The response to advertising

1. The response to advertising Week 9 Consumer Behaviourand Food Marketing

2. Methods for measuring advertising response Qualitative research Focus group, personal interview Little relevance Experiments Are they realistic? Surveys More value when data are collected at intervals Links with demographic characteristics Consumer panel data Change over time (panellists diary, home scan) Econometric analysis Data fusion Combining data from two sources using common elements, e.g. purchase with TV viewing through consumer viewing habits

3. IRI BehaviorScan Cable tv + checkout scanner = very accurate measure of response to advertising IRI BehaviorScan in the 1980s Poor off-air TV transmission and relevance of cable TV IRI can control (switch) the advertisement for each individual (consenting) household Local stores are equipped with IRI scanners Purchases are associated with households through identification card Marketing mix variables (prices, deals) are also recorded GFK Behaviorscan in Europe (France and Germany)

4. Limits of IRI BehaviorScan Household owning more than a TV set (one not scanned) Out of town shopping Is the isolated community representative of the US? Tests limited to commercially advantageous studies and big brands (they are expensive) Trade response is not taken into account (retailers stock advertised goods) Competitor response is not considered There is no market validation: ads that are perceived as weak do not enter the nationwide market

5. Nielsen home scan Home scanned panels National samples No experimentation Link with television viewing data

6. Store level data Sales extracted from checkout data Aggregate sales by brand and variety Nielsen ScanTrack IRI Infoscan

7. Sales response

8. Effects of advertising Direct effects Price support Sales support Indirect effects Increases consumption from stock, future purchase Increases retailer demand, opportunity to purchase, sales Improves targeting, reducing costs Restrains market entry by competitors, which may raise sales and margins

9. Price support Limited supply Advertising raises price by raising demand Unconstrained supply Increased acceptability of brand price Price premia due to brand name

10. Reassuringly expensive�

11. From the web site� �Stella Artois has used the same �Reassuringly Expensive� slogan for over 20 years but in that time only five adverts have been made.� 

12. �how much does it cost? On blind tests Stella is not significantly preferred In Britain it is premium priced The price premium is estimated at 7.5% (Baker, 1993) Larger turnover finances the adspend

13. Sales support In mature markets competition is on market shares, not total product sales Advertising can be necessary just to defend a company�s own market share Advertising has usually a modest impact (brand loyalty) Some numbers from IRI tests (293 cases): Considering a 50-100% increase in adspend, 49% of the companies experienced an increase in the volume of sales (+23% on average) Only in 20% of the tests the increase in adspend was justified by a sufficient increase in profits Half of the tests had no effects� ineffective ads? Competitors reaction?

14. Increasing consumption from stock Goods kept in home (cereals, canned soups, tea�) Increased consumption leads to further sales

15. Supporting distribution It is rare that loyalty leads to refusing an alternative when favoured brand is unavailable Availability on shelf Distribution increases are reported in relation to advertising effects

16. Supporting promotions Synergy between ads and promotions: joint effect is larger than the simple sum of the two effects Strong effects of in-store advertising Point-of-sale discounts (coupons) act sinergistically with advertising

18. Improving targeting Communicating with the right groups and discouraging those who are unsuited to the product will reduce costs (e.g. enquiries to staff) Especially for expensive goods and for elite stores

19. Restraining market entry Big brands advertise more, but maybe spend a lower proportion of sales profits Economies of scale Customer retention Trade commission (e.g. US) see excessive advertising as a restraint of trade

20. Advertising and price elasticity Despite higher prices, heavy advertising seems to lead to lower price elasticity, especially for fast moving consumer goods

21. Advertising and consumer response Unique Selling Proposition (USP): a marketing claim based upon a distinctive product feature or unique element in the marketing � mix A good ad is one that successfully implants knowledge about USP (Reeves, 1961) Too cognitive approach? For fmcg there are just one or two salient attributes

22. Effect sequential models: AIDA (19th Century)

23. Lavidge and Steiner (1961)

24. DAGMAR model(Colley, 1961)

25. Conversion and reinforcement Problems in sequential models They are not appropriate for repetitive advertising of established brands Not appropriate for repeat purchase and full awareness Ehrenberg theory (1974) Advertising to retain consumers Quality to retain consumers

26. Ehrenberg ATR model

27. Leaking bucket approach� Customers do switch brand, so a brand can attract non-customers to replace the ones it is losing Offensive function of advertising Defensive function of advertising

28. Rossiter and Percy (1997)Buyer response sequence

29. Involvement and information processing Different levels of involvement lead to a different way in processing ads High involvement decisions are more consistent with sequential models Low involvement purchases are more related to reinforcement models

30. Batra and Ray classification Three types of response to advertising: Low involvement process, the ad affects brand salience and increase purchase disposition (no prior change in attitudes) High involvement process following the Theory of Planned Behaviour (belief, attitudes, intentions, actions) High involvement sequence (dissonance-attribution), behaviour first change and then there are changes in attitudes and beliefs

31. Elaboration-likelihood model Petty and Cacioppo (1983,1985) Persuasion is more likely to occur when people need to review the arguments (supporting or contrasting them) rather than with ready-made arguments Central route to persuasion Elaboration Long-lived and resistant changes Predictive of future behaviour Peripheral route Association of feelings and response to cues No arguments generated (future change more likely) Involvement increases elaboration

32. The five communication objectives (Rossiter & Percy)

33. Category need Arousing need Connections between audience values and product category Good association also with the brand

34. Brand awareness Recall or recognition? Recall: category brand Recognition: brand category It depends on purchasing context Recall: products bought �via intermediaries� � Courier service, radio stations Recognition: the visual part is relevant (supermarket) � Packaged foods (conjoint analysis)

35. Brand attitude Some brand names are well known despite a bad attitude towards them Better attitudes may be achieved by advertising how the product meets specific needs

36. Purchase intention Advertising can generate a purchase intention by instructing consumers �how to buy� E.g. times and places which can become cues to buy when the consumer finds himself in such situation

37. Purchase facilitation How much does it cost? Where can you buy it? (Store) How can I pay? (e.g. diluted payments, on-line purchase�)

38. Securing attention Not only grabbing attention, but also remaining on the subject� Arousal Relevant information Attitude change

39. Image meaning and culture Framing (schemata, heuristics) are important Music, communication� ads as art Advertising is culturally (socially) situated Long-lived shared meanings Transnational advertising must rely on basic ideas to be cross-cultural

40. Ads classification Credibility Stimulation Taste Empathy Clarity Attracting attention Involving

41. FCB classification grid(Foote, Coone, Belding)

42. Percy-Rossiter grid

43. Sales effects over time

44. Implication of scheduling and media If the curve is concave, burst advertising strategy is questionable Burst is appropriate for new products (S-shape?) It is more effective to spread adspend across media (more coverage, fewer exposure, defer saturation) Media multiplier effect However, it can be more expensive Message change to overcome habituation

45. Effects in the longer term 90% of the extra sales tend to occur in the first 3-9 months of the advertisement 50% are made in the first 1-3 months

46. Responsiveness to advertising Which brands are worth to be advertised? Size of the user group Large number of purchase occasions Leading brands Frequently purchased goods Proportionate loyalty Advertising in different loyalty segments (especially those at 50-70% level) New products Novelty effects Flexibility of total category consumption Food categories can gain against others (e.g. fish/meat)

47. Ads or sales promotion? Discounts favour: Stock/staff management Better returns than media advertising Media advertising favour: Extra sales In the short or long term?