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Advertising’s Role in Marketing

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1 Advertising’s Role in Marketing
Advertising Principles and Practices Advertising’s Role in Marketing

2 Questions We’ll Answer
What is marketing and what are its key concepts? What are the different types of markets, and how do they relate to the marketing process? Who are the key players in marketing? How are agencies organized, and how do they work with their clients? Prentice Hall, © 2009 2-2

3 Puma’s Brand Evolution
What were the key decisions behind Puma’s brand strategy? How does Puma communicate its “cool” brand image? \ Visit the Site Prentice Hall, © 2009 2-3

4 WHAT IS ADVERTISING? What is marketing? Traditionally, marketing is the way a product is designed, tested, produced, branded, packaged, priced, distributed, and promoted. “An organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.”—American Marketing Association

5 Key Concepts: The Marketing Concept
Marketing should focus first on identifying the needs and wants of the consumer, rather than building products the consumer may not want. Market-driven companies include Dell, Harley-Davidson, Intel, UPS. Two steps of the marketing concept: Determine customer needs and wants through research. Develop, manufacture, market, and service goods that fill those needs and wants—solve customers’ problems.

6 Example of Consumer-First Approach
Do you think this is a believable ad? Does it ring true to you? Do you think it works to attract new customers to the Discover card? Principle: An company that operates with a marketing concept philosophy focuses on satisfying its customers’ needs and wants. Prentice Hall, © 2009 2-6 6

7 Consumer vs. Corporate Focus
Prentice Hall, © 2009 2-7 7

8 Key Concepts: Exchange
Exchange is the act of trading a product or service for something of value (money) Two types of exchange: economic and communication Money Goods

9 Key Concepts: Differentiation nad Competitive Advantage
A brand’s competitive advantage is where it’s different from its competitors and superior in some way. In marketing, this concept is called differentiation. Areas of differentiation include: Price Design Performance Distribution Brand image Reliability (Maytag’s lonely repairman)

10 Key Concepts: Added Value
Added value is a marketing or advertising activity that makes the product more valuable, useful or appealing to consumers. Other ways to add value: More convenient to buy Lower price More useful features Higher quality Status symbol More knowledgeable employees

11 Key Concepts: Branding
Branding is the way marketers create a special meaning for a product. Brand image is based on communication and on the consumer’s personal experiences with the product. Brand Equity refers to the financial value based on the reputation and meaning the brand name has acquired over time. Principle: Effective branding transforms a product by creating a special meaning based on an emotional connection.

12 A Motorcycle is a Motorcycle… But a Harley is Something Different
Visit the Site Prentice Hall, © 2009 2-12 12

13 Table 2.1 Most Valued Global Brands
Coca-Cola Microsoft IBM General Electric Intel Nokia Toyota Disney McDonald’s Mercedes-Benz Market Value ($ Billions) $67 $57 $56 $49 $32 $30 $28 $28 $28 $22 Source: Interbrand Group; quoted in “Best Global Brands,” Business Week, August 7, 2006, p. 54. Reprinted with permission.

14 Ivory Soap: It’s Pure and it Floats
How did Ivory become one of the most powerful brands of all time? What role did research play in building the Ivory brand? \ Visit the Site Prentice Hall, © 2009 2-14 14

15 Types of Markets A market is a particular type of buyer.
Share of market is the percentage of a product category’s total market that buys a particular brand.

16 Ads for Four Types of Markets
Which is which? Consumer Business-to-Business Institutional Channel How are the four ads different? How are they the same? Prentice Hall, © 2009 2-16 16

17 The Marketing Plan Steps in the Marketing Process
Research the consumer marketplace and competitive marketplace and develop a situation analysis or SWOT analysis. Set objectives for the marketing effort. Assess consumer needs and wants, segment the market into groups, target specific markets. Differentiate and position the product relative to the competition. Develop the marketing mix strategy. Evaluate the effectiveness of the strategy.

18 The Marketing Plan Marketing Research
Research markets, product categories, consumers, and the competitive situation. Planners need to know as much as they can about the marketplace so they can make informed, insightful strategic decisions. SWOT (Strengths, Weaknesses, Opportunities, Threats) helps managers turn data into insights. Principle: Marketing research is about more than just the compilation of information; it also produces insights into marketing situations and consumer behavior.

19 The Marketing Plan Key Strategic Decisions
Objectives—increases sales, share of market, or broader distribution Segmenting and targeting Potential customers constitute the target market. Identifying specific groups within the target market whose needs intersect with the product and its features is segmenting. A target audience is the audience for a marketing communication message. Differentiating and positioning The point of differentiation positions the product within the competitive environment, relative to consumer needs. Positioning is how consumers view the brand relative to others in the category.

20 The Marketing Mix

21 The Marketing Mix: Product
Considerations include product design and development, product operation and performance, branding, and physical packaging. Product design, performance, and quality are key to a product’s success. Design is important for fashion and clothing items Performance is important for cars and computers Quality is important for upscale brands

22 The Marketing Mix: Distribution
The channels used to move a product from manufacturer to buyer. Types of distribution: Direct marketing to consumer Channel marketing through resellers and retailers Strategic distribution decisions: Market coverage strategy Push strategies direct marketing to the consumer Pull strategies direct marketing to resellers

23 Push, Pull, and Combination Strategies
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24 The Marketing Mix: Pricing
Price is based on: Cost of making and marketing the product and seller’s expected profit level Also, based on what the market will bear, competition, economic well-being of customer, value of product, and the consumer’s ability to gauge the value Pricing strategies: Customary pricing (e.g., movie theaters) Psychological pricing for affluent customers

25 The Marketing Mix: Marketing Communications
Includes personal selling, advertising, public relations, sales promotion, direct marketing, events and sponsorships, point of sale, packaging Personal sales uses face-to-face contact with customers to create immediate sales An ad or direct mail piece may invite a potential customer to contact the company and the sales staff follows up on the “lead.” Marketing communication is about “Big Ideas” Creative concepts that get attention and stick in memory

26 Key Players: Marketer The advertiser or client that is the company or organization who produces and sells the brand. The marketing function is usually handled by a marketing department headed by a VP or director of marketing. Some companies have a product or brand manager who handles marketing and makes all strategic decisions about design, manufacture, and the marketing mix. (e.g., Procter & Gamble).

27 Key Players: Suppliers and Vendors
They provide or produce the materials and ingredients that are sold to manufacturers to make products. This network of suppliers/vendors is the supply chain. In theory, every member of the supply chain adds value. In practice, every member of the supply chain is a partner in creating the product and marketing the brand. Ingredient branding acknowledges a supplier’s brand as a product feature

28 Key Players: Distributors and Retailers
The distribution chain or channel of distribution refers to all the companies who help move a product from manufacturer to buyer. Wholesalers use personal selling, direct mail, trade papers, and catalogs Retailers try to draw their customers through advertising. The trade refers to upstream players (suppliers and vendors in the supply chain) and downstream players (companies in distribution chain)

29 Key Players: Marketing Partners
Suppliers, distributors, and marketing communication agencies are partners in supporting the brand and maintaining good customer relationships. Affiliate marketing is a partnership in which one company drives customers to another company and may get a commission for doing so. ebay Barnes & Noble

30 How Agencies Work with Clients
Agencies and agency networks (holding companies) Companies have internal advertising departments who act as a liaison between the marketing department and advertising agency(ies). Also called marketing services Advertisers may have one agency of record (AOR) or several agencies Agencies offer clients: Specialized services Objective advice Experienced staffing Management of all advertising activities and personnel

31 Table 2.2 Top 10 Agency Networks
Marketing Organization Omnicom Group WPP Group Interpublic Group Publicis Groupe Dentsu Havas Aegis Group Hakuhodo DY Holdings aQuantive Asatsu-DK Worldwide Revenues ($ millions) $11,376.9 $10,819.6 $6,190.9 $5,872.0 $2,950.7 $1,841.0 $1,825.8 $1,337.0 $442.2 $430.0 Source: Agency Report: World’s Top 25 Marketing Organizations,” Advertising Age, April 30, 2007: S-2.

32 Agencies have their own style and philosophy.
In these three ads for the Navy, Army, and Air Force, can you perceive a difference in approach, style, and strategy? Which do you think would be most effective in recruiting volunteers? Prentice Hall, © 2009 2-32

33 Table 2.3 Top 10 Consolidated Agency Networks
Dentsu [Dentsu] McCann Erickson Worldgroup [Interpublic] BBDO Worldwide [Omnicom] DDB Worldwide Communications [Omnicom] Ogilvy & Mather Worldwide [WPP] Young & Rubicam Brands [WPP] TBWA Worldwide [Omnicom] JWT (WPP) [WPP] Publicis Worldwide [Publicis] Leo Burnett [Publicis] Headquarters ‘06 Revenue (billions) Tokyo $2.49 New York $2.13 New York $2.10 New York $2.08 New York $1.71 New York $1.59 New York $1.52 New York $1.50 Paris $1.24 Chicago $1.19 Source: Agency Report: Top Ten Consolidated Agency Networks,” Advertising Age, April 30, 2007: S-4.

34 Types of Agencies Full-service Agencies Specialized by:
Offer account management, creative services, media planning, account planning, accounting, traffic, production, and HR Specialized by: Function (copy, art, media) Audience (minority, youth) Industry (healthcare, computers, agriculture) Market (minority groups) Creative Boutiques Small agencies focused on the creative product Media-buying Services Focused on purchasing media for clients

35 How Agency Jobs Are Organized
Account Management Serves as a liaison between the client and agency Three levels: management supervisor, account supervisor, account executive Account Planning and Research Acts as the voice of the consumer Creative Development and Production People who create and people who inspire Creative directors, copywriters, art directors, producers Media Planning and Buying Recommend most efficient means of delivering the message Internal Agency Services Traffic, print production, financial services, human resources

36 How Agency Are Paid Commissions Fees Retainers Performance-based
A percentage of the media cost Fees Hourly fee or rate plus expenses and travel Retainers Amount billed per month based on projected amount of work and hourly rate charged Performance-based Based on percentage of sales or marketing budget Profit-based Greater risk if campaign doesn’t have desired impact Value Billing Based on value of creative strategy or ideas

37 Accountability Senior managers want marketing managers to prove that their marketing is effective based on: Sales increases Percentage share of the market the brand holds Return on Investment (ROI) Agencies are creating departments to help marketers evaluate the efficiency and effectiveness of their marketing communication budgets.

38 Integrated (Holistic) Marketing
Focused on better coordinating all marketing efforts to maximize customer satisfaction All areas of the marketing mix work together to present the brand in a coherent and consistent way. The goal is to manage all the messages delivered by all aspects of the marketing mix to present a consistent brand strategy.

39 Emerging Marketing Strategies
Relationship Marketing Permission Marketing Experience Marketing Guerilla Marketing Digital Marketing Viral Marketing Mobile Marketing Social Network Marketing

40 Global Marketing Most countries have local, regional, and international brands requiring international advertising to promote the same brand in several countries. Companies may have several international regional offices and/or a world corporate headquarters. Agencies must adapt with new tools including one language, one budget, and one strategic plan. The choice of an agency for international advertising depends on whether the brand message will be standardized or localized.

41 Discussion Questions

42 Discussion Question 1 Look through the ads in this textbook and find an example of an ad that you think demonstrates the marketing concept and another ad that you think does not represent an effective application of the marketing concept. Compare the two and explain why you evaluated them as you did.

43 Discussion Question 2 Coca-Cola is the most recognizable brand in the world. How did the company achieve this distinction? What has the company done in its marketing mix in terms of product, price, distribution, and marketing communications that has created such tremendous brand equity and loyalty? How has advertising aided in building the brand?

44 Discussion Question 3 Imagine you are starting a company to manufacture fudge based on your family’s old recipe. Consider the following decisions: Describe the marketing mix you think would be most effective for this company. Describe the marketing communications mix you would recommend for this company. How would you determine the advertising budget for your new fudge company?

45 Discussion Question 4 Three-minute debate: This chapter stressed integration of advertising with other components of the marketing mix. A classmate argues that advertising is a small part of the marketing process and relatively unimportant. If you were in marketing management for Kellogg cereals, how would you see advertising supporting the marketing mix? Does advertising add value to each of these functions for Kellogg? Do you think it is a major responsibility for the marketing manager? What would you say either in support or in opposition to your classmate’s view. Organize into small teams with pairs of teams taking one side or the other. In class, set up a series of 3-minute debates in which each side has half the time to argue its position. Every team of debaters must present new points not covered in the previous teams’ presentations until there are no arguments left to present. Then the class votes as a group on the winning point of view.

46 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc.   Publishing as Prentice Hall

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