 2007 Thomson South-Western

1. Chapter Nine Overview of Advertising Management: Messages, Media, and Measurement  2007 Thomson South-Western

2. Is Advertising Rocket Science? “The truth is that advertising is harder than rocket science. It’s news when a rocket launch FAILS. It’s news when an ad campaign launch SUCCEEDS.”

3. Advertising Advertising is a paid, mediated form of communication from an identifiable source, designed to persuade the receiver to take some action, now or in the future. Contrast this with a PSA, PR and Product Placement

4. Magnitude of Advertising 2005 $280 Billion U.S. Worldwide $900 spent on advertising for every man, woman, and child in the United States. $550 Billion

5. Some Top Spenders in U.S. Advertisinghttp://adage.com/images/random/lna2007.pdf Some Top Spenders in U.S. Advertisinghttp://adage.com/images/random/lna2007.pdf

6. Advertising-to-Sales Ratios Average 2 to 10% Ranging from 1.4% To 30.7%

7. Advertising Effects Are Uncertain

8. Advertising Effects Are Uncertain “If you want your brand to be fit, it’s got to exercise regularly. When you get the opportunity to go to the movies or do something else instead of working out, you can do that once in a while—that’s [equivalent to] shifting funds into [sales] promotion. But it’s not a good thing to do. If you get off the regimen, you will pay for it later.” Jennifer Lawrence, P&G

9. “I know that half the amount I spend on advertising is wasted; The trouble is, I don’t know which half” Chairman, Unilever Group

10. Advertising Functions • Informing • Influencing • Reminding and Increasing Salience • Adding Value • Assisting Other Company Efforts

11. Informing • Make consumers aware of new brands. • Increase TOMA (Top of Mind Awareness) • Teach new uses for existing brands (called usage expansion advertising) • Campbell’s soup for formal family dinners and for breakfast • Special K for afternoon or late-night snacking

12. Influencing

13. Reminding and Increasing Salience • Making a brand more salient: enriching the memory trace for a brand so that the brand comes to mind in relevant choice situations. • Increasing the customer’s interest in mature brands and the likelihood of choosing brands that might have otherwise not been chosen.

14. Adding Value • Three ways a company can add value to its offerings: • Innovating • Improving quality • Altering consumer perceptions

15. Assisting Other Company Efforts • Advertising may be used as a vehicle for delivering coupons and sweepstakes • Assisting sales representatives • Pre-selling a company’s products by introducing the product and legitimizing salespeople’s claims. • Augment the effectiveness of price deals.

16. The Advertising Management Process

17. The Role of Advertising Agencies • Three alternative ways to perform the advertising function: • Use an in-house advertising operation • Purchase advertising services on an ad-as-needed basis • Select a full-service advertising agency

19. Ad Agency Lists • http://adage.com/datacenter/article?article_id=116344

20. Alternative ways to perform the advertising function In-house advertising operation • Necessitates employing an advertising staff and absorbing the operation costs • Unprofitable unless a company does a large amount of continual advertising

21. Alternative ways to perform the advertising function Full-service advertising agency • Advantages • In-depth knowledge and skills • Obtaining negotiating muscle with the media • Coordinating advertising and marketing efforts • Disadvantages • Some control is lost • Larger clients are favored over small clients • Occasionally inefficient in media buying

22. Alternative ways to perform the advertising function A la carte • Advantages • Use services only when they are needed • Availability of high-caliber creative talent • Potential cost efficiencies • Disadvantages • Specialists approach client problems in a stereotyped fashion • Lack of cost accountability • Financial instability of smaller boutiques

23. Advertising Agency Organization • Develop advertising copy and campaigns • Copywriters, production people, and creative directors Creative Services Media Services Research Services Account Management

24. Advertising Agency Organization • Selecting the best advertising media • Media planners develop overall media strategy • Media buyers procure the selected media Creative Services Media Services Research Services Account Management

25. Advertising Agency Organization • Study clients’ customers’ buying habits, purchase preferences, and responsiveness • Focus groups, mall intercepts, acquisition of syndicated research data Creative Services Media Services Research Services Account Management

26. Advertising Agency Organization • Link the agency with the client • Act as liaisons so that the client does not need to interact directly with several different service departments and specialists Creative Services Media Services Research Services Account Management

27. Agency Compensation • Commissions from media (15%) • Reduced commission system(<15%) Three Sources • Labor-based fee system • Outcome-based

28. The Case for Investing: the belief that advertising can increase profitability by increasing sales volume, enabling higher selling prices, and thus increasing revenue beyond the incremental advertising expense. The Case for Disinvesting: Firms often choose to reduce advertising expenses either when a brand is performing well or during economic recession. The belief is that an expense reduction, with all else held constant, will result in increased profits. Which Position is More Acceptable?

29. Elasticity A measure of how responsive the demand for a brand is to changes in marketing variables such as price and advertising.

30. How to Increase Profit • Maintain status quo • Build Image Via Advertising • Grow Volume via Price Discounting • Increase Advertising and/or discount prices