations, as we prioritize investments across segments to drive strong consumer engagement and support conversion at new retail price points.”
- Steven Voskuil, CFO
Kimberly-Clark (April 25, 2023)
“I've always got out of the renting of share business. And what I mean by that is over-promoting brands to kind of tick up shares. I'd rather earn it through the base business through advertising innovation and making the products better. And so that's kind of what our high road -- internally, we call our high road strategy, which is, hey, we want sustainable growth. We're going to earn our share through a better brand value proposition, and we're going to grow category penetration over time. That doesn't get done well through trade promotion. So it will be out there. Obviously, we're going to want to be competitive. But I think for us, I think investing in advertising to grow the category and innovation is our preferred path.”
- Michael Hsu, CEO
Procter & Gamble (April 21, 2023)
“We simply have, though it may be hard to believe, a lot of low-hanging fruit that's out there. We have many categories where we are not at our target levels of reach. And that's a very high ROI activity. When we can reduce waste and frequency, reinvest that into expanded reach, very good things happen as you've seen, by the way, not just this quarter, but for the last 4 years.”
“As ad spending becomes more efficient with our ability to in-house both scheduling and buying of media, more digital capability to be more targeted, that increases the ROI of every dollar we can spend. So it actually makes investment in media spending more attractive.”
- Andre Schulten, CFO
Progressive (May 3, 2023)
“We won't share exactly where we're pulling back, just like we don't share our budget and actually where our budget goes to whether it's mass media or digital. But I will say when we pull back on advertising, we have an incredible…media group, and they will look at the most inefficient media and pull back accordingly. So that's something that we can dial up or down depending on what's happening with our profit margin.”
- Susan Griffith, CEO
Restaurant Brands International (May 2, 2023)
“Advertising… is allowing us to generate early momentum in the (Burger King) business. And I think you saw that starting in Q4 and into Q1. It's flowing through to the bottom line, and it's impacting franchise profitability.”
“I think you should expect to see some variation in kind of quarter-to-quarter ad spend. A lot of that is driven by the calendar and kind of seasonality of revenues as well as when some of the biggest ad campaigns that we really want to dial up the GRPs are going to come through during the calendar. So I'd look at it more on a full year basis and expect to see a bit of volatility going forward just as you look quarter-to-quarter on that spend.”
- Joshua Kobza, CEO
Unilever (April 27, 2023)
“We increased BMI (brand and marketing investment) spend last year by .5 billion and driven principally by increases in media, not nonworking media, but working media, showing more of our great advertising to consumers. And we do expect that, that will increase further in 2023, again, with an emphasis on media. So you're right to ask the question what -- how does that correlate with competitiveness? My answer to it is that the investment in BMI has a long-term consequence on the health of your brands on penetration, on preference and then market share. But it is a chain that does not happen instantly.
“And right now, when we're leading on price, price is a bigger driver of competitiveness than BMI is. But we are very happy to be continuing to step up investment as we're taking the price because at the end of the day, we have…brands that our consumers are aware of and consumers have to be clear how great our products are and how great the performance of our product is even as they're paying more for those products. So they need to go hand in hand. But I think you're looking for a more direct correlation between step-up in brand investment and competitiveness than existing reality. And as I'd say, pricing, particularly when you're leading on pricing is a bigger driver of competitive dynamics in the short term than BMI, but we must continue to invest more in BMI.”
- Graeme Pitkethly, CFO
Wayfair (May 4, 2023)
“On advertising…I think the easiest way to think about it is think of it as having 3 buckets of that cost.
“And the first bucket, which is by far the largest bucket, think of that as kind of evergreen. And by evergreen what I mean is, these are different advertising channels that are highly measurable, that are run to very tight paybacks and that we are looking to increase our spend there. But within that payback constraint, that's very tight and very measurable. And how can we do that? We can do that with targeting. We can do that with different creative ad units. We can do that by helping the conversion on the traffic. And so that, we're continuing to maximize.
“Then there's a second bucket, which is generally top of funnel type advertising. So television would be kind of the poster child of this, but there's other things in this bucket. Those are channels that we can measure, but the error band around measurement there is larger. You can't measure them quite as precisely as you can measure that first bucket…the measurement methods there more triangulate in on what you believe the value is there. So inside that band, you could spend at the low end of the band or the high end of the band. And it would be within the band that you think is productive for the spend. But again, there's an arrow band there. And there, what we've done is…biased towards being lower in the band rather than being higher in the band, and we're getting good results from that.
“And then the think of the third bucket as an R&D bucket. So these are advertising channels that do not yet operate at the payback we want them to, but we believe they could. So we're experimenting in these channels, figuring out what…works, what doesn't work. And once you get to a productive approach there, we're getting the payback you want, you would then scale it. And these channels would then go into either bucket 1 or bucket 2 depending on what kind of advertising channel it is. There, what we've done is we've taken a top-down approach and saying, hey, what percent of our ad budget or how many dollars are we willing to put into R&D…and we're kind of doing that top down rather than bottoms up. Because bottoms up, you can end up with many different opportunities with many different ideas of what to test and it could add up to being a higher percentage of your total ad spend than you would like.”
- Niraj Shah, CEO
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