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L’Oréal to Review Media Spend

Jean-Paul Agon sent shivers down the spines of publishing companies when he told analysts that the group is launching a review of its media spend.

AND PUBLISHERS GO PALE ALL OVER THE WORLD: Jean-Paul Agon, chairman and chief executive officer of L’Oréal, the world’s largest beauty company, sent shivers down the spines of publishing companies globally on Wednesday when he told analysts that the group is launching a wide-ranging review of its media spend. The review is designed to measure the impact and return on investment of its advertising and promotions budget, which represented 30.9 percent of sales in the first half.

“We believe that we have a lot to gain in terms of productivity of these investments, so we don’t plan to increase these investments,” Agon said. “If we find solutions to be much more efficient with our investment in the future, why not reduce the amount? But it’s not a question of money, it’s a question of having the firepower that we need.”

This story first appeared in the September 1, 2011 issue of WWD.  Subscribe Today.

Agon also said: “I think that 30.9 [percent] globally, roughly, we think is a good level.”

L’Oréal is one of fashion’s largest advertisers, with advertising and promotion spending totaling 3.13 billion euros, or $4.4 billion, in the first six months of 2011. In 2010 as a whole, the company spent 6.03 billion euros, or $8 billion, on advertising and promotions. All dollar rates are calculated at average exchange for the period in question.

L’Oréal does not break out which proportion of the total is allocated to advertising and which proportion to promotions, but Agon said Wednesday that the global ratio of advertising to promotions was stable. He also said advertising spending should remain stable in the second half of 2011.

Agon said digital now accounted for 6 to 7 percent of its total ad spend.

He did not provide details of the review, beyond saying each division would launch studies to optimize the impact and return on investment of its advertising. He noted that new models allow for a more accurate measure of the impact of advertisements.

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