1. Overview of Advertising Management
Chapter Eight
Overview of Advertising Management

2. Chapter Eight Objectives
Explain why advertising is an investment in brand equity bank
Describe the functions of advertising
Understand the role for advertisement objectives and the requirements for setting good objectives
Describe the hierarchy-of-effects model and its relevance for setting advertising objectives

3. Chapter Eight Objectives
Explain the distinction between direct and indirect advertising objectives
Understand the role of sales as an advertising objective and the logic of “vaguely right versus precisely wrong” thinking

4. Chapter Eight Objectives
Understand the nature and importance of advertising budgeting
Explain the relation between a brand’s share of market (SOM) and share of voice (SOV)
Explain the various rules of thumb, or heuristics, that guide practical advertising budgeting

5. Ad-Investment
Consistent investment spending is the key factor underlying successful advertising.

6. Arguments for Investing in Advertising
Investment in advertising requires that incremental revenue > advertising expense

7. Arguments for Disinvesting in Advertising
Decreased expenses in advertising mean increased profits (everything else held equal)

8. Investment in the Brand Equity Bank
“Strong advertising represents a deposit in the brand equity bank.”
Strong- that is, different, unique, clever, memorable

9. Advertising Functions
Informing
Persuading
Reminding
Adding Value
Assisting Other Company Efforts

10. Advertising Functions
Informing
Makes consumers aware, educates them about the features and benefits, and facilitates the create the creation of positive brand images
Facilitates the introduction of new brands and increases demand for existing brands
Performs another information role by teaching new uses for existing brands (Usage expansion advertising)

11. Advertising Functions
Persuading
Persuades customers to try advertised products and services
Primary demand- creating demand for an entire product category
Secondary demand- the demand for a specific company’s brand

12. Persuading
Gillette MACH3

13. Advertising Functions
Reminding
Keeps a company’s brand fresh in the consumer’s memory
Influences brand switching by reminding consumers who have not recently purchased a brand that the brand is available and that it possesses favorable attributes

14. Advertising Functions
Adding Value
Three basic ways by which companies can add value
innovating
improving quality
altering consumer perceptions
Advertising adds value to brands by influencing consumers’ perceptions

15. Advertising Functions
Assisting Other Company Efforts
Advertising is just one member of the marketing communications team
Sometimes, an assister that facilitates other company efforts in the marketing communications process

16. The Advertising Management Process
Advertising Strategy
Setting Objectives
Formulating Budgets
Creating Ad messages
Selecting Ad Media and Vehicles
Strategy Implementation
Assessing Ad Effectiveness

17. Setting Advertising Objectives
Expression of management consensus
Guides the budgeting, message, and media aspects of advertising strategy
Provide standards against with results can be measured

18. The Hierarchy of Effects
The hierarchy of effects metaphor implies that for advertising to be successful it must move consumers from one goal to the next goal

19. A Hierarchy Model of How Advertising Works

20. The Hierarchy of Effects

21. Setting Good Advertising Objectives
Include a precise statement of who, what, and when
Be quantitative and measurable
Specify the amount of change
Be realistic
Be internally consistent
Be clear and put it in writing

22. Sales Volume as an Advertising Objective
Traditional View
Sales volume is the consequence of a host factors in addition to advertising
Effect of advertising is delayed

23. Sales Volume as an Advertising Objective
Heretical View
Advertising’s purpose is to generate sales
Sales measures are “vaguely right”

24. The Logic of Vaguely Right Vs. Precisely Wrong Thinking
Choice of
Objective
Issue
Measurement
Accuracy
Issue
Versus
Precisely
Wrong

25. Advertising Budgeting in Theory
The best(optimal) level of any investment is the level that maximizes profits(MR=MC)
Advertisers should continue to increase their advertising investment as long as it is profitable to do so MC
= (Change in total cost)
(Change in quantity)
= TC/Q MR
= (Change in total Revenue)
(Change in quantity)
= TR/Q

26. Budgeting Considerations in Practice
What is the Ad objective?
How much are competitors spending?
How much money is available?

27. Budgeting Methods Percent-of-Sales Budgeting Objective-and-Task Method
Competitive Parity Method
(match competitors method)
Affordability Method

28. Percentage-of-Sales Budgeting
A company sets a brand’s advertising budget by simply establishing the budget as a fixed percentage of past or anticipated sales volume
Criticized as being illogical
Sales=f(Advertising) (o)
Advertising=f(Sales) (x)

29. Objective-and-Task Method
The most sensible and defendable advertising budgeting method
Specify what role they expect advertising to play for a brand and then set the budget accordingly

30. The Competitive Parity Method
Sets the ad budget by basically following what competitors are doing

31. Affordability Method
Only the funds that remain after budgeting for everything else are spent on advertising
Only the most unsophisticated and impoverished firms
However, affordability and competitive considerations influence the budgeting decisions of all companies