ADVERTISING KEY CONCEPTS

The Effects of Advertising  U.S. advertising was almost $300 billion in 2006  In 2005, 32 companies spent over $1 billion each  The advertising industry is small—only 155,000 employed by the 12,000 advertising agencies  Ad budgets of some firms are almost $4 billion annually

The Effects of Advertising Top Ten Leaders by U.S. Advertising Spending Top Ten Leaders by U.S. Advertising Spending

Advertising and Market Share New brands with a small market share spend proportionally more for advertising and sales promotion than those with a large market share.  Beyond a certain level of spending, diminishing returns set in.  New brands require higher spending to reach a minimum level of exposure needed to affect purchase habits.

The Effects of Advertising on Consumers  The average U.S. citizen is exposed to hundreds of ads each day.  Advertising may change a consumer’s negative attitude toward a product, or reinforce a positive attitude.  Advertising can affect consumer ranking of a brand’s attributes.

Effects of Advertising

Major Types of Advertising Corporate identity Pioneering Competitive Comparative Product Advertising Product Advertising Institutional Advertising Institutional Advertising Advocacy advertising

Product Advertising PioneeringPioneering  Stimulates primary demand for new product or category  Used in the PLC introductory stageCompetitiveCompetitive  Influences demand for brand in the growth phase of the PLC  Often uses emotional appeal ComparativeComparative  Compares two or more competing brands’ product attributes  Used if growth is sluggish, or if competition is strong Online

The Major Types of Advertising

Creative Decisions in Advertising A series of related advertisements focusing on a common theme, slogan, and set of advertising appeals. Advertising Campaign

Creative Decisions in Advertising Determine the advertising objectives Make creative decisions Make media decisions Evaluate the campaign

Setting Objectives: The DAGMAR Approach Define target audience Define desired percentage change Define the time frame for change

Creative Decisions Develop and evaluate advertising appeals Execute the message Evaluate the campaign’s effectiveness Identify product benefits

Identify Product Benefits  “Sell the Sizzle, not the Steak”  Sell product’s benefits, not its attributes  A benefit should answer “What’s in it for me?”  Ask “So?” to determine if it is a benefit

Product Attributes Vs Benefits Attribute Benefit “Powerade’s new line has been reformulated to combine the scientific benefits of sports drinks with B vitamins and to speed up energy metabolism.” “So, you’ll satisfy your thirst with a great-tasting drink that will power you throughout the day.” - So?

Advertising Appeals Profit Health Love or romance Fear Admiration Convenience Fun and pleasure Vanity and egotism Environmental Consciousness Product saves, makes, or protects money Appeals to body-conscious or health seekers Used in selling cosmetics and perfumes Social embarrassment, old age, losing health Reason for use of celebrity spokespeople Used for fast foods and microwave foods Key to advertising vacations, beer, parks Used for expensive or conspicuous items Centers around environmental protection

Unique Selling Proposition A desirable, exclusive, and believable advertising appeal selected as the theme for a campaign. Unique Selling Proposition

Executing the Message Mood or Image Musical Demon- stration Demon- stration Scientific Real/ Animated Product Symbols Real/ Animated Product Symbols Fantasy Lifestyle Slice-of-Life Humorous Spokes- person/ Testimonial Spokes- person/ Testimonial

Creative Decisions for Ad Campaign Set advertising objectives Identify benefits Develop appeal Evaluate campaign results Evaluating results helps marketers adjust objectives for future campaigns Execute message

Major Advertising Media Newspapers Magazines Radio Television Outdoor Media Yellow Pages Internet

Newspapers – 2009 Demise of Majors!! Advantages  Geographic selectivity  Short-term advertiser commitments  News value and immediacy  Year-round readership  High individual market coverage  Co-op and local tie-in availability  Short lead time Disadvantages  Limited demographic selectivity  Limited color  Low pass-along rate  May be expensive

An arrangement in which the manufacturer and the retailer split the costs of advertising the manufacturer’s brand. Cooperative Advertising

Magazines – 2009 Circulation Decline Advantages  Good reproduction  Demographic selectivity  Regional/local selectivity  Long advertising life  High pass-along rate Disadvantages  Long-term advertiser commitments  Slow audience build-up  Limited demonstration capabilities  Lack of urgency  Long lead time

Radio – Great for Local markets Advantages  Low cost  Immediacy of message  Short notice scheduling  No seasonal audience change  Highly portable  Short-term advertiser commitments  Entertainment carryover Disadvantages  No visual treatment  Short advertising life  High frequency to generate comprehension and retention  Background distractions  Commercial clutter

Television – 2009 Viewership Down Discuss New Mode of TV viewing – Online: Hula, Youtube, etc Advantages  Wide, diverse audience  Low cost per thousand  Creative opportunities for demonstration  Immediacy of messages  Entertainment carryover  Demographic selectivity with cable Disadvantages  Short life of message  Consumer skepticism  High campaign cost  Little demographic selectivity with stations  Long-term advertiser commitments  Long lead times for production  Commercial clutter

Outdoor Media New Electronic Billboards Advantages  Repetition  Moderate cost  Flexibility  Geographic selectivity Disadvantages  Short message  Lack of demographic selectivity  High “noise” level

Internet Most Effective Reaching Youth Advantages  Fast growing  Ability to reach narrow target audience  Short lead time  Moderate cost Disadvantages  Difficult to measure ad effectiveness and ROI  Ad exposure relies on “click through” from banner ads  Not all consumers have access to Internet

Alternative Media Ads in Movies Interactive Kiosks Computer Screen Savers Computer Screen Savers Shopping Carts DVDs Advertainments Cell Phone Ads Subway Tunnel Ads Subway Tunnel Ads Floor Ads Video Game Ads

Videogame Advertising  Microsoft plans to acquire Massive inc., a start-up that places ads in video games.  Ads are inserted into the game environment.  Video games could become a large new medium for advertising. SOURCE: Robert A. Guth and Nick Wingfield, “Microsoft’s ‘Massive’ Move into Game Ads,” Wall Street Journal, April 26,2006, B1.

Directory Assistance Advertising  Companies are offering free telephone directory assistance—but there’s an advertisement first.  The audio ads are narrowly targeted, and are 10 to 12 seconds.  The growth of such free services could represent another change in the telecom industry.  Dial FREE411 or METRO SOURCE: Rebecca Buckman, “Your Listing, and a Word From Our Sponsor,” Wall Street Journal, April 20,2006, B1.

Media Scheduling on the Web  Competition for Web advertising spots is driving up prices.  Some Web advertisers now run campaigns based on time of day. Examples: ● McDonald’s: breakfast meals during morning hours ● Xerox: copier ads during the workday ● Budweiser: beer ads on Friday afternoons  Scheduling Web ads during prime times is a more efficient use of ad dollars and more targeted. SOURCE: David Kesmodel, “More Marketers Place Web Ads by Time of Day,” Wall Street Journal, June 23, 2006, B1.

Public Relations The element in the promotional mix that: Public Relations Public Relations  evaluates public attitudes  identifies issues of public concern  executes programs to gain public acceptance  E.g. McDonald’s: Healthy Meals – In response to Fast Food Nation

Types of Public Relations Activities Press relations Product publicity Corporate communication Public affairs Lobbying Employee and investor relations Crisis management

Public Relations Tools Product placement - movies Consumer education Event sponsorship Issue sponsorship Internet Web sites New product publicity

Example of Consumer Education  Corporations are teaching public school students about personal finance.  People under age 25 are a fast-growing group for credit card debt increases and bankruptcy.  Is it appropriate to use educational materials with corporate a corporate identity?  How should financial literacy be taught? SOURCE: Diya Gullapalli, “Your Kid’s Teacher: The Bank,” Wall Street Journal, April 8-9, 2006, B1.

Managing Unfavorable Publicity The Exxon Valdez Incident A coordinated effort to handle the effects of unfavorable publicity or of an unfavorable event. Crisis Management Crisis Management

The Role of Public Relations