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Advertising’s Role in Marketing Advertising Principles and Practices.

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1 Advertising’s Role in Marketing Advertising Principles and Practices

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? 2-2Prentice Hall, © 2009

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 2-3Prentice Hall, © 2009

4 2-4 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 WHAT IS ADVERTISING?

5 Prentice Hall, © 20092-5 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. 6 2-6Prentice Hall, © 2009

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

8 2-8 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 Prentice Hall, © 20092-9 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 Prentice Hall, © 20092-10 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 Prentice Hall, © 20092-11 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 12 2-12Prentice Hall, © 2009

13 2-13 Brand 1.Coca-Cola 2.Microsoft 3.IBM 4.General Electric 5.Intel 6.Nokia 7.Toyota 8.Disney 9.McDonald’s 10.Mercedes-Benz Market Value ($ Billions) $67 $57 $56 $49 $32 $30$28 $28 $22 Table 2.1 Most Valued Global Brands 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 14 2-14Prentice Hall, © 2009

15 2-15 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? 16 2-16Prentice Hall, © 2009

17 2-17 The Marketing Plan Steps in the Marketing Process 1.Research the consumer marketplace and competitive marketplace and develop a situation analysis or SWOT analysis. 2.Set objectives for the marketing effort. 3.Assess consumer needs and wants, segment the market into groups, target specific markets. 4.Differentiate and position the product relative to the competition. 5.Develop the marketing mix strategy. 6.Evaluate the effectiveness of the strategy.

18 Prentice Hall, © 20092-18 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 Prentice Hall, © 20092-19 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 Prentice Hall, © 20092-20 The Marketing Mix

21 Prentice Hall, © 20092-21 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 Prentice Hall, © 20092-22 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 2-23Prentice Hall, © 2009

24 2-24 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 Prentice Hall, © 20092-25 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 Prentice Hall, © 20092-26 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 Prentice Hall, © 20092-27 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 Prentice Hall, © 20092-28 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 Prentice Hall, © 20092-29 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 Prentice Hall, © 20092-30 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 Prentice Hall, © 20092-31 Marketing Organization 1.Omnicom Group 2.WPP Group 3.Interpublic Group 4.Publicis Groupe 5.Dentsu 6.Havas 7.Aegis Group 8.Hakuhodo DY Holdings 9.aQuantive 10.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 Table 2.2 Top 10 Agency Networks 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? 2-32Prentice Hall, © 2009

33 2-33 Agency 1.Dentsu [Dentsu] 2.McCann Erickson Worldgroup [Interpublic] 3.BBDO Worldwide [Omnicom] 4.DDB Worldwide Communications [Omnicom] 5.Ogilvy & Mather Worldwide [WPP] 6.Young & Rubicam Brands [WPP] 7.TBWA Worldwide [Omnicom] 8.JWT (WPP) [WPP] 9.Publicis Worldwide [Publicis] 10.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 Table 2.3 Top 10 Consolidated Agency Networks Source: Agency Report: Top Ten Consolidated Agency Networks,” Advertising Age, April 30, 2007: S-4.

34 Prentice Hall, © 20092-34 Types of Agencies Full-service Agencies –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 Prentice Hall, © 20092-35 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 Prentice Hall, © 20092-36 How Agency Are Paid Commissions –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 Prentice Hall, © 20092-37 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 Prentice Hall, © 20092-38 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 Prentice Hall, © 20092-39 Emerging Marketing Strategies Relationship Marketing Permission Marketing Experience Marketing Guerilla Marketing Digital Marketing Viral Marketing Mobile Marketing Social Network Marketing

40 Prentice Hall, © 20092-40 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 Prentice Hall, © 20092-42 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 Prentice Hall, © 20092-43 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 Prentice Hall, © 20092-44 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 Prentice Hall, © 20092-45 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 Prentice Hall, © 20092-46 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. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

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