Overview of Advertising Management: Messages, Media, and Measurement

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Chapter Nine
Overview of Advertising Management Messages,
Media, and Measurement
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Chapter Nine Objectives

• Understand the magnitude of advertising and the
  percentage of sales revenue companies invest in
  this marcom tool.
• Recognize that advertising can be extraordinarily
  effective but that there is risk and uncertainty
  when investing in this practice.
• Appreciate the various functions advertising is
  capable of performing.

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Chapter Nine Objectives

• Explore the advertising management process from
  the perspective of clients and their agencies.
• Understand the functions agencies perform and how
  they are compensated.
• Explore the issue of when investing in
  advertising is warranted and when disinvesting is
  justified.
• Examine advertising elasticity as a means for
  understanding the contention that strong
  advertising is an investment in the brand-equity
  bank.

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Is Advertising Rocket Science?
The truth is that advertising is harder than
rocket science. Its news when a rocket launch
FAILS. Its news when an ad campaign launch
SUCCEEDS.
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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.

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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
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Some Top Spenders in U.S. Advertising
Company Advertising Dollars
General Motors 3.43 Billion
Proctor Gamble 3.32 Billion
Time Warner 3.1 Billion
Pfizer 2.84 Billion
U.S. Government 1.1 Billion
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Advertising-to-Sales Ratios
Average 2 to 10
Ranging from 1.4
To 30.7
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Advertising Effects Are Uncertain
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Advertising Effects Are Uncertain

• If you want your brand to be fit, its 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
  whilethats equivalent to shifting funds into
  sales promotion. But its not a good thing to
  do. If you get off the regimen, you will pay for
  it later.

Jennifer Lawrence, PG
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Advertising Functions

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

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Informing

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

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Influencing
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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 customers interest in mature
  brands and the likelihood of choosing brands that
  might have otherwise not been chosen.

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Adding Value

• Three ways a company can add value to its
  offerings
• Innovating
• Improving quality
• Altering consumer perceptions

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Assisting Other Company Efforts

• Advertising may be used as a vehicle for
  delivering coupons and sweepstakes
• Assisting sales representatives
• Pre-selling a companys products by introducing
  the product and legitimizing salespeoples
  claims.
• Augment the effectiveness of price deals.

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The Advertising Management Process
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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

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Top-25 U.S. Advertising Agencies in Ad
Revenue, 2003
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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

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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

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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

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Advertising Agency Organization
Creative Services

• Develop advertising copy and campaigns
• Copywriters, production people, and creative
  directors

Media Services
Research Services
Account Management
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Advertising Agency Organization
Creative Services

• Selecting the best advertising media
• Media planners develop overall media strategy
• Media buyers procure the selected media

Media Services
Research Services
Account Management
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Advertising Agency Organization
Creative Services

• Study clients customers buying habits, purchase
  preferences, and responsiveness
• Focus groups, mall intercepts, acquisition of
  syndicated research data

Media Services
Research Services
Account Management
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Advertising Agency Organization
Creative Services

• 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

Media Services
Research Services
Account Management
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Agency Compensation

• Commissions from media (15)
• Reduced commission system(lt15)

Three Sources

• Labor-based fee system

• Outcome-based

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Ad Investment Consideration
ProfitRevenue Expenses
Revenue Price X Volume
Volume Trial Repeat
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Which Position is More Acceptable?

• 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.

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Elasticity

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

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How to Increase Profit

• Maintain status quo
• Build Image Via Advertising
• Grow Volume via Price Discounting
• Increase Advertising and/or discount prices

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Ad Spending
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