Marketing midterm

Chapter 2

Roles of Advertising

Chapter Objectives

After reading this chapter you will understand:

1. Primary goals and objectives of advertising

2. Changing roles of advertising within the marketing communication mix

3. Value of advertising and measuring return-on-investment (ROI)

4. Various categories of advertising

5. Advertising and building brand equity

6. Advertising of ideas and non-profit organizations

Chapter Overview

Advertising has undergone dramatic changes during the last decade. Technological change and demands from clients for more accountability have altered practices of the advertising industry. Advertising’s primary role, however, continues to be to convey truthful information about products, services, or ideas to a targeted audience. Media will increasingly target market niches and individual buyers.

Lecture Outline

1. Advertising and the Changing Communication Environment

A. In recent years, a major concern of marketers has been the convergence, or coming together of related components of the mass-communications system. These components appear in three distinctly related areas:

1) Technological convergence—the incorporation of computer technology with broadcast media and home reception.

2) Business convergence—usually referred to as consolidation, it is the dominant trend of companies merging and includes advertising agencies and media companies.

3) Content convergence—companies try to stretch their advertising or program content in new directions to help amortize sizable investments.

B. Convergence is very apparent in advertising communication. Finding a cost-efficient plan for reaching increasingly in-control and demanding consumers is the major challenge of contemporary advertising. The forces of convergence and consolidation dominate every advertising, promotion, and marketing decision.

C. Advertisers have a dual problem – an ever-expanding number of media options and the need to develop advertising messages that consumers will invite to share their time.

D. Citizen media describes the relationship between advertisers and consumers where communication users exert more control than do communication providers. Participatory media such as blogs is another step in citizen media.

E. The year 2000 marks when the communication revolution first became commercially viable.

F. Advertisers vote with their dollars, and no better evidence exists of the importance of new technology than the shift in financial support by major advertisers away from traditional media to new and, especially, interactive technology.

2. Advertising as a Communication Tool

A. Advertising is a communication tool. Advertising objectives must be viewed from a communication perspective. The fundamental principle of good advertising is that it must be built around the overall marketing plan and execute the communication elements of a more far-reaching marketing program.

B. Advertising objectives must complement the marketing plan. The following are the primary factors in the typical marketing plan:

1) Overall goal(s) of the plan. Marketing goals are usually expressed in financial terms; such as percentage increases in sales.

2) Marketing objectives. Marketing objectives should be clearly stated and measurable.

3) Marketing strategy. Steps to achieve goals and objects are outlined, in the form of a general overview.

4) Situational analysis. An environmental analysis including product benefits, sales and industry projections, and the competitive situation.

5) Problems and opportunities. Major problems and opportunities facing a brand are addressed.

6) Financial plan. An outline of expected profit or loss over a designated time frame.

7) Research. This section outlines the data needed for marketing planning, where they can be obtained, their cost, and time frame for availability.

C. Following the marketing plan as a blueprint, the advertising plan is drawn up to accomplish the following communication tasks:

1) Prospect identification. Identify prime company prospects, including demographic and psychographic data.

2) Consumer motivations. Analyze the underlying consumer needs, wants, and aspirations relative to the purchase of product/service categories and specific brands.

3) Advertising execution. Develop creative advertising messages that effectively set brands apart from the competition.

4) The advertising budget and allocation. The share of the marketing program designated for advertising will be included in the marketing plan. Allocation of the advertising budget will be part of the advertising plan.

3. Advertising and Profitability

A. The value of a particular marketing function is often expressed as return-on-investment (ROI). A number of studies indicate a strong correlation between brand awareness, market share, and profits.

Clients are increasingly demanding that media and advertising agencies measure advertising success on the basis of effective communication rather than on audience exposure.

B. While there is general agreement on the need to estimate audience involvement, there is a lack of consensus on how to define and/or measure it.

C. The demand for accountability and a focus on ROI are already becoming part of the media/advertiser relationship.

D. Despite these attempts to change the method of buying and measuring the audience of various media, we are far from a consistent model for determining audience value across the hundreds of communication vehicles currently used by advertisers. Despite some misgivings on the part of media and advertising agencies, it is the client that will ultimately prevail in the application of ROI management.

4. Integrated Marketing

A. Marketing consists of four primary elements: product, price distribution, and communication. These are the marketing mix. The communication component is further divided into four primary categories:

1) Personal selling. Personal communication is the most effective means of persuading someone. It is also the most expensive and thus impractical at the initial stages of mass selling. As a primary technique, it is used most often in business-to-business marketing. Personal selling techniques are becoming important factors in many selling tactics across a number of platforms such as direct response and the Internet.

2) Sales promotion. Extra incentives are used periodically to generate sales through pricing discounts, sweepstakes, point-of-purchase displays, etc. Commonly seen by consumers, these incentives are even more widely used through the marketing distribution channels as an inducement to carry a particular brand and to secure favorable shelf space. But over-emphasis on price can hurt profits and long-term brand equity and loyalty.

3) Public relations. In the last decade, public relations has become one of the fastest-growing sectors of marketing communications. A primary benefit is that it is perceived as having higher audience credibility than advertising. Public relations is now fully integrated into the marketing communications plans of most major companies.

a) Contemporary marketers have adopted many of the techniques of the two-step flow (media providing information to opinion leaders who, in turn, influence the general public) and other public-relations practices to develop similar programs of influencing the purchase of brands. More recent techniques include buzz, guerilla marketing, and word-of-mouth marketing. The key to their success is to engage marketplace influencers.

b) The key to successful public relations is to view it as a complement rather than a competitor to advertising. Public relations and especially word-of-mouth advertising tend to work best at the introductory stage of building brand awareness with advertising taking over to build long-term brand loyalty.

c) Unlike advertising, a public-relations message is ultimately controlled by the media. The media make decisions concerning when, where, and if a particular product story will be carried.

4) Advertising. Paid, persuasive (not neutral or unbiased) messages delivered through the mass media are referred to as advertising communications. Advertising is undergoing dramatic changes as it adapts to new technologies.

B. During the early development of modern marketing and advertising, these components were viewed separately and lacked coordination by many companies; often resulting in confusing and sometime contradictory messages. In recent years, companies have begun to move toward a consolidation of all areas of the marketing function, especially marketing communications.

C. The complexity of contemporary marketing communication plans has resulted in a demand for programs that “speak with one voice” and to consolidate all areas of the marketing communication function.

D. Referred to as integrated marketing communication (IMC) , emphasis has turned to assuring effectiveness of the “total” marketing communication plan. All marketing disciplines must work together to give a unified message to consumers. IMC also has had significant implications for the way advertising agencies deal with clients.

E. In coming years, some form of IMC will be even more the norm in the marketing plans of virtually every company. Demands for marketing efficiency combined with new marketing communication channels and an increasingly diverse audience will combine to force greater integration and coordination of all aspects of the marketing function, especially those involved in the communication process.

F. Although the benefits of IMC are apparent, the implementation of the strategy can be extremely difficult.

5. Advertising: An Institutional Approach

A. Society establishes institutions to bring order to vital activities. An institutional consideration of advertising permits us to see that it is a logical – some would say necessary – requirement for a capitalistic economic system.

B. Advertising is viewed from two related perspectives: (1) its economic role and (2) its social and cultural role in communicating not only product information but also social values.

C. The cultural role is often referred to as its inadvertent role. With the exception of advertising overtly intended to foster some idea or initiative, many of advertising’s social consequences are often unintended by sponsors. One of the major criticisms of contemporary advertising is its effect on the behavior of children. Advertisers must be aware of both economic and social aspects of their advertising; the public has proven itself to be unforgiving when it perceives that certain advertising is exploitive (whether intended or not).

D. Most economists agree that advertising has a utilitarian function in the marketing system – to disseminate product information that allows consumers to know that products exist, to give consumers information about competing brands, and to permit consumers to make intelligent choices among product options. However, the effects of advertising, beyond these strictly functional characteristics are viewed with suspicion in many quarters.

E. It is sometimes argued that advertising creates artificial wants among consumers, because purchases are often made based upon psychological and social factors as well as utilitarian considerations. But, in fact, advertising actually mirrors the mores and behavior of society at any point in time.

F. The roles of advertising fall into three categories:

1) What advertising does for consumers. Consumer behavior is need driven. A purchase is the culmination of a process that begins with the recognition that some problem can be solved by a particular product or service. Advertising’s role in this process is to provide information as efficiently and economically as possible to potential buyers. Closely related to the function of consumer information is the belief that advertising promotes greater choice for the consumer. An age of specialized media targeted to narrow audiences has facilitated the delivery of specialized product information and given consumers greater choices. Customer feedback is critical to tailoring efforts.

2) What advertising does for business. Advertising is one element in a fundamental marketing process known as exchange theory. Exchange theory suggests that the long-term success of a business relies upon a positive and mutually beneficial relationship with its customers. Customers must, however, perceive that they receive value in their purchases. Advertising is a tool to assist businesses in quickly grabbing the attention of the consuming public in order to help offset the enormous costs associated with the production and sale of new and existing products and/or brands.

3) What advertising does for society. In the current environment of social change and diversity, advertisers are hard-pressed to present effective sales messages that are at the same time compelling to the audience and noncontroversial to all segments of the population. Three challenges stand out:

a) Monitoring changes so that a company is aware of what is happening in society.

b) Creating products and services compatible with changing values.

c) Designing marketing messages that reflect and build on the values target markets and individual customers hold.

The intended purpose of advertising is to contribute to the profitable sale of products and a continuing economic expansion that presumably is a benefit for society as a whole. In addition to its economic role, advertising benefits society by providing revenues to support a diverse and independent press system protected from government and special interest control. In carrying out these goals, advertising must be aware of its responsibility as a mirror and monitor of society. Advertisers have a new and different responsibility to society in the way they sell their products and services. New technology and sophisticated research methods have only increased the importance of issues such as consumer privacy and the potentially intrusive nature of advertising.

6. Advertising to Diverse Publics

A. Advertising, regardless of its intended recipients, communicates a message to various groups (business-to-business) and individuals who interpret the message in the context of their own self-interest.

B. Advertisers must take into account the perceptions these various publics will have of the message communicated by businesses. That message can be delivered to any one of the following publics:

1) The distribution channel . Companies attempt to persuade retail distribution outlets (particularly growing national chains) that they are offering brands with high-consumer demand, plus significant advertising dollar support. Large retailers often demand this support before they agree to stock a brand.

2) Employees. With the goal of building employee loyalty and teamwork, consumer advertising will frequently focus upon quality workmanship and even feature company employees in their message.

3) Current and potential customers. Advertising is often the most efficient means to build brand awareness among new customers and enhance brand loyalty among current buyers.

4) Stockholders. The majority of ordinary customers hold ownership in many of the companies they patronize. Advertising serves to build strong brand awareness and a positive reputation, which in turn, keeps stock prices high.

5) The community at large. Corporations want to be viewed as good neighbors in the localities housing their production facilities. Public opinion must be positively maintained in order to properly deal with inevitable local disputes regarding taxes, noise levels, pollution, zoning ordinances, etc.

C. Advertising functions within a matrix of political, legal, economic, and cultural environments. The entire range of publics must be considered when planning an advertising campaign.

7. The Components of Advertising Strategy

A. Advertising should be designed to reach those consumers who are interested in the particular product features and benefits that a brand offers. The most successful brands are those with features and benefits unique within a product category and, consequently, those that hold a differentiated position in the minds of consumers. Advertising’s job is to turn these product benefits into an attention-getting story that appeals to prospective buyers.

B. This section will discuss some of the primary elements of successful advertising.

C. Brand name. An established brand name that customers recognize and respect is one of the most valued assets of a company. One of the principal uses of advertising is to enhance brand familiarity awareness in the minds of consumers by emphasizing consumer benefits of a product.

1) High brand recognition is especially important for products with little inherent product differentiation (e.g., soft drinks and cigarettes) and that are easily duplicated by competitors from a functional standpoint. What competitors cannot duplicate are the years of successful brand building that the parent companies have invested in their brands

2) In the global market, companies are finding that overcoming entrenched local brands is very difficult as they expand into new markets. Hoping to jump-start the process, many foreign companies have bought U.S. brands or even entire companies. As new companies enter the global marketplace, brands will take on even more importance as a competitive tool to differentiate one product from another.

D. Brand extensions. The present fiercely competitive environment has caused companies with high-profile brands to move into “brand extension” as a means to efficiently and profitably introduce new products.

1) Caution, cannibalization. Since 2000, Coke and Pepsi together intro​duced approximately 20 new beverages. Although newly introduced products are quickly adopted by consumers under the umbrella of a strong brand name and can boost sales, there are also dangers present that the sale of new products can erode the sales of the core branded product.

2) Cost of product failures. In addition to cannibalizing existing brands, the failure of a newly introduced product can adversely impact the image of the parent brand and entire product line. And consumers can become confused by the introduction of too many products.

3) Market saturation. When successful brands stagnate and show no growth, product line extension is often viewed as the only way to expand. Loyal consumers, however, may begin to question brand values and benefits if the scope of a brand becomes too large.

4) Risks can be considerable. Mixing market niches can be a tricky business. Virtually all luxury carmakers have expanded into less expensive lines. But how are loyal upscale buyers going to view the prestige and value of brands like Mercedes, BMW, and Cadillac over the long-term? Companies face the problem of how to move brands into a different position (in the consumers’ minds) without harming the core brand.

5) Leaving the parent logo “off” a new product. Defying conventional marketing logic, companies sometimes wish to distance a niche product from the parent brand to build a unique position in a non-conventional market. Nike entered the lower-priced shoe market to broaden its market and enhance overall profits with a $40 running shoe for Wal-Mart that is marketed under the “Starter” brand with no observable connection to Nike.

6) Advantages and Disadvantages of brand-extension strategy:

· Advantages of a brand-extension strategy

a) Saving money by not needing to build awareness for a new and unknown brand name.

b) Adding equity to an existing brand name with a successful extension.

· Disadvantages of a brand-extension strategy

a) Damaging a core brand in the minds of loyal consumers with a failed introduction.

b) Losing marketing focus on your existing brand and/or diluting marketing efforts and budget across several brands.

E. Closing thoughts on branding. Although there is no one strategy right for every company, there is common agreement on one thing. Building brand equity is one of the most important elements of advertising for any company.

8. A Good Product That Meets a Perceived Need

A. The fundamental job of most businesses is to develop products that meet the need of some consumer segment.

Introducing successful products is difficult – only one in seven product ideas that enter the developmental process are successful and nearly half of the dollars allocated to new product introductions go to products that either fail or are abandoned. For examples, visit the closeout chain Big Lots.

B. Creating successful new products begins with the premise that companies are not offering a physical object but, rather, the means of solving a problem. The marketer’s fundamental task is not so much to understand the customer, as it is to understand what jobs customers need to do.

C. When evaluating the marketing potential for innovative products or product line extensions, firms often have to determine the social and psychological tendencies of their prospects before moving ahead. For example, Kodak’s historical domination of the home photography market by appealing to women and emphasizing the emotional appeals rather than product technology. Continuing to emphasize the female market as the family “keeper of memories” has contributed to Kodak’s recent success in digital cameras. Successful products are those that are perceived by consumers as being best for a task, not necessarily those that are considered the winner according to some objective standard.

D. One of the fundamental problems of product development is the fragmentation of both products and audiences. In their quest to gain market share and meet the demands of every market niche, companies have presented consumers with an array of oftentimes confusing alternatives.

E. Attempting to determine the needs of consumers and actually doing so are two different things. Consumers may know their problems but not be able to enunciate the type of products that would solve these problems.

F. It is not unusual for products to face changing preferences in the marketplace. The problem for marketing and advertising is how to adapt to these shifts in consumer attitude without alienating current customers.

1) Starbucks – can it keep its upscale image and at the same time move to drive-through pick-up windows? Drive-through service offers the potential of increasing its breakfast business, but some customers think it cheapens the brand image and reduces it to just another fast-food outlet. The Starbucks example demonstrates that a brand is more than the physical characteristics of a product. Rather, it is a complex combination of product, price, distribution methods, and communication, which creates a sociological, psychological, and physical experience for users.2. Mercedes-Benz – found that rebuilding consumers’ trust in a brand is much harder than gaining it in the first place. To win back customers lost due to some quality-control problems in the early 2000s, Mercedes launched an extensive advertising campaign..

G. Product success depends upon reliable research.

1) All advertising and promotional messages depend upon relevant information to create appealing messages.

2) Establishing a priority of consumer wants, however, is often difficult to identify.

3) Conjoint analysis. This technique assists in identifying consumer priorities by asking consumers to weight the importance of many elements or benefits, of products and services; such as pricing, ingredients, packaging, and technical specifications. Taken together, such elements determine consumer preference and help to avoid costly mistakes of emphasizing wrong product benefits in advertising appeals.

H. Successful advertising begins with product development and marketing from the consumer’s perspective. Many companies, such as Proctor & Gamble, are adopting a bottom-up, consumer-centric model of product development and maintenance as opposed to the top-down model of providing customers with products companies hoped they would buy.

9. Sales, Revenue, and Profit Potential

A. Marketing’s contribution to profitability is achieved through a complex balance among sales, market share, promotional expenditures, and cost efficiency. While only the most unsophisticated marketing executives would emphasize sales and revenue goals to the detriment of profits, a number of strategies are used to attain profitability. Established companies use four major approaches to achieve long-term revenues and profits.

1) Developing and expanding new-product niches to reach current customers. Using “gap analysis,” JCPenney looked for gaps in the style preferences of customers and then developed private-branded clothing to fill those gaps in order to set itself apart from its competitors. Today, it is among the most profitable clothing retailers, and it has established a reputation for exclusivity with its in-house brands. Wal-Mart is attempting to move its upscale customers to think of the chain as a place to buy fashion clothing with advertisements in Vogue featuring real customers in much more stylish setting than previous advertisements.

2) Emphasizing profits over sales volume. Ford Motor Company announced a new plan that drastically cut production to match demand. Ford is redesigning and introducing a number of new models with a strategy of giving emphasis to revenue and profitability over sales and market share, underscoring the fact that gross revenue and sales volume can be a misleading gauge of a company’s success.

3) Emphasizing short-term market share rather than profitability. Faced with significant increases in advertising and promotion from arch rival Proctor & Gamble, Colgate-Palmolive made the decision that it had to reduce profit levels in coming years in order to protect market share in a number of product categories, underscoring the need to take a long-term perspective in developing a marketing strategy.

4) Customer tracking – are all customers created equal? Some customers may be a detriment to a company’s bottom line. Some companies have long discouraged continued patronage from some of their buyers. For example, insurers cancel policies for those that “use” the product too often and banks impose significantly higher fees for customers who maintain low balances or write excessive checks.

B. The bottom line and advertising.

1) With growing emphasis on profit-based accountability, advertising agencies are now being compensated relative to the effect of their promotional efforts on the client’s profits.

2) Corporations too, are giving more scrutiny to marketing and promotional functions and are increasingly being judged on the basis of return on investment.

3) Measurement of advertising effectiveness; a broader view.

a. Equal weight is now being given to measuring advertising’s ability to “maintain” sales as well as to increase sales.

b. Keeping current customers is also given equal importance with finding new ones.

c. Sales alone are not a measure of profitability. Some of America’s largest companies, in sales volume over the past decade, have experienced the largest financial losses.

10. Product Timing

A. Timing is a critical element in marketing and advertising planning and decisions.

B. Monitoring the product life cycle.

1) Advertising functions differently at different stages of the product life cycle.

a. Introduction and growth phase—focus is on gaining consumer awareness and building a competitive edge.

b. Entering the mature phase—advertising strategy takes a longer view and addresses the strengthening of brand equity and a longer horizon for sales development.

2) Product introduction and the advertising that accompanies it are among the most important decisions that determine the long-term success of a company. How improvements are communicated and to what market segments can have a major influence on their acceptance. The key is not just to spot new trends but, rather, to creatively develop products and services to take advantage of them in the marketplace.

a. No matter how good a product is, it can rarely be forced on consumers before they are ready to accept it. Without the current spikes in gasoline prices and more awareness of environmental issues by the public, it is doubtful that fuel-efficient cars would have been accepted. Demonstrating that fuel conservation is not a fad nor is it confined just to the car industry, we are seeing a number of other products touting energy savings.

b. Marketers need to distinguish fads from trends. For example, low-carb eating was going to revolutionize weight maintenance and create a new food industry, but many people thought the diet too restrictive and food makers have withdrawn low-carb products. The current trend to cater to dieters is “portion-control” products. Only time will tell if these products will resonate with consumers.

c. Another example of trend spotting that marketers hope will lead to new-product success is eating on the run. Products such as Tide to Go demonstrate the way trends evolve into an array of products and the importance of timing in the introduction of most new products.

3) Market timing may be a matter of doing something first rather than doing something different. For example, Kimberly-Clark Corporation, maker of Huggies disposable diapers, got a jump on the competition by developing a relationship with expectant mothers shortly after they became pregnant. The idea is to build a relationship so that Huggies will be top of mind as new moms buy their first package of diapers.

4) Timing can also be tactical, involving sales related to specific events or occasions.

C. Timing concerns of agency media planners.

1) Television—when should commercials be run? Primetime? Daytime? Late night?

2) Newspaper—should advertisements be run on weekends or mid-week?

3) Magazine—are weekly or monthly publications more effective?

D. Changing the normal buying season for a product category. Advertising can induce consumers to use a product year-round by informing them of alternative uses. But advertisers must recognize the risk associated with promoting a consumption pattern that is counter to established patterns and preferences.

11. Product Differentiation

A. Product differentiation is the circumstance in which a target audience regards a product as different from others in the category. This difference may be based on some tangible attribute of the physical product, or base on some intangible element including a brand image created in part by advertising. Differentiation is meaningful only if consumers perceive it as an important distinction.

B. In the absence of a strong brand identity built on meaningful differentiation, buyers tend to view all brands in a category as interchangeable. These products are viewed as commodities and purchase decisions tend to be based on price. Such brands cut price to maintain market share and profitability suffers.

1) Volvo is a brand closely associated with “safety.” As a Volvo executive commented, while its advertising may push other features, …” safety is always going to be part of our message.”

C. Products with well-defined positions find that their differentiating characteristics also can play major roles in brand extensions, if the differentiation is transferable to new products.

1) Proctor & Gamble’s Febreze Fabric Refresher was introduced as a laundry accessory to give clothes a fresh scent. Proctor & Gamble successfully extended the brand into air freshener, demonstrating that brand equities can be broader than a single product category.

D. Keeping an open mind when selecting a bundle of benefits to create meaningful differentiation.

1) Product differentiation often involves minor changes in either a product or the position communicated by advertising.

a) Quiznos created a distinct position with toasted sandwiches. This also highlights the problem of product differentiation based on features that can be duplicated by competitors in a reasonably short period.

2) Too often when companies search for product differentiation they concentrate on product functions.

a) Motorola decided that because consumers regarded service and function as equal, it would compete on the basis of design. The RAZR cell phone, intended to capture the youth market, shows that any part of the “benefit package” is open to examination when searching for unique differentiations.

E. The key motivation in the product-differentiation strategy is to reduce the competition for your brand. The more consumers see your products as meaningfully different from competing brands, the less the competition. The key is that prospects see a brand as differentiated in a manner that is important to solve their specific problems.

F. In conclusion, there are two important elements to building product differentiation.

1) We must remember that differentiation is a target marketing technique that requires choosing to appeal to a specific market segment while often simultaneously surrendering consumers looking for features not emphasized in their brands to other manufacturers. . One’s brand position should be inclusive enough to be profitable.

2) And, advertisers bare a responsibility to the general public to promote meaningful product differences, not inconsequential product features. Successful products demonstrate significant competitive advantages.

12. Price

A. Price is closely related to product differentiation. Price is most often dictated by favorable consumer perceptions of the value of a product – a perception that is created in part by advertising.

1) A primary function of advertising is to create, or enhance, a positive gap between the price of a product and the value the average consumer assigns to the product. The greater the value gap, the more insulated the product is from price competition.

B. A major part of positioning a product in the market and in the minds of consumers is setting the price.

1) Price is often equated with value and plays an important role in maintaining sales.

2) Price defines who your competitors are.

C. New technology is allowing marketers to be more flexible and precise in relating price to specific market segments, seasonal selling, and particular items within a product line.

1) Many marketers have used a strategy known as yield management to even out supply and demand. This process has become more sophisticated and reliable with software programs.

2) At the retail level, research technology allows managers to analyze each store as its own discrete market. Known as variable pricing strategy, it offers “each customer a different price at a different point in time.”

D. A low-price strategy can be an important element in the marketing process. Depending on the product type, pricing strategy can be both a means of market entry for new products and a means of product differentiation for mature products. Companies have found that low-price strategies must be augmented by a strong consumer promise to be successful.

E. Price plays a major role in advertising. An advertising plan must not ignore the basic price/value perceptions of its target audience. Pricing strategy, to a large degree, determines marketing strategy and the success or failure of brands.

13. Variations in the Importance of Advertising

A. Because companies differ in terms of their marketing goals, competitive situation, product line, and customer base, we would expect that advertising plans demonstrate markedly different approaches from one company to another.

1) Even within the same industry, companies often demonstrate large discrepancies in the use of advertising.

B. Most firms use advertising “in concert with” a mix of other promotional activities to create a synergy to reach consumers.

C. The role that advertising plays in a company’s promotional strategy depends on a number of factors including:

1) Corporate preference for various segments of marketing communication channels. As a number of major companies experiment with marketing through the Internet, event marketing, word-of-mouth advertising, and public relations, we will continue to see a trend to supplement or replace dollars previously spent in traditional advertising media.

2) High sales volume tends to lower advertising to sales ratios. Consumers need only be reminded of the brand, not “sold” on it. And, for these most dominant brands, the cost of attaining new customers through additional advertising might be nonproductive.

3) Industries with a number of competing firms and/or extensive competition. Despite being the acknowledged leader in the snack-food segment, PepsiCo’s Frito-Lay division announced a 50 percent increase in its advertising budget in 2005 in an effort to prevent loss of market share from new competition

4) Product categories with widespread competition and little perceived product differentiation. Carmakers rank number one among all advertisers in total advertising spending; telecommunication companies rank number two. This reflects the degree of competition among major manufacturers as they try to maintain or enhance market share.

5) Reversing sales or market share declines. Often, smaller brands in a category must allocate a significantly higher percentage of sales to advertising to compete with larger competitors.

D. Many variables must be considered when a business is deciding the role that advertising will play. Companies, even those with similar product lines, not only use different levels of advertising as part of their marketing communication mix but also utilize vastly different advertising plans in terms of media used, scheduling of advertising placements, and the messages communicated.

E. Variances also exist in order to keep a fresh approach to promotional communications, which can get stale over a period of time among consumers.

14. Advertising and the Marketing Channel

A. One of the most important aspects of marketing is the development of the marketing channel.

Advertising plays a major role in moving products through various marketing channels, from production, to distribution, to end-of-channel customers.

B. Traditional channels remained unchanged over most of the twentieth century. The past decade, however, has seen many changes resulting from technological innovations.

1) With the advent of the World Wide Web, travelers can now bypass travel agents and go directly to airlines and hotels to make reservations.

2) Digital cameras are greatly impacting film processors.

3) The downloading of music is now significantly impacting the distribution and sale of recording companies’ products.

The “traditional” marketing channel has largely been replaced by distribution and marketing communication systems that are unique to each seller.

C. One of the most fundamental changes has been the control of both marketing and communication channels by the consumer. As one electronic marketer commented, “People are using the Internet not only to gather information about brands, but about product selection and variations of products and pricing.”

1) The Internet’s use is even more dramatic among business-to-business buyers. Research shows that the Web is an excellent means of reaching B2B decision makers, but more important, it is the best way to influence purchases.

D. Marketing strategy not only determines the role of advertising and its budget but also plays a major part in decisions concerning media choices.

1) The use of coupons will dictate the use of print media.

2) Product demonstrations will call for the use of television or the Internet.

3) Complex messages may require magazine media.

4) Local messages will employ newspaper media.

E. Although consumer advertising is the most familiar to us, it is only one category of marketing communication necessary at any number of distribution levels. Advertising must both communicate and carry out marketing goals.

F. Evaluating advertising’s role in the marketing process. Marketers must continually assess the success of the directness of communication to intended markets and evaluate the time frame in which this is accomplished.

G. Intended level of response in the marketing channels.

1) Direct-action, short-term advertising—typically retail promotion focusing on stimulating immediate consumer response.

2) Direct-action, long-term advertising—continual promotion over a longer period of time for products with relatively long purchase cycles.

H. Indirect advertising – intended to affect sales only over the long term.

1) Appeals in promotion, which concentrate on the general attributes of the manufacturer rather than specific product attributes.

2) Most institutional or public relations advertising. The exception would be remedial public relations advertising designed to overcome some immediate negative publicity.

15. Advertising to the Consumer

A. National advertising. The advertising by the owner of a trademarked product (brand) or service through different distributors or stores.

1) Not limited to giant brands like Nike, Tide, and Chevrolet.

2) Sales message in national advertising is general in nature and lacks the specifics found in retail promotion such as price, local availability, service, hours of operation, and installation.

3) Geographic targeting began in the 1980s, first regionally, and then started reaching more narrowly defined segments on a market-by-market basis.

4) Advances in computer technology are now allowing individual tailoring based upon lifestyles and product usage.

B. Retail (local) advertising. Advertising by a merchant who sells directly to the consumer.

1) Consolidation of the retail industry has had pronounced effects on the way retail marketing is conducted.

a) Customers more and more are doing “one-stop shopping.”

b) Difficult to categorize retailers.

c) In 2005, Federated Department Store, Inc. announced it would adopt the Macy’s name for all its regional department store chains. This brand consolidation allowed Federated to implement national advertising strategies and provided the opportunity to move into national media and promote its in-store exclusive brands on a national basis.

2) Move to national retailing has significant ramifications for newspapers and local radio stations, experiencing advertising spending shifts as retailers move to national promotional plans.

3) Retail consolidation has also changed the relationship between retailers and manufacturers.

a. Manufacturers provide a number of product, merchandising, and promotional services specific to each retailer to gain entry.

b. At the same time, manufacturers find themselves increasingly competing with in-store brands.

C. End-product advertising. Some products are not purchased directly by consumers, but are acquired by them by virtue of being an ingredient or component part of other products.

1) End-product advertising began in the 1940s when DuPont began promoting its Teflon non-stick coating on cookware.

2) After a five-year effort, Microsoft’s “Intel Inside” dominated the end-product inclusion in computers hardware of nearly every major manufacturer.

3) Promotion of such products is termed end-product advertising (or branded ingredient advertising).

4) When an end product is highly recognizable and adds value, its promotion also builds consumer demand for the sale of the main product of which it is a part.

D. Direct-response advertising. Avenues for direct-consumer response to pro​motional appeals have long been a part of this country’s history.

1) Ben Franklin is credited with creating America’s first direct sales catalog in 1744.

2) The modern era of direct selling was ushered in with the publication of the Montgomery Ward catalog in 1872.

3) Techniques and media of direct-response advertising have changed dramatically, but not the necessity to reach consumers with personal messages with offers designed to meet their specific needs.

a. As advertisers have shifted dollars from traditional mass media to more targeted vehicles, direct-response advertising has grown to more than $170 billion or almost half of all advertising expenditures.

b. New technology, such as the Internet and other interactive media, provides a catalyst for future growth of direct response.

c. Advertisers in traditional media will increasingly adopt direct-response techniques.

16. Advertising to Business and Professions

A. The average consumer does not see a large share of advertising effort, which is directed to business, industry, professions, and all stages of the marketing distribution channel.

B. Business-to-business advertising (B2B) is one of the fastest growing categories of advertising.

C. Promotion in this category is unlike the traditional media approach to which the ultimate consumer is accustomed.

D. Primary promotional B2B tools include business publications, personal selling, telemarketing, and Internet sales.

E. B2B advertisements tend to be factual, efficiency- and profit-oriented, rather than the emotional appeals seen in consumer ads.

F. The buying process is different for B2B.

1) Purchase collaboration. Purchases are often made collectively by a committee or group of decision makers; combining experience, perspectives, and business needs.

2) Purchase specifications. Products are bought according to precise, technical specifications. Both buyers and sellers need significant knowledge about the product category.

3) Purchase cycles. Impulse buying is unheard of.

4) Purchase scale. The dollar volume of purchases is often substantial.

17. Categories of Business Advertising

A. Trade advertising. Not readily recognized by average consumers; used by manufacturers to promote their products to wholesalers and retailers.

1) Promotional messages emphasize profitability and advertising support.

2) Products sold can be those for resale or those needed by stores for administration and operations.

3) Trade advertising objectives.

a. Gain additional distribution and retail outlets.

b. Increase trade support, eliciting favorable shelf space and point-of-purchase displays.

c. Announce consumer promotions to demonstrate advertising support.

B. Industrial advertising. Manufacturers are also consumers, purchasing machinery, equipment, raw materials, and component parts. Companies selling to manu​facturers must target their sales messages to this market.

1) Advertising is placed in publications directly related to particular industries.

2) In addition, companies employ direct mail, telemarketing, and personal selling.

3) It is directed to a very small, specialized audience.

4) Purchases are usually made through a number of decision makers.

5) Industrial advertising informs companies of new products and builds brand awareness.

6) Personal follow-up through sales representatives helps to close the sale.

C. Professional advertising. Advertising is directed to individuals or groups of individuals in various professions such as medical, legal, and engineering.

1) The clientele of these professions purchase whatever products are recommended; professionals greatly control consumer choice.

D. Corporate or Institutional advertising. Advertising done by an organization speaking of its work views, and problems as a whole, to gain public goodwill and support rather than to sell a specific product.

1) While institutional advertising remains a long-term image-building technique, in recent years it has taken on a decided sales orientation in terms of the audiences reached and intent of communication.

2) Several objectives of corporate advertising are suggested:

a. Establishing a public identity.

b. Explaining company’s diverse missions.

c. Boosting corporate identity and image.

d. Gaining awareness with target audiences for sales across a number of brands.

e. Associating a company’s brands with some distinctive corporate character.

18. Non-Product Advertising

A. Idea advertising. Advertising used to promote an idea or cause rather than to sell a product or service.

1) Not a new phenomenon. Number of public interest groups using advertising and the sophistication of the communication techniques being employed is new.

2) Idea advertising is often controversial.

a) Many of the issues being addressed through promotional campaigns are controversial in nature such as gun control, abortion, animal rights, and environmental protection.

b) Critics think advertising messages are too short and superficial to fully debate many of the issues.

c) Proponents argue that it is the most practical means to reach mass audiences.

3) The increasing sophistication of media’s ability to narrowly target audiences by ideology will make this type of advertising more prevalent in the future.

B. Service advertising. America is increasingly becoming a service economy, with consumers seeking a wide range of help from financial planning and advice to child care. Services, although not tangible like products, still need good advertising to be sold.

1) Strong institutional component. Similar to corporate advertising, providers of services need to build consumer awareness over a prolonged period of time and develop distinct differentiation among competitors.

2) Some basic principles of service advertising include:

a. Feature tangibles. Adding a personal dimension through testimonials and stressing service benefits.

b. Feature employees. Building trust with customers by demonstrating the quality of the firm’s employees; an added benefit is improvement of employee morale.

c. Stress quality. Advertising messages should emphasize consistency and high levels of competency.

19. Government Advertising

A. Advertising has been used by governmental agencies for generations and labeled as “propaganda.”

B. The more recent growth in numbers of government services and programs has, however, resulted in greater use of traditional advertising by government agencies.

C. Traditional advertising techniques are being applied by an array of national agencies such as the volunteer armed forces, consumer protection agencies, and environmental and health initiatives.

D. State governmental agencies, too, are finding the use of advertising to advise the citizenry on beneficial services related to savings plans for higher education.

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