Chapter Nine Overview of Advertising Management Messages Media

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

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. ” 2

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 3

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 4

Some Top Spenders in U. S. Advertising http: //adage. com/images/random/lna 2007. pdf Company Advertising Dollars (bn. USD 2006) Proctor & Gamble 4. 89 AT&T 3. 34 GM 3. 29 Time Warner 3. 08 Verizon 2. 82 5

Advertising-to-Sales Ratios Average 2 to 10% Ranging from 1. 4% To 30. 7% 6

Advertising Effects Are Uncertain 7

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 8

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

Advertising Functions 1. Informing 2. Influencing 3. Reminding and Increasing Salience 4. Adding Value 5. Assisting Other Company Efforts 10

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 formal family dinners and for breakfast – Special K for afternoon or late-night snacking 11

Influencing 12

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. 13

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

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. 15

The Advertising Management Process 16

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-asneeded basis – Select a full-service advertising agency 17

TOP 10 CORE AGENCIES WORLDWIDE By worldwide revenue from traditional advertising in millions of dollars RANK WORLDWIDE REVENUE 200 6 200 5 2006 2005 % CHG 1 Tokyo $2, 213. 0 $2, 165. 9 2. 2 BBDO Worldwide* [Omnicom] New York 1, 539. 9 1, 425. 8 8. 0 2 Mc. Cann Erickson Worldwide* [Interpublic] New York 1, 479. 2 1, 461. 1 1. 2 4 4 JWT* [WPP] New York 1, 286. 5 1, 245. 0 3. 3 5 5 DDB Worldwide Communications* [Omnicom] New York 1, 263. 9 1, 190. 6 6. 2 6 6 Publicis* [Publicis] New York/Paris, N. Y. /France 1, 177. 8 1, 154. 2 2. 0 7 7 TBWA Worldwide* [Omnicom] New York 1, 135. 0 950. 2 19. 4 8 8 Leo Burnett Worldwide* [Publicis] Chicago 909. 0 889. 1 2. 2 9 10 Y&R* [WPP] New York 820. 0 788. 0 4. 1 10 9 Hakuhodo [Hakuhodo DY Holdings] Tokyo 780. 0 788. 0 -1. 0 AGENCY HEADQUARTERS 1 Dentsu [Dentsu Inc. ] 2 3 3 Notes: Dollars are in millions. (*)Revenue is Ad Age estimate and represents worldwide core-level returns from advertising only for the global network. Figures exclude revenue from non-advertising operations such as direct marketing, sales promotion, interactive, media buying and planning. 18

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

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 20

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

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

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

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

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

Advertising Agency Organization Creative Services Media Services Research Services Account Management • 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 26

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

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

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

How to Increase Profit 1. 2. 3. 4. Maintain status quo Build Image Via Advertising Grow Volume via Price Discounting Increase Advertising and/or discount prices 30