After applying zero-based budgeting, CPGs are coming back, said IPG CEO Michael Roth during his company’s Q1 2018 earnings call Friday.
Roth said CPGs are among the leading spenders for the quarter, with spend up by 10% across IPG. The growth was in part reflective of new business wins.
“I’ll put it out there that it feels like some of the bleeding and cuts on consumer goods is slowing down,” he said. “In some cases, it’s stopped. And that’s an opportunity for us.”
CPGs are realizing that cutting marketing dollars in a low growth period isn’t going to help them grow, Roth said. And with an economic environment in the US that favors big corporations, clients, including auto and financial services, are starting to spend more on marketing.
“I met with clients who indicated that the tax law changes were beneficial, and some tax dollars will be used as marketing dollars,” he said. “As long as the macroeconomic environment continues to be positive, clients will feel more comfortable spending and converting that to marketing dollars.”
But CPG spend was flat worldwide, indicating that a global turnaround isn’t yet on the horizon.
“The tone from these clients is that we need to spend marketing dollars,” Roth said. “On the other hand, they want to make sure they aren’t throwing money away. That’s where the battle is being fought right now.”
To help clients better allocate their spend and generate ROI, IPG will continue to invest in data and analytics through Mediabrands’ AMP platform. Roth said Mediabrands posted strong growth for the quarter, driven by Cadreon and Reprise, but didn’t break out numbers.
“That remains a priority for us,” he said. “In time, it will become an asset all of our agencies plug into to connect our messaging and reach the right consumer audiences.”
For the quarter, IPG saw organic net revenue increase 5.9% to $1.77 billion. Organic net revenue growth in the US, where 62% of IPG’s business operates, was strong at 4.3%. Internationally organic net revenue growth was 2.6%.
The results put IPG on track to reach its growth target of the high end of 2% to 3% for 2018.
“Our first quarter is seasonally small in terms of revenue,” Roth said. “That said, our performance is indicative of solid progress toward full-year financial targets. We believe we’re seeing evidence of marketers returning to growth mode, which would clearly be positive for us and our sector.”
In a heavy agency review period, IPG sees more opportunity to win new business than a need to defend existing clients. Just a handful of major clients are up for review, including the group’s 12-year contract with the US Army as well as Dunkin Donuts’ media account.
With RFPs increasingly coming in at the holding company level, the group is creating bespoke cross-agency solutions to fit client needs.
“With all of the complexity and changes in the marketplace, it’s healthy for [clients] to look at their offerings and how it comes together,” Roth said. “Clients want to see our capabilities on an integrated basis to see all of the resources we have.”
Regarding data privacy issues in the market, both around the upcoming GDPR in Europe and Facebook’s Cambridge Analytica scandal, clients haven’t pulled back media spend, Roth said.
“I think clients will continue to spend,” he said. “We’ve been working very closely with our third-party providers where a lot of these issues come into play. We’re working with Facebook to make sure third-party data has the appropriate permissions.”