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.
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 communicationMoneyGoods
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:PriceDesignPerformanceDistributionBrand imageReliability (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 buyLower priceMore useful featuresHigher qualityStatus symbolMore 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.
13 Table 2.1 Most Valued Global Brands Coca-ColaMicrosoftIBMGeneral ElectricIntelNokiaToyotaDisneyMcDonald’sMercedes-BenzMarket Value ($ Billions)$67$57$56$49$32$30$28 $28$28$22Source: Interbrand Group; quoted in “Best Global Brands,” Business Week, August 7, 2006, p. 54. Reprinted with permission.
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 distributionSegmenting and targetingPotential 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 positioningThe 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.
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 itemsPerformance is important for cars and computersQuality 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 consumerChannel marketing through resellers and retailersStrategic distribution decisions:Market coverage strategyPush strategies direct marketing to the consumerPull strategies direct marketing to resellers
24 The Marketing Mix: Pricing Price is based on:Cost of making and marketing the product and seller’s expected profit levelAlso, based on what the market will bear, competition, economic well-being of customer, value of product, and the consumer’s ability to gauge the valuePricing 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, packagingPersonal sales uses face-to-face contact with customers to create immediate salesAn 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: MarketerThe 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 catalogsRetailers 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.Amazon.comebayBarnes & 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 servicesAdvertisers may have one agency of record (AOR) or several agenciesAgencies offer clients:Specialized servicesObjective adviceExperienced staffingManagement of all advertisingactivities and personnel
31 Table 2.2 Top 10 Agency Networks Marketing OrganizationOmnicom GroupWPP GroupInterpublic GroupPublicis GroupeDentsuHavasAegis GroupHakuhodo DY HoldingsaQuantiveAsatsu-DKWorldwide 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$430.0Source: Agency Report: World’s Top 25 Marketing Organizations,” Advertising Age, April 30, 2007: S-2.
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 $2.49New York $2.13New York $2.10New York $2.08New York $1.71New York $1.59New York $1.52New York $1.50Paris $1.24Chicago $1.19Source: 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 HRSpecialized by:Function (copy, art, media)Audience (minority, youth)Industry (healthcare, computers, agriculture)Market (minority groups)Creative BoutiquesSmall agencies focused on the creative productMedia-buying ServicesFocused on purchasing media for clients
35 How Agency Jobs Are Organized Account ManagementServes as a liaison between the client and agencyThree levels: management supervisor, account supervisor, account executiveAccount Planning and ResearchActs as the voice of the consumerCreative Development and ProductionPeople who create and people who inspireCreative directors, copywriters, art directors, producersMedia Planning and BuyingRecommend most efficient means of delivering the messageInternal Agency ServicesTraffic, print production, financial services, human resources
36 How Agency Are Paid Commissions Fees Retainers Performance-based A percentage of the media costFeesHourly fee or rate plus expenses and travelRetainersAmount billed per month based on projected amount of work and hourly rate chargedPerformance-basedBased on percentage of sales or marketing budgetProfit-basedGreater risk if campaign doesn’t have desired impactValue BillingBased on value of creative strategy or ideas
37 AccountabilitySenior managers want marketing managers to prove that their marketing is effective based on:Sales increasesPercentage share of the market the brand holdsReturn 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 satisfactionAll 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.
40 Global MarketingMost 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.
42 Discussion Question 1Look 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 2Coca-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 3Imagine 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 4Three-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.